Exhibit 99.3
The following unaudited pro forma condensed combined financial information gives effect to the acquisition of Lummus Global by Chicago Bridge & Iron Company, N.V. (“CB&I”), accounted for as a business combination using the purchase method of accounting. The preliminary allocation of the purchase price used in the unaudited pro forma condensed combined financial statements is based on management’s preliminary valuation. The estimates and assumptions are subject to change upon the finalization of valuations, which are contingent upon appraisals of property, plant and equipment, identifiable intangible assets, actuarial valuations of employee benefit plans and adjustments to contract-related and other accounts. Revisions to the preliminary purchase price allocation could result in significant deviations from these pro forma results.
The historical results of operations included in the unaudited pro forma condensed combined statement of income for the nine months ended September 30, 2007 were derived from the unaudited financial statements of each entity as described above. The historical results of operations included in the unaudited pro forma condensed combined statement of income for the fiscal year ended December 31, 2006 were derived from the audited financial statements of each entity. For CB&I, this information was derived from its annual report onForm 10-K filed with the Securities and Exchange Commission on March 1, 2007. For Lummus Global, this information is included in exhibit 99.2 herein.
The historical consolidated balance sheets of CB&I and Lummus Global included in the unaudited pro forma condensed combined balance sheet were derived from the unaudited financial statements of each entity. For CB&I, this information was derived from its quarterly report onForm 10-Q filed with the Securities and Exchange Commission on October 31, 2007. For Lummus Global, this information is included in exhibit 99.2 herein.
This unaudited pro forma combined financial information has been prepared by CB&I management for illustrative purposes only. The unaudited pro forma combined financial statements are not intended to represent or be indicative of the financial position or results of operations in future periods or the results that actually would have been realized had CB&I and Lummus Global been a combined company during the specified periods. Additionally, classifications of certain financial accounts of the acquired company may differ from those of CB&I. The unaudited pro forma combined financial statements assume the acquisition is financed with a combination of cash, borrowings under our credit facility and new term debt. The unaudited pro forma combined financial information, including the notes thereto, is qualified in its entirety by reference to, and should be read in conjunction with, the historical consolidated financial statements of Lummus Global included in exhibit 99.2 herein and in CB&I’sForm 10-K filed with the Securities Exchange Commission on March 1, 2007 andForm 10-Q filed with the Securities and Exchange Commission on October 31, 2007.
1
Chicago Bridge & Iron Company N.V. and Subsidiaries
Unaudited Pro Forma Condensed Combined Statement of Income
For the Year Ended December 31, 2006
(amounts in thousands, except per share data)
Unaudited Pro Forma Condensed Combined Statement of Income
For the Year Ended December 31, 2006
(amounts in thousands, except per share data)
Pro Forma | Pro Forma | |||||||||||||||
CB&I | Lummus | Adjustments | Combined | |||||||||||||
Revenue | $ | 3,125,307 | $ | 988,362 | $ | — | $ | 4,113,669 | ||||||||
Cost of revenue | (2,843,554 | ) | (931,662 | ) | — | (3,775,216 | ) | |||||||||
Gross profit | 281,753 | 56,700 | — | 338,453 | ||||||||||||
Selling and administrative expenses | (133,769 | ) | (109,456 | ) | (2,000 | )(a) | (245,225 | ) | ||||||||
Intangibles amortization | (1,572 | ) | (3,733 | ) | (21,267 | )(b) | (26,572 | ) | ||||||||
Earnings of investees accounted for by the equity method | — | 11,731 | 11,731 | |||||||||||||
Other operating (loss)/income | (773 | ) | 1,163 | — | 390 | |||||||||||
Income (loss) from operations | 145,639 | (43,595 | ) | (23,267 | ) | 78,777 | ||||||||||
Interest expense | (4,751 | ) | (37,067 | ) | (4,183 | )(c) | (46,001 | ) | ||||||||
Interest income | 20,420 | 5,947 | (24,197 | )(d) | 2,170 | |||||||||||
Income (loss) before taxes and minority interest | 161,308 | (74,715 | ) | (51,647 | ) | 34,946 | ||||||||||
Income tax expense | (38,127 | ) | (4,638 | ) | 47,370 | (e) | 4,605 | |||||||||
Income before minority interest | 123,181 | (79,353 | ) | (4,277 | ) | 39,551 | ||||||||||
Minority interest in income | (6,213 | ) | (620 | ) | — | (6,833 | ) | |||||||||
Net income | $ | 116,968 | $ | (79,973 | ) | $ | (4,277 | ) | $ | 32,718 | ||||||
Net income per share | ||||||||||||||||
Basic | $ | 1.21 | $ | 0.34 | ||||||||||||
Diluted | $ | 1.19 | $ | 0.33 | ||||||||||||
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Chicago Bridge & Iron Company N.V. and Subsidiaries
Unaudited Pro Forma Condensed Combined Statement of Income
For the Nine Months Ended September 30, 2007
(Amounts in thousands, except per share data)
Unaudited Pro Forma Condensed Combined Statement of Income
For the Nine Months Ended September 30, 2007
(Amounts in thousands, except per share data)
Pro Forma | Pro Forma | |||||||||||||||
CB&I | Lummus | Adjustments | Combined | |||||||||||||
Revenue | $ | 3,040,424 | $ | 728,527 | $ | — | $ | 3,768,951 | ||||||||
Cost of revenue | (2,787,550 | ) | (570,459 | ) | — | (3,358,009 | ) | |||||||||
Gross profit | 252,874 | 158,068 | — | 410,942 | ||||||||||||
Selling and administrative expenses | (103,822 | ) | (84,473 | ) | (1,500 | )(a) | (189,795 | ) | ||||||||
Intangibles amortization | (396 | ) | (1,120 | ) | (17,630 | )(b) | (19,146 | ) | ||||||||
Earnings of investees accounted for by the equity method | — | 17,877 | 17,877 | |||||||||||||
Other operating income/(loss), net | 32 | (4,010 | ) | — | (3,978 | ) | ||||||||||
Income from operations | 148,688 | 86,342 | (19,130 | ) | 215,900 | |||||||||||
Interest expense | (2,980 | ) | (27,253 | ) | 11,503 | (c) | (18,730 | ) | ||||||||
Interest income | 24,420 | 8,427 | (31,490 | )(d) | 1,357 | |||||||||||
Income before taxes and minority interest | 170,128 | 67,516 | (39,117 | ) | 198,527 | |||||||||||
Income tax expense | (44,233 | ) | (12,426 | ) | 3,837 | (e) | (52,822 | ) | ||||||||
Income before minority interest | 125,895 | 55,090 | (35,280 | ) | 145,705 | |||||||||||
Minority interest in income | (4,446 | ) | (1,260 | ) | — | (5,706 | ) | |||||||||
Net income | $ | 121,449 | $ | 53,830 | $ | (35,280 | ) | $ | 139,999 | |||||||
Net income per share | ||||||||||||||||
Basic | $ | 1.27 | $ | 1.46 | ||||||||||||
Diluted | $ | 1.26 | $ | 1.45 | ||||||||||||
(a) | To record additional estimated depreciation expense for a property, plant and equipment fair value adjustment of $10,000 with average depreciable lives of five years, based upon preliminary valuation information. | ||
(b) | Based on preliminary valuation information, the acquired identifiable intangibles are estimated to have a fair value of approximately $300,000 and estimated average economic lives ranging from 3 to 20 years. The pro forma adjustments reflect the incremental amortization to bring the Lummus Global amortization to a total of $25,000 for the year ended December 31, 2006, and $18,750 for the nine months ended September 30, 2007. When completed, the final valuation may differ in both the amount and the estimated economic lives described above. | ||
(c) | To eliminate the historical interest expense of Lummus Global and record interest expense of $41,250 for the year ended December 31, 2006 and $15,750 for the nine months ended September 30, 2007, reflecting the additional borrowings as follows: For 2007: |
• | Draw on revolving credit facility of $100,000 with associated interest expense at 7.0%; | ||
• | New term debt of $200,000 with associated interest expense at 7.0%. |
For 2006:
• | Draw on revolving credit facility of $350,000 with associated interest expense at 7.5%; | ||
• | New term debt of $200,000 with associated interest expense at 7.5%. |
(d) | To eliminate the historical interest income of Lummus Global and reflect the loss of interest income from an assumed cash portion of purchase price of $615,000 for 2007 and $365,000 for 2006, both at 5%. The assumed cash portion of the purchase price differs for each period as a result of differences in available cash at the beginning of each period. | ||
(e) | To reflect the tax effect of the above noted adjustments at the United States statutory rate of 35% and tax effect the historical results of Lummus Global at an estimated 33% effective tax rate. |
Chicago Bridge & Iron Company N.V. and Subsidiaries
Unaudited Pro Forma Condensed Combined Balance Sheet
As of September 30, 2007
(Amounts in thousands)
Unaudited Pro Forma Condensed Combined Balance Sheet
As of September 30, 2007
(Amounts in thousands)
Pro Forma | Pro Forma | |||||||||||||||
CB&I | Lummus | Adjustments | Combined | |||||||||||||
Assets | ||||||||||||||||
Cash and cash equivalents | $ | 580,789 | $ | 65,934 | $ | (590,000 | )(a) | $ | 56,723 | |||||||
Short-term investments | 160,537 | — | 160,537 | |||||||||||||
Accounts receivable, net of allowance for doubtful accounts | 537,442 | 196,375 | 733,817 | |||||||||||||
Contracts in progress with costs and estimated earnings exceeding related progress billings | 215,122 | 450,298 | 665,420 | |||||||||||||
Other current assets | 115,362 | 21,457 | 136,819 | |||||||||||||
Total current assets | 1,609,252 | 734,064 | (590,000 | ) | 1,753,316 | |||||||||||
Investments | — | 97,625 | 97,625 | |||||||||||||
Property and equipment | 231,232 | 10,060 | 9,940 | (c) | 251,232 | |||||||||||
Goodwill | 228,296 | 217,936 | 508,646 | (d) | 954,878 | |||||||||||
Other intangibles, net of accumulated amortization | 25,694 | 20,901 | 279,099 | (d) | 325,694 | |||||||||||
Other non-current assets | 32,048 | 36,380 | 68,428 | |||||||||||||
Total assets | $ | 2,126,522 | $ | 1,116,966 | $ | 207,685 | $ | 3,451,173 | ||||||||
Liabilities | ||||||||||||||||
Net affiliate balance | $ | — | $ | 262,562 | $ | (262,562 | )(b) | $ | — | |||||||
Current maturity of long-term debt | — | 200 | 100,000 | (a) | 100,200 | |||||||||||
Accounts payable | 456,139 | 139,110 | 595,249 | |||||||||||||
Accrued liabilities | 175,478 | 623,273 | (17,600 | )(b) | 781,151 | |||||||||||
Contracts in progress with progress billings exceeding related costs and estimated earnings | 699,578 | 170,862 | 870,440 | |||||||||||||
Income taxes payable | 15,941 | — | 15,941 | |||||||||||||
Total current liabilities | 1,347,136 | 1,196,007 | (180,162 | ) | 2,362,981 | |||||||||||
Long-term debt | — | 169 | 200,000 | (a) | 200,169 | |||||||||||
Other non-current liabilities | 97,030 | 94,382 | 191,412 | |||||||||||||
Deferred income taxes | — | 13,839 | 13,839 | |||||||||||||
Minority interest in subsidiaries | 10,057 | 416 | 10,473 | |||||||||||||
Total liabilities | 1,454,223 | 1,304,813 | 19,838 | 2,778,874 | ||||||||||||
Commitments and contingencies | — | — | — | |||||||||||||
Shareholders’ Equity | ||||||||||||||||
Common stock | 1,154 | 12,429 | (12,429 | )(e) | 1,154 | |||||||||||
Additional paid-in capital | 353,136 | — | 353,136 | |||||||||||||
Retained earnings | 400,504 | (128,492 | ) | 128,492 | (e) | 400,504 | ||||||||||
Stock held in Trust | (21,633 | ) | — | (21,633 | ) | |||||||||||
Treasury stock, at cost | (74,371 | ) | — | (74,371 | ) | |||||||||||
Accumulated other comprehensive income (loss) | 13,509 | (71,784 | ) | 71,784 | (e) | 13,509 | ||||||||||
Total shareholders’ equity | 672,299 | (187,847 | ) | 187,847 | 672,299 | |||||||||||
Total liabilities and shareholders’ equity | $ | 2,126,522 | $ | 1,116,966 | $ | 207,685 | $ | 3,451,173 | ||||||||
(a) | At September 30, 2007, the approximate net cash purchase price of $825,000 was assumed to be funded as follows: |
· | Cash consideration | $ | 590,000 | |||||||
· | Draw on revolving credit facility | $ | 100,000 | |||||||
· | New term debt | $ | 200,000 | |||||||
· | Acquired cash balance | ($65,000 | ) |
(b) | The elimination of Lummus Global’s net receivables and payables with its parent company, which was paid in connection with the acquisition and the elimination of accrued liabilities that remained with the seller. | |
(c) | To record the write-up of fixed assets, based on preliminary valuation information, to their fair value. This write-up will be depreciated over 5 years. |
(d) | The elimination of Lummus Global’s historical goodwill and other intangible assets and the recognition of goodwill and identifiable intangible assets, based upon preliminary valuation information, in connection with the acquisition, inclusive of acquisition-related costs. | |
(e) | The elimination of Lummus Global’s historical stockholder’s equity. |