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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, 1999
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ____ to ____
Commission File Number 1-12815
CHICAGO BRIDGE & IRON COMPANY N.V.
Incorporated in The Netherlands IRS Identification Number: not applicable
Polarisavenue 31
2132 JH Hoofddorp
The Netherlands
31-23-568-5660
(Address and telephone number of principal executive offices)
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. [ ]
Aggregate market value of common stock held by non-affiliates, based on a New
York Stock Exchange closing price of $15.75 as of February 29, 2000, was
$133,465,721.
The number of shares outstanding of a single class of common stock as of
February 29, 2000 was 9,375,675.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1999 Annual Report to Shareholders Part I and Part II
Portions of the 2000 Proxy Statement Part III
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CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
PART I.
Item 1. Business 3
Item 2. Properties 10
Item 3. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 12
PART II
Item 5. Market for Registrant's Common Equity and Related 13
Stockholder Matters
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis of Financial 13
Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 13
Item 8. Financial Statements and Supplementary Data 13
Item 9. Changes in and Disagreements with Accountants on 13
Accounting and Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant 14
Item 11. Executive Compensation 16
Item 12. Security Ownership of Certain Beneficial Owners and 16
Management
Item 13. Certain Relationships and Related Transactions 16
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports 17
on Form 8-K
SIGNATURES 18
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PART I
ITEM 1. BUSINESS
Chicago Bridge & Iron Company N.V. and its 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,
storage tanks, process vessels, low temperature and cryogenic storage facilities
and other steel plate structures and their associated systems. The Company 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
REVENUES BY PRODUCT LINE
(In millions)
1999 1998 1997
---- ---- ----
Flat Bottom Tanks $296 $287 $209
Low Temperature/Cryogenic
Tanks and Systems 82 108 109
Repairs and Modifications 67 64 58
Specialty and Other Structures 66 130 154
Pressure Vessels 63 64 53
Elevated Tanks 52 38 48
Turnarounds 49 85 42
---- ---- ----
Total $675 $776 $673
==== ==== ====
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Flat Bottom Tanks
These aboveground 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, refined products such as
gasoline, raw water, potable water, chemicals, petrochemicals and a large
variety of feedstocks for the manufacturing industry.
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 at the storage pressure. The systems
usually include special refrigeration systems to maintain the gases in liquefied
form at the storage pressure. Applications extend from low temperature
(+30(Degree)F to -100(Degree)F ) to cryogenic (-100(Degree)F to -423(Degree)F).
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. While the Company has focused on providing
these services primarily in the United States, efforts are under way to expand
these services throughout the world. Customers in the petroleum, chemical,
petrochemical and water industries generally require these types of services.
Specialty and Other Structures
These specialty and other structures are marketed to a diverse group of
customers in such industries as metals and mining, power generation,
telecommunications, aerospace, wastewater treatment, microelectronics,
pharmaceutical, food and beverage, as well as government customers. Examples of
these specialty structures include turnkey vacuum facilities for testing
prototype spacecraft, rocket engines and satellites before launch; hydroelectric
structures such as penstocks and spiral cases; processing facilities or
components used in the iron, aluminum and mining industries; and high purity
process piping systems used in the microelectronics, pharmaceutical and food and
beverage industries. These structures are typically made from bent and formed
metal materials (carbon steel, stainless steel, special alloy steel and
aluminum) and are fabricated and shipped as components to their final location
for field assembly and welding.
Pressure Vessels
Pressure vessels are built primarily from high strength carbon steel plates
which have been formed in a fabrication shop and are welded together at a job
site. Pressure vessels are constructed in a variety of shapes and sizes, some
weighing in excess of 700 tons, with thicknesses in excess of six inches. This
product line requires technological expertise in design, analysis, welding
capabilities, metallurgy, complex fabrication and specialty field erection
methods. Existing customers represent a cross section of the petroleum,
petrochemical, chemical, wastewater and pulp and paper industries, where process
applications of high pressure and/or temperature are required. Typical pressure
vessel usage includes process and storage vessels in the petroleum,
petrochemical, chemical, and wastewater industry and as digesters in
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the pulp and paper industry. The Company has designed and erected pressure
vessels throughout the world.
Elevated Tanks
The water storage line includes single pedestal, fluted column and concrete
pedestal tanks, as well as standpipes and reservoirs. These products have a
capacity range of 25,000 gallons to 3,000,000 gallons. These structures provide
potable water reserves and supply pressure to the water distribution system.
Turnarounds
A turnaround is a planned shutdown of a refinery or other process unit for
repair and maintenance of equipment and associated systems. The work is usually
scheduled on a multi-shift, seven day-per-week basis to minimize downtime of the
facility. Personnel, materials and equipment must come together at precisely the
right time to accomplish this labor 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 GOALS AND STRATEGIES
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. It intends to accomplish this by means of a strategic plan, which
includes goals and key strategies.
Goals
The Company's goals provide direction for its employees as they strive for the
long-term enhancement of shareholder value.
1. Continue to improve the Company's safe work practices with a goal of zero
injuries to employees and subcontractors.
Working safely is of paramount importance; the Company cannot compromise safety
for expediency; its constant goal must be zero injuries.
2. Selectively compete in the global market for steel plate structures and their
associated systems.
The Company is a niche player in the Engineering & Construction industry with
special expertise in the design and engineering, fabrication, field erection and
repair of steel plate structures including bulk liquid terminals, storage tanks,
process vessels, and low temperature and cryogenic storage facilities.
Associated systems are the civil, foundation, piping, mechanical, electrical,
instrumentation and fire protection systems that accompany many of the process
and storage vessels the Company builds.
3. Focus on profitable opportunities in the developing regions and active
markets worldwide, as well as in the Company's strong base in North America.
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The Company will leverage its core competencies in logistics and project
execution to expand in areas where it can secure profitable new business while
maintaining and strengthening its North American base.
4. Create and deliver superior, cost-effective solutions to the Company's
customers that provide a competitive advantage.
The Company will use its proprietary knowledge, know-how and execution
capabilities to deliver better solutions to its customers than those available
from its competitors.
5. Create an atmosphere in which the Company's skilled, productive, motivated
and mobile work force can grow and develop.
It will seek to attract and retain superior employees, deploy them wisely,
invest in developing their capabilities, and enable them to share in the
Company's financial successes.
6. Use the Company's marketing and selling expertise to build superior
relationships with the right targeted customers.
The Company will cultivate existing and pursue additional strategic alliances
with targeted customers.
7. Make the Company's support services (e.g., Legal, Finance, Information
Technology, Human Resources) strong contributors to its performance and
profitability.
Indirect functions must efficiently provide value-added support services to its
field operations.
8. Lead the Company's industry by growing profitably and enhancing shareholder
value.
The Company's management is committed to delivering returns to its owners that
exceed the average for similar companies in its industry.
Key Strategies
The Company's key strategies provide a focus for near-term efforts and a
foundation for future growth.
1. Continue to improve the Company's safe work practices with a goal of zero
injuries to employees and subcontractors.
As a result of the importance of safety to its employees, the goal of safer
operations is reemphasized here as the number one key strategy.
2. Build excellence in project execution.
This is the means by which the Company will plan, track and execute its projects
safely, on time, and at or above the "as sold" profitability. The ability to
consistently achieve these results depends upon the skills of the Company's
people and the excellence of its systems. The Company will invest in and improve
both of these. In addition, the Company will expand its value awareness
(continuous improvement) effort in order to achieve cost savings utilizing both
employee and customer input. The Company has put controls in place to
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ensure that the scope and value of the work delivered meet the customer's
requirements and are adequately reflected in the compensation received.
3. Execute an effective marketing process with a focus on customer solutions,
major opportunities, emerging countries, difficult geographies and expanded
services for significant profitable growth.
The Company will utilize its ability to provide customers with cost-effective,
superior turnkey solutions that offer a competitive advantage. The Company is
tracking "elephant" projects that fit its unique capabilities. These projects
represent a significantly larger revenue than "normal" projects. The Company
continues to expand into emerging markets such as Equatorial Africa and the
former Soviet Republics. It continues to seek work in locations where its
ability to staff and to field erect commands a premium. The Company will strive
to continue its success in selling expanded work scope.
4. Accurately identify all costs and improve the Company's ability to forecast
financial results.
Costs that do not add value are being eliminated. The Company is strengthening
its financial controls, and the worldwide implementation of the financial
portion of the J.D. Edwards enterprise management system was completed in 1999.
5. Capture a major share of the LNG market.
The Company has proven global capabilities in the LNG industry and intends to
capitalize on these capabilities to capture a major share of the fast growing
LNG market by identifying, targeting, pursuing and winning its share of
significant, targeted opportunities.
6. Generate incremental profitable revenue by establishing project development
and finance capabilities.
The Company recognizes that leadership and coordination of financing activities
could make significant additional project revenue available to the Company by
facilitating the development of selected projects in which the Company can
participate. By providing alternative solutions for external financing
arrangements for targeted projects worldwide, the Company can potentially
achieve both top and bottom line growth.
7. Create step-change growth in sustainable revenue, profitability and
shareholder value from acquisitions and other business opportunities.
The Company will identify, evaluate and pursue potential business combinations
including acquisitions, alliances and partnerships to attain sustainable
expansion of annual revenue.
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OTHER OPERATIONAL INFORMATION
On January 28, 2000, the Company purchased the assets and assumed certain
liabilities of the business now known as CB&I Trusco Tank ("Trusco"). Trusco
designs, fabricates and erects steel structures, including storage and
shop-built tanks, and services municipal and industrial customers primarily in
the water, wastewater and petroleum markets on the U.S. West Coast.
On September 30, 1999, the Company purchased the assets of XL Systems. This
acquisition enables the Company to combine its existing experience in vacuum
facility construction and project management with XL's leading-edge thermal
vacuum technology and manufacturing capabilities. The Company can now provide
complete solutions to customers in the growing aerospace and telecommunications
industries.
UltraPure Systems, a new business unit of the Company, was developed during 1999
in response to potential market opportunities and to leverage the Company's core
competencies into new areas. UltraPure Systems provides high purity process
piping systems for customers in the microelectronics, pharmaceutical, and food
and beverage industries.
The Company continues to pursue opportunities in the growing market for
water-related products and has broadened its product line to provide complete
water storage and treatment solutions. The water services product offerings
encompass water storage tanks and water and wastewater treatment products,
including elevated tanks, standpipes, reservoirs and clarification products. The
Company has been successful in securing awards for concrete pedestal tanks,
which incorporate a steel water storage structure atop a concrete base and
provide a lower-cost storage option.
The Company continues to be successful with its innovative tank building process
called CoilBuild(R), in which the tank shell is formed from continuous steel
coils rather than individual plates. CoilBuild(R) 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 CoilBuild 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. The
Company does not anticipate having difficulty obtaining adequate amounts of raw
materials in the foreseeable future.
The Company 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.
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.
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The Company had a backlog of work to be completed on contracts of $511 million
at December 31, 1999, and $508 million at December 31, 1998. Approximately 75%
of the backlog as of December 31, 1999 is expected to be completed in 2000. New
business taken represents the value of new project commitments received by the
Company during a given period and is 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 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 $1,294,000 in 1999, $860,000 in
1998, and $1,670,000 in 1997 for its research and development activities.
The Company employed 5,666 people as of December 31, 1999. The Company believes
it is a leader in the global field erection of storage tanks and other steel
plate structures because of its project management and technological expertise,
which are considered to be among its core competencies. To preserve these
competencies, the Company recruits, develops and maintains ongoing training
programs for engineers and field supervision personnel. Furthermore, the Company
recognizes the importance of having the right people with the right skills in
the right places to achieve its business objectives.
Financial information by geographic area of operation can be found on pages 42
and 43 of the Company's 1999 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. The
Company 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>
North America
Fort Saskatchewan, Canada Warehouse, operations and Owned
administrative office
Houston, Texas Engineering, fabrication facility, warehouse, Owned
operations and administrative office
Kankakee, Illinois Warehouse Owned
Plainfield, Illinois Engineering, operations and administrative Owned
office
Europe, Africa, Middle East
Al Aujam, Saudi Arabia Fabrication facility and warehouse Leased
Amsterdam, Netherlands Corporate office Leased
Dubai, United Arab Emirates Engineering, warehouse, operations and Leased
administrative office
Secunda, South Africa Fabrication facility and warehouse Leased
Asia Pacific
Batangas, Philippines Fabrication facility and warehouse Leased
Cilegon, Indonesia Fabrication facility and warehouse Leased
Laem Chabang, Thailand Warehouse, operations and Leased
administrative office
Kwinana, Australia Fabrication facility, warehouse and Leased
administrative office
Central and South America
Puerto Ordaz, Venezuela Fabrication facility and warehouse Leased
</TABLE>
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.
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ITEM 3. LEGAL PROCEEDINGS
Environmental Matters
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 with respect to such facilities. The Company
does not consider it to be probable that a claim will be asserted with respect
to such facilities which claim is reasonably possible to have an unfavorable
outcome, which in each case would be material to the Company. The Company
believes that any potential liability for these matters will not 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 $20,000,000 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. While the
Company believes any liability in excess of a $2,000,000 deductible is covered
by insurance, and 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 material 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
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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. At December 31, 1999, the Company and certain
subsidiaries had provided $161,245,000 of performance bonds and letters of
credit to support its contracting activities arising in the ordinary course of
business. This amount fluctuates based on the level of contracting activity.
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. At December 31,
1999, the Company had outstanding surety bonds and letters of credit of
$23,646,000 relating to its insurance program.
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, 1999.
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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 44 of the Company's 1999
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 20 and 21 of the
Company's 1999 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 22 through 25 of the
Company's 1999 Annual Report to Shareholders and is incorporated herein by
reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by this item can be found on page 24 of the Company's 1999
Annual Report to Shareholders and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated financial statements and Report of Independent Public Accountants
can be found on pages 26 through 44 of the Company's 1999 Annual Report to
Shareholders and are incorporated herein by reference.
Quarterly financial data can be found on page 44 of the Company's 1999 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
The Company has neither changed its independent public accountants nor had any
disagreements on accounting and financial disclosure with its independent public
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 appearing under "Item 1.
Appointment of Directors" in the Company's 2000 Proxy Statement 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
managing director.
<TABLE>
<CAPTION>
Served in
Name Age Position Position Since
- ---- --- -------- --------------
<S> <C> <C> <C>
Gerald M. Glenn 57 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.
Stephen P. Crain 46 Vice President - Global Sales and Marketing of 1997
CBIC;
Managing Director of CB&I B.V. 1998
Stephen M. Duffy 50 Vice President - Human Resources and 1996
Administration of CBIC
Richard E. Goodrich 56 Vice President - Financial Operations of CBIC 1999
Robert B. Jordan 50 Vice President - Operations of CBIC; 1998
Chief Operating Officer of CBIC; 2000
Managing Director of CB&I B.V. 1998
Keith A. Reed 47 Corporate Controller of CBIC 1999
Timothy J. Wiggins 43 Vice President and 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 50 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 for the Past Five Years
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
April 1997. Mr. Glenn has been elected to serve as Chairman of the Supervisory
Board of the Company; his term will expire in 2000. Mr. Glenn has been a
principal in The Glenn Group LLC since April 1994.
Stephen P. Crain has been the Vice President - Global Sales and Marketing of
CBIC since July 1997 and Managing Director of CB&I B.V. since August 1998. Prior
to that time, Mr. Crain was employed by CBIC or its affiliates in an executive
or management capacity.
Stephen M. Duffy has been the Vice President - Human Resources and
Administration of CBIC since June 1996. Prior to that time, Mr. Duffy was the
Vice President - Human Resources and Administration of CBI Industries, Inc.
Richard E. Goodrich has been the Vice President - Financial Operations of CBIC
since April 1999. Mr. Goodrich was the Vice President - Area Director of
Finance, Western Hemisphere for CBIC from June 1998 through April 1999. Prior to
that time, Mr. Goodrich was the Director of Strategic Planning - Energy and
Chemicals Group of Fluor Daniel, Inc.
Robert B. Jordan has been the Vice President - Operations of CBIC and Managing
Director of CB&I B.V. from February 1998 and the Chief Operating Officer of CBIC
since March 2000. 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. Prior to that time, Mr. Jordan was the Senior
Vice President - Sales and Operations for the Process and Industrial Division of
Raytheon/Rust Engineering & Construction.
Keith A. Reed has been the Corporate Controller of CBIC since April 1999. From
July 1997 to April 1999, Mr. Reed was the Director of Financial Reporting for
CBIC. Prior to that time, Mr. Reed was the Director of Financial Reporting of
CBI Industries, Inc.
Timothy J. Wiggins has been the Vice President and 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 April 1997.
Prior to that time, Mr. Wiggins was the Executive Vice President - Finance and
Administration, Chief Financial Officer and Secretary and a director of Fruehauf
Trailer Corporation.
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"). Prior to that time, he served as
Vice President, General Counsel and Secretary to Rust.
15
<PAGE> 16
Information appearing under "Section 16(a) Beneficial Ownership Reporting
Compliance" in the Company's 2000 Proxy Statement is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
Information appearing under "Executive Compensation" in the Company's 2000 Proxy
Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information appearing under "Common Stock Ownership By Certain Persons and
Management" in the Company's 2000 Proxy Statement is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
16
<PAGE> 17
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.
Report of Independent Public Accountants
Consolidated Statements of Income - For the years ended December 31,
1999, 1998 and 1997
Consolidated Balance Sheets - As of December 31,
1999 and 1998
Consolidated Statements of Cash Flows - For the years
ended December 31, 1999, 1998 and 1997
Consolidated Statements of Changes in Shareholders' Equity -
For the years ended December 31, 1999, 1998 and 1997
Notes to Consolidated Financial Statements
Financial Statement Schedules
Supplemental Schedule V - Valuation and Qualifying Accounts and Reserves for
each of the years ended December 31, 1999, 1998 and 1997 can be found on page 20
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, 1999 and 1998 is shown
in the Notes to Consolidated Financial Statements previously incorporated by
reference under Item 8 of Part II of this report.
The Company'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 21 and Exhibits being filed are submitted as a
separate section of this report.
Reports on Form 8-K
The Company did not file a current report on Form 8-K during the three months
ended December 31, 1999.
17
<PAGE> 18
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 28, 2000 /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 28, 2000.
Signature Title
/s/ Gerald M. Glenn Chairman of the Supervisory Board
- ------------------------------ of Registrant, and President, Chief
Gerald M. Glenn Executive Officer of CBIC
(Principal Executive Officer)
/s/ Timothy J. Wiggins Vice President and Chief Financial
- ------------------------------ Officer of CBIC
Timothy J. Wiggins (Principal Financial Officer)
/s/ Keith A. Reed Corporate Controller of CBIC
- ------------------------------ (Principal Accounting Officer)
Keith A. Reed
/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
18
<PAGE> 19
/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
19
<PAGE> 20
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, 1999
(in thousands)
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
------------ --------- -------- ---------- -----------
Allowance for
doubtful accounts
1999 $2,050 $ 1,326 $(2,322) $1,054
1998 1,909 1,232 (1,091) 2,050
1997 3,047 1,207 (2,345) 1,909
(1) Deductions generally represent utilization of previously established
reserves or adjustments to reverse unnecessary reserves due to subsequent
collections.
20
<PAGE> 21
EXHIBIT INDEX
3(6) Amended Articles of Association of the Company (English
translation)
4.1(2) Specimen Stock Certificate
10.1(2) Form of Indemnification Agreement between the Company and its
Supervisory and Managing directors
10.2(3) The Company's Annual Incentive Compensation Plan
10.3(4) The Company's 1997 Long-Term Incentive Plan As amended September 1,
1998
10.4(3) The Company's Deferred Compensation Plan
10.5(7) The Company's Management Defined Contribution Plan As amended
September 1, 1999
(a) Agreement between the Company and Gerald M. Glenn
dated September 1, 1999
(b) Agreement between the Company and Timothy J. Wiggins
dated September 1, 1999
10.6(3) The Company's Excess Benefit Plan
10.7(2) Form of the Company's Supplemental Executive Death Benefits Plan
10.8(2) Employment Agreements Including Special Stock-Based, Long-Term
Compensation Related to the Common Share Offering between the
Company and Certain Executive Officers
10.9(6) Form of Amended Termination Agreements between the Company and
Certain Executive Officers
10.10(2) Separation Agreement
10.11(2) Form of Amended and Restated Tax Disaffiliation Agreement
10.12(2) Employee Benefits Separation Agreement
10.13(2) Conforming Agreement
10.14(3) Employment Agreement Letters between the Company and Robert B.
Jordan
21
<PAGE> 22
10.15(2)(7) Revolving Credit Facility
(a) Amendment No. 1 dated October 31, 1997
(b) Amendment No. 2 dated March 5, 1998
(c) Reduction and Termination Notice dated September 28, 1999
10.16(4) The Company's Supervisory Board of Directors Fee Payment Plan
10.17(4) The Company's Supervisory Board of Directors Stock Purchase Plan
10.18(5) The Chicago Bridge & Iron 1999 Long-Term Incentive Plan
10.19(5) The Company's Incentive Compensation Program
10.20(6) The Company's Equity Forward Purchase Contract
10.21(7) Revolving Credit Facility Agreement dated September 30, 1999
13(1) Portion of the 1999 Annual Report to Shareholders
21(1) List of Significant Subsidiaries
23(1) Consent and Report of the Independent Public Accountants
27(1) 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 1997 Form 10-K dated March 31,
1998
(4) Incorporated by reference from the Company's 1998 Form 10-Q dated November
12, 1998
(5) Incorporated by reference from the Company's 1999 Form 10-Q dated May 14,
1999
(6) Incorporated by reference from the Company's 1999 Form 10-Q dated August
13, 1999
(7) Incorporated by reference from the Company's 1999 Form 10-Q dated November
12, 1999
22
<PAGE> 1
20 Exhibit 13
CHICAGO BRIDGE & IRON COMPANY N.V.
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, 1999 and the selected consolidated balance sheet data as of
December 31, 1999, 1998, 1997, 1996 and 1995 have been derived from the audited
consolidated financial statements of Chicago Bridge & Iron Company N.V. and
Subsidiaries (the "Company").
(In thousands, except share and employee data)
<TABLE>
<CAPTION>
PRE-PRAXAIR
POST-PRAXAIR ACQUISITION(1) ACQUISITION(1)
-------------------------------------------- -----------
Years Ended December 31, 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
- ---------------------------------------------------------------------------------------------------
Revenues $ 674,770 $775,692 $ 672,811 $ 663,721 $621,938
Cost of revenues 598,335 703,363 609,173 590,030 614,230
- ---------------------------------------------------------------------------------------------------
Gross profit 76,435 72,329 63,638 73,691 7,708
Selling and administrative expenses 49,849 46,959 44,988 42,921 43,023
Management Plan charge (2) -- -- 16,662 -- --
Special charge (3) -- -- -- -- 5,230
Other operating income, net (4) (2,788) (991) (4,807) (493) (10,030)
- ---------------------------------------------------------------------------------------------------
Income (loss) from operations 29,374 26,361 6,795 31,263 (30,515)
Interest expense (2,980) (3,488) (3,892) (5,002) (799)
Interest income 766 1,616 1,416 990 1,191
- ---------------------------------------------------------------------------------------------------
Income (loss) before taxes and
minority interest 27,160 24,489 4,319 27,251 (30,123)
Income tax (expense) benefit (7,605) (7,347) 730 (7,789) 8,093
- ---------------------------------------------------------------------------------------------------
Income (loss) before minority interest 19,555 17,142 5,049 19,462 (22,030)
Minority interest in (income) loss (1,171) (105) 354 (2,900) (3,576)
- ---------------------------------------------------------------------------------------------------
Net income (loss) $ 18,384 $ 17,037 $ 5,403 $ 16,562 $(25,606)
===================================================================================================
PER SHARE DATA
- ---------------------------------------------------------------------------------------------------
Net income--basic (5) $ 1.67 $ 1.41 $ 0.43 N/A N/A
Net income--diluted (5) 1.65 1.40 0.43 N/A N/A
Dividends (5) 0.24 0.24 0.18 N/A N/A
- ---------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
- ---------------------------------------------------------------------------------------------------
Total assets $ 337,325 $348,709 $ 400,650 $ 351,496 $356,125
Long-term debt 25,000 5,000 44,000 53,907 --
Total shareholders' equity 104,410 101,656 103,826 90,746 186,507
Contract capital (6) 78,859 76,969 95,243 121,926 109,503
- ---------------------------------------------------------------------------------------------------
CASH FLOW DATA
- ---------------------------------------------------------------------------------------------------
Cash flow from operating activities $ 22,461 $ 50,824 $ 40,407 $ 25,159 $(36,806)
Cash flow from investing activities (8,911) (2,142) (21,907) (11,348) 1,554
Cash flow from financing activities (779) (53,286) (20,124) (14,797) 32,012
- ---------------------------------------------------------------------------------------------------
OTHER FINANCIAL DATA
- ---------------------------------------------------------------------------------------------------
Depreciation and amortization $ 17,765 $ 17,710 $ 16,911 $ 17,281 $ 16,077
EBITDA (7) 47,139 44,071 40,368 48,544 (9,208)
Capital expenditures 13,450 12,249 34,955 20,425 14,880
- ---------------------------------------------------------------------------------------------------
OTHER DATA
- ---------------------------------------------------------------------------------------------------
Number of employees:
Salaried 1,378 1,525 1,464 1,516 1,663
Hourly and craft 4,288 4,928 4,630 4,432 3,483
New business taken (8) $ 716,499 $760,989 $ 757,985 $ 687,227 $782,878
Backlog (8) 510,614 507,783 554,982 485,704 470,174
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
1999 ANNUAL REPORT 21
FOOTNOTES FOR PREVIOUS TABLE
(1) Prior to the first quarter of 1996, Chicago Bridge & Iron Company and
Subsidiaries ("CB&I") 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, Inc. ("Praxair"). This merger transaction was reflected in the
consolidated financial statements of CB&I 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.
(2) 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"--Note 9) in 1997.
(3) In 1995, CB&I 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.
(4) 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. The gain recorded in 1995 primarily relates to the sale of certain
underutilized facilities.
(5) 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.
(6) Contract capital is defined as contract receivables plus net contracts in
progress less accounts payable.
(7) 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."
(8) 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.
<PAGE> 3
22 CHICAGO BRIDGE & IRON COMPANY N.V.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and accompanying Notes.
RESULTS OF OPERATIONS
The following table indicates new business taken by geographic area for the
years ended December 31, 1999, 1998 and 1997:
(In millions)
1999 1998 1997
- -------------------------------------------------------------------------------
NEW BUSINESS TAKEN BY GEOGRAPHIC AREA
- -------------------------------------------------------------------------------
North America $ 293 $ 276 $ 263
Europe, Africa, Middle East 296 211 191
Asia Pacific 75 108 200
Central and South America 52 166 104
- -------------------------------------------------------------------------------
Total $ 716 $ 761 $ 758
===============================================================================
1999 VERSUS 1998
NEW BUSINESS TAKEN/BACKLOG--New business taken during 1999 was $716.5 million
compared with a historically high level of $761.0 million in 1998. The level of
new business taken was achieved in spite of challenging market conditions for
the engineering and construction industry. Included in the 1999 new business
taken was an order for a liquefied natural gas ("LNG") expansion project in
Nigeria worth in excess of $100 million, one of the Company's largest single
project awards in over a decade, and tankage for a crude export terminal in
Russia on the Black Sea at the terminus of the Caspian pipeline. Over 59% of the
new business taken during 1999 was for contracts awarded outside of North
America. During 1999, new business taken increased 40% in the Europe, Africa,
Middle East (EAME) area and 6% in North America, but declined 68% in the Central
and South America (CSA) area and 31% in the Asia Pacific (AP) area. The CSA
decline is a result of returning to a more historic level of new business after
the record level of new business achieved in 1998. Backlog at December 31, 1999
was $510.6 million compared with the backlog at December 31, 1998 of $507.8
million.
The Company expects its new business to improve in 2000 due to the following
factors: an upturn in capital spending by the petroleum industry, resulting from
higher oil prices and the completion of consolidation activity; the large number
of significant prospects, especially LNG projects, for which the Company is in
active negotiations; improving economic conditions in Asia; and a full year's
results from the recent acquisitions of XL Systems and Trusco Tank, as well as
the continued development of UltraPure Systems, which serves the high purity
piping market. New business could also be impacted positively by any future
acquisitions.
REVENUES--Revenues were $674.8 million in 1999 compared with $775.7 million
in 1998, reflecting the difficult industry conditions. Revenues in 1999 were
lower in all areas except CSA. The increase in revenue in the CSA area resulted
from a significant volume of work being put in place following a record level of
new business awarded during 1998, including three heavy crude oil projects in
Venezuela. Compared with the prior year, 1999 revenues declined primarily due to
mechanical work put in place on the Saldanha Steel project in South Africa
during 1998.
Revenues in 2000 are expected to improve subsequent to the first quarter,
which will be lower than the comparable period in 1999, as significant contract
awards taken in late 1999 and early 2000 are put into place, and improving
industry fundamentals lift the Company's base business level. The Company's flow
of revenue will fluctuate based on the changing mix of projects worldwide. It is
expected there will be a shift in the geographic distribution of revenues with
an increase in EAME and a decline in CSA based on the current backlog. Revenues
are dependent on the level and timing of customer releases of new business
awarded to the Company, and on other matters such as project schedules.
GROSS PROFIT--Gross profit increased $4.1 million to $76.4 million in 1999
from $72.3 million in 1998. Gross profit as a percentage of revenues ("gross
margin") was 11.3% in 1999 and 9.3% in 1998. Gross profit increased as a result
of project cost savings, contract extras and expanded scope. Gross profit also
benefited from favorable developments related to outstanding legal exposures.
The Company expects gross margin during 2000 to be comparable to that achieved
during 1999.
INCOME FROM OPERATIONS--Income from operations increased 11.4% to $29.4
million in 1999, compared with $26.4 million in 1998. The significant turnaround
in CSA, driven by increased volume and improved project execution, was a key
reason for the increase. Selling and administrative expenses increased to $49.8
million, or 7.4% of revenues, in 1999 compared with $47.0 million, or 6.1% of
revenues, in 1998. Most of the increase came in the fourth quarter of 1999 and
reflects the cost of stock and performance-based pay, selling expense for
pursuing work in new geographies and costs related to the Company's new
high-technology businesses. The Company expects higher selling and
administrative expenses during 2000 compared with prior years, as the Company
continues to pursue work in new geographies and for costs related to the
Company's new high-technology businesses.
<PAGE> 4
1999 ANNUAL REPORT 23
Interest expense decreased $0.5 million to $3.0 million in 1999 from $3.5
million in 1998. The decrease primarily reflected lower average debt levels.
Interest income consisted primarily of interest earned on cash balances at
non-U.S. subsidiaries and decreased $0.8 million to $0.8 million in 1999
compared with $1.6 million in 1998. Net interest expense increased $0.3 million
to $2.2 million in 1999 compared with $1.9 million in 1998.
The Company recorded income tax expense of $7.6 million in 1999 compared with
a $7.3 million income tax expense in 1998. The effective tax rate was 28.0% in
1999 compared with 30.0% in 1998. The lower effective tax rate was the result of
higher earnings in countries with lower tax rates.
Net income for 1999 was $18.4 million, or $1.65 per diluted share, an 18%
increase, compared with net income of $17.0 million, or $1.40 per diluted share,
for 1998.
1998 VERSUS 1997
NEW BUSINESS TAKEN/BACKLOG--New business taken during 1998 increased by $3.0
million to $761.0 million compared with $758.0 million in 1997. The level of new
business taken was achieved in spite of difficult market conditions for the
engineering and construction industry. Management believes the Company's more
deliberate and focused marketing strategy--including the pursuit of prospects in
new geographic areas and beyond the Company's traditional scope of
work--contributed to the 1998 new business taken results. Included in the 1998
new business taken was an expansion of an order for a large iron plant for
Saldanha Steel in South Africa and three heavy crude oil projects in Venezuela.
Over 60% of the new business taken during 1998 was for contracts awarded outside
of North America. During 1998, new business taken increased 60% in the Central
and South America area, 10% in the Europe, Africa, Middle East area and 5% in
North America, but declined 46% in the Asia Pacific area as a result of the
Asian economic downturn. Backlog at December 31, 1998 was $507.8 million
compared with the backlog at December 31, 1997 of $555.0 million.
REVENUES--Revenues increased $102.9 million, or 15.3%, to $775.7 million in
1998 from $672.8 million in 1997. Major projects contributing to revenues in
1998 were the iron plant for Saldanha Steel in South Africa and an ammonia plant
expansion and a liquefied natural gas facility in North America. Revenues in
1998 were favorably impacted by a higher volume of work in all geographic areas,
except Asia Pacific. The decline in Asia Pacific 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 increased $8.7 million to $72.3 million in 1998
from $63.6 million in 1997. Gross profit as a percentage of revenues was 9.3% in
1998 and 9.5% in 1997. The CSA area had higher than expected costs and
disappointing execution results. Excluding the disappointing results in the CSA
area, gross margin in 1998 would have been 11.0% of revenues, which was
consistent with unearned gross margin in the Company's December 31, 1998
backlog.
INCOME FROM OPERATIONS--Income from operations increased 12.4% to $26.4
million in 1998, compared with $23.5 million in 1997, excluding the one-time,
non-cash Management Plan charge (Note 9). This increase in operating income was
the result of a more than threefold increase in North America and a 50% increase
in EAME. These accomplishments were partially offset by the operating loss in
CSA. Including the one-time, non-cash Management Plan charge, the Company
reported operating income of $6.8 million in 1997. Selling and administrative
expenses were $47.0 million or 6.1% of revenues in 1998 compared with $45.0
million or 6.7% of revenues in 1997.
Interest expense decreased $0.4 million to $3.5 million in 1998 from $3.9
million in 1997. The decrease primarily reflected lower interest expense on
corporate revolving debt, partially offset by higher costs for short-term
borrowing outside of the United States. Interest income consisted primarily of
interest earned on cash balances at non-U.S. subsidiaries and increased $0.2
million to $1.6 million in 1998 compared with $1.4 million in 1997. Net interest
expense decreased $0.6 million to $1.9 million in 1998 compared with $2.5
million in 1997.
The Company recorded income tax expense of $7.3 million in 1998 compared with
a $0.7 million income tax benefit in 1997. The lower income tax expense for 1997
was mostly due to a $6.6 million income tax benefit attributable to 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 30.0% in 1998. Compared with the prior year, income tax expense
increased due to the higher effective tax rate that resulted from reduced
project profitability in lower tax rate jurisdictions.
Net income for 1998 was $17.0 million, or $1.40 per diluted share, compared
with net income of $15.5 million, or $1.24 per diluted share for 1997, excluding
the Management Plan charge. Including the one-time, non-cash Management Plan
charge in 1997, the Company reported net income of $5.4 million or $0.43 per
diluted share.
<PAGE> 5
24 CHICAGO BRIDGE & IRON COMPANY N.V.
LIQUIDITY AND CAPITAL RESOURCES
In 1999, the Company generated cash from operations of $22.5 million compared
with $50.8 million in 1998. A significant contributor to positive operating cash
flow in 1998 was an $18.3 million reduction in contract capital. In 1999,
contract capital increased by $1.9 million; however, the Company reduced
contract capital by $25.4 million during the fourth quarter of 1999 and
continues to focus on improving cash flow from operations by reducing contract
capital.
In 1999, the Company expended $13.5 million for capital expenditures and
realized $4.5 million in proceeds from the sale of field equipment and an excess
warehouse facility. The capital expenditures in 1999 included $5.9 million for
information systems, $4.8 million for field equipment, and $2.8 million for the
expansion and improvement of facilities. In 1998, the Company expended $12.2
million for capital expenditures and realized $10.1 million in proceeds from the
sale of an excess manufacturing facility and field equipment. The capital
expenditures in 1998 included $5.9 million for field equipment, $3.9 million for
information systems, and $2.4 million for the expansion and improvement of
facilities. The Company anticipates that capital expenditures in the near future
will be lower than the level of depreciation and amortization, although there
can be no assurance that such levels will not increase.
On September 30, 1999, the Company and a group of five banks entered into a
three-year, unsecured $100 million revolving credit facility (the "Revolving
Credit Facility"), effective October 1, 1999. The Revolving Credit Facility
replaced the Company's prior existing competitive advance and revolving credit
facility, which was terminated by the Company effective October 1, 1999. Under
the new Revolving Credit Facility, committed amounts are available for general
corporate purposes, including working capital, letters of credit, share
repurchase, acquisitions and other requirements of the Company. Letters of
credit may be issued, subject to a $50 million sublimit, on either a committed
or a competitive bid basis and expire one year after issuance, unless otherwise
provided. The Revolving Credit Facility will terminate on September 30, 2002.
During 1999, the Company repurchased 1,354,000 shares, or 11% of common
shares outstanding as of year-end 1998, for $17.5 million. As a result of
repurchasing these shares, the Company returned to a more normal debt level,
ending the year with $25.0 million in long-term debt, up from $5.0 million at
the end of 1998. During 1998, the Company made significant progress in reducing
long-term debt, ending the year with $5.0 million in long-term debt, which was
lower than the Company's expected normal debt level, down from $44.0 million at
the end of 1997. This reduction in long-term debt was achieved even as the
Company repurchased $14.0 million of its common stock during 1998. The Company
ended 1999 with contract capital of $78.9 million, a $1.9 million increase from
December 31, 1998. Cash and cash equivalents at year-end were $18.4 million
compared with $5.6 million at the end of 1998. During the first two months of
2000, the Company has repurchased 968,000 additional shares for $15.3 million.
In addition to liquidity generated through the Revolving Credit Facility, the
Company intends to continue to improve its contract capital position through
aggressive management of its individual components, including programs to reduce
accounts receivable, to manage contracts in progress and to maximize available
terms from trade suppliers.
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 contract capital and capital expenditure needs for at least the next 24
months.
As part of its strategy to create step-change growth in sustainable revenues,
the Company intends to pursue acquisition opportunities that extend the
Company's core competencies. The financing of these transactions may come from
cash, the issuance of securities or additional borrowing arrangements.
As previously reported, the Company continues to be impacted by the Tuban
Project, a $2.5 billion petrochemical project in Tuban, West Java, Indonesia,
where work remains suspended. At December 31, 1999, the Company's backlog
related to this project was approximately $50 million. Similar to other major
contractors involved in the project, the Company has received approval to
redeploy certain material purchased for this project in order to reduce its
costs. While the Company believes the Tuban Project remains viable, the $28.7
million outstanding net receivable has been recorded as a non-current asset in
recognition of the continued suspension of this project. The Company believes
work on the Tuban Project ultimately will resume, but no assurances can be given
that this will happen, or even though the project resumes, that it will not have
an adverse impact on the Company.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company is exposed to market risk from changes in foreign currency exchange
rates which may adversely affect its results of operations and financial
condition. The Company seeks to minimize the risks from these foreign currency
exchange rate fluctuations through its regular operating and financing
activities and, when deemed appropriate, through its limited use of foreign
currency forward contracts. The Company's exposure to changes in foreign
currency exchange rates arises from receivables, payables and firm commitments
from international transactions, as well as intercompany loans utilized to
finance non-U.S. subsidiaries. The Company does not use financial instruments
for trading or other speculative purposes.
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 cash equivalents, trade and accounts receivable, payables, notes
payable and long-term debt approximates fair value. The Company's accounting
policies and a quantification of its derivative financial instruments are
included in Note 2 (Significant Accounting Policies) of the Notes to
Consolidated Financial Statements.
<PAGE> 6
1999 ANNUAL REPORT 25
EURO CONVERSION
The Euro was introduced on January 1, 1999, at which time the conversion rates
between the currencies of the 11 participating European countries that are
members of the European Economic and Monetary Union (EMU) and the Euro were set.
The local currencies will continue to be used as legal tender through January 1,
2002. Thereafter, the local currencies will be canceled and Euro bills and coins
will be used in the 11 participating countries. The Company does not anticipate
that the transition to the Euro will have a significant impact on its results of
operations, financial position or cash flows.
YEAR 2000 COMPLIANCE
The Company's worldwide businesses experienced a smooth and successful
transition into the Year 2000. No significant problems have been encountered and
the Company's business functions were not adversely impacted. The Company
believes its thorough assessment and remediation efforts were a major factor in
reducing the number of incidents to a few minor incidents, which were
immediately resolved. The Company continues to remain alert to potential Year
2000-related problems. Any additional efforts to be expended on this matter are
not anticipated to be significant.
The Company has implemented the J.D. Edwards information system (an
enterprise resource planning system). Although the decision to implement this
new information system was made independently of the Company's Year
2000-readiness effort, a portion of the system enabled the Company to meet part
of its Year 2000-readiness needs. Over the next several years the Company plans
to continue to integrate its other software systems into J.D. Edwards in order
to further utilize the system's capabilities.
The Company identified key material suppliers and service providers
("suppliers") and communicated with these suppliers regarding their state of
readiness on Year 2000 issues. The Company has not experienced any business
disruptions as a result of any failure of suppliers to remediate their own Year
2000 issues.
The Company completed its assessment and remediation of Year 2000 issues at a
cost of $1.9 million ($1.8 million expense and $0.1 million capitalized for the
accelerated purchase of desktop hardware and other equipment). The Company
anticipates no further significant costs related to Year 2000 issues. The cost
estimate excludes the direct costs of the J.D. Edwards implementation, which
have been capitalized.
Not all Year 2000 issues were expected to surface in January 2000. However,
based upon assurances received from suppliers and the Company's review of
pertinent business systems and documentation, the Company believes that its
major business systems will not suffer any material disruption resulting from
such Year 2000 issues which would impair the Company's ability to deliver
products and services. While the Company believes all of such Year 2000 issues
have been anticipated and corrected, there can be no assurance that the Company
will not suffer a business interruption caused by such Year 2000 issue.
Because of the uncertainties the Company faced with regard to Year 2000
issues, it developed contingency plans to address identified potential risks and
to provide for continuation of its critical operations in spite of possible Year
2000 disruptions. These contingency plans remain available for the Company's
specific global locations and were customized to address the severity levels of
Year 2000 issues that may be encountered and include strategic use of some
alternate sources of electrical power and communications equipment for specific
areas to help minimize a potential business interruption.
FORWARD-LOOKING STATEMENTS
This discussion and analysis contains certain forward-looking statements that
involve a number of risks and uncertainties. Actual events or results may differ
materially from the Company's expectations. In addition to matters described
herein, the uncertain timing of awards and contracts, project cancellation
risks, operating risks, risks associated with fixed price contracts, risks
associated with percentage of completion accounting, fluctuating revenues and
cash flow, dependence on the petroleum and petrochemical industries, competitive
conditions, the Tuban project, Year 2000 issues, as well as risk factors
detailed from time to time in the Company's reports filed with the Securities
and Exchange Commission (including, but not limited to its Registration
Statement on Form S-1 [File No.333-18065], as amended), may affect the actual
results achieved by the Company. The Company does not undertake to update any
forward-looking statement contained herein or that may be made from time to time
by or on behalf of the Company.
<PAGE> 7
26 CHICAGO BRIDGE & IRON COMPANY N.V.
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 as of
December 31, 1999 and 1998, and the related consolidated statements of income,
changes in shareholders' equity and cash flows for each of the three years ended
December 31, 1999. 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, 1999 and 1998, and the results of its
operations and cash flows for each of the three years ended December 31, 1999,
in conformity with accounting principles generally accepted in the United
States.
Arthur Andersen
Amsterdam, The Netherlands
February 9, 2000
<PAGE> 8
1999 ANNUAL REPORT 27
CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share data)
YEARS ENDED DECEMBER 31, 1999 1998 1997
- ------------------------------------------------------------------------------
Revenues $ 674,770 $ 775,692 $672,811
Cost of revenues 598,335 703,363 609,173
- ------------------------------------------------------------------------------
Gross profit 76,435 72,329 63,638
Selling and administrative expenses 49,849 46,959 44,988
Management Plan charge (Note 9) -- -- 16,662
Other operating income, net (2,788) (991) (4,807)
- ------------------------------------------------------------------------------
Income from operations 29,374 26,361 6,795
Interest expense (2,980) (3,488) (3,892)
Interest income 766 1,616 1,416
- ------------------------------------------------------------------------------
Income before taxes and minority interest 27,160 24,489 4,319
Income tax (expense) benefit (7,605) (7,347) 730
- ------------------------------------------------------------------------------
Income before minority interest 19,555 17,142 5,049
Minority interest in (income) loss (1,171) (105) 354
- ------------------------------------------------------------------------------
Net income $ 18,384 $ 17,037 $ 5,403
==============================================================================
Net income per share (Note 2)
Basic $ 1.67 $ 1.41 $ 0.43
Diluted 1.65 1.40 0.43
- ------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
<PAGE> 9
28 CHICAGO BRIDGE & IRON COMPANY N.V.
CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
YEARS ENDED DECEMBER 31, 1999 1998
- ------------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------------
Cash and cash equivalents $ 18,407 $ 5,636
Accounts receivable 93,811 143,911
Contracts in progress with earned revenues
exceeding related progress billings (Note 3) 48,486 51,953
Other current assets 7,359 6,760
- ------------------------------------------------------------------------------
Total current assets 168,063 208,260
- ------------------------------------------------------------------------------
Property and equipment (Note 6) 104,600 110,481
Goodwill (Note 2) 18,010 18,051
Long-term receivable, net (Note 7) 28,739 --
Other non-current assets 17,913 11,917
- ------------------------------------------------------------------------------
Total assets $ 337,325 $348,709
==============================================================================
LIABILITIES
- ------------------------------------------------------------------------------
Notes payable (Note 4) $ 665 $ 3,088
Accounts payable 36,979 41,536
Accrued liabilities (Note 6) 49,797 50,045
Contracts in progress with progress billings
exceeding related earned revenues (Note 3) 53,314 77,359
Income taxes payable 4,942 2,882
- ------------------------------------------------------------------------------
Total current liabilities 145,697 174,910
- ------------------------------------------------------------------------------
Long-term debt (Note 4) 25,000 5,000
Other non-current liabilities (Note 6) 57,367 62,199
Minority interest in subsidiaries 4,851 4,944
- ------------------------------------------------------------------------------
Total liabilities 232,915 247,053
- ------------------------------------------------------------------------------
Commitments and Contingencies (Note 7)
SHAREHOLDERS' EQUITY
- ------------------------------------------------------------------------------
Common stock, NLG .01 par value; authorized:
35,000,000 in 1999 and 50,000,000 in 1998;
issued: 11,295,687 in 1999 and 12,517,552
in 1998 (Note 10) 67 74
Additional paid-in capital 93,393 94,037
Retained earnings 44,621 28,851
Stock held in Trust (Note 11) (12,700) --
Treasury stock, at cost: 1,022,705 in 1999
and 1,103,258 in 1998 (13,729) (13,144)
Cumulative translation adjustment (7,242) (8,162)
- ------------------------------------------------------------------------------
Total shareholders' equity 104,410 101,656
- ------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 337,325 $348,709
==============================================================================
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
<PAGE> 10
1999 ANNUAL REPORT 29
CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
YEARS ENDED DECEMBER 31, 1999 1998 1997
- ------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------------------------------------------------
Net income $ 18,384 $ 17,037 $ 5,403
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 17,765 17,710 16,911
Management Plan charge (Note 9) -- -- 16,662
Increase/(decrease) in deferred
income taxes (3,689) 1,137 (9,292)
Gain on sale of property and equipment (1,963) (991) (1,623)
Change in operating assets and
liabilities (see below) (8,036) 15,931 12,346
- ------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 22,461 50,824 40,407
- ------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------------------------------------------------
Proceeds from sale of property and equipment 4,539 10,107 13,048
Capital expenditures (13,450) (12,249) (34,955)
- ------------------------------------------------------------------------------
Net Cash Used in Investing Activities (8,911) (2,142) (21,907)
- ------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------------------------------------------------
Increase/(decrease) in notes payable (2,423) 1,930 (1,956)
Payment to former Parent Company -- -- (6,008)
Net borrowing/(repayment) under Revolving
Credit Facility 20,000 (39,000) 44,000
Net repayment of debt to former Parent Company -- -- (53,907)
Purchase of treasury stock (17,484) (13,970) --
Issuance of treasury stock 1,742 652 --
Dividends paid (2,614) (2,898) (2,253)
- ------------------------------------------------------------------------------
Net Cash Used in Financing Activities (779) (53,286) (20,124)
- ------------------------------------------------------------------------------
Increase/(decrease) in cash and
cash equivalents 12,771 (4,604) (1,624)
Cash and cash equivalents, beginning of
the year 5,636 10,240 11,864
- ------------------------------------------------------------------------------
Cash and cash equivalents, end of the year $ 18,407 $ 5,636 $ 10,240
==============================================================================
CHANGE IN OPERATING ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
(Increase)/decrease in receivables, net $ 13,355 $ 13,874 $(56,110)
(Increase)/decrease in contracts in
progress, net (20,578) 15,768 54,693
Increase/(decrease) in accounts payable 5,333 (11,368) 28,100
- ------------------------------------------------------------------------------
Change in contract capital (1,890) 18,274 26,683
(Increase)/decrease in other current assets (599) 6,318 (5,714)
Increase/(decrease) in income taxes payable 2,060 (2,278) 720
Increase/(decrease) in accrued and other
non-current liabilities (5,080) (3,275) (8,396)
(Increase)/decrease in other (2,527) (3,108) (947)
- ------------------------------------------------------------------------------
Total $ (8,036) $ 15,931 $ 12,346
==============================================================================
SUPPLEMENTAL CASH FLOW DISCLOSURES
- ------------------------------------------------------------------------------
Cash paid for interest $ 2,939 $ 3,899 $ 4,619
Cash paid for income taxes 9,456 5,200 5,310
- ------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
<PAGE> 11
30 CHICAGO BRIDGE & IRON COMPANY N.V.
CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
(In thousands)
TOTAL
ADDITIONAL STOCK TREASURY CUMULATIVE SHARE-
COMMON PAID-IN RETAINED HELD IN STOCK, TRANSLATION HOLDERS'
STOCK CAPITAL EARNINGS TRUST AT COST ADJUSTMENT EQUITY
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 $ 1 $ 79,958 $ 11,562 $ -- $ -- $ (775) $ 90,746
Reorganization (Note 1) 73 (14) -- -- -- -- 59
Comprehensive income -- -- 5,403 -- -- (3,876) 1,527
Management Plan charge (Note 9) -- 16,662 -- -- -- -- 16,662
Dividends to common shareholders -- -- (2,253) -- -- -- (2,253)
Common Stock offering costs -- (2,915) -- -- -- -- (2,915)
- ------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 74 93,691 14,712 -- -- (4,651) 103,826
Comprehensive income -- -- 17,037 -- -- (3,511) 13,526
Dividends to common shareholders -- -- (2,898) -- -- -- (2,898)
Long-Term Incentive Plan
amortization -- 520 -- -- -- -- 520
Purchase of treasury stock -- -- -- -- (13,970) -- (13,970)
Issuance of treasury stock -- (174) -- -- 826 -- 652
- ------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 74 94,037 28,851 -- (13,144) (8,162) 101,656
Comprehensive income -- -- 18,384 -- -- 920 19,304
Dividends to common shareholders -- -- (2,614) -- -- -- (2,614)
Long-Term Incentive Plan
amortization -- 1,806 -- -- -- -- 1,806
Stock held in Trust (Note 11) -- 12,700 -- (12,700) -- -- --
Purchase of treasury stock -- -- -- -- (17,484) -- (17,484)
Issuance of treasury stock -- (1,406) -- -- 3,148 -- 1,742
Cancellation of treasury stock (7) (13,744) -- -- 13,751 -- --
- ------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 $ 67 $ 93,393 $ 44,621 $(12,700) $(13,729) $(7,242) $104,410
============================================================================================================
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
<PAGE> 12
1999 ANNUAL REPORT 31
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 "Company"), the
business of which was formerly operated by Chicago Bridge & Iron Company and
Subsidiaries ("CB&I"), is a global engineering and construction company
specializing in the design and engineering, fabrication, field erection and
repair of bulk liquid terminals, storage tanks, process 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 the 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.
HISTORICAL ORGANIZATION--During the periods and as of the dates prior to
January 1, 1996, CB&I 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 CB&I'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"). Related-party transactions
recorded with Industries or Praxair (the "former Parent Company"), not disclosed
elsewhere, were not material.
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, after the
Reorganization discussed below, 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 to Chicago Bridge & Iron Company N.V., a corporation organized
under the laws of The Netherlands. The 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. The Reorganization is
reflected in the Company's financial statements effective January 1, 1997.
NATURE OF OPERATIONS--Projects for the worldwide petroleum and petrochemical
industry accounted for approximately 60-70% of the Company's revenues in 1999,
1998 and 1997. 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 due to the
price of oil or changing taxes, price controls and laws and regulations related
to the petroleum and petrochemical industry.
ACQUISITION--On September 30, 1999, the Company purchased the assets and
certain liabilities of XL Systems ("XL"). This acquisition enables the Company
to combine its existing experience in vacuum facility construction and project
management with XL's thermal vacuum technology and manufacturing capabilites.
The acquisition was accounted for under the purchase method of accounting.
Financial information has not been disclosed separately as the amounts were not
significant.
<PAGE> 13
32 CHICAGO BRIDGE & IRON COMPANY N.V.
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 in the United States 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 change orders and
estimated minimum recoveries of claims. Losses expected to be incurred on jobs
in process are charged to income as soon as such losses are known.
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 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 (losses)/gains are
included in the determination of income, and were $(550) in 1999, $615 in 1998,
and $1,387 in 1997.
PER SHARE COMPUTATIONS--
1999 1998 1997
- -------------------------------------------------------------------------------
Net income $ 18,384 $ 17,037 $ 5,403
- -------------------------------------------------------------------------------
Weighted average shares outstanding
--basic 10,998,872 12,117,573 12,517,552
Effect of restricted stock units 141,282 29,438 --
Effect of performance share units 14,064 5,127 --
Effect of directors deferred
fee shares 7,626 711 --
Effect of stock options 6,997 -- --
- -------------------------------------------------------------------------------
Weighted average shares outstanding
--diluted 11,168,841 12,152,849 12,517,552
===============================================================================
NET INCOME PER SHARE
- -------------------------------------------------------------------------------
Basic $ 1.67 $ 1.41 $ 0.43
Diluted 1.65 1.40 0.43
- -------------------------------------------------------------------------------
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 $17,263 in 1999,
$17,222 in 1998 and $16,423 in 1997. 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--The Company records the excess of cost over the fair value of
tangible net assets as goodwill on the balance sheet. Goodwill is amortized
principally on a straight-line basis over 40 years. Amortization expense was
$502 in 1999, and $488 in 1998 and 1997. Accumulated amortization was $1,966 as
of December 31, 1999 and $1,464 as of December 31, 1998. 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 goodwill would be
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 IPO goodwill balance dollar-for-dollar until zero, and
thereafter will reduce income tax expense.
PRECONTRACT COSTS--Precontract costs are charged to cost of revenues as
incurred. However, certain precontract costs are deferred to the balance sheet
if their recoverability from the contract is probable.
<PAGE> 14
1999 ANNUAL REPORT 33
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 cash equivalents, 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, 1999, the Company recorded interest expense on notes payable,
long-term debt and certain other interest bearing obligations.
FORWARD CONTRACTS--Although the Company does not engage in currency
speculation, it periodically uses forward contracts to hedge foreign currency
transactions. Gains or losses on forward contracts are included in income. At
December 31, 1999, the Company had $2,185 of outstanding foreign currency
exchange contracts to sell Dutch guilders, $1,059 of outstanding foreign
currency exchange contracts to sell British pounds and a $645 outstanding
foreign exchange contract to buy Spanish pesatas. These forward contracts hedged
intercompany loans utilized to finance non-U.S. subsidiaries and will mature
within 20 days after year end. Also at December 31, 1999, the Company had a
$1,250 outstanding foreign currency exchange contract to buy Singapore dollars.
This forward contract hedges contract costs to be incurred in U.S. dollars with
revenues to be earned in Singapore dollars and will mature within 15 days after
year end. The fair value of these forward contracts approximated their carrying
value in the financial statements at December 31, 1999. 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.
NEW ACCOUNTING STANDARDS--In June 1998, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133, as
amended by SFAS 137, is effective for fiscal years beginning after June 15,
2000. SFAS 133 requires all derivative instruments be recorded on the balance
sheet at their fair value and that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria are
met. The Company has not yet determined the impact that the adoption of SFAS 133
will have on its earnings or statement of financial position. However, the
Company anticipates that, due to its limited use of derivative instruments, the
adoption of SFAS 133 will not have a significant effect on its results of
operations or its financial position.
RESEARCH AND DEVELOPMENT--Expenditures for research and development
activities, which are charged to income as incurred, amounted to $1,294 in 1999,
$860 in 1998 and $1,670 in 1997.
3. CONTRACTS IN PROGRESS
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 contracts in progress is reported as a
current asset and the excess of progress billings over revenues recognized on
contracts in progress is reported as a current liability as follows:
<TABLE>
<CAPTION>
1999 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
CONTRACTS IN PROGRESS
- -------------------------------------------------------------------------------------------------------
Revenues recognized on contracts in progress $ 808,312 $ 871,100
Billings on contracts in progress (813,140) (896,506)
- -------------------------------------------------------------------------------------------------------
$ (4,828) $ (25,406)
=======================================================================================================
Shown on balance sheet as:
Contracts in progress with earned revenues exceeding related progress billings $ 48,486 $ 51,953
Contracts in progress with progress billings exceeding related earned revenues (53,314) (77,359)
- -------------------------------------------------------------------------------------------------------
$ (4,828) $ (25,406)
=======================================================================================================
</TABLE>
4. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable consist primarily of short-term loans borrowed under credit
facilities made available by commercial banks. The Company's weighted average
interest rate for notes payable was 8.5% at December 31, 1999 and 8.5% at
December 31, 1998.
On September 30, 1999, the Company and a group of five banks entered into a
three-year, unsecured $100,000 revolving credit facility (the "Revolving Credit
Facility"), effective October 1, 1999. The Revolving Credit Facility replaced
the Company's prior existing competitive advance and revolving credit facility,
which was terminated by the Company effective October 1, 1999. Under the new
Revolving Credit Facility, committed amounts are available for general corporate
purposes, including working capital, letters of credit, share repurchase,
acquisitions and other requirements of the Company. A facility fee is based on
the aggregate commitment of the Revolving Credit Facility. Letters of credit may
be issued, subject to a $50,000 sublimit, on either a committed or a competitive
bid basis and expire one year after issuance, unless otherwise provided. The
weighted average interest rate was 6.9% at December 31, 1999 and 5.9% at
December 31, 1998. The Revolving Credit Facility contains certain restrictive
covenants including net worth, interest coverage and leverage ratios, and
capital expenditures, among other restrictions. The Revolving Credit Facility
will terminate on September 30, 2002.
Capitalized interest was insignificant in 1999 and 1998, and $599 in 1997.
<PAGE> 15
34 CHICAGO BRIDGE & IRON COMPANY N.V.
5. LEASES
Certain facilities and equipment are rented under operating leases that expire
at various dates through 2006. Rental expense on operating leases was $14,410 in
1999, $12,596 in 1998 and $9,268 in 1997. Future rental commitments during the
years ending in 2000 through 2004 and thereafter are $7,536, $3,215, $1,601,
$1,050, $485, and $569, respectively.
6. SUPPLEMENTAL BALANCE SHEET DETAIL
1999 1998
- ------------------------------------------------------------------------------
COMPONENTS OF PROPERTY AND EQUIPMENT
- ------------------------------------------------------------------------------
Land and improvements $ 10,937 $ 11,267
Buildings and improvements 40,961 39,527
Plant and field equipment 106,127 104,188
- ------------------------------------------------------------------------------
Total property and equipment 158,025 154,982
- ------------------------------------------------------------------------------
Accumulated depreciation (53,425) (44,501)
- ------------------------------------------------------------------------------
Net property and equipment $ 104,600 $110,481
==============================================================================
COMPONENTS OF ACCRUED LIABILITIES
- ------------------------------------------------------------------------------
Payroll, vacation, bonuses and profit-sharing $ 15,790 $ 15,762
Self-insurance/retention reserves 6,155 7,446
Postretirement benefit obligations 2,283 2,295
Pension obligation 1,520 1,529
Contract cost and other accruals 24,049 23,013
- ------------------------------------------------------------------------------
Accrued liabilities $ 49,797 $ 50,045
==============================================================================
COMPONENTS OF OTHER NON-CURRENT LIABILITIES
- ------------------------------------------------------------------------------
Self-insurance/retention reserves $ 14,684 $ 19,541
Postretirement benefit obligations 22,959 24,258
Pension obligation 11,513 12,953
Other 8,211 5,447
- ------------------------------------------------------------------------------
Other non-current liabilities $ 57,367 $ 62,199
==============================================================================
7. COMMITMENTS AND CONTINGENCIES
LONG-TERM RECEIVABLE, NET--In late 1996, the Company took 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 currently about 40%
complete, remains suspended. At December 31, 1999, the Company's backlog
related to this project was approximately $50,000. Similar to other major
contractors involved in the project, the Company has received approval to
redeploy certain material purchased for this project in order to reduce its
costs. While the Company believes the Tuban Project remains viable, the $28,700
outstanding net receivable has been recorded as a non-current asset in
recognition of the continued suspension of this project. The Company believes
work on the Tuban Project ultimately will resume, but no assurances can be given
that this will happen, or even though the project resumes, that it will not have
an adverse impact on the Company.
ENVIRONMENTAL MATTERS--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 with respect to such facilities.
The Company does not consider it to be probable that a claim will be asserted
with respect to such facilities which claim is reasonably possible to have an
unfavorable outcome, which in each case would be material to the Company. The
Company believes that any potential liability for these matters will not 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.
<PAGE> 16
1999 ANNUAL REPORT 35
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. While
the Company believes any liability in excess of a $2,000 deductible is covered
by insurance, and 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 material 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. At December 31, 1999, the Company and certain
subsidiaries had provided $161,245 of performance bonds and letters of credit to
support its contracting activities arising in the ordinary course of business.
This amount fluctuates based on the level of contracting activity.
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. At December 31,
1999, the Company had outstanding surety bonds and letters of credit of $23,646
relating to its insurance program.
<PAGE> 17
36 CHICAGO BRIDGE & IRON COMPANY N.V.
8. POSTRETIREMENT BENEFITS
DEFINED CONTRIBUTION PLANS--Effective January 1, 1997, the Company adopted a
tax-qualified defined contribution plan ("Chicago Bridge & Iron Savings Plan")
for eligible employees. This Plan substantially replaces the former Parent
Company-sponsored pension and 401(k) plans discussed below. This 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 in the form of cash or the Company's common
stock to be determined annually by the Company. The Company expensed $7,369 in
1999, $7,845 in 1998 and $6,949 in 1997 for the Chicago Bridge & Iron Savings
Plan.
Effective January 1, 1998, the Company established a defined contribution
plan ("International Savings and Benefit Plan") for eligible employees. This
Plan consists of a voluntary salary deferral feature, a Company matching
contribution, and an additional Company profit-sharing contribution to be
determined annually by the Company. The Company expensed $433 in 1999 and $200
in 1998 for the International Savings and Benefit 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 not
significant in 1999, 1998 and 1997.
DEFINED BENEFIT PLANS--The Company has participated 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, CB&I participated
in a defined benefit plan sponsored by the former Parent Company (the "CBI
Industries Pension Plan").
The following tables reflect information for the Canadian plans:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMPONENTS OF NET PERIODIC PENSION COST
- ------------------------------------------------------------------------------------------------
Service cost $ -- $ -- $ --
Interest cost 576 687 1,007
Expected return on plan assets (1,227) (1,513) (1,806)
Recognized net actuarial (gain)/loss 92 (1,116) (126)
Settlement loss due to annuity purchase (44) 147 --
Settlement loss due to distribution of surplus to members -- 1,016 --
- ------------------------------------------------------------------------------------------------
Net periodic pension cost/(income) $ (603) $ (779) $ (925)
================================================================================================
CHANGE IN PENSION BENEFIT OBLIGATION 1999 1998
- -------------------------------------------------------------------------------------
Benefit obligation at beginning of year $ 8,433 $ 11,374
Interest cost 576 687
Actuarial (gain)/loss (44) 147
Benefits paid (974) (3,037)
Annuity purchase (1,862) --
Currency translation 529 (738)
- -------------------------------------------------------------------------------------
Benefit obligation at end of year $ 6,658 $ 8,433
- -------------------------------------------------------------------------------------
CHANGE IN PLAN ASSETS
- -------------------------------------------------------------------------------------
Fair value at beginning of year $ 15,983 $ 23,532
Actual return on plan assets 1,791 1,326
Benefits paid (974) (4,053)
Annuity purchase (1,862) --
Employer reversion -- (3,831)
Currency translation 943 (991)
- -------------------------------------------------------------------------------------
Fair value at end of year 15,881 15,983
- -------------------------------------------------------------------------------------
Funded status 9,223 7,550
Unrecognized net prior service costs 127 126
Unrecognized net actuarial gains (1,588) (986)
- -------------------------------------------------------------------------------------
Prepaid pension asset $ 7,762 $ 6,690
=====================================================================================
</TABLE>
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>
1999 1998 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.50 - 8.50% 6 - 8.50% 6 - 8.50%
Long-term rate of return on plan assets 7.50% 7.50% 7.50%
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 18
1999 ANNUAL REPORT 37
In 1997, a portion of the salaried plan was converted from a defined benefit
to a defined contribution arrangement. All active members ceased accruing
benefits under the defined benefit provision and commenced participation in the
defined contribution arrangement. The remaining members (retirees and deferreds)
continue to have benefits under the plan. In 1994, CB&I announced its intention
to terminate the field construction plan. During 1998, members who elected to
transfer their balance from this plan were paid out, and annuities were
purchased for members who elected the pension option and for the pensioners. The
remaining surplus assets reverted to CB&I. In 1996, CB&I announced its intention
to terminate the hourly plan. During 1999, annuities were purchased for all
hourly plan members entitled to basic benefits. Benefit settlements under the
hourly plan have been settled and no benefit liabilities remain. A surplus
sharing agreement with the participants was developed in 1998, and has been
presented to the plan members. During 1999, the hourly plan members agreed to
the surplus sharing agreement and it awaits approval by Canadian authorities.
Upon approval, a portion of the hourly plan assets will revert to the Company.
The Company made contributions of $3,275 in 1999, $2,773 in 1998 and $3,991
in 1997 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 CB&I and covered most U.S. salaried employees
of CB&I. Benefit accruals under the CBI Industries Pension Plan for CB&I
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 CB&I and Praxair. This obligation is payable ratably to Praxair over a
12-year period beginning December 1, 1997 with interest at 7.5%. The Company
incurred $1,070 in 1999, $1,178 in 1998 and $1,284 in 1997 of pension expense
and has a remaining pension liability to Praxair of $13,033 and $14,482 as of
December 31, 1999 and 1998.
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, CB&I discontinued its participation in the program
sponsored by the former Parent Company, and the future obligation for CB&I's
active employees as of December 31, 1996 under this program has been assumed by
the Company.
The following tables reflect information for the assumed and current
employees of the Company:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------------------------------------------
COMPONENTS OF NET PERIODIC POSTRETIREMENT BENEFIT COST
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 278 $ 298 $ 253
Interest cost 457 519 488
Unrecognized prior service cost (85) -- --
Recognized net actuarial gain -- (7) (47)
Curtailment gain -- -- (812)
- ------------------------------------------------------------------------------------------------------
Net periodic postretirement benefit cost/(income) $ 650 $ 810 $ (118)
======================================================================================================
</TABLE>
The significant assumptions used in determining the other postretirement
benefit expense were a discount rate of 6.75% in 1999, 7.0% in 1998, and 7.5% in
1997; and a salary scale of 4.25% in 1999, 1998 and 1997. During 1999, the
Company changed its postretirement life insurance benefits program. The
curtailment gain of $812 recognized in 1997 was related to the closure of the
Company's manufacturing facility in Kankakee, Illinois.
<TABLE>
<CAPTION>
1999 1998
- -------------------------------------------------------------------------------------------
CHANGE IN POSTRETIREMENT BENEFIT OBLIGATION
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Benefit obligation at beginning of year $ 7,946 $ 7,275
Service cost 278 298
Interest cost 457 519
Assumption change 63 173
Effect of plan change (1,276) --
Retiree contributions 255 77
Benefits paid (422) (396)
- -------------------------------------------------------------------------------------------
Benefit obligation at end of year 7,301 7,946
===========================================================================================
Funded status (7,301) (7,946)
Unrecognized prior service cost (1,192) --
Unrecognized net actuarial gain (599) (662)
- -------------------------------------------------------------------------------------------
Accrued postretirement benefit obligation $ (9,092) $ (8,608)
===========================================================================================
</TABLE>
<PAGE> 19
38 CHICAGO BRIDGE & IRON COMPANY N.V.
Because the medical plan offers a defined dollar benefit, the accumulated
postretirement benefit obligation, service cost and interest cost are unaffected
by a 1% increase or decrease in the assumed rate of medical inflation.
The Company's financial obligation with respect to retired employees of CB&I
as of December 31, 1996 was fixed at $21,400 as of December 31, 1996, as agreed
to by CB&I and Praxair. This obligation is payable ratably to Praxair over a
12-year period beginning December 1, 1997 with interest at 7.5%. The Company
incurred $1,326 in 1999, $1,457 in 1998 and $1,593 in 1997 of other
postretirement expense for these retirees and has a remaining postretirement
benefit liability to Praxair of $16,150 and $17,945 as of December 31, 1999 and
1998.
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 U.S. 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.
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 in March 2000, and had vested with respect to one participant in
January 1999. Upon vesting, the balance held in the individual participant's
account will be distributed, except as amended (Note 11). Forfeitures of
Management Plan shares under the provisions of the Management Plan will be
reallocated to the other Management Plan participants.
10. COMMON STOCK
The changes in the number of outstanding common shares were:
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year 11,414,294 12,517,552 12,517,552
Purchases of treasury shares (1,354,033) (1,158,300) --
Shares issued under employee and director stock plans 87,251 55,042 --
Shares issued under the Long-Term Incentive Plan 45,893 -- --
Shares contributed to the Chicago Bridge & Iron Savings Plan 79,577 -- --
- -------------------------------------------------------------------------------------------------------
Balance at end of year 10,272,982 11,414,294 12,517,552
=======================================================================================================
</TABLE>
At the Annual Meeting of Shareholders held on May 12, 1999, the shareholders
authorized the Company to cancel up to 30% of the Company's 12,517,552 issued
shares of Common Stock which may be acquired and held by the Company in its own
share capital. Any single cancellation is not to exceed 10% of the then issued
share capital of the Company. On July 28, 1999, 1,221,865 shares of Common Stock
owned by the Company were cancelled.
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 for the purchase of up to 250,000 of authorized and unissued
shares of Common Stock or treasury shares. As of December 31, 1999, 109,724
shares remain available for purchase.
LONG-TERM INCENTIVE PLAN (THE "INCENTIVE PLAN")--Under the Company's 1999
Long-Term Incentive Plan up to 1,130,000 shares and under the Company's 1997
Long-Term Incentive Plan up to 1,251,755 shares may be granted to its executive
officers, other management employees and Supervisory Directors in the form of
stock options, performance shares or restricted stock units. Total compensation
expense of $1,806 was recognized in 1999 and $520 in 1998 under the Incentive
Plan. At December 31, 1999, 1,213,574 shares remain available for grant under
the Incentive Plan.
<PAGE> 20
1999 ANNUAL REPORT 39
STOCK OPTIONS--In accordance with APB Opinion No. 25, no compensation cost
related to stock options granted has been recognized in the Company's Income
Statement. Had compensation cost for the Employee Stock Purchase Plan and stock
options granted under the Incentive Plan been determined consistent with FASB
Statement No. 123 (using the Black-Scholes option pricing model), the Company's
net income and net income per common share would have been reduced to the
following pro forma amounts:
1999 1998 1997
- -----------------------------------------------------------------------------
NET INCOME
- -----------------------------------------------------------------------------
As reported $ 18,384 $ 17,037 $ 5,403
Pro forma 17,442 16,677 4,740
NET INCOME PER COMMON SHARE--BASIC
- -----------------------------------------------------------------------------
As reported $ 1.67 $ 1.41 $ .43
Pro forma 1.59 1.38 .38
NET INCOME PER COMMON SHARE--DILUTED
- -----------------------------------------------------------------------------
As reported $ 1.65 $ 1.40 $ .43
Pro forma 1.56 1.37 .38
- -----------------------------------------------------------------------------
Using the Black-Scholes option pricing model, the fair value of each option
grant is estimated on the date of grant based on the following weighted-average
assumptions:
1999 1998 1997
- -----------------------------------------------------------------------------
Risk-free interest rate 5.42% 5.53% 6.87%
Expected dividend yield 1.83% 1.64% 1.33%
Expected volatility 44.19% 37.73% 31.65%
Expected life in years 10 10 10
- -----------------------------------------------------------------------------
The following table summarizes the changes in stock options for the years
ended December 31, 1999, 1998 and 1997:
Weighted Average
Stock Exercise Price Exercise Price
Options Per Share Per Share
- -------------------------------------------------------------------------------
Outstanding at January 1, 1997 -- -- --
Granted 520,248 $18.00 - $22.88 $18.06
Forfeited (15,945) $18.00 $18.00
- -------------------------------------------------------------------------------
Outstanding at December 31, 1997 504,303 $18.00 - $22.88 $18.06
Granted 241,900 $ 9.19 - $16.88 $13.84
Forfeited (58,128) $18.00 $18.00
- -------------------------------------------------------------------------------
Outstanding at December 31, 1998 688,075 $9.19 - $18.00 $16.54
Granted 175,106 $12.50 - $14.00 $13.13
Forfeited (7,500) $18.00 $18.00
- -------------------------------------------------------------------------------
Outstanding at December 31, 1999 855,681 $9.19 - $18.00 $15.83
===============================================================================
The option exercise price equals the Common Stock's market price on date of
grant. The weighted average fair value of options granted during 1999, 1998 and
1997 was $6.57, $6.56 and $8.77, respectively. At December 31, 1999, there were
855,681 options outstanding with a weighted-average remaining contractual life
of 8.03 years, and 46,725 of these options were exercisable with a weighted
average exercise price of $12.76.
Options on 161,700 shares granted in 1999 and 158,900 shares granted in
1998 vest over a four-year period at a rate of one-fourth each year. Options on
3,500 shares granted in 1999 and 7,000 shares granted in 1998 vest in one year.
In conjunction with the vesting of restricted stock units during 1999, options
on 9,906 shares were granted and vest in seven years from the date of grant;
however, if all of the shares issued with respect to the restricted stock units
remain held by the participant on the third anniversary of the option grant
date, vesting is accelerated to three years from the date of grant.
The outstanding options on 438,675 shares granted in 1997 and 76,000 shares
granted in 1998 are exercisable 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
five years from their date of grant for 490,636 shares and after nine years for
24,039 shares. Options on 6,900 shares granted in 1997 to non-executive
employees, having an exercise price of $21.38 or $22.88, were repriced to $18.00
in July 1998.
<PAGE> 21
40 CHICAGO BRIDGE & IRON COMPANY N.V.
PERFORMANCE SHARES--Performance shares of 53,300 were granted during 1999 and
52,300 were granted during 1998 under the Incentive Plan. The shares are
targeted to vest one-third each year over a three-year period, subject to
achievement of specific Company performance goals. Performance shares of 20,331
were issued during 1999.
RESTRICTED STOCK UNITS--Restricted stock units of 62,055 were granted during
1999 and 100,920 were granted in 1998 under the Incentive Plan. The units vest
one-fourth each year over a four-year period. In September 1999, 50,000
restricted stock units were granted to one executive officer as additional
consideration (Note 11), and vest upon the earlier of April 1, 2002 or a change
of control. Restrictions on 25,562 units lapsed during 1999. 1,440 restricted
stock units were forfeited during 1999.
11. STOCK HELD IN TRUST
The Management Plan (Note 9) and associated Trust was amended and restated in
September 1999 to provide for the transfer of 705,560 unvested shares (valued
for the balance sheet at the original Trust amount of $18.00 per share) of two
executive officers into a separate Trust. These two participants agreed to
exchange their interest in these shares on a one-for-one basis into restricted
stock units, which vest in March 2000, and represent a right to receive Common
Stock on the earliest to occur of (i) the first business day after April 1,
2002, (ii) the first business day after termination of employment, or (iii) a
change of control; and for additional consideration. The amendment and
restatement of the Management Plan does not change the rights of the remaining
participants.
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 is
being calculated using a separate return approach. The separate return approach
did not result in significant adjustments to the tax accounts.
1999 1998 1997
- --------------------------------------------------------------------------------
SOURCES OF INCOME/(LOSS)
BEFORE INCOME TAXES AND MINORITY INTEREST
- --------------------------------------------------------------------------------
U.S. $ (6,221) $ (143) $(23,778)(A)
Non-U.S. 33,381 24,632 28,097
- --------------------------------------------------------------------------------
Total $ 27,160 $ 24,489 $ 4,319
================================================================================
(A)The U.S. loss before income taxes and minority interest in 1997 includes
the Management Plan charge.
INCOME TAX (EXPENSE)/BENEFIT
- --------------------------------------------------------------------------------
Current income taxes--
U.S. $ -- $ -- $ --
Non-U.S. (6,580) (4,721) (4,596)
- --------------------------------------------------------------------------------
(6,580) (4,721) (4,596)
- --------------------------------------------------------------------------------
Deferred income taxes--
U.S. (1,448) 418 4,575
Non-U.S. 423 (3,044) 751
- --------------------------------------------------------------------------------
(1,025) (2,626) 5,326
- --------------------------------------------------------------------------------
Total income tax (expense)/benefit $ (7,605) $ (7,347) $ 730
================================================================================
RECONCILIATION OF INCOME TAXES AT THE STATUTORY RATE
AND INCOME TAX (EXPENSE)/BENEFIT
- --------------------------------------------------------------------------------
Tax (expense) at statutory rate $ (9,506) $ (8,571) $ (1,512)
State income taxes (65) -- (394)
Non-statutory tax rate differential 1,048 1,973 3,180
Other, net 918 (749) (544)
- --------------------------------------------------------------------------------
Income tax (expense)/benefit $ (7,605) $ (7,347) $ 730
================================================================================
Effective tax rate 28.0% 30.0% (16.9%)
- --------------------------------------------------------------------------------
The Company's statutory rate was The Netherlands' rate of 35% in 1999,
1998 and 1997.
<PAGE> 22
1999 ANNUAL REPORT 41
The principal temporary differences included in deferred income taxes
reported on the December 31, 1999 and 1998 balance sheets were:
1999 1998
- --------------------------------------------------------------------
CURRENT DEFERRED TAXES
- --------------------------------------------------------------------
Insurance $ 2,390 $ 2,425
Employee benefits 474 1,026
Contracts 2,627 2,405
Tax benefit of U.S. operating losses 4,564 5,307
Other 893 247
- --------------------------------------------------------------------
10,948 11,410
Valuation allowance (10,948) (11,410)
- --------------------------------------------------------------------
NON-CURRENT DEFERRED TAXES
- --------------------------------------------------------------------
Employee benefits 14,132 14,006
Insurance 9,675 7,533
Non-U.S. activity 5,304 5,299
Other 7,288 3,178
- --------------------------------------------------------------------
36,399 30,016
Valuation allowance (16,207) (15,745)
Depreciation (11,035) (11,064)
- --------------------------------------------------------------------
NET DEFERRED TAX ASSETS $ 9,157 $ 3,207
====================================================================
The Company had a valuation allowance of $27,155 as of December 31, 1999
and 1998 for its U.S. deferred tax assets, as realization is dependent on
sustained U.S. taxable income. As of December 31, 1999, the Company had United
States net operating loss carryforwards of approximately $22,900, which expire
in 2012 to 2019. The Company did not record any Netherlands deferred income
taxes on indefinitely reinvested undistributed earnings of its subsidiaries and
affiliates at December 31, 1999. 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.
<PAGE> 23
42 CHICAGO BRIDGE & IRON COMPANY N.V.
13. SEGMENT INFORMATION
The Company manages its operations by four geographic segments: North America;
Europe, Africa, Middle East; Asia Pacific; and Central and South America. Each
geographic area offers similar services. The Chief Executive Officer evaluates
the performance of these four segments based on revenues and income from
operations. Each segment's performance reflects the allocation of corporate
costs, which were based primarily on revenues. No customer accounted for more
than 10% of revenues. Intersegment revenues are not material.
The following table represents revenues by geographic segment:
1999 1998 1997
- ----------------------------------------------------------------------
REVENUES
- ----------------------------------------------------------------------
North America $ 288,516 $ 314,975 $295,159
Europe, Africa, Middle East 159,580 225,548 134,187
Asia Pacific 93,241 135,861 148,501
Central and South America 133,433 99,308 94,964
- ----------------------------------------------------------------------
Total revenues $ 674,770 $ 775,692 $672,811
======================================================================
The following list indicates revenues for individual countries in excess of
10% of consolidated revenues during any of the three years ended December 31,
1999, based on where the Company performed the work:
1999 1998 1997
- ----------------------------------------------------------------------
United States $ 243,752 $ 288,162 $272,778
Venezuela 78,126 51,019 35,414
Australia 51,476 77,828 24,443
South Africa 18,040 79,251 37,609
- ----------------------------------------------------------------------
The following tables present income from operations, assets and capital
expenditures by geographic segment:
1999 1998 1997
- ----------------------------------------------------------------------
INCOME FROM OPERATIONS
- ----------------------------------------------------------------------
North America $ 6,704 $ 11,411 $ 3,134(A)
Europe, Africa, Middle East 9,416 18,962 12,803
Asia Pacific 3,019 4,905 4,886
Central and South America 10,235 (8,917) 2,634
Management Plan charge (Note 9) -- -- (16,662)
- ----------------------------------------------------------------------
Total income from operations $ 29,374 $ 26,361 $ 6,795
======================================================================
(A)1997 was favorably impacted by non-recurring income of approximately $3,400
from the recognition of income related to a favorable appeals court decision.
1999 1998 1997
- ----------------------------------------------------------------------
ASSETS
- ----------------------------------------------------------------------
North America $ 161,589 $ 137,538 $181,224
Europe, Africa, Middle East 92,610 92,854 99,332
Asia Pacific 51,458 68,133 70,708
Central and South America 31,668 50,184 49,386
- ----------------------------------------------------------------------
Total assets $ 337,325 $ 348,709 $400,650
======================================================================
<PAGE> 24
1999 ANNUAL REPORT 43
The Company's revenues earned and assets attributable to operations in The
Netherlands were not significant in any of the three years ended December 31,
1999. The Company's long-lived assets are considered to be net property and
equipment. Approximately 66% of these assets were located in the United States
for the three years ended December 31, 1999, while the other 34% were
strategically located throughout the world.
1999 1998 1997
- ----------------------------------------------------------------------
CAPITAL EXPENDITURES
- ----------------------------------------------------------------------
North America $ 9,359 $ 6,374 $ 25,856
Europe, Africa, Middle East 1,611 3,550 6,095
Asia Pacific 1,639 1,367 1,116
Central and South America 841 958 1,888
- ----------------------------------------------------------------------
Total capital expenditures $ 13,450 $ 12,249 $ 34,955
======================================================================
Although the Company manages its operations by the four geographic
segments, revenues by product line are shown below:
1999 1998 1997
- -----------------------------------------------------------------------------
REVENUES
- -----------------------------------------------------------------------------
Flat Bottom Tanks $ 295,697 $ 287,382 $208,556
Low Temperature/Cryogenic Tanks and Systems 82,147 107,725 109,195
Repairs and Modifications 67,087 63,523 57,857
Specialty and Other Structures 65,646 129,949 153,553
Pressure Vessels 63,443 64,078 53,279
Elevated Tanks 51,648 38,287 47,922
Turnarounds 49,102 84,748 42,449
- -----------------------------------------------------------------------------
Total revenues $ 674,770 $ 775,692 $672,811
=============================================================================
14. SUBSEQUENT EVENTS (UNAUDITED)
COMMON STOCK--During the first two months of 2000, the Company has repurchased
967,620 additional shares for $15,280. On January 11, 2000, 1,129,568 shares of
Common Stock owned by the Company were cancelled, as authorized by shareholders
on May 12, 1999 (Note 10). As of February 29, 2000, the Company had 9,375,675
shares outstanding and 790,444 treasury shares.
ACQUISITION--On January 28, 2000, the Company purchased the assets and
certain liabilities of the business now known as CB&I Trusco Tank ("Trusco") for
approximately $9,000. Trusco designs, fabricates and erects steel structures,
including storage and shop-built tanks, and services municipal and industrial
customers primarily in the water, wastewater and petroleum markets on the U.S.
West Coast. This acquisition will be accounted for under the purchase method of
accounting. Pro forma presentation of financial information has not been
presented as this acquisition is not significant.
<PAGE> 25
44 CHICAGO BRIDGE & IRON COMPANY N.V.
15. 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, 1999:
QUARTER ENDED 1999 MARCH 31 JUNE 30 SEPT. 30 DEC. 31
- ---------------------------------------------------------------------------
Revenues $170,681 $ 181,202 $ 157,195 $165,692
Gross profit 18,002 18,873 18,006 21,554
Income from operations 6,605 7,451 7,306 8,012
Net income 4,226 4,366 4,703 5,089
- ---------------------------------------------------------------------------
Net income per share
Basic $ .37 $ .39 $ .43 $ .49
Diluted .37 .38 .42 .48
- ---------------------------------------------------------------------------
QUARTER ENDED 1998 MARCH 31 JUNE 30 SEPT. 30 DEC. 31
- ---------------------------------------------------------------------------
Revenues $189,881 $ 181,808 $ 204,965 $199,038
Gross profit 16,888 17,538 18,130 19,773
Income from operations 5,424 5,911 6,520 8,506
Net income 3,350 3,927 4,638 5,122
- ---------------------------------------------------------------------------
Net income per share
Basic $ .27 $ .32 $ .38 $ .44
Diluted .27 .32 .38 .43
- ---------------------------------------------------------------------------
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 February 2000, the Company had
approximately 2,200 shareholders. The following table presents the quarterly
common shares outstanding, dividends on Common Stock and range of Common Stock
prices for the years ended December 31, 1999 and 1998:
QUARTER ENDED 1999 MARCH 31 JUNE 30 SEPT. 30 DEC. 31
- -------------------------------------------------------------------------------
Common shares outstanding 11,284,530 11,275,734 10,435,144 10,272,982
Common dividends per share $ .06 $ .06 $ .06 $ .06
- -------------------------------------------------------------------------------
RANGE OF COMMON STOCK PRICES
- -------------------------------------------------------------------------------
New York Stock Exchange
High $12 3/4 $14 1/8 $15 1/4 $14 3/4
Low 9 3/8 10 1/4 13 11 5/8
Close 11 7/8 13 15/16 14 5/8 13 3/4
- -------------------------------------------------------------------------------
Amsterdam Stock Exchange (In EUR)
High 12.00 12.60 14.00 14.00
Low 7.70 9.40 12.24 11.00
Close 9.70 12.25 14.00 11.00
QUARTER ENDED 1998 MARCH 31 JUNE 30 SEPT. 30 DEC. 31
- -------------------------------------------------------------------------------
Common shares outstanding 12,267,852 12,284,748 11,659,609 11,414,294
Common dividends per share $ .06 $ .06 $ .06 $ .06
- -------------------------------------------------------------------------------
RANGE OF COMMON STOCK PRICES
- -------------------------------------------------------------------------------
New York Stock Exchange
High $17 5/16 $17 3/4 $15 7/8 $13 1/2
Low 12 7/8 15 10 1/8 8
Close 16 3/4 15 1/2 10 7/8 12 3/16
- -------------------------------------------------------------------------------
Amsterdam Stock Exchange (In NLG)
High 36.00 29.50 18.50 24.00
Low 34.50 29.50 18.50 24.00
Close 36.00 29.50 18.50 24.00
- -------------------------------------------------------------------------------
The rate of exchange for the Euro (EUR) to the Dutch guilder (NLG) is fixed
at 2.20371.
<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
CB&I Nigeria, Ltd. Nigeria
CBI (Philippines) Inc. Philippines
CBI Sino Thai, Ltd. Thailand
CBI Venezolana, S.A. Venezuela
Chicago Bridge & Iron Company (Egypt) LLC Egypt
CMP Holdings, B.V. The Netherlands
CB&I (Europe) B.V. The Netherlands
Horton CBI, Limited Canada
Horton Services, Inc. Canada
P.T. CBI Indonesia (1) Indonesia
UltraPure Systems, Inc. Puerto Rico
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
Asia Pacific Supply Company Delaware
CBI Caribe Limited Delaware
CBI Company Ltd. Delaware
Constructora CBI Ltd. Chile
Central Trading Company Ltd. Delaware
Highland Trading Company Cayman Islands
Chicago Bridge & Iron Company (Delaware) Delaware
XL Technology Systems, Inc. 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 PUBLIC ACCOUNTANTS
As independent public accountants with respect to Chicago Bridge & Iron Company
N.V. and Subsidiaries, we hereby consent to the incorporation of our reports
addressed to the Shareholders and the Supervisory Board of Chicago Bridge & Iron
Company N.V. in respect of the December 31, 1999 and 1998 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, 1999, 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, 333-39975 and 333-87081).
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, 1999, the date of the latest
financial statements covered by our report.
/s/ Arthur Andersen
Amsterdam, The Netherlands
March 24, 2000
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, included in the
Company's 1999 Annual Report to Shareholders incorporated by reference in this
Form 10-K, and have issued our report thereon dated February 9, 2000. Our audits
were 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 20 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 audits 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 9, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FORM THE BALANCE
SHEET AS OF DECEMBER 31, 1999, AND THE INCOME STATEMENT FOR THE TWELVE MONTHS
ENDED DECEMBER 31, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 18,407
<SECURITIES> 0
<RECEIVABLES> 94,865
<ALLOWANCES> 1,054
<INVENTORY> 1,598
<CURRENT-ASSETS> 168,063
<PP&E> 158,025
<DEPRECIATION> (53,425)
<TOTAL-ASSETS> 337,325
<CURRENT-LIABILITIES> 145,697
<BONDS> 25,000
0
0
<COMMON> 67
<OTHER-SE> 104,343
<TOTAL-LIABILITY-AND-EQUITY> 337,325
<SALES> 0
<TOTAL-REVENUES> 674,770
<CGS> 0
<TOTAL-COSTS> 598,335
<OTHER-EXPENSES> (2,788)
<LOSS-PROVISION> (996)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 27,160
<INCOME-TAX> 7,605
<INCOME-CONTINUING> 18,384
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,384
<EPS-BASIC> 1.67
<EPS-DILUTED> 1.65
</TABLE>
