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 September 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
September 30, 1994 - 38,061,886.
1 of 16
CBI INDUSTRIES, INC. AND SUBSIDIARIES
Table of Contents
PART I.FINANCIAL INFORMATION
Financial Statements: Page
Statements of Income
Nine Months Ended September 30, 1994 and 1993............... 3
Balance Sheets
September 30, 1994 and December 31, 1993.................... 4
Statements of Cash Flows
Nine Months Ended September 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..........................................................16
2
PART I - FINANCIAL INFORMATION
CBI INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENTS OF INCOME
Three Months Nine Months
Thousands of dollars, except per share amounts Ended September 30,Ended September 30,
1994 1993 1994 1993
Revenues
Industrial Gases $233,226 $201,950 $658,989 $598,966
Contracting Services 210,701 177,033 593,717 541,715
Investments 45,264 29,389 108,358 93,459
Total Revenues 489,191 408,372 1,361,064 1,234,140
Costs of Services and Products Sold
Industrial Gases 161,472 142,985 457,210 422,450
Contracting Services 196,979 153,356 522,295 479,248
Investments 35,744 24,172 86,805 78,485
Total Costs of Services and Products Sold 394,195 320,513 1,066,310 980,183
Gross Profit from Operations 94,996 87,859 294,754 253,957
Selling and Administrative Expense
Industrial Gases 36,712 32,500 111,241 97,699
Contracting Services 19,732 18,738 60,258 57,259
Investments 1,598 1,064 4,324 2,978
Corporate 4,103 4,034 14,293 13,595
Total Selling and Administrative Expense 62,145 56,336 190,116 171,531
Income from Operations 32,851 31,523 104,638 82,426
Interest Expense (11,085) (7,329) (28,887) (19,689)
Income before Income Taxes and Minority Interest 21,766 24,194 75,751 62,737
Provision for Income Taxes (9,500) (11,800) (35,200) (30,700)
Income before Minority Interest 12,266 12,394 40,551 32,037
Minority Interest in Income (2,874) (2,097) (7,915) (7,738)
Net Income 9,392 10,297 32,636 24,299
Dividends on Preferred Shares (1,521) (1,446) (4,529) (4,373)
Net Income to Common Shareholders $7,871 $8,851 $28,107 $19,926
Net Income per Common Share
Primary $0.20 $0.24 $0.74 $0.54
Fully Diluted $0.20 $0.22 $0.69 $0.50
Average Common Shares Outstanding (thousands)
Primary 37,913 37,344 37,795 37,096
Fully Diluted 43,199 42,728 43,081 42,480
Dividends on Common Shares
Amount $4,557 $4,482 $13,636 $13,336
Per Share $0.12 $0.12 $0.36 $0.36
<F1>
The accompanying notes are an integral part of these financial statements.
3
CBI INDUSTRIES, INC. AND SUBSIDIARIES
BALANCE SHEETS
Thousands of dollars Sept. 30, Dec. 31,
1994 1993
Current Assets
Cash $5,722 $6,224
Temporary Cash Investments 38,250 17,005
Accounts Receivable, less allowances
of 11,100 and 11,500 292,768 283,952
Contracts in Progress with Earned Revenues
exceeding related Progress Billings 68,401 61,823
Inventories (Note 2) 80,100 63,644
Other Current Assets 40,728 38,626
525,969 471,274
Other Assets
Notes Receivable 35,474 33,057
Real Estate Properties 27,086 26,721
Equity in and Advances to Unconsolidated Affiliates 49,336 65,506
Intangible Assets 76,545 78,278
Other Non-Current Assets 64,839 64,444
253,280 268,006
Property and Equipment 1,838,896 1,699,852
Accumulated Depreciation (628,376) (568,887)
1,210,520 1,130,965
Total Assets $1,989,769 $1,870,245
Current Liabilities
Notes Payable $75,019 $43,472
Current Maturities of Long-Term Debt (Note 3) 15,320 25,226
Accounts Payable 76,264 66,558
Dividends Payable 669 2,790
Accrued Liabilities 123,926 137,871
Contracts in Progress with Progress Billings
exceeding related Earned Revenues 55,149 52,198
Income Taxes Payable 23,526 16,955
369,873 345,070
Long-Term Debt and Other Liabilities
Long-Term Debt (Note 3) 680,190 607,579
Other Non-Current Liabilities 125,514 130,494
Deferred Income Taxes 40,424 42,867
Minority Interest in Subsidiaries 65,520 67,623
Capital Stock
Preferred Stock
Series C (Note 4) 116,214 120,318
Unallocated ESOP Shares (Note 6) (914) (3,654)
Unamortized ESOP Debt (Note 6) (78,726) (83,584)
36,574 33,080
Common Stock
Common Stock (Note 5) 99,459 99,459
Additional Paid-in Capital 214,320 214,320
Retained Earnings 447,535 427,828
Unamortized Restricted Stock Awards (10,952) (8,498)
Unallocated ESOP Shares (Note 6) (233) (931)
Unamortized ESOP Debt (Note 6) (17,527) (18,609)
Cost of Reacquired Common Stock (Note 5) (35,292) (45,353)
Cumulative Translation Adjustment (25,636) (24,684)
671,674 643,532
Total Liabilities and Capital Stock $1,989,769 $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
Nine Months
Thousands of dollars Ended September 30,
1994 1993
Cash Flows from Operating Activities
Net Income $32,636 $24,299
Depreciation 78,086 72,162
110,722 96,461
(Increase) in Accounts Receivable (3,002) (19,023)
(Increase)/Decrease in Contracts in Progress, net (2,668) 4,705
(Decrease) in Accounts Payable,
Accrued Liabilities and Income Taxes, net (975) (32,930)
(Decrease) in Deferred Income Taxes (2,289) (6,921)
Decrease in Undistributed Earnings
of Unconsolidated Affiliates 352 3,146
Other, net 413 (964)
Total Cash Flows from Operating Activities 102,553 44,474
Cash Flows from Capital Investment Activities
Purchase of Property and Equipment (168,286) (143,095)
Cost of Business Acquisitions, net of cash acquired (19,151)
Disposition of Property and Equipment 11,860 10,624
Decrease in Other Assets, net 367 96
Other, net 4,029 5,103
Total Cash Flows from Capital Investment Activities (152,030) (146,423)
Cash Flows from Financing and Shareholder Activities
Issuance of Debt 122,169 151,930
Repayment of Debt (32,004) (33,202)
90,165 118,728
Sale of Common Stock 3,978 3,026
Purchase of Common Stock (2,012) (1,511)
Dividends Paid (21,911) (21,918)
Total Cash Flows from Financing and Shareholder Activities 70,220 98,325
Increase/(Decrease) in Cash and Temporary Cash Investments $20,743 ($3,624)
The accompanying notes are an integral part of these financial statements.
5
CBI INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Financial Statements
September 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 September 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 September 30, 1994:
Raw materials and supplies $31,154
Work in process 9,443
Finished goods 39,503
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Total inventories $80,100
=======
Average cost method $54,545
First-in, first-out method 25,555
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Total inventories $80,100
=======
6
(3) Long-Term Debt
Summary of long-term debt at September 30, 1994:
Commercial Paper and Other Similar Borrowings with a weighted
average quarter-end interest rate of 5.1% $247,778
Senior ESOP Notes with a quarter-end interest rate of 8.354%,
maturing in 1995 through 2002 94,273
6-1/4% Notes, $75,000 face amount, due 2000 74,747
6-5/8% Notes, $75,000 face amount, due 2003 74,498
Variable Rate Unsecured Notes with a weighted average quarter-
end interest rate of 5.6%, maturing in 1994 through 1999 107,080
Variable Rate Secured Notes with a weighted average quarter-
end interest rate of 5.3%, maturing in 1994 through 2000 61,600
Fixed Rate Medium-Term Notes, Series A, with a weighted average
quarter-end interest rate of 7.7%, maturing in 1999 and 2004 31,000
Other 4,534
--------
695,510
Less: current maturities (15,320)
--------
$680,190
========
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:
October 1 through December 31, 1994 $ 2,576
Year ending December 31, 1995 17,725
Year ending December 31, 1996 270,984
Year ending December 31, 1997 28,711
Year ending December 31, 1998 27,697
Year ending December 31, 1999 110,473
After 1999 237,344
--------
$695,510
========
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 - 3,586,858 shares are issued as Convertible Voting Preferred
Stock, Series C, at September 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 September 30, 1994 and December 31, 1993.
Reacquired stock - The number of reacquired shares of common stock was
1,721,728 at September 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 September 30, 1994, 61,657 common
shares and 86,332 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 capital stock. 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 September 30, 1994, 804,211 common shares and
2,033,148 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 third quarter ended September 30,
1994 was $9.4 million ($0.20 per common share) as compared to $10.3 million
($0.24 per common share) for the third quarter of 1993. For the nine months
ending September 30, 1994, CBI's consolidated net income was $32.6 million
($0.74 per common share) compared to $24.3 million ($0.54 per common share)
for the comparable 1993 period.
Revenues of $489.2 million for the quarter were $80.8 million (19.8%) greater
than the $408.4 million of third quarter 1993 revenues. Approximately 15% of
the increase in revenues is attributable to the consolidation, beginning in
the second quarter of 1994, of certain Canadian industrial gas
distributorships previously accounted for under the equity method. All three
segments of the company realized nine percent or greater increases in revenues
compared to the previous year's third quarter, even excluding the Canadian
consolidation. For the nine months to date, revenues of $1,361.1 million
exceeded those of 1993 by 10.3%.
Gross profit for the quarter of $95.0 million (19.4% of revenues) compared to
$87.9 million (21.5% of revenues) in the third quarter of 1993. For the year
to date, 1994's gross profit of $294.8 million (21.7% of revenues) was 16.1%
better than the $254.0 million (20.6% of revenues) in the previous year,
reflecting both the increase in revenues and improved margins in all three
segments.
Selling and administrative expense increased $5.8 million from the third
quarter of 1993 to the current quarter, of which approximately half of the
increase was due to the consolidation of the Canadian distributorships. For
the first nine months of 1994, selling and administrative expense was $190.1
million, compared to $171.5 million for the same 1993 period. Excluding the
effect of the consolidation of the Canadian distributorships, selling and
administrative expenses year-to-year have increased less than 4%.
Income from operations of $32.9 million (6.7% of revenues) for 1994's third
quarter was up modestly from the $31.5 million (7.7% of revenues) in the
comparable 1993 quarter. Net income declined from the amount reported in the
third quarter of 1993 due to higher levels of interest expense and an increase
in the minority interest in such income. For the year to date, income from
operations of $104.6 million (7.7% of revenues) exceeded the $82.4 million
(6.7% of revenues) recorded in 1993. Cash flow from operations for the quarter
and year to date was $53.8 million and $201.3 million, respectively, compared
to $65.5 million and $175.3 million in 1993.
CBI's comparative operating performance (before interest and taxes) for the
third quarters of 1994 and 1993 and for the first nine months of those years
is as follows (dollars in thousands):
Three Months Nine Months
1994 1993 1994 1993
Revenues $489,191 $408,372 $1,361,064 $1,234,140
Costs 394,195 320,513 1,066,310 980,183
-------- -------- ---------- ----------
Gross profit 94,996 87,859 294,754 253,957
Gross profit-% 19.4% 21.5% 21.7% 20.6%
Selling and administrative 62,145 56,336 190,116 171,531
-------- -------- ---------- ----------
Income from operations 32,851 31,523 104,638 82,426
Income from operations-% 6.7% 7.7% 7.7% 6.7%
Depreciation 27,303 24,413 78,086 72,162
Other non-cash charges (6,395) 9,604 18,624 20,734
-------- -------- ---------- ----------
Cash flow from operations$ 53,759 $ 65,540 $ 201,348 $ 175,322
======== ======== ========== ==========
9
Industrial Gases. Liquid Carbonic's performance for the periods ending
September 30, 1994 and 1993 is as follows (dollars in thousands):
Three Months Nine Months
1994 1993 1994 1993
Revenues $233,226 $201,950 $658,989 $598,966
Costs 161,472 142,985 457,210 422,450
-------- -------- -------- --------
Gross profit 71,754 58,965 201,779 176,516
Gross profit-% 30.8% 29.2% 30.6% 29.5%
Selling and administrative 36,712 32,500 111,241 97,699
-------- -------- -------- --------
Income from operations $ 35,042 $ 26,465 $ 90,538 $ 78,817
Income from operations-% 15.0% 13.1% 13.7% 13.2%
======== ======== ======== ========
Revenues in the Industrial Gases segment in the third quarter of 1994
increased approximately nine percent over the comparable quarter of 1993,
excluding revenues of certain Canadian distributorships first consolidated in
the second quarter of 1994. For the year to date, revenues increased
approximately four percent on a similar basis. Revenues outside the United
States and Canada were up 20.0% in the third quarter and 9.7% for the year to
date, compared to 1993, due principally to improvements in the Brazilian and
Thai economies, and to a full nine months of benefit from the acquisition of
two Polish atmospheric gas companies in the second quarter of 1993. The 1993
results included approximately $4.8 million in the third quarter and $12.3
million for the nine month period of revenues in product lines since
discontinued or sold.
Income from operations for the quarter improved 32.4% from 1993 to 1994 and
was up 14.9% for the nine months to date. In North America, revenues,
operating income and margins were higher as improved economic conditions led
to volume growth in carbon dioxide and atmospheric gases. Increased shipments
of specialty and process gases also contributed to record sales. Selling and
administrative expenses in the United States in 1994 were lower as a result of
Liquid Carbonic's ongoing restructuring program.
Outside the United States and Canada, income from operations for the third
quarter was up significantly due mainly to volume growth in Brazil, Thailand,
Mexico and Argentina. In the quarter, reported operating income was affected
by the accounting impacts of Brazil's successful economic program which
reduced that country's inflation rate dramatically commencing in July. While
net income was unchanged by the accounting treatment, both reported operating
income and the company's tax provision were reduced in the quarter as compared
to that which would have been reported under previous hyper-inflationary
conditions. For the year to date, income from operations outside the U.S. and
Canada was up approximately 10% compared to the previous year, while operating
margins remained constant.
10
Contracting Services. The operating results of Chicago Bridge and Iron
Company for the three and nine months ending September 30, 1994 are as follows
(dollars in thousands):
Three Months Nine Months
1994 1993 1994 1993
Revenues $210,701 $177,033 $593,717 $541,715
Costs 196,979 153,356 522,295 479,248
-------- -------- -------- --------
Gross profit 13,722 23,677 71,422 62,467
Gross profit-% 6.5% 13.4% 12.0% 11.5%
Selling and administrative 19,732 18,738 60,258 57,259
-------- -------- -------- --------
Income from operations $ (6,010) $ 4,939 $ 11,164 $ 5,208
Income from operations-% (2.9)% 2.8% 1.9% 1.0%
======== ======== ======== ========
Revenues for the Contracting Services segment increased 19.0% in the third
quarter of 1994, compared to the same 1993 quarter, and 9.6% for the year to
date. Revenues grew at double-digit rates in the United States during the
quarter and internationally during both the quarter and year to date, due to
the execution of major contracts by the domestic union company and in the
Caribbean and Southeast Asian areas.
Gross profit and income from operations in the third quarter were adversely
affected in the United States by a reduction in the margins due in large part
to the continuing slow pace of capital expenditures for new or replacement
vessels for the refining, chemical, and pulp and paper industries. Outside the
United States, gross profit and income from operations were negatively
affected by previously announced costs associated with a project which
requires additional resources in order to assure successful completion. In
comparing results for the year to date, the effects of the above on gross and
operating margins were counterbalanced by the effects of reserves established
in the first half of 1993 for costs associated with the closing of a
fabrication facility.
New contract awards during the third quarter of 1994 amounted to $149.9
million, a 31.7% reduction from the $219.5 million of new business recorded in
the third quarter of 1993, when three major contracts totalling almost $80
million were awarded. Contract awards in the third quarter were up 9.6% from
the previous quarter. New orders for the nine-month period in 1994 were $508.6
million compared to $507.3 million in the same period in 1993. The backlog of
work to be executed in the future amounted to $325.5 million as of September
30, 1994, as compared to $424.9 million at December 31, 1993 and $292.0
million at September 30, 1993.
11
Investments. The operating results of Statia Terminals and the contributions
from financial investments, which together comprise the Investments segment,
are as follows for the periods ending September 30, 1994 and 1993 (dollars in
thousands):
Three Months Nine Months
1994 1993 1994 1993
Revenues $45,264 $29,389 $108,358 $93,459
Costs 35,744 24,172 86,805 78,485
------- ------- -------- -------
Gross profit 9,520 5,217 21,553 14,974
Gross profit-% 21.0% 17.8% 19.9% 16.0%
Selling and administrative 1,598 1,064 4,324 2,978
------- ------- -------- -------
Income from operations $ 7,922 $ 4,153 $ 17,229 $11,996
Income from operations-% 17.5% 14.1% 15.9% 12.8%
======= ======= ======== =======
Revenues for the current quarter increased 54.0% compared to the same 1993
quarter principally due to a significant increase in the supply of bunkering
products and services to ships calling at the St. Eustatius facility of Statia
Terminals and to revenues generated by Statia's Point Tupper terminal, which
became operational in the second quarter of 1994. Revenues for the 1994 year
to date increased 15.9% over the previous year, reflecting principally the
activation of Point Tupper. Statia Terminals' revenues otherwise were
essentially level with 1993, although a change in the mix of products and
services improved gross margins in 1994.
Selling and administrative expenses increased for both the quarter and year to
date due in part to the opening of Point Tupper and in part to the
reclassification in 1994 of certain charges previously included in costs of
revenues.
Operating profits of the Investments segment were also favorably impacted in
both the quarter and year to date by increases in income from short-term
investments and investments in affiliated companies.
12
Other Income Statement Matters. Interest expense for the third quarter and
first nine months of 1994 amounted to $11.1 million and $28.9 million,
respectively, compared to $7.3 million and $19.7 million, respectively, in the
comparable 1993 periods, as a result of both higher debt levels and the
issuance of $150 million of long-term debt in 1993. The estimated effective
income tax rate for 1994 is 46.5%, compared to 48.9% in 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 third quarter of 1994 and $0.69 for the
year to date, compared to $0.22 and $0.50, 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 $44.0 million at September 30, 1994, up from $23.2 million at
December 31, 1993. Working capital increased from $126.2 million at the end
of 1993 to $156.1 million. Total debt (notes payable plus current and non-
current long-term debt) increased from $676.3 million at December 31, 1993 to
$770.5 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 capital stock) was 52.1% at September 30, 1994, up from 50.0% at the
end of 1993 and 44.9% at September 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 45.7% at September 30, 1994, compared to 42.4% at December
31, 1993 and 37.2% at September 30, 1993.
Capital Expenditures. Expenditures for new plant and equipment in the third
quarter totalled $45.9 million and aggregated $168.3 million for the first
nine months of 1994. Of the totals, $22.9 million in the third quarter and
$106.3 million for the year to date represent investments in increased
capacity, primarily within Liquid Carbonic. Capital expenditures in the first
nine months of 1993 amounted to $143.1 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 12 of the 4,300 (approximate) third-party plaintiffs
who brought suit as a result of the incident. The Company believes that
the outcome of this remaining litigation will not have a material
adverse effect on the Company's consolidated financial position.
CBI Na-Con also was 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. After
filing and arguing posttrial motions and participating in court directed
mediation, this case was settled during the third quarter. The
settlement amount was within the Company's available reserves.
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. The case was argued
before the Texas Supreme Court on September 20, 1994 and the parties are
waiting for the Court's decision. 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.
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.
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.
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Item 1. Legal Proceedings (Continued)
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 any 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,
Zafter 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
3. (i) Certificate of Incorporation
As restated September 27, 1994
11. Computation of Earnings per Common Share
27. Financial Data Schedule
(b) Reports on Form 8-K
A Form 8-K was filed under Item 5, Other Events. The date of
that report was August 17, 1994.
A Form 8-K was filed under Item 5, Other Events and Item 7,
Financial Statements and Exhibits. The date of that report was
October 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: November 10, 1994
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