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, 1994
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 1-7833
CBI INDUSTRIES, INC.
Incorporated in Delaware IRS Identification Number: 36-3009343
Principal Executive Offices: 800 Jorie Boulevard
Oak Brook, Illinois 60521-2268
Telephone Number: (708) 572-7000
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, 1994 - 37,817,537.
1 of 17
CBI INDUSTRIES, INC. AND SUBSIDIARIES
Table of Contents
PART I. FINANCIAL INFORMATION
Financial Statements: Page
Statements of Income
Three Months Ended March 31, 1994 and 1993................. 3
Balance Sheets
March 31, 1994 and December 31, 1993....................... 4
Statements of Cash Flows
Three Months Ended March 31, 1994 and 1993................. 6
Notes to Financial Statements................................. 7
Management's Discussion and Analysis of Operating
Performance and Financial Condition........................... 10
PART II. OTHER INFORMATION............................................. 15
SIGNATURE PAGE.......................................................... 17
2
PART I - FINANCIAL INFORMATION
CBI INDUSTRIES, INC. AND SUBSIDIARIES
Statements of Income
Three Months
Thousands of dollars, Ended March 31,
except per share amounts 1994 1993
Revenues
Contracting Services $174,484 $166,966
Industrial Gases 197,525 192,405
Investments 29,874 38,555
--------- ---------
Total revenues 401,883 397,926
--------- ---------
Costs of services and products sold
Contracting Services 147,507 150,468
Industrial Gases 140,493 136,796
Investments 24,209 33,204
--------- ---------
Total costs of services and products sold 312,209 320,468
--------- ---------
Gross profit from operations 89,674 77,458
--------- ---------
Selling and administrative expense
Contracting Services 19,814 19,040
Industrial Gases 32,439 31,903
Investments 1,223 738
Corporate 4,766 4,398
--------- ---------
Total selling and administrative expense 58,242 56,079
--------- ---------
Income from operations 31,432 21,379
Interest expense (8,146) (5,462)
--------- ---------
Income before income taxes and minority interest 23,286 15,917
Provision for income taxes (11,500) (7,000)
--------- ---------
Income before minority interest 11,786 8,917
Minority interest in income (2,113) (3,333)
--------- ---------
Net income 9,673 5,584
Dividends on preferred shares (1,501) (1,435)
--------- ---------
Net income to common shareholders $ 8,172 $ 4,149
========= =========
Net income per common share
Primary $ 0.22 $ 0.11
Fully diluted 0.20 0.11
Average common shares outstanding (thousands)
Primary 37,680 36,873
Fully diluted 43,257 42,344
Dividends on common shares
Amount $ 4,535 $ 4,422
Per share 0.12 0.12
<F1>
The accompanying notes are an integral part of these financial statements.
3
CBI INDUSTRIES, INC. AND SUBSIDIARIES
Balance Sheets
Assets
March 31, Dec. 31,
Thousands of dollars 1994 1993
Current assets
Cash $ 14,336 $ 6,224
Temporary cash investments 25,214 17,005
Accounts receivable, less allowances
of 10,700 and 11,500 248,901 283,952
Contracts in progress with earned revenues
exceeding related progress billings 67,224 61,823
Inventories (Note 2) 61,765 63,644
Other current assets 43,098 38,626
--------- ---------
Total current assets 460,538 471,274
--------- ---------
Other assets
Notes receivable 36,889 33,057
Real estate properties 26,589 26,721
Equity in unconsolidated affiliates 60,098 65,506
Intangible assets 79,076 78,278
Other non-current assets 60,462 64,444
--------- ---------
Total other assets 263,114 268,006
--------- ---------
Property and equipment
Land and improvements 70,221 67,700
Buildings and improvements 185,966 187,203
Plant machinery and terminals 892,280 848,710
Field and office equipment 600,322 596,239
--------- ---------
1,748,789 1,699,852
Accumulated depreciation (583,333) (568,887)
--------- ---------
Net property and equipment 1,165,456 1,130,965
--------- ---------
$1,889,108 $1,870,245
========= =========
<F1>
The accompanying notes are an integral part of these financial statements.
4
CBI INDUSTRIES, INC. AND SUBSIDIARIES
Balance Sheets (Continued)
Liabilities and Shareholders' Equity
March 31, Dec. 31,
Thousands of dollars 1994 1993
Current liabilities
Notes payable $ 76,976 $ 43,472
Current maturities of long-term debt (Note 3) 24,197 25,226
Accounts payable 56,662 66,558
Dividends payable 688 2,790
Accrued liabilities 127,616 137,871
Contracts in progress with progress billings
exceeding related earned revenues 58,130 52,198
Income taxes payable 21,808 16,955
--------- ---------
Total current liabilities 366,077 345,070
--------- ---------
Long-term debt (Note 3) 600,456 607,579
--------- ---------
Other non-current liabilities 130,256 130,494
--------- ---------
Deferred income taxes 38,744 42,867
--------- ---------
Minority interest in subsidiaries 67,874 67,623
--------- ---------
Shareholders' investment
Preferred stock
Series C (Note 4) 119,681 120,318
Unallocated ESOP shares (Note 6) (2,740) (3,654)
Unamortized ESOP debt (Note 6) (81,965) (83,584)
--------- ---------
Total preferred stock 34,976 33,080
--------- ---------
Common stock
Common stock (Note 5) 99,459 99,459
Additional paid-in capital 214,320 214,320
Retained earnings 434,904 427,828
Unamortized restricted stock awards (13,281) (8,498)
Unallocated ESOP shares (Note 6) (698) (931)
Unamortized ESOP debt (Note 6) (18,249) (18,609)
Cost of reacquired common stock (Note 5) (39,420) (45,353)
Cumulative translation adjustment (26,310) (24,684)
--------- ---------
Total common stock 650,725 643,532
--------- ---------
Total shareholders' investment 685,701 676,612
--------- ---------
$1,889,108 $1,870,245
========= =========
<F1>
The accompanying notes are an integral part of these financial statements.
5
CBI INDUSTRIES, INC. AND SUBSIDIARIES
Statements of Cash Flows
Three Months
Thousands of dollars Ended March 31,
1994 1993
Cash flows from operating activities
Net income $ 9,673 $ 5,584
Depreciation 24,837 23,793
-------- --------
34,510 29,377
Decrease/(increase) in accounts receivable 36,119 (9,436)
Decrease in contracts in progress, net 531 3,763
(Decrease) in accounts payable,
accrued liabilities and income taxes, net (14,794) (3,763)
(Decrease)/increase in deferred income taxes (2,174) 1,252
Decrease in undistributed earnings
of unconsolidated affiliates 111 799
Other, net 3,608 969
-------- --------
Total cash flows from operating activities 57,911 22,961
-------- --------
Cash flows from capital investment activities
Purchase of property and equipment (67,540) (42,174)
Disposition of property and equipment 2,216 2,397
Decrease/(increase) in other assets, net 1,681 (87)
Other, net 3,101 846
-------- --------
Total cash flows from capital investment activities (60,542) (39,018)
-------- --------
Cash flows from financing and shareholder activities
Issuance of debt 44,809 89,389
Repayment of debt (19,191) (69,230)
-------- --------
25,618 20,159
Sale of common stock 2,328 1,073
Purchase of common stock (264) (898)
Dividends paid (8,730) (8,734)
-------- --------
Total cash flows from financing and shareholder activities 18,952 11,600
-------- --------
Increase/(decrease) in cash and temporary cash investments $ 16,321 $ (4,457)
======== ========
<F1>
The accompanying notes are an integral part of these financial statements.
6
CBI INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Financial Statements
March 31, 1994
Thousands of dollars
(1) Additional Information
The consolidated financial statements included herein have been prepared
by CBI Industries, Inc. and Subsidiaries (CBI), without audit, 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 CBI believes that the disclosures are
adequate to make the information presented not misleading. These
consolidated financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto included in the
1993 annual report on Form 10-K of CBI.
In the opinion of CBI, all adjustments necessary to present fairly the
financial position of CBI as of March 31, 1994 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) Inventories
Inventories by component and valuation method at March 31, 1994:
Raw materials and supplies $30,740
Work in process 5,400
Finished goods 25,625
-------
Total inventories $61,765
=======
Average cost method $49,421
First-in, first-out method 12,344
-------
Total inventories $61,765
=======
7
(3) Long-Term Debt
Summary of long-term debt at March 31, 1994:
Commercial Paper and Other Similar Borrowings with a weighted
average quarter-end interest rate of 3.6% $238,755
6-1/4% Notes due 2000, net of unamortized discount of $271 74,729
6-5/8% Notes due 2003, net of unamortized discount of $524 74,476
Senior ESOP Notes with a quarter-end interest rate of 8.354%,
maturing in 1994 through 2002 98,836
Variable Rate Secured Notes with a weighted average quarter-
end interest rate of 4.9%, maturing in 1994 through 2001 64,800
Variable Rate Unsecured Notes with a weighted average quarter-
end interest rate of 5.5%, maturing in 1994 through 1998 66,894
Fixed Rate Secured Notes with a weighted average quarter-end
interest rate of 9.6%, maturing in 1994 through 1998 1,166
Fixed Rate Unsecured Notes with a weighted average quarter-
end interest rate of 8.8%, maturing in 1994 through 1997 3,930
Capital Lease Obligations with a weighted average quarter-end
interest rate of 13.1%, payable through 1996 725
Other 342
--------
624,653
Less: current maturities (24,197)
--------
$600,456
========
Commercial paper and other similar borrowings, which would normally be
classified as current debt, have been classified as long-term debt since
this debt is supported by unused commitments under an existing $300,000
unsecured three-year extendible revolving credit agreement. The
agreement has a present termination date of December 31, 1996, which is
extendible annually for one additional year by mutual consent. Amounts
borrowed under the agreement may be repaid under certain options and a
commitment fee is payable on any unused portion.
Minimum annual principal payments of long-term debt are as follows:
April 1 through December 31, 1994 $ 17,070
Year ending December 31, 1995 25,191
Year ending December 31, 1996 269,555
Year ending December 31, 1997 25,175
Year ending December 31, 1998 46,273
Year ending December 31, 1999 20,085
After 1999 221,304
--------
$624,653
========
8
(4) Preferred Stock
Preferred stock - $1.00 par value; authorized - 20,000,000 shares.
Series A - No shares have been issued. 800,000 shares are reserved as
Series A Junior Participating Preferred Stock.
Series C - 3,693,859 shares are issued as Convertible Voting Preferred
Stock, Series C, at March 31, 1994 and 3,713,519 shares at December 31,
1993. The annual dividend is $2.27 per share.
(5) Common Stock
Common stock - $2.50 par value; authorized - 120,000,000 shares; issued
- 39,783,614 shares at March 31, 1994 and December 31, 1993.
Reacquired stock - The number of reacquired shares of common stock was
1,966,077 at March 31, 1994 and 2,273,761 at December 31, 1993.
(6) Employee Stock Ownership Plan (ESOP)
Unallocated ESOP shares - Shares received and purchased from the
transfer of the surplus assets from the terminated and restructured
defined benefit pension plans are reflected as unallocated ESOP shares.
These shares are being allocated to eligible employees over a period of
eight years beginning in 1987. As of March 31, 1994, 68,459 common
shares and 102,306 Series C preferred shares are subject to future
allocation.
Unamortized ESOP debt - The Senior ESOP Notes, which were issued in
1988, in an amount of $125,000, were initially offset by a like amount
of unamortized ESOP debt in shareholders' investment. As company
contributions plus the dividends on the shares held by the ESOP are used
to meet interest and principal payments on the loan over its 14-year
term, shares acquired with the loan proceeds are allocated to eligible
employees. As of March 31, 1994, 808,750 common shares and 2,060,055
Series C preferred shares are subject to future allocation.
(7) Unconsolidated Affiliates - Summarized Financial Information
Summarized financial information for unconsolidated affiliates (50% or
less owned companies) follows. Intercompany transactions have not
been eliminated.
Three Months
Ended
March 31,
1994
-------------
Revenues $77,303
Gross profit 28,497
Income before income taxes 10,560
Net income 8,256
CBI's equity in net income 2,316
9
Management's Discussion and Analysis
of Operating Performance and Financial Condition
The following discussion and analysis should be read in conjunction with
the consolidated financial statements and accompanying notes.
OPERATING PERFORMANCE
OVERVIEW. Consolidated net income for the first quarter ended March 31,
1994 was $9.7 million ($0.22 per common share) compared to $5.6 million
($0.11 per common share) for the first quarter of 1993.
Revenues for the first three months of 1994 were $401.9 million, up 1.0%
from $397.9 million in revenues in the first quarter of 1993, due to an
improvement in the Contracting Services segment as well as the
continuing growth in the company's Industrial Gases business. This
improvement was partially offset by a managed decline in revenues in the
Investments segment, as Statia Terminals reduced its sales of low-
margined petroleum products. Gross profit of $89.7 million (22.3% of
revenues) in 1994's first quarter compared to $77.5 million (19.5% of
revenues) in the previous year's first quarter, reflecting both the
increase in revenues and better margins in Contracting Services as well
as better margins in the Investments segment. Selling and
administrative expenses increased 3.9% from $56.1 million in 1993 to
$58.2 million in the first quarter of 1994. Income from operations of
$31.4 million in the quarter (7.8% of revenues) was up 47.0% from 1993's
income from operations of $21.4 million (5.4% of revenues), while cash
flow from operations increased by 45.0% to $68.9 million.
CBI's comparative operating performance (before interest and taxes) for
the first quarters of 1994 and 1993 is as follows (dollars in
thousands):
1994 1993
---- ----
Revenues $401,883 $397,926
Costs 312,209 320,468
-------- --------
Gross profit 89,674 77,458
Gross profit-% 22.3% 19.5%
Selling and administrative 58,242 56,079
-------- --------
Income from operations 31,432 21,379
Income from operations-% 7.8% 5.4%
Depreciation 24,837 23,793
Other non-cash charges 12,592 2,304
-------- --------
Cash flow from operations $ 68,861 $ 47,476
======== ========
10
CONTRACTING SERVICES. The operating results of Chicago Bridge and Iron
Company during the quarters ended March 31, 1994 and 1993 are as follows
(dollars in thousands):
1994 1993
---- ----
Revenues $174,484 $166,966
Costs 147,507 150,468
-------- --------
Gross profit 26,977 16,498
Gross profit-% 15.5% 9.9%
Selling and administrative 19,814 19,040
-------- --------
Income from operations $ 7,163 $ (2,542)
Income from operations-% 4.1% (1.5)%
======== ========
New contract awards during the first quarter of 1994 amounted to $221.9
million, a 77.2% improvement over the $125.3 million of new business
recorded in the first quarter of 1993. While substantially greater than
in the comparable quarter of 1993, new contract awards in 1994's first
quarter represented a more current market level of orders as compared to
the extraordinary new order total of the last quarter of 1993, when
$332.4 million in new business was received. About 60% of new orders in
the first quarter of 1994 were for work within the U.S., although the
company was awarded a contract in excess of $40 million in the Asia-
Pacific market area. The current backlog of work to be executed in the
future amounted to $475.7 million as of March 31, 1994, as compared to
$424.9 million at December 31, 1993 and $284.0 million at March 31,
1993.
Revenues in the first quarter of 1994 were up 4.5% over the previous
year, reflecting the realization of the stronger order flow experienced
since mid-1993. Approximately 55% of 1994 revenues were from domestic
work, somewhat less than the domestic share of revenues in the previous
year, as Chicago Bridge's international units increased their activities
in Africa, Southeast Asia and the Caribbean. Ershig's, a company
specializing in fiberglass-reinforced plastic and dual laminate vessels
and tanks which was acquired by Chicago Bridge in the second quarter of
1993, contributed revenues during the current quarter which accounted
for a portion of the revenue gain in the first quarter of 1994.
Income from operations was positive in the first three months of 1994 in
contrast to the operating loss sustained in the first quarter of 1993
when reserves were established for the closing of an Alabama fabrication
facility. Results in the current quarter also modestly benefited from
the favorable resolution of certain international contract claims and a
gain from the sale of property to the U.S. Navy. While operating income
improved on both domestic and international work, margins on work put in
place continued to reflect the effects of generally uncertain economic
conditions affecting Chicago Bridge's major customers as well as the
unresolved environmental requirements facing the company's process
industry customers. Results in the quarter also do not reflect any
adjustments to previously established reserves for the unexpected
verdict and resulting $31.5 million judgment entered against CBI Na-Con
on April 6 in the previously reported Marathon Oil case in Houston,
Texas. This judgment was revised to $33.5 million on May 6, 1994 as a
result of a different calculation of prejudgment interest. Because the
amount CBI Na-Con may yet be required to pay in this matter is uncertain
due to the continued court actions which are pending, additional
reserves, if any, beyond those previously established will be reviewed
and established as needed.
11
INDUSTRIAL GASES. Liquid Carbonic's performance for the first quarters
of 1994 and 1993 is as follows (dollars in thousands):
1994 1993
---- ----
Revenues $197,525 $192,405
Costs 140,493 136,796
-------- --------
Gross profit 57,032 55,609
Gross profit-% 28.9% 28.9%
Selling and administrative 32,439 31,903
-------- --------
Income from operations $ 24,593 $ 23,706
Income from operations-% 12.5% 12.3%
======== ========
Revenues in the Industrial Gases segment increased 2.7% year-to-year
due mainly to an 8% growth in revenues outside North America, including
the results of two Polish atmospheric gas companies acquired in the
second quarter of 1993. The 1993 results include approximately $3
million in revenues of product lines since discontinued or sold.
Revenues increased in all geographic areas except Canada, where the
adverse economic conditions which continue to depress Liquid Carbonic's
markets in that country, coupled with a lower exchange rate for the
Canadian dollar, caused a 6% decline in revenues from the comparable
1993 quarter.
Income from operations increased 3.7% from 1993 to 1994 and improved
slightly as a percent of revenues, due to the continuing growth of
revenues outside North America where the company enjoys better profit
margins. Operating margins in certain Latin American countries were,
however, affected by Liquid Carbonic's recent expansion into the
precipitated calcium carbonate market, where margins are lower than in
the company's historical lines of business. Operating margins in the
United States improved year-to-year, particularly in the cylinder gas
business due to the positive effect from the sale of the lower-margined
retail operations. These improvements were partially offset by the
impact of domestic carbon dioxide selling prices, which were
approximately 3% lower in the first quarter of 1994 than in the
comparable 1993 quarter. Unit volumes of all gases sold in the U.S.,
however, increased in year-to-year comparisons.
Reductions in selling and administrative expenses in the U.S. also
contributed to the improvement in operating margins. Impacts from Liquid
Carbonic's restructuring program were not yet felt in the first quarter,
but are expected to begin being reflected in results during the second
quarter of 1994.
12
INVESTMENTS. The operating results of Statia Terminals and the
contributions from financial investments comprising the Investments segment
for the first quarters of 1994 and 1993 are as follows (dollars in
thousands):
1994 1993
---- ----
Revenues $29,874 $38,555
Costs 24,209 33,204
------- -------
Gross profit 5,665 5,351
Gross profit-% 19.0% 13.9%
Selling and administrative 1,223 738
------- -------
Income from operations $ 4,442 $ 4,613
Income from operations-% 14.9% 12.0%
======= =======
Revenues for the current quarter declined 22.5% from the same quarter in
1993, but gross profit was up 5.9% due to a change in the mix of product
revenues in Statia Terminals, where sales of low-margined petroleum
products declined approximately $12 million from the first quarter of 1993
compared to the current quarter, while storage fee revenue and higher
margined sales of bunker fuel increased about $3 million. Selling and
administrative expense increased from the previous year due in part to the
inclusion in 1994 of the results of Statia Terminals Point Tupper, a
Canadian terminal company of which Statia Terminals became sole owner in
October 1993, and in part to a reclassification in 1994 of certain charges
previously included in costs of revenues. Statia's income from operations
resulted in a nearly 10% improvement over the same period in 1993.
Other than Statia Terminals, the other investments in the segment recorded
lower income from operations compared to 1993, primarily due to the
inclusion in the first quarter of 1993 of a gain from the sale of an
investment. Returns from other financial investments, net of foreign
currency exchange effects, were greater in 1994 than in 1993.
13
OTHER INCOME STATEMENT MATTERS. Interest expense in the first quarter of
1994 amounted to $8.1 million compared to $5.5 million in the comparable
quarter of 1993, reflecting higher debt levels and the issuance of $150
million in
long-term debt, $75 million each in March and July of 1993. The estimated
effective income tax rates were 49.4% in the first quarter of 1994,
compared to 44.0% in 1993; however, the 1993 effective income tax rate was
adjusted upward in subsequent quarters and averaged 49.0% for all of 1993.
CBI's effective
income tax rate continues to be higher than the statutory U.S. tax rate
because its taxable domestic earnings remain low relative to earnings from
its international operations.
Fully diluted earnings per share, assuming the conversion of the company's
Series C Convertible Voting Preferred Stock as required by accounting
disclosure rules, was $0.20 for the first quarter of 1994 and $0.11 for the
comparable quarter of 1993.
FINANCIAL CONDITION
BALANCE SHEET. CBI's financial position and capital resources are adequate
to permit the financing of its operations. Cash and short-term investments
totalled $39.6 million at March 31, 1994, compared to $23.2 million at
December 31, 1993. Working capital decreased from $126.2 million at the
end of 1993 to $94.5 million, due to an increase of $32.5 million in short-
term debt, most of which will be reclassified as long-term, non-current
debt under an international revolving credit agreement now being expanded,
and a reduction of $35.1 million in accounts receivable. Total debt (notes
payable plus current and non-current long-term debt) increased from $676.3
million at December 31, 1993 to $701.6 million as a result of the company's
ongoing program of capital investment (see below). The ratio of total debt
to total capitalization (total debt plus shareholders' investment) was
50.6% at March 31, 1994, up from 50.0% at the end of 1993 and 40.9% at
March 31, 1993. With CBI's ESOP debt considered as equity, which will
occur as the common and preferred shares held by the ESOP Trust are
allocated to eligible employees, debt as a percent of capitalization was
43.5% at March 31, 1994, compared to 42.4% at December 31, 1993 and 32.0%
at March 31, 1993.
CAPITAL EXPENDITURES. Expenditures for new plant and equipment in the first
quarter of 1994 totalled $67.5 million, with $21.3 million dedicated to
sustaining the current level of business and $46.2 million invested in
increased capacity. Of the total expenditures, $53.4 million was invested
in Liquid Carbonic during the quarter. Capital expenditures for the first
quarter of 1993 amounted to $42.2 million.
14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Marathon/Texas City Litigation
On October 30, 1987, CBI Na-Con, Inc. ("CBI Na-Con") was working in the
Marathon Petroleum Company refinery in Texas City, Texas. While a lift was
being made by a crane supplied and operated by others, the crane became
unstable, causing the operator to drop the load on a hydrofluoric acid tank
which released part of its contents into the atmosphere. The community
surrounding the refinery was evacuated after the incident, and a
substantial number of persons evacuated sought medical attention. CBI Na-
Con has reached settlements with all but about 15 of the 4,300
(approximate) third-party plaintiffs who brought suit as a result of the
incident.
CBI Na-Con also is a defendant in a lawsuit brought in 1989 by Marathon for
damage to Marathon's property, lost profits and cost of repair. In 1993 the
lawsuit was amended to include reimbursement for Marathon's expenditures
relating to the incident, including emergency response costs, third party
legal fees and claims payments. This lawsuit went to trial in March, 1994,
and after a trial that lasted approximately four weeks, a jury in Harris
County, Texas returned a verdict against CBI Na-Con. Judgment on the
verdict in the amount of approximately $31,500,000, which includes
prejudgment interest, was entered on April 6, 1994, against CBI Na-Con.
This judgment was revised to $33,500,000 on May 6, 1994, as a result of a
different calculation of prejudgment interest. The result in this case was
totally unexpected by CBI Na-Con, and CBI Na-Con believes the result was
incorrect in many respects, including the trial court's incorrect
application of substantive and procedural law with respect to liability,
evidence and damages. CBI Na-Con, Inc. is seeking relief through post
trial motions, and, if unsuccessful, will appeal to the Texas Court of
Appeals.
After CBI's insurers declined to indemnify CBI for this incident based on
certain pollution exclusions contained in CBI's insurance policies, CBI
filed suit in Harris County, Texas against its insurers seeking a court
ruling that the policies covered the incident. The Trial Court, on the
insurers' preliminary motion, sustained the insurers' position that
coverage did not exist. The Texas Court of Appeals reversed the Trial
Court and found that CBI should be allowed to proceed with its lawsuit and
related discovery against the insurers. The insurers immediately appealed
the Court of Appeals decision in CBI's favor to the Texas Supreme Court
which has agreed to hear the appeal. It is CBI's position that it was not
the intent of the pollution exclusions in the policies to exclude an
incident of this kind.
Because the amount CBI Na-Con may yet be required to pay in this matter is
uncertain due to the pending court actions, additional reserves, if any,
beyond those previously established will be reviewed and established as
needed.
Antitrust Matters
A subsidiary of the company, Liquid Carbonic Industries Corporation
("Liquid Carbonic"), has been or is currently involved in civil litigation
and governmental proceedings relating to antitrust matters. In this
regard, since April 1992, several lawsuits have been filed against Liquid
Carbonic and various competitors. These cases have been consolidated in
the United States District Court for the Middle District of Florida,
Orlando Division. The lawsuits allege generally that, beginning not later
than 1968 and continuing through October, 1992, defendants conspired to
allocate customers, fix prices and rig bids for carbon dioxide in the
United States in violation of the antitrust laws. On April 19, 1993, the
court certified a class in the consolidated cases consisting of direct
purchasers of carbon dioxide from defendants in the continental United
States for the period from January 1, 1968, to and including October 26,
1992.
15
Item 1. Legal Proceedings (Continued)
Plaintiffs seek from defendants unspecified treble damages, civil
penalties, injunctive relief, costs and attorneys' fees. In addition, suits
have been brought against Liquid Carbonic and others under the antitrust
laws of the States of Alabama and California based upon the foregoing
allegations. The Company believes that the allegations made against Liquid
Carbonic in these lawsuits are without merit, and Liquid Carbonic intends
to defend itself vigorously. Liquid Carbonic and its subsidiaries also
from time to time furnish documents and witnesses in connection with
governmental investigations of alleged violations of the antitrust laws.
While the outcome of any particular lawsuit or governmental investigation
cannot be predicted with certainty, the Company believes that these
antitrust matters will not have a materially adverse effect on its
operations or financial condition.
Environmental Litigation
Chicago Bridge & Iron Company ("Chicago Bridge") was a minority shareholder
from 1934 to 1954 in a company which owned or operated at various times
several wood treating facilities at sites in the United States, some of
which are currently under investigation, monitoring or remediation under
various environmental laws. Chicago Bridge is involved in litigation
concerning environmental liabilities, which are currently undeterminable,
in connection with certain of those sites. Chicago Bridge denies any
liability for each site and believes that the successors to the wood
treating business are responsible for cost of remediation of the sites.
Chicago Bridge has reached settlements for environmental clean-up at most
of the sites. The Company believes that any remaining potential liability
will not have a materially adverse effect on its operations or financial
condition.
Other Litigation
In addition to the above lawsuits, CBI is a defendant in a number of
lawsuits arising from the conduct of its business. While it is impossible
at this time to determine with certainty the ultimate outcome of this
litigation, CBI's management believes that adequate provisions have been
made for probable losses with respect thereto as best as can be determined
at this time and that the ultimate outcome, after provisions therefor, will
not have a material adverse effect on the financial position of CBI. 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.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
1. Underwriting Agreement
3. (ii) By-laws
As amended May 12, 1994.
4. Instruments Defining the Rights of Security Holders,
Including Indentures
4.1 Indenture
4.2 Form of Floating Rate Note
4.3 Form of Fixed Rate Note
11. Computation of Earnings per Common Share
(b) Reports on Form 8-K
A Form 8-K was filed under Item 5, Other Events and Item 7,
Financial Statements and Exhibits. The date of that report was
April 7, 1994.
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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.
CBI INDUSTRIES, INC.
BY /s/ George L. Schueppert
_________________________________
George L. Schueppert
Executive Vice President - Finance
and Chief Financial Officer
Date: May 13, 1994
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