<PAGE> 1
FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended March 31, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission File Number 1-12815
CHICAGO BRIDGE & IRON COMPANY N.V.
Incorporated in The Netherlands IRS Identification Number: Not Applicable
Polarisavenue 31
2132 JH Hoofddorp
The Netherlands
31-23-568-5660
(Address and telephone number of principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--------- ------
The number of shares outstanding of a single class of common stock as of March
31, 2000 - 9,174,674
<PAGE> 2
CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Page
Consolidated Financial Statements
Statements of Income
Three Months Ended March 31, 2000 and 1999 3
Balance Sheets
March 31, 2000 and December 31, 1999 4
Statements of Cash Flows
Three Months Ended March 31, 2000 and 1999 5
Notes to Consolidated Financial Statements 6 - 9
Management's Discussion and Analysis of
Results of Operations and Financial Condition 10 - 12
PART II. OTHER INFORMATION 12 - 13
SIGNATURE PAGE 14
2
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CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Three Months
Ended March 31,
2000 1999
Revenues $155,499 $170,681
Cost of revenues 139,900 152,679
-------- --------
Gross profit 15,599 18,002
Selling and administrative expenses 11,337 11,943
Other operating income, net (633) (546)
-------- --------
Income from operations 4,895 6,605
Interest expense (971) (556)
Interest income 95 268
-------- --------
Income before taxes and minority interest 4,019 6,317
Income tax expense (1,125) (1,895)
-------- --------
Income before minority interest 2,894 4,422
Minority interest in (income) loss (442) (196)
-------- --------
Net income $ 2,452 $ 4,226
======== ========
Net income per share
Basic $ 0.26 $ 0.37
Diluted $ 0.25 $ 0.37
Weighted average shares outstanding
Basic 9,527 11,363
Diluted 9,812 11,478
Dividends on shares
Amount $557 $677
Per share $ 0.06 $ 0.06
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
3
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CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 5,792 $ 18,407
Accounts receivable, net of allowance for doubtful
accounts of $996 in 2000 and $1,054 in 1999 89,010 93,811
Contracts in progress with earned revenues
exceeding related progress billings 53,084 48,486
Other current assets 9,491 7,359
--------- ---------
Total current assets 157,377 168,063
--------- ---------
Property and equipment 105,780 104,600
Goodwill 19,159 18,010
Long-term receivable, net 28,631 28,739
Other non-current assets 19,422 17,913
--------- ---------
Total assets $ 330,369 $ 337,325
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable $ 8,693 $ 665
Accounts payable 29,680 36,979
Accrued liabilities 45,368 49,797
Contracts in progress with progress billings
exceeding related earned revenues 43,532 53,314
Income taxes payable 4,798 4,942
--------- ---------
Total current liabilities 132,071 145,697
--------- ---------
Long-term debt 49,000 25,000
Other non-current liabilities 56,657 57,367
Minority interest in subsidiaries 5,293 4,851
--------- ---------
Total liabilities 243,021 232,915
--------- ---------
Shareholders' equity
Common stock, NLG .01 par value;
authorized: 35,000,000 in 2000 and 1999;
issued: 10,166,119 in 2000 and 11,295,687 in 1999;
outstanding: 9,174,674 in 2000 and 10,272,982 in 1999 60 67
Additional paid-in capital 77,533 93,393
Retained earnings 46,516 44,621
Stock held in Trust (Note 7) (12,735) (12,700)
Treasury stock, at cost: 991,445 in 2000 and 1,022,705 in 1999 (15,840) (13,729)
Cumulative translation adjustment (8,186) (7,242)
--------- ---------
Total shareholders' equity 87,348 104,410
--------- ---------
Total liabilities and shareholders' equity $ 330,369 $ 337,325
========= =========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
4
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CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
2000 1999
<S> <C> <C>
Cash flows from operating activities
Net income $ 2,452 $ 4,226
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization 4,379 4,436
Increase/(decrease) in deferred income taxes 348 (536)
Gain on sale of property and equipment (633) (546)
Change in operating assets and liabilities (see below) (21,987) (27,974)
-------- --------
Net cash provided by operating activities (15,441) (20,394)
-------- --------
Cash flows from investing activities
Cost of business acquisition, net of cash acquired (Note 3) (9,190) --
Capital expenditures (2,428) (2,884)
Proceeds from sale of property and equipment 1,250 736
-------- --------
Net cash used in investing activities (10,368) (2,148)
-------- --------
Cash flows from financing activities
Increase/(decrease) in notes payable 8,028 (427)
Net borrowing under Revolving Credit Facility 24,000 25,000
Purchase of treasury stock (18,528) (2,682)
Issuance of treasury stock 251 1,341
Dividends paid (557) (677)
-------- --------
Net cash used in financing activities 13,194 22,555
-------- --------
(Decrease)/increase in cash and cash equivalents (12,615) 13
Cash and cash equivalents, beginning of the year 18,407 5,636
-------- --------
Cash and cash equivalents, end of the period $ 5,792 $ 5,649
======== ========
Change in operating assets and liabilities
Decrease in receivables, net $ 9,683 $ 12,937
(Increase) in contracts in progress, net (14,762) (26,899)
(Decrease) in accounts payable (8,244) (3,482)
-------- --------
Change in contract capital (13,323) (17,444)
(Increase) in other current assets (1,737) (3,401)
(Decrease) in income taxes payable (144) (766)
(Decrease) in accrued and other non-current liabilities (5,573) (5,884)
(Increase) in other (1,210) (479)
-------- --------
Total $(21,987) $(27,974)
======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
5
<PAGE> 6
CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(IN THOUSANDS)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements for Chicago Bridge
& Iron Company N.V. and Subsidiaries (the "Company") have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures, normally included in financial statements
prepared in accordance with generally accepted accounting principles, have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading. The accompanying unaudited interim consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the 1999 Annual Report on
Form 10-K of the Company.
In the opinion of the Company, all adjustments necessary to present fairly the
financial position of the Company and the results of its operations and cash
flows for the period then ended have been included. The results of operations
for such interim periods are not necessarily indicative of the results for the
full year.
2. SIGNIFICANT ACCOUNTING POLICIES
Forward Contracts - Although the Company does not engage in currency
speculation, it periodically uses forward contracts to hedge currency
transactions. Gains or losses on forward contracts are included in income. At
March 31, 2000, the Company had $2,946 of outstanding foreign currency exchange
contracts to sell Dutch guilders, $688 of outstanding foreign currency exchange
contracts to buy Canadian dollars, $528 of outstanding foreign currency exchange
contracts to sell British pounds and $361 of outstanding foreign exchange
contracts to buy Spanish pesetas. These forward contracts hedged intercompany
loans utilized to finance non-U.S. subsidiaries and matured within 20 days after
quarter end. At March 31, 2000, the Company also had a $1,841 outstanding
foreign currency exchange contract to buy German marks. This forward contract
hedges contract costs to be incurred in German marks with revenues to be earned
in U.S. dollars and matured within 20 days after quarter end. The fair value of
these forward contracts approximated their carrying value in the financial
statements at March 31, 2000. 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
6
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recognized currently in earnings unless specific hedge accounting criteria are
met. The Company has not yet determined the impact that the adoption of SFAS 133
will have on its earnings or statement of financial position. However, the
Company anticipates that, due to its limited use of derivative instruments, the
adoption of SFAS 133 will not have a significant effect on its results of
operations or its financial position.
3. ACQUISITION
On January 28, 2000, the Company purchased the assets and assumed certain
liabilities of the business now known as CB&I Trusco Tank ("Trusco") for $9,190
(including acquisition costs). 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 was accounted for under the purchase
method of accounting. The purchase price has been allocated to assets acquired
and liabilities assumed based on estimated fair values at the date of
acquisition while the balance of $1,296 was recorded as goodwill and will be
amortized over 40 years on a straight-line basis. The fair values of assets
acquired and assumed liabilities are subject to final adjustment. Pro forma
presentation of financial information has not been presented as this acquisition
is not significant.
4. NOTES PAYABLE AND LONG-TERM DEBT
The weighted average interest rate on $8,693 of notes payable was 7.00% at March
31, 2000.
The weighted average interest rate on $49,000 of borrowings under the Company's
Revolving Credit Facility was 6.87% at March 31, 2000.
5. COMPREHENSIVE INCOME
Three Months
Ended March 31,
2000 1999
Net income $2,452 $4,226
Other comprehensive income, net of tax:
Cumulative translation adjustment (944) (94)
------ ------
Comprehensive income $1,508 $4,132
====== ======
7
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6. PER SHARE COMPUTATIONS
Three Months
Ended March 31,
2000 1999
Net income $2,452 $ 4,226
====== =======
Weighted average shares outstanding - Basic 9,527 11,363
Effect of restricted stock units 185 101
Effect of stock options 66 -
Effect of performance share units 22 9
Effect of directors deferred fee shares 12 5
------ -------
Weighted average shares outstanding - Diluted 9,812 11,478
====== =======
Net income per share - Basic $0.26 $0.37
===== =====
Net income per share - Diluted $0.25 $0.37
===== =====
7. STOCK HELD IN TRUST
The restricted stock units transferred to this Trust in September 1999 were
adjusted to 707,495 units during January. The increase of 1,935 units resulted
from forfeitures under the Management Plan.
8. COMMON STOCK
At the Annual Meeting of Shareholders held on May 12, 1999, the shareholders
authorized the Company to cancel shares of Common Stock held by the Company in
its own share capital. On January 11, 2000, 1,129,568 shares of Common Stock
owned by the Company were cancelled. The cost of the shares cancelled was
$15,313.
8
<PAGE> 9
9. SEGMENT INFORMATION
Three Months
Ended March 31,
2000 1999
New Business Taken
North America $104,197 $ 87,562
Europe, Africa & Middle East 40,188 54,443
Asia Pacific 14,003 31,761
Central & South America 52,538 19,617
-------- --------
Total $210,926 $193,383
======== ========
Revenues
North America $ 74,240 $ 72,648
Europe, Africa & Middle East 43,210 41,277
Asia Pacific 16,167 20,383
Central & South America 21,882 36,373
-------- --------
Total $155,499 $170,681
======== ========
Income (Loss) From Operations
North America $ 1,821 $ 1,945
Europe, Africa & Middle East 2,172 2,850
Asia Pacific (936) 457
Central & South America 1,838 1,353
-------- --------
Total $ 4,895 $ 6,605
======== ========
10. SUBSEQUENT EVENT
On May 8, 2000, 869,922 shares of Common Stock owned by the Company were
cancelled, as authorized by shareholders on May 12, 1999. The cost of the
shares cancelled was $13,852. After this cancellation, 100,000 shares remained
in Treasury Stock.
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
The following discussion and analysis should be read in conjunction with the
consolidated financial statements and accompanying notes.
RESULTS OF OPERATIONS
For the three months ended March 31, 2000, new business taken increased 9% to
$211 million compared with $193 million in 1999. New contract awards in the
quarter included a $50 million award for process vessels and tankage for a
Canadian oil sands project and a significant award for a liquefied natural gas
(LNG) storage tank in the Caribbean. The Company's outlook for new business
taken remains optimistic with strong indications for more than $100 million in
new projects. Backlog at March 31, 2000 was $561 million compared with $511
million at year-end 1999.
First quarter revenues were $155.5 million compared with $170.7 million in the
first quarter of 1999. Higher revenues in North America and the Europe, Africa,
Middle East region were offset by lower revenues in the Asia Pacific and Central
and South America (CSA) regions, where work is winding down or has been
completed on several significant projects that were active during the prior-year
period. The Company expects improving volume from its growth initiatives will
help offset lower revenues in Asia Pacific and CSA. The Company's revenues will
fluctuate based on the changing project mix and are dependent on the level and
timing of customer releases of new business, and on other matters such as
project schedules.
Gross profit for the three months ended March 31, 2000 was $15.6 million, or
10.0% of revenues, compared with $18.0 million, or 10.5% of revenues, in the
prior-year quarter. These results reflect lower absorption of costs due to
reduced volume and competitive pricing in certain markets, partially offset by
the positive impact of favorable experience in workers compensation and
liability claims, resulting from the Company's continued success in improving
workplace safety. The Company expects margins to be impacted by competitive
pressure on standard product work, but also expects improvement as the year
progresses from improving industry conditions and the release of larger, more
profitable work.
Income from operations for the first quarter of 2000 was $4.9 million, or 3.1%
of revenues, compared with $6.6 million, or 3.9% of revenues, for the first
quarter of 1999. During the quarter the Company's investment in the start-up of
UltraPure Systems reduced operating income by $1.6 million. The Company also
incurred $0.8 million of severance costs during the quarter which will result in
cost savings going forward. The Company is proactively managing its costs in
response to economic conditions affecting its base business in certain markets.
Net income for the three months ended March 31, 2000 was $2.5 million or $0.25
per diluted share, compared with net income of $4.2 million or $0.37 per diluted
share for the same period in 1999. The Company believes its 15% EPS growth
target remains attainable, if it achieves the full benefits of its cost
reduction program and volume increases in line with anticipated improving
industry conditions.
10
<PAGE> 11
FINANCIAL CONDITION
For the three months ended March 31, 2000, the Company used cash from operations
of $15.4 million, primarily due to an increase in contract capital (accounts
receivable plus net contracts in progress less accounts payable) resulting from
contract terms and project life cycles, and the funding of employee benefit and
incentive compensation programs. Capital expenditures were $2.4 million during
the quarter. Cash and cash equivalents at the end of the first quarter were $5.8
million. Total debt was $58 million at the end of the period, up from $26
million at year-end 1999, reflecting approximately $28 million invested in the
acquisition of Trusco Tank and the purchase of 1.2 million shares or 11.4% of
shares outstanding as of year-end 1999.
The Company remains committed to implementing its strategy to create step-change
growth in sustainable revenues and continues to target and pursue additional
acquisition prospects, both large and small, that will help to meet its
strategic initiatives. 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 March 31, 2000, 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 $28.6
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.
Management anticipates that by utilizing cash generated from operations and
funds provided under the Revolving Credit Facility, the Company will be able to
meet its working capital and capital expenditure needs for at least the next 24
months.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company seeks to minimize the risks from currency exchange rate fluctuations
through regular operating and financing activities and, when deemed appropriate,
through its limited use of currency forward contracts. The Company's exposure to
changes in currency exchange rates arises from receivables, payables and firm
commitments from international transactions, as well as intercompany loans used
to finance non-U.S. subsidiaries. The Company does not use financial instruments
for trading or speculative purposes.
11
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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 filings 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.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There have been no material developments in the legal proceedings as described
in Note 7 of the Notes to Consolidated Financial Statements submitted with the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1999.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders of Chicago Bridge & Iron
Company N.V. was held on May 11, 2000. The following matters were voted
upon and adopted at the meeting:
(i) Reappointment of J. Dennis Bonney, Gerald M. Glenn and Vincent
L. Kontny as members of the Board of Supervisory Directors until
the Annual Meeting of Shareholders in 2003, and until their
successors have been duly appointed.
Nominees-J. Dennis Bonney Gerald M. Glenn Vincent L. Kontny
For 3,779,641 3,777,000 3,775,622
Against 11,718 11,579 15,777
Abstain 3,921 6,701 3,881
(ii) The authorization to prepare the annual accounts and the
report in the English language and the adoption of the Dutch
Statutory Annual Accounts of the Company for the fiscal year ended
December 31, 1999.
For 3,785,082
Against 1,183
Abstain 9,015
(iii) The approval of distribution of profits for fiscal year
ended December 31, 1999 in the amount of US$0.24 per share
previously paid as common dividends.
For 3,785,198
Against 882
Abstain 9,200
12
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(iv) The approval to extend the authority of the Management Board
to repurchase up to 30% of the issued share capital of the Company
until November 11, 2001.
For 3,784,081
Against 3,118
Abstain 8,081
(v) The approval to cancel shares to be acquired by the Company in
its own share capital.
For 3,781,836
Against 4,463
Abstain 8,961
(vi) The amendment of the Articles of Association to allow the
Chairman of the meeting of shareholders to establish the rules of
order and grant authorization to implement the amendment.
For 3,750,276
Against 40,399
Abstain 4,603
(vii) To determine the compensation of Supervisory Directors who
are not employees of the Company.
For 3,746,116
Against 37,663
Abstain 11,501
(viii) The appointment of Arthur Andersen as the Company's
independent public accountants for the fiscal year ending
December 31, 2000.
For 3,788,957
Against 2,958
Abstain 3,365
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file a current report on Form 8-K during
the three months ended March 31, 2000.
13
<PAGE> 14
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Chicago Bridge & Iron Company N.V.
/s/ Timothy J. Wiggins
----------------------------------------
By: Chicago Bridge & Iron Company B.V.
Its: Managing Director
Timothy J. Wiggins
Managing Director
(Principal Financial Officer)
Date: May 15, 2000
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF MARCH 31, 2000, AND THE INCOME STATEMENT FOR THE THREE MONTHS ENDED
MARCH 31, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 5,792
<SECURITIES> 0
<RECEIVABLES> 90,006
<ALLOWANCES> 996
<INVENTORY> 2,126
<CURRENT-ASSETS> 157,377
<PP&E> 159,073
<DEPRECIATION> (53,293)
<TOTAL-ASSETS> 330,369
<CURRENT-LIABILITIES> 132,071
<BONDS> 49,000
0
0
<COMMON> 60
<OTHER-SE> 87,288
<TOTAL-LIABILITY-AND-EQUITY> 330,369
<SALES> 0
<TOTAL-REVENUES> 155,499
<CGS> 0
<TOTAL-COSTS> 139,900
<OTHER-EXPENSES> (633)
<LOSS-PROVISION> (58)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,019
<INCOME-TAX> 1,125
<INCOME-CONTINUING> 2,452
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,452
<EPS-BASIC> 0.26
<EPS-DILUTED> 0.25
</TABLE>
