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 June 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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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
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The number of shares outstanding of a single class of common stock as of
June 30, 1994 - 37,887,617.
1 of 17
CBI INDUSTRIES, INC. AND SUBSIDIARIES
Table of Contents
PART I. FINANCIAL INFORMATION
Financial Statements: Page
Statements of Income
Six Months Ended June 30, 1994 and 1993.................... 3
Balance Sheets
June 30, 1994 and December 31, 1993........................ 4
Statements of Cash Flows
Six Months Ended June 30, 1994 and 1993.................... 5
Notes to Financial Statements............................... 6
Management's Discussion and Analysis of Operating
Performance and Financial Condition......................... 9
PART II. OTHER INFORMATION........................................... 14
SIGNATURE PAGE......................................................... 17
2
PART I - FINANCIAL INFORMATION
CBI INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENTS OF INCOME
Three Months Six Months
Thousands of dollars, except per share amounts Ended June 30, Ended June 30,
1994 1993 1994 1993
Revenues
Contracting Services $208,532 $197,716 $383,016 $364,682
Industrial Gases 228,238 204,611 425,763 397,016
Investments 33,220 25,515 63,094 64,070
Total Revenues 469,990 427,842 871,873 825,768
Costs of Services and Products Sold
Contracting Services 177,809 175,424 325,316 325,892
Industrial Gases 155,245 142,669 295,738 279,465
Investments 26,852 21,109 51,061 54,313
Total Costs of Services and Products Sold 359,906 339,202 672,115 659,670
Gross Profit from Operations 110,084 88,640 199,758 166,098
Selling and Administrative Expense
Contracting Services 20,712 19,481 40,526 38,521
Industrial Gases 42,090 33,296 74,529 65,199
Investments 1,503 1,176 2,726 1,914
Corporate 5,424 5,163 10,190 9,561
Total Selling and Administrative Expense 69,729 59,116 127,971 115,195
Income from Operations 40,355 29,524 71,787 50,903
Interest Expense (9,656) (6,898) (17,802) (12,360)
Income before Income Taxes and Minority Interest 30,699 22,626 53,985 38,543
Provision for Income Taxes (14,200) (11,900) (25,700) (18,900)
Income before Minority Interest 16,499 10,726 28,285 19,643
Minority Interest in Income (2,928) (2,308) (5,041) (5,641)
Net Income 13,571 8,418 23,244 14,002
Dividends on Preferred Shares (1,507) (1,492) (3,008) (2,927)
Net Income to Common Shareholders $ 12,064 $ 6,926 $ 20,236 $ 11,075
Net Income per Common Share
Primary $ 0.32 $ 0.19 $ 0.54 $ 0.30
Fully Diluted $ 0.29 $ 0.17 $ 0.49 $ 0.28
Average Common Shares Outstanding (thousands)
Primary 37,791 37,068 37,736 36,971
Fully Diluted 43,198 42,456 43,143 42,359
Dividends on Common Shares
Amount $ 4,544 $ 4,432 $ 9,079 $ 8,854
Per Share $ 0.12 $ 0.12 $ 0.24 $ 0.24
<F1>
The accompanying notes are an integral part of these financial statements.
3
CBI INDUSTRIES, INC. AND SUBSIDIARIES
BALANCE SHEETS
Thousands of dollars June 30, Dec. 31,
1994 1993
Current Assets
Cash $ 12,498 $ 6,224
Temporary Cash Investments 23,717 17,005
Accounts Receivable, less allowances
of 11,500 and 11,500 260,273 283,952
Contracts in Progress with Earned Revenues
exceeding related Progress Billings 71,453 61,823
Inventories 76,824 63,644
Other Current Assets 44,241 38,626
489,006 471,274
Other Assets
Notes Receivable 37,495 33,057
Real Estate Properties 26,877 26,721
Equity in and Advances to Unconsolidated Affiliates 47,381 65,506
Intangible Assets 74,670 78,278
Other Non-Current Assets 60,900 64,444
247,323 268,006
Property and Equipment 1,796,866 1,699,852
Accumulated Depreciation (609,102) (568,887)
1,187,764 1,130,965
Total Assets $ 1,924,093 $ 1,870,245
Current Liabilities
Notes Payable $ 52,981 $ 43,472
Current Maturities of Long-Term Debt 13,374 25,226
Accounts Payable 64,965 66,558
Dividends Payable 2,713 2,790
Accrued Liabilities 127,948 137,871
Contracts in Progress with Progress Billings
exceeding related Earned Revenues 54,556 52,198
Income Taxes Payable 20,634 16,955
337,171 345,070
Long-Term Debt and Other Liabilities
Long-Term Debt 665,039 607,579
Other Non-Current Liabilities 125,179 130,494
Deferred Income Taxes 37,572 42,867
Minority Interest in Subsidiaries 63,146 67,623
Shareholders' Investment
Preferred Stock
Series C 117,049 120,318
Unallocated ESOP Shares (1,828) (3,654)
Unamortized ESOP Debt (80,345) (83,584)
34,876 33,080
Common Stock
Common Stock 99,459 99,459
Additional Paid-in Capital 214,320 214,320
Retained Earnings 443,338 427,828
Unamortized Restricted Stock Awards (12,144) (8,498)
Unallocated ESOP Shares (465) (931)
Unamortized ESOP Debt (17,888) (18,609)
Cost of Reacquired Common Stock (38,676) (45,353)
Cumulative Translation Adjustment (26,834) (24,684)
661,110 643,532
Total Shareholders' Investment 695,986 676,612
Total Liabilities and Shareholders' Investment $ 1,924,093 $ 1,870,245
<F1>
The accompanying notes are an integral part of these financial statements
4
CBI INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
Six Months
Thousands of dollars Ended June 30,
1994 1993
Cash Flows from Operating Activities
Net Income $ 23,244 $ 14,002
Depreciation 50,783 47,749
74,027 61,751
Decrease/(Increase) in Accounts Receivable 29,493 (6,355)
(Increase) in Contracts in Progress, net (6,313) (1,055)
(Decrease) in Accounts Payable,
Accrued Liabilities and Income Taxes, net (13,044) (29,303)
(Decrease) in Deferred Income Taxes (3,974) (1,646)
Decrease in Undistributed Earnings
of Unconsolidated Affiliates 468 1,844
Other, net (4,800) (4,454)
Total Cash Flows from Operating Activities 75,857 20,782
Cash Flows from Capital Investment Activities
Purchase of Property and Equipment (122,367) (85,824)
Cost of Business Acquisitions, net of cash acquired - (19,151)
Disposition of Property and Equipment 12,323 6,273
Decrease/(Increase) in Other Assets, net 3,599 (1,764)
Other, net 5,311 4,131
Total Cash Flows from Capital Investment Activities (101,134) (96,335)
Cash Flows from Financing and Shareholder Activities
Issuance of Debt 75,476 116,960
Repayment of Debt (24,446) (25,083)
51,030 91,877
Sale of Common Stock 2,407 1,396
Purchase of Common Stock (1,899) (1,189)
Dividends Paid (13,275) (13,184)
Total Cash Flows from Financing and Shareholder Activities 38,263 78,900
Increase in Cash and Temporary Cash Investments $ 12,986 $ 3,347
The accompanying notes are an integral part of these financial statements.
5
CBI INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Financial Statements
June 30, 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 June 30, 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 June 30, 1994:
Raw materials and supplies $34,494
Work in process 6,251
Finished goods 36,079
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Total inventories $76,824
=======
Average cost method $54,239
First-in, first-out method 22,585
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Total inventories $76,824
=======
6
(3) Long-Term Debt
Summary of long-term debt at June 30, 1994:
Commercial Paper and Other Similar Borrowings with a weighted
average quarter-end interest rate of 4.6% $264,389
Senior ESOP Notes with a quarter-end interest rate of 8.354%,
maturing in 1994 through 2002 98,836
6-1/4% Notes due 2000, net of unamortized discount of $262 74,738
6-5/8% Notes due 2003, net of unamortized discount of $513 74,487
Variable Rate Secured Notes with a weighted average quarter-
end interest rate of 5.5%, maturing in 1994 through 2001 67,200
Variable Rate Unsecured Notes with a weighted average quarter-
end interest rate of 6.4%, maturing in 1994 through 1998 94,482
Other 4,281
--------
678,413
Less: current maturities (13,374)
--------
$665,039
========
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:
July 1 through December 31, 1994 $ 7,844
Year ending December 31, 1995 17,051
Year ending December 31, 1996 292,050
Year ending December 31, 1997 25,268
Year ending December 31, 1998 25,368
Year ending December 31, 1999 89,508
After 1999 221,324
--------
$678,413
========
7
(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 - 3,612,642 shares are issued as Convertible Voting Preferred
Stock, Series C, at June 30, 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 June 30, 1994 and December 31, 1993.
Reacquired stock - The number of reacquired shares of common stock was
1,895,997 at June 30, 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 ending in 1994. As of June 30, 1994, 65,051 common shares
and 100,936 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 June 30, 1994, 806,445 common shares and 2,057,544
Series C preferred shares are subject to future allocation.
8
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 second quarter ended June 30, 1994
was $13.6 million ($0.32 per common share) compared to $8.4 million ($0.19 per
common share) for the second quarter of 1993. For the six months ending June
30, 1994, CBI's consolidated net income was $23.2 million ($0.54 per common
share) compared to $14.0 million ($0.30 per common share) for the comparable
1993 period.
Revenues of $470.0 million for the quarter were $42.1 million (9.9%) greater
than the $427.9 million recorded in the second quarter of 1993. Approximately
half of the increase in revenues was attributable to the consolidation during
the quarter of certain Canadian industrial gas distributorships in which the
company owns the majority of shares. The remaining increase was due
principally to a 5.5% improvement in the revenues of the Contracting Services
segment. For the six months to date, revenues of $871.9 million were 5.6%
greater than in 1993.
Gross profit of $110.1 million (23.4% of revenues) in the second quarter of
1994 compared favorably to gross profit of $88.6 million (20.7% of revenues)
in 1993's second quarter. For the year to date 1994's gross profit of $199.8
million (22.9% of revenues) was 20% greater than the $166.1 million (20.1% of
revenues) of the previous year, reflecting both the increase in revenues and
improved margins in all three segments.
Selling and administrative expense increased $10.6 million from the second
quarter of 1993 to the current quarter, almost entirely due to the
consolidation of the Canadian distributorships. For the six months to date,
selling and administrative expense of $128.0 million for 1994 compared to
$115.2 million in 1993. Excluding the effect of the consolidation of the
Canadian distributorships, selling and administrative expenses for the year to
date have increased only 2.7%.
Income from operations of $40.4 million for the second quarter (8.6% of
revenues) was up 36.7% from the $29.5 million (6.9% of revenues) in the
comparable 1993 quarter. For the year to date, income from operations of
$71.8 million (8.2% of revenues) in 1994 exceeded the $50.9 million (6.2% of
revenues) recorded in 1993. Cash flow from operations for the quarter and year
to date was $78.7 million and $147.6 million, respectively, compared to $62.3
million and $109.8 million in 1993.
CBI's comparative operating performance (before interest and taxes) for the
second quarters of 1994 and 1993 and for the first six months of those years
is as follows (dollars in thousands):
Three Months Six Months
1994 1993 1994 1993
Revenues $469,990 $427,842 $871,873 $825,768
Costs 359,906 339,202 672,115 659,670
-------- -------- -------- --------
Gross profit 110,084 88,640 199,758 166,098
Gross profit-% 23.4% 20.7% 22.9% 20.1%
Selling and administrative 69,729 59,116 127,971 115,195
-------- -------- -------- --------
Income from operations 40,355 29,524 71,787 50,903
Income from operations-% 8.6% 6.9% 8.2% 6.2%
Depreciation 25,946 23,956 50,783 47,749
Other non-cash charges 12,427 8,826 25,019 11,130
-------- -------- -------- --------
Cash flow from operations $ 78,728 $ 62,306 $147,589 $109,782
======== ======== ======== ========
9
CONTRACTING SERVICES. The operating results of Chicago Bridge and Iron
Company for the three and six months ended June 30, 1994 and 1993 are as
follows (dollars in thousands):
Three Months Six Months
1994 1993 1994 1993
Revenues $208,532 $197,716 $383,016 $364,682
Costs 177,809 175,424 325,316 325,892
-------- -------- -------- --------
Gross profit 30,723 22,292 57,700 38,790
Gross profit-% 14.7% 11.3% 15.1% 10.6%
Selling and administrative 20,712 19,481 40,526 38,521
-------- -------- -------- --------
Income from operations $ 10,011 $ 2,811 $ 17,174 $ 269
Income from operations-% 4.8% 1.4% 4.5% 0.1%
======== ======== ======== ========
Revenues for the Contracting Services segment increased 5.5% in the second
quarter of 1994, as compared to the same quarter the year previous, and 5.0%
for the six months to date. Virtually all of the increase took place within
Chicago Bridge's international units as major contracts are being executed in
Southeast Asia and the Caribbean. Within the United States, revenues were
essentially constant between years.
Income from operations in both 1994 periods was up appreciably from the levels
of 1993, when reserves were established for losses on certain contracts and
for the closing of an Alabama fabrication facility.
New contract awards during the second quarter of 1994 amounted to $136.7
million, a 15.8% decline from the $162.4 million of new business recorded in
the second quarter of 1993. Approximately 80% of the decline between years
occurred in the United States as Chicago Bridge's major customers,
particularly in the United States, have been reluctant to commit to
significant changes in current operations in the face of unresolved
environmental requirements and uncertain economic conditions in some overseas
markets. An increase in the level of inquiries and bookings in recent weeks,
however, indicates that the volume of new orders may return to the underlying
levels achieved in the previous three quarters during the second half of 1994
and into 1995. New orders for the six-month period in 1994 were $358.7
million compared to $287.7 million in the same period in 1993. The backlog of
work to be executed in the future amounted to $384.5 million as of June 30,
1994, as compared to $424.9 million at December 31, 1993 and $253.3 million at
June 30, 1993.
10
INDUSTRIAL GASES. Liquid Carbonic's performance for the periods ending June
30, 1994 and 1993 is as follows (dollars in thousands):
Three Months Six Months
1994 1993 1994 1993
Revenues $228,238 $204,611 $425,763 $397,016
Costs 155,245 142,669 295,738 279,465
-------- -------- -------- --------
Gross profit 72,993 61,942 130,025 117,551
Gross profit-% 32.0% 30.3% 30.5% 29.6%
Selling and administrative 42,090 33,296 74,529 65,199
-------- -------- -------- --------
Income from operations $ 30,903 $ 28,646 $ 55,496 $ 52,352
Income from operations-% 13.5% 14.0% 13.0% 13.2%
======== ======== ======== ========
During the second quarter of 1994, Liquid Carbonic consolidated, for the first
time, certain Canadian distributorships in which the company owns a majority
of shares. While not affecting net income, the consolidation increased
revenues by $25.2 million, gross profit by $10.0 million and selling and
administrative expenses by $9.6 million.
Excluding the effect of this consolidation, revenues in the Industrial Gases
segment remained essentially level with those of the second quarter of 1993
and are up 1% for the year to date, due to a 5% increase in revenues outside
North America, including the results of two Polish atmospheric gas companies
acquired in the second quarter of 1993. The 1993 results included
approximately $5.1 million in the second quarter and $7.5 million for the six
month period of revenues in product lines since discontinued or sold.
Income from operations for the quarter increased 7.9% from 1993 to 1994 and
6.0% for the six months to date. Operating income and margins improved in the
United States in 1994's second quarter and for the year to date also, due to
the sale in early 1994 of lower-margined retail operations and to reduced
selling and administrative expenses in 1994 resulting from Liquid Carbonic's
ongoing restructuring program. Additional savings are expected to be realized
as the program proceeds.
Outside North America, income from operations and operating margins improved
slightly in the second quarter of 1994 compared to the comparable 1993
quarter, particularly in Brazil, Spain, Mexico and Thailand, but remained
modestly lower year to date because of Liquid Carbonic's recent expansion into
the precipitated calcium carbonate market, where margins are lower than in the
company's historical lines of business, and because of lower margins in
Argentina and Venezuela.
11
INVESTMENTS. The operating results of Statia Terminals and the contributions
from financial investments comprising the Investments segment for the periods
ending June 30, 1994 and 1993 is as follows (dollars in thousands):
Three Months Six Months
1994 1993 1994 1993
Revenues $33,220 $25,515 $63,094 $64,070
Costs 26,852 21,109 51,061 54,313
------- ------- ------- -------
Gross profit 6,368 4,406 12,033 9,757
Gross profit-% 19.2% 17.3% 19.1% 15.2%
Selling and administrative 1,503 1,176 2,726 1,914
------- ------- ------- -------
Income from operations $ 4,865 $ 3,230 $ 9,307 $ 7,843
Income from operations-% 14.6% 12.7% 14.8% 12.2%
======= ======= ======= =======
Revenues for the current quarter were up 30.2% over the comparable 1993
quarter as sales of petroleum products by Statia Terminals rose 72% and
storage fees increased 20%, principally due to the activation of a portion of
Statia's Point Tupper terminal in the latter part of 1993. Revenues from
other investments also increased, mainly due to the initiation of sales of
development sites at the company's Suffolk, Virginia, Harbourview property.
Revenues for the first half of 1994 were slightly below those of the
comparable period in 1993 because the first quarter of 1993 included large
sales of petroleum products. Excluding sales of petroleum products, revenues
for the Investments segment would have increased almost 20% in the first six
months.
Selling and administrative expenses increased for both the quarter and year to
date due in part to the opening of the Point Tupper terminal and in part to
the reclassification in 1994 of certain charges previously included in costs
of revenues. The terminal became fully operational during the quarter ended
June 30, 1994. During the second quarter and first half of 1994, while the
terminal was initiating operations, Point Tupper operated at a loss, but that
loss was more than offset by greater earnings in Statia's other operations and
on other investments within the segment. Subsequent to the end of the
quarter, Statia Point Tupper signed contracts for virtually all available
storage at its terminal and expects profitable operations for the remainder of
1994.
12
OTHER INCOME STATEMENT MATTERS. Interest expense for the second quarter and
first six months of 1994 amounted to $9.7 million and $17.8 million,
respectively, compared to $6.9 million and $12.4 million, respectively, in the
comparable 1993 periods, as a result of both higher debt levels and the
issuance of $75 million of long-term debt in each of March and July of 1993.
The estimated effective income tax rate for the first half of 1994 was 47.6%,
compared to 49.0% for the first half of 1993. CBI's effective income tax rate
continues to be higher than the statutory U.S. tax rate, however, 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 $0.29 for the second quarter of 1994 and $0.49 for the
year to date, compared to $0.17 and $0.28, respectively, in 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 $36.2 million at June 30, 1994, compared to $23.2 million at December
31, 1993. Working capital increased from $126.2 million at the end of 1993 to
$151.8 million. Total debt (notes payable plus current and non-current long-
term debt) increased from $676.3 million at December 31, 1993 to $731.4
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 51.2% at June 30, 1994, up from 50.0% at the end
of 1993 and 44.0% at June 30, 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 44.3% at June 30, 1994, compared to 42.4% at December 31, 1993 and 35.8%
at June 30, 1993.
CAPITAL EXPENDITURES. Expenditures for new plant and equipment in the second
quarter totalled $54.8 million and aggregate to $122.4 million for the year to
date. Of the total, $37.1 million in the second quarter and $83.4 million for
the first six months represent investments in increased capacity, principally
for Liquid Carbonic. The rate of investment is expected to decline over the
balance of the year. Capital expenditures in the first half of 1993 amounted
to $85.8 million.
13
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 which 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.
CBI Na-Con believes that pending the disposition of post trial motions,
it has good grounds to appeal the judgment based upon the trial court's
application of substantive and procedural law with respect to
liability, evidence and damages. CBI Na-Con, Inc. will vigorously
pursue its appeal of the judgment to the Texas Court of Appeals, but, as
with any litigation, the outcome is uncertain. Final resolution through
the appeals process could take two or more years.
After CBI's insurers declined to indemnify CBI for this incident based
on their interpretation of 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 of the uncertain outcome of any appeal of the judgment and the
litigation concerning insurance coverage, the Company's assessment of
this matter is continuing. Upon resolution of the uncertainties
regarding this litigation, the company may ultimately establish
additional reserves or incur charges in excess of presently established
reserves. While such future charges or increased reserve levels could
have a material adverse impact on the Company's net income in the
periods in which they are recorded, management believes that any outcome
of this litigation will not have a material adverse effect on the
Company's consolidated financial position.
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
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Item 1. Legal Proceedings (Continued)
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.
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 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders of CBI Industries, Inc. was
held on May 12, 1994. The matters voted upon at the Meeting are
described in (c) below.
(c) (i) To elect four directors to serve for a three year term
expiring in 1997.
Nominee Votes For Votes Withheld
Robert J. Daniels 33,434,941 331,576
John E. Jones 33,432,266 334,251
Edward J. Mooney, Jr. 33,458,590 307,927
Robert G. Wallace 33,453,354 313,163
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Item 4. Submission of Matters to a Vote of Security Holders (Continued)
(ii) To amend the Company's Certificate of Incorporation to
permit the Company to enter into certain mergers without
shareholder approval.
Votes For - 29,954,595
Votes Against - 1,577,432
Votes Abstaining - 485,505
Broker Non-Votes - 1,748,985
(iii) To adopt the CBI 1994 Restricted Stock Award Plan.
Votes For - 31,780,575
Votes Against - 1,641,309
Votes Abstaining - 344,633
(iv) To adopt the CBI Industries, Inc. Officers' Bonus Plan.
Votes For - 30,552,240
Votes Against - 2,616,623
Votes Abstaining - 597,654
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3. (i) Articles of Incorporation
As amended June 2, 1994.
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.
16
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: August 15, 1994
17