XXX BEGIN PAGE 24 HERE XXX
FINANCIAL SUMMARY CBI Industries, Inc. and Subsidiaries
____________________________________________________________________________________________________________________________________
Thousands of dollars,
except per share amounts; Years ended December 31, 1994 1993 1992 1991 1990
____________________________________________________________________________________________________________________________________
RESULTS OF OPERATIONS
Revenues Industrial Gases $ 907,300 $ 826,242 $ 746,394 $ 697,569 $ 661,970
Contracting Services 831,399 728,572 793,093 775,591 764,890
Investments 152,208 116,930 133,287 141,741 138,549
________________________________________________________________________________________________________
1,890,907 1,671,744 1,672,774 1,614,901 1,565,409
__________________________________________________________________________________________________________________________________
Income from Operations Industrial Gases 127,575 112,628 107,505 106,968 102,589
Contracting Services 23,540 8,035 75,698 70,231 55,265
Investments 29,626 14,916 2,236 10,214 14,747
Corporate (20,201) (17,834) (19,159) (19,880) (19,684)
Special (Charge)/Credit - (91,600)<FN1> - - 10,788<FN3>
________________________________________________________________________________________________________
160,540 26,145 166,280 167,533 163,705
__________________________________________________________________________________________________________________________________
Income/(Loss) before Income Taxes 118,910 (2,235) 145,500 136,965 122,849
Net Income/(Loss) 51,484 (34,013)<FN1> 63,963<FN2> 61,076 55,135<FN3>
Net Income/(Loss) to Common Shareholders 45,454 (39,846)<FN1> 58,367<FN2> 53,408 47,604<FN3>
____________________________________________________________________________________________________________________________________
FINANCIAL POSITION
Assets Industrial Gases $1,238,945 $1,109,051 $971,796 $843,239 $803,496
Contracting Services 387,268 402,225 385,455 350,855 358,735
Investments 382,499 358,969 328,074 284,777 270,051
________________________________________________________________________________________________________
2,008,712 1,870,245 1,685,325 1,478,871 1,432,282
__________________________________________________________________________________________________________________________________
Debt Current 89,830 68,698 65,657 46,378 46,085
Long-Term 666,730 607,579 410,998 259,550 394,739
________________________________________________________________________________________________________
756,560 676,277 476,655 305,928 440,824
__________________________________________________________________________________________________________________________________
Capital Stock Preferred 38,138 33,080 27,187 20,570 15,198
Common 677,698 643,532 688,294 645,591 497,465
________________________________________________________________________________________________________
715,836 676,612 715,481 666,161 512,663
__________________________________________________________________________________________________________________________________
Debt to Capitalization <FN4> - % 51.4% 50.0% 40.0% 31.5% 46.2%
Debt to Capitalization Adjusted for the ESOP Debt <FN5> - % 45.0% 42.4% 30.7% 19.4% 33.4%
____________________________________________________________________________________________________________________________________
PER COMMON SHARE
Net Income/(Loss) - Primary $ 1.20 $ (1.07)<FN1> $ 1.59<FN2> $ 1.54 $ 1.58<FN3>
Net Income/(Loss) - Fully Diluted 1.10 (.89)<FN1> 1.42<FN2> 1.38 1.41<FN3>
Dividends .48 .48 .48 .44 .40
Common Capital Stock 17.79 17.19 18.74 17.79 15.32
__________________________________________________________________________________________________________________________________
Common Stock Price Range 35-20 1/8 32-21 7/8 37 1/8-25 7/8 36 3/4-23 7/8 29 1/4- 20 3/4
Year-End 25 5/8 30 3/8 29 5/8 32 3/8 26 7/8
____________________________________________________________________________________________________________________________________
OTHER
Capital Expenditures Industrial Gases $ 188,098 $ 189,041 $ 156,813 $ 93,536 $ 91,180
Contracting Services 24,153 24,925 56,427 29,267 24,630
Investments 26,774 16,960 24,315 24,214 12,599
________________________________________________________________________________________________________
239,025 230,926 237,555 147,017 128,409
__________________________________________________________________________________________________________________________________
Depreciation Industrial Gases 78,654 73,306 67,457 60,836 57,783
Contracting Services 18,844 20,899 14,704 11,095 11,176
Investments 9,625 6,495 9,390 10,694 8,213
________________________________________________________________________________________________________
107,123 100,700 91,551 82,625 77,172
__________________________________________________________________________________________________________________________________
Net Other Non-Cash Charges to Income from Operations 26,294 85,932 43,370 17,115 23,347
Cash Flow from Operations <FN6> 293,957 212,777<FN1> 301,201 267,273 264,224<FN3>
____________________________________________________________________________________________________________________________________
<FN>
<FN1>Results in 1993 are after a special charge of $91,600 ($68,400 after-tax), which was equivalent to a net loss per common share
of $1.84 ($1.60 on a fully diluted basis), to provide for costs to more efficiently align capabilities to customer needs, and
for non-operational regulatory and legal costs.
<FN2>In 1992, CBI adopted Statements of Financial Accounting Standards No. 106 - Employers' Accounting for Postretirement Benefits
Other Than Pensions and No. 109 - Accounting for Income Taxes. The cumulative effect of adopting these two accounting
standards decreased net income by $7,170, which was equivalent to a net loss per common share of $0.20 ($0.17 on a fully
diluted basis).
<FN3>Results in 1990 include a special credit from the sale of an equity interest in Australian Submarine Corporation of $10,788
($6,580 after-tax), which was equivalent to net income per common share of $0.23 ($0.19 on a fully diluted basis).
<FN4>Capitalization equals debt plus capital stock.
<FN5>Adjusted to reflect ESOP debt as additional capital stock consistent with the requirement of the ESOP Trust to allocate its
holdings of the Series C preferred and common shares to eligible employees.
<FN6>Cash flow from operations equals income from operations plus depreciation and net other non-cash charges to income from
operations.
The financial statements should be read in conjunction with this summary.
XXX BEGIN PAGE 25 HERE XXX
FINANCIAL REVIEW CBI Industries, Inc. and Subsidiaries
______________________________________________________________________________
The following discussion and analysis of operating performance and financial
condition should be read in conjunction with the financial statements.
______________________________________________________________________________
OPERATING PERFORMANCE
OVERVIEW
Over the past two years, CBI has strengthened its focus on customer needs,
improved operational and executional efficiencies, eliminated redundant and
non-value-adding activities, and enhanced and added to its productive
capabilities. The success of these initiatives, which have been supplemented
by the reengineering and quality management programs in operation throughout
the company, is confirmed by the financial results achieved in 1994.
Millions of dollars, except per share amounts 1994 1993<FN1> 1992<FN2>
______________________________________________________________________________
Revenues $1,890.9 $1,671.7 $1,672.8
Gross Profit from Operations 421.9 353.6 380.7
Gross Profit from Operations - % 22.3% 21.2% 22.8%
Income from Operations 160.5 117.7 166.3
Income from Operations - % 8.5% 7.0% 9.9%
Net Income 51.5 34.4 64.0
Net Income per Common Share - Primary 1.20 .77 1.59
Net Income per Common Share - Fully Diluted 1.10 .71 1.42
Cash Flow from Operations <FN3> 294.0 262.4 301.2
______________________________________________________________________________
[FN]
<FN1>Income from operations, net income, earnings per share data and cash flow
from operations in 1993 are before the special charge discussed in Note
14.
<FN2>Net income and earnings per share data in 1992 is after the cumulative
effect of accounting changes discussed in Notes 10 and 11.
<FN3>Cash flow from operations equals income from operations plus depreciation
and net other non-cash charges to income from operations.
CBI's consolidated revenues have grown at a compound annual rate of 6.3% over
the past two years. In 1994, total revenues advanced $219.2 million, or 13.1%,
to $1.891 billion, with each of CBI's three businesses contributing to the
gain. Geographically, revenues advanced approximately 9% in the United States
and at an average double-digit rate in the 40 plus international markets where
CBI services customer needs. Revenues in 1993 totaled $1.672 billion, which
was equal to the amount reported in 1992, as the increases posted by Liquid
Carbonic's operations were offset by the lower level of work executed by
Chicago Bridge & Iron and the absence of $20 million of revenues from
Integrated Drilling and Exploration (Indrex), which was sold as of the end of
1992.
In both dollars and as a percent of revenues, gross profit from operations
increased in 1994. This improvement, which equates to a dollar increase of
$68.3 million, or 19.3%, and resulted in consolidated margins advancing to
22.3% from 21.2% in 1993, primarily reflects more favorable economic
conditions in the Western Hemisphere where CBI has a significant presence,
improved pricing on selected product lines and achievement of higher capacity
utilization rates. In 1993, gross profit dollars and margins were adversely
influenced by lower U.S. carbon dioxide prices and depressed economic
conditions in Canada, as well as by the lower level and value of contracting
work executed.
Given the above progress, consolidated income from operations increased in
1994 by 36.3%, or $42.8 million, to $160.5 million. On a global basis, the
increase in income from operations was largely derived in markets outside of
the United States. Because CBI's business segments grew operating earnings
more rapidly than revenues, total income from operations as a percent of
revenues advanced to 8.5% in 1994 from 7.0% in 1993. The year-to-year increase
in cash flow from operations, from $262.4 million in 1993 to $294.0 million in
1994, was primarily driven by the higher level of operating performance
achieved in the current year. In 1993, consolidated operating income declined
from $166.3 million in 1992 to $117.7 million. This was largely due to
lower contributions provided by Chicago Bridge & Iron resulting from the
decline in new business taken during the twelve month period ending June 1993,
the decision to close a fabrication facility in the United States and the
absence of significant contract settlement recoveries such as were recorded in
1992.
1994 represented a year of reestablishing momentum. Although a number of
variables could influence the level of progress which CBI will achieve in
1995, adherence to our guiding principles will result in enhancing shareholder
wealth.
______________________________________________________________________________
INDUSTRIAL GASES
Liquid Carbonic posted its eighth consecutive year of record setting revenues
and income in 1994. Over the past two years, revenue and operating income
contributions have grown at compound annual rates of 10.3% and 8.9%,
respectively. The following table presents Liquid Carbonic's operating
performance over the period of 1992 through 1994.
Millions of dollars 1994 1993 1992
______________________________________________________________________________
Revenues $ 907.3 $ 826.2 $ 746.4
Gross Profit from Operations 281.9 247.3 231.1
Gross Profit from Operations - % 31.1% 29.9% 31.0%
Income from Operations 127.6 112.6 107.5
Income from Operations - % 14.1% 13.6% 14.4 %
Average Assets Employed 1,174.0 1,040.4 907.5
Rate of Return on Average Assets Employed - % 10.9% 10.8% 11.8%
______________________________________________________________________________
Total industrial gas revenues advanced by 9.8% in 1994 and 10.7% in 1993. As
highlighted in the following table, which presents revenues by product line,
Liquid Carbonic has grown by expanding its core competencies in carbon
dioxide, and in atmospheric and specialty gases. The significant increase in
specialty gas revenues in 1994 was primarily related to the first-time
consolidation of the Canadian distributor operations which generated $49
million in 1994 revenues and were previously accounted for under the equity
method of accounting. Additionally, through selective acquisitions, Liquid
Carbonic has added calcium carbonate to its specialty chemicals line and new
process gas capacity has been added to supply carbon monoxide, hydrogen and
methanol to customers which operate in the chemical and petroleum industries.
The decline in other product revenues came primarily from the sale of certain
business lines in Argentina and Canada, and from a reclassification of some
product sales in Poland.
Millions of dollars 1994 1993 1992
______________________________________________________________________________
Carbon Dioxide $422 $385 $363
Atmospheric Gases 175 169 160
Specialty Gases 157 101 95
Process Gases 49 41 38
Specialty Chemicals 46 47 22
Other Products 58 83 68
---- ---- ----
Total Revenues $907 $826 $746
______________________________________________________________________________
XXX BEGIN PAGE 26 HERE XXX
INDUSTRIAL GASES (CONTINUED)
The following table presents revenues by geographic area. Compound annual
growth rates over the past two years by area have equaled 3.4% in the United
States, 18.2% (negative 2.3% excluding the first-time consolidation of the
distributor operations) in Canada, 15.6% in Latin America and 16.6% in
Eurasia. Revenues in North America have been largely driven by investing in
new capacity to respond to expanding customer requirements for carbon dioxide,
atmospheric gases and hydrogen. During the last half of 1994, improved pricing
conditions also contributed to the gains registered. Internationally, where
economic growth rates significantly exceed those experienced in North America,
revenues have advanced much more rapidly as demand increased for carbon
dioxide and specialty gases in both traditional and new applications in such
key markets as Brazil, Mexico, Thailand, Argentina, Spain, Venezuela and
Colombia. Revenue growth has also been accelerated through selective
acquisitions, made in 1993 and 1992, which have added calcium carbonate to the
line of products sold throughout Latin America and expanded the markets served
to include Poland.
Millions of dollars 1994 1993 1992
______________________________________________________________________________
United States $390 $379 $365
Latin America 294 275 220
Canada 155 114 111
Eurasia 68 58 50
---- ---- ----
Total Revenues $907 $826 $746
______________________________________________________________________________
The rate of return on average assets employed, which have increased at an
annual compound growth rate of 13.7%, from $907.5 million in 1992 to $1,174.0
million in 1994, declined from 11.8% in 1992 to 10.9% in 1994. This has
happened primarily because many of the projects included in the $377.1 million
capital expenditure program of the past two years either are not yet complete
or were just recently completed and therefore have not yet realized their
ultimate benefits. The increases generated in operating income have occurred
in all major markets served, and were most dramatic in Brazil, Liquid
Carbonic's largest single earnings contributor, Mexico, Poland, Spain and
Thailand, where food freezing applications have experienced rapid growth.
Brazil, which has contributed in excess of one-third of Liquid Carbonic's
operating income in each of the past two years, was a lesser percentage of
such income in 1994 as compared to 1993. With benefits to be realized from
the continuing re-engineering efforts and with increasing utilization of an
expanding base of modern production facilities, Liquid Carbonic is poised to
deliver another year of record results in 1995.
______________________________________________________________________________
CONTRACTING SERVICES
Chicago Bridge & Iron continued to adapt to an evolving marketplace in 1994.
The following table presents a summary of revenues, gross profit, operating
income, operating returns, new business and year-end backlog over the most
recent three year period.
Millions of dollars 1994 1993 1992
______________________________________________________________________________
Revenues $831.4 $728.6 $793.1
Gross Profit from Operations 104.5 87.0 141.6
Gross Profit from Operations - % 12.6% 11.9% 17.9%
Income from Operations 23.5 8.0 75.7
Income from Operations - % 2.8% 1.1% 9.5%
Average Assets Employed 394.7 393.8 368.2
Rate of Return on Average Assets Employed - % 6.0% 2.0% 20.6%
New Business Taken 707.5 839.6 703.5
Backlog at Year-End 287.5 424.9 325.2
______________________________________________________________________________
Reflecting several major international awards received in the last half of
1993 and first quarter of 1994 for tanks, spheres and pressure vessels, along
with increased current year domestic demand from refinery customers to assist
with their repair and turnaround requirements, 1994 revenues advanced by 14.1%
to $831.4 million. The heat treating and inspection revenues provided by
Cooperheat, acquired in 1993, and MQS Inspection, acquired in 1992, also
increased in 1994. The capabilities of these two newer operations are
successfully being extended to serve customers in key international markets.
Revenues in 1993 declined by $64.5 million, or 8.1%, as a direct result of the
low level of new business taken during the twelve month period ending June
1993, when orders totaled $549.0 million as compared to $724.4 million for the
preceding twelve months. The following table reports the value of work
executed, and reported as revenues, by product line in 1994, 1993 and 1992.
Millions of dollars 1994 1993 1992
______________________________________________________________________________
Tanks and Spheres $348 $268 $321
Repairs and Turnarounds 162 127 79
Specialty Structures 124 146 215
Heat Treating and Inspection 93 84 29
Pressure Vessels 76 54 74
General Contracting 28 50 75
---- ---- ----
Total Revenues $831 $729 $793
______________________________________________________________________________
Chicago Bridge & Iron's global performance improved in 1994, as gross profit
dollars increased by 20.1% to $104.5 million, gross profit margins improved
from 11.9% in 1993 to 12.6% in 1994 and operating earnings advanced almost
threefold to $23.5 million. This improvement largely reflects the continuing
success of the effort being expended to enhance customer service through
partnering arrangements and to redesign processes, both of which are focused
on reducing costs and improving Chicago Bridge & Iron's competitive position.
Additionally, the comparisons of year-to-year performance were also affected
by the strategic actions taken to dispose of facilities and equipment which
are not required to maintain optimal capabilities, such as the 1993 decision
to close a fabrication site in Cordova, Alabama, and the timing and product
mix of contract awards.
XXX BEGIN PAGE 27 HERE XXX
The following table highlights the annual amount of new business taken by
product line over the three years ended December 31, 1994.
Millions of dollars 1994 1993 1992
______________________________________________________________________________
Tanks and Spheres $266 $328 $320
Repairs and Turnarounds 172 120 78
Heat Treating and Inspection 94 84 29
Specialty Structures 87 138 151
Pressure Vessels 63 118 67
General Contracting 25 52 59
---- ---- ----
Total New Business Taken $707 $840 $704
______________________________________________________________________________
An estimated 55% of the orders in 1994 and 56% over the past three years have
come from customers which operate in the hydrocarbon sector. Geographically,
approximately 37% of 1994's new business related to non-U.S. work and
international orders over the past three years contributed 42% of the
contracts awarded. Due to the significant level of work executed in 1994, the
backlog of work to be performed in the future declined to $287.5 million at
December 31, 1994 as compared to $424.9 million and $325.2 million at the ends
of 1993 and 1992, respectively. Although Chicago Bridge & Iron is anticipating
improvement in new business awards in 1995, with the level of uncertainty over
customer capital expenditure decisions it is extremely difficult to project
the magnitude of improvement that is hoped to be realized.
______________________________________________________________________________
INVESTMENTS
Statia Terminals (Statia), which is a leading Western Hemisphere third party
provider of transshipment, storage and blending services for hydrocarbon and
other liquid products, is the sole operating company and principal source of
revenue and operating income within the Investments segment. Statia's
contributions, plus those provided from other segment assets, including real
estate and short-term investments, and the final year results of Indrex in
1992, which was sold as of December of that year, are presented below.
Millions of dollars 1994 1993 1992
______________________________________________________________________________
Revenues $152.2 $116.9 $133.3
Income from Operations 29.6 14.9 2.2
______________________________________________________________________________
Since January 1992, Statia has substantially enhanced its capabilities by
increasing its total storage capacity from 5.5 million to 15.3 million
barrels, through expansions at both St. Eustatius, in the Caribbean, and
Brownsville, Texas, and by the purchase and reactivation of a 7.4 million
barrel storage facility located at Point Tupper, Nova Scotia. Effective as of
the end of January 1995, Statia assumed operational responsibility, under a
lease agreement, of an additional 5 million barrels of storage capacity and a
single-point mooring system at St. Eustatius. These new facilities will be
used to service a long-term contract with a major oil producer to discharge
oil from very large crude oil carriers and reload shipments into smaller
tankers for transshipments primarily to the United States.
With the increased capacity and Statia's recognized ability to satisfy its
customer requirements for quality bunkering fuels and product blending, its
revenue and operating income contributions have grown at compound annual rates
of 15.7% and 18.7%, respectively, over the past two years. The revenues and
income provided by Point Tupper, which became operational in the second
quarter of 1994, positively added to Statia's performance in the current year,
as the available storage was virtually all utilized in the last half of the
year. Given Statia's momentum, 1995 promises to generate increasing returns
and cash flow from this strategic investment.
Sales of real estate and returns on temporary cash investments, net of
foreign currency adjustments, increased in 1994. The returns on real estate
and financial assets in 1993, although lower than in 1992, met expectations.
The comparisons of 1993 to 1992 operating income were favorably impacted by
the sale of Indrex, which was effective as of December 31, 1992. Total segment
revenues, in contrast, were lower by approximately $20 million in 1993 due to
the absence of Indrex's operations.
______________________________________________________________________________
OTHER
In the fourth quarter of 1993, CBI recorded a special charge of $91.6 million
($68.4 million after-tax), which was equivalent to a net loss per common share
of $1.84 ($1.60 on a fully diluted basis), to provide for costs, identified
through its re-engineering and quality management programs, to more
efficiently align capabilities to customer needs, and also for non-operational
regulatory and legal costs. Included within the special charge were non-cash
provisions totaling $42.0 million for write-downs of excess, non-performing
assets and for increases in certain liability reserves. The remaining $49.6
million of the special charge included provisions for costs associated with
certain workforce realignments and reductions, and selected regulatory and
legal issues. The actions anticipated by the special charge are proceeding as
expected.
Interest expense in 1994 increased to $41.6 million from $28.4 million in
1993 and $20.8 million in 1992. These increases reflect higher debt levels,
higher variable interest rates, particularly in 1994, and the lengthening of
debt maturities to obtain the benefit of more favorable long-term interest
rates. In March 1993, the company sold $75 million of ten year 6 5/8% notes,
and in July 1993, sold an additional $75 million of 6 1/4% notes due in the
year 2000. Interest costs capitalized in connection with the construction of
new facilities amounted to $4.0 million in 1994, $5.9 million in 1993 and $6.1
million in 1992.
1994's consolidated effective tax rate equaled 46.5% as compared to 49.0%
in 1993, excluding the effect of the tax benefit attributable to the special
charge, and 43.1% in 1992. The successful introduction of a new economic plan
in July 1994 by the Brazilian government, which has significantly reduced that
country's inflation rate and brought stability to its exchange rate with the
U.S. dollar, contributed to a reduction in CBI's consolidated tax rate by
approximately 4% in 1994. CBI's consolidated effective tax rates have been
negatively influenced, principally in 1994 and 1993, by the level of domestic
source taxable operating earnings compared to domestic administrative costs,
interest and special charge expenses. Additionally, as also indicated in the
fourth table in Note 10, CBI's effective tax rates were higher than the U.S.
statutory rate due to Internal Revenue Service requirements to allocate a
portion of domestic interest and other expenses against income from foreign
sources.
In the fourth quarter of 1992, CBI adopted, retroactively to the first
quarter of 1992, the accounting requirements of Financial Accounting Standards
Board Statements No. 106 - Employers' Accounting for Postretirement Benefits
Other Than Pensions and No. 109 - Accounting for Income Taxes. The cumulative
effect of adopting these two accounting pronouncements decreased 1992 net
income by $7.2 million ($0.20 per common share).
XXX BEGIN PAGE 28 HERE XXX
______________________________________________________________________________
FINANCIAL CONDITION
LIQUIDITY
CBI's overriding objective, to maximize shareholder wealth, is partially
achieved through financial management which optimizes the company's cost of
capital and maximizes cash returns from business activities. The following
table is a condensed summary of that activity and shows cash flows taken from
the Statements of Cash Flows on page 31, capital expenditures, year-end
balances of debt, capital stock and capitalization ratios.
Millions of dollars 1994 1993 1992
______________________________________________________________________________
Operating Cash Flows $191.5 $106.2 $162.6
Capital Investment Cash Flows (214.2) (250.3) (306.5)
Financing and Shareholder Cash Flows 50.4 129.5 140.8
______________________________________________________________________________
Increase/(Decrease) in Cash and
Temporary Cash Investments 27.7 (14.6) (3.1)
______________________________________________________________________________
Capital Expenditures 239.0 230.9 237.6
Debt <FN1> 756.6 676.3 476.7
Capital Stock 715.8 676.6 715.5
Debt to Capitalization - % 51.4% 50.0% 40.0%
Debt to Capitalization Adjusted for the
ESOP Debt <FN2> - % 45.0% 42.4% 30.7%
______________________________________________________________________________
[FN]
<FN1>Includes notes payable plus current and non-current long-term debt.
<FN2>Adjusted to reflect ESOP debt as additional capital stock consistent with
the requirement of the ESOP Trust to allocate its holdings of the Series
C preferred and common shares to eligible employees.
The combined balances of cash and temporary cash investments, the majority of
which is in the company's non-U.S. operations, stood at $51.0 million at the
end of 1994 as compared to $23.2 million and $37.8 million at the ends of 1993
and 1992, respectively. Working capital amounted to $138.8 million at December
31, 1994 as compared to $126.2 million at December 31, 1993 and $108.7 million
at December 31, 1992. The increase in 1994's working capital is primarily
attributable to increases in accounts receivable and inventories which arose
from the first-time consolidation of the Canadian distributor operations.
Operating cash flows shown in the preceding table represent the combined
after-tax cash generated from operating activities together with the effect of
changes in working capital. The expenditures made to expand capacity and
improve efficiencies, which are included in capital investment cash flows,
have aggregated $707.5 million over the past three years, with 75.5% of this
investment being devoted to Industrial Gases. Approximately 58% of CBI's total
capital expenditures during this three year period has been invested to
increase capacity and the remaining 42% was dedicated to sustaining the level
of business activity. In addition to expanding CBI's capacity, the investment
program in new plant and equipment has also led to a steady decline in the
proportion of maintenance and repair expenditures over the past four years,
from 7.3% of net property, plant and equipment in 1991 to 4.9% in 1994.
The financing and shareholder cash flows include the net cash flows of
managing CBI's capital structure in response to growing requirements and to
providing shareholders with dividends on their investment in the company. The
annual per share dividends paid to common shareholders equaled $0.48 in each
of the three years ending December 31, 1994. 1994 marked the eighty-second
consecutive year in which CBI has paid cash dividends to common shareholders,
a record uninterrupted since the company began paying dividends in 1913.
Long-term debt increased by $59.2 million in 1994 to $666.7 million,
following an increase of $196.6 million in 1993. The increases in debt have
resulted from CBI's active program of reinvestment and business acquisitions
made over the past two years. The ratio of debt to capitalization (debt plus
capital stock) was 51.4% at the end of 1994 as compared to 50.0% at December
31, 1993 and 40.0% at the end of 1992. The measurement of CBI's financial
leverage is complicated by the accounting required for the debt incurred by
the ESOP in 1988 to purchase the Series C preferred and common stock. Under
generally accepted accounting principles, CBI was required to simultaneously
record the original $125 million of Senior ESOP Notes as additional long-term
debt and as a reduction of preferred and common capital stock. With the ESOP
debt considered as capital stock, which will occur as the preferred and common
shares held by the ESOP Trust are allocated to eligible employees, debt as a
percent of capitalization was 45.0% at December 31, 1994 as compared to 42.4%
and 30.7% at the ends of 1993 and 1992, respectively.
______________________________________________________________________________
CAPITAL RESOURCES
CBI has adequate resources to permit the financing of its operations. In
addition to a strong financial position and cash flow from operations, there
was available at December 31, 1994, $129.4 million of unused bank overdraft
and borrowing privileges, and a $300.0 million unsecured three-year extendible
revolving credit agreement which is used to support commercial paper and other
similar borrowings.
XXX BEGIN PAGE 29 HERE XXX
STATEMENTS OF INCOME CBI Industries, Inc. and Subsidiaries
____________________________________________________________________________________________________________________________________
Thousands of dollars, except per share amounts; Years ended December 31 1994 1993 1992
____________________________________________________________________________________________________________________________________
REVENUES Industrial Gases $ 907,300 $ 826,242 $ 746,394
Contracting Services 831,399 728,572 793,093
Investments 152,208 116,930 133,287
______________________________________________________________________________________________________
1,890,907 1,671,744 1,672,774
____________________________________________________________________________________________________________________________________
COSTS OF PRODUCTS AND
SERVICES SOLD Industrial Gases (625,431) (578,959) (515,257)
Contracting Services (726,885) (641,575) (651,515)
Investments (116,684) (97,604) (125,339)
______________________________________________________________________________________________________
(1,469,000) (1,318,138) (1,292,111)
____________________________________________________________________________________________________________________________________
GROSS PROFIT FROM OPERATIONS 421,907 353,606 380,663
____________________________________________________________________________________________________________________________________
SELLING AND ADMINISTRATIVE
EXPENSE Industrial Gases (154,294) (134,655) (123,632)
Contracting Services (80,974) (78,962) (65,880)
Investments (5,898) (4,410) (5,712)
Corporate (20,201) (17,834) (19,159)
______________________________________________________________________________________________________
(261,367) (235,861) (214,383)
____________________________________________________________________________________________________________________________________
SPECIAL CHARGE (Note 14) - (91,600) -
____________________________________________________________________________________________________________________________________
INCOME FROM OPERATIONS 160,540 26,145 166,280
____________________________________________________________________________________________________________________________________
Interest Expense (41,630) (28,380) (20,780)
______________________________________________________________________________________________________
Income/(Loss) before Income Taxes, Minority Interest
and Cumulative Effect of Accounting Changes 118,910 (2,235) 145,500
Provision for Income Taxes (Note 10) (55,300) (20,600) (62,700)
______________________________________________________________________________________________________
Income/(Loss) before Minority Interest and
Cumulative Effect of Accounting Changes 63,610 (22,835) 82,800
Minority Interest in Income (12,126) (11,178) (11,667)
______________________________________________________________________________________________________
Income/(Loss) before Cumulative Effect
of Accounting Changes 51,484 (34,013) 71,133
Cumulative Effect of Changes in Accounting
for Income Taxes (Note 10) and Other
Postretirement Benefits (Note 11) - - (7,170)
______________________________________________________________________________________________________
Net Income/(Loss) 51,484 (34,013) 63,963
Dividends on Preferred Shares, net of tax
benefits of $1,875 in 1994, $2,099 in 1993
and $2,255 in 1992 (6,030) (5,833) (5,596)
____________________________________________________________________________________________________________________________________
NET INCOME/(LOSS) TO
COMMON SHAREHOLDERS $ 45,454 $ (39,846) $ 58,367
____________________________________________________________________________________________________________________________________
PER COMMON SHARE - Net Income/(Loss) before Cumulative Effect of
PRIMARY (Note 1) Accounting Changes $ 1.20 $ (1.07) $ 1.79
Cumulative Effect of Accounting Changes - - (.20)
______________________________________________________________________________________________________
Net Income/(Loss) to Common Shareholders $ 1.20 $ (1.07) $ 1.59
____________________________________________________________________________________________________________________________________
PER COMMON SHARE - Net Income/(Loss) before Cumulative Effect of
FULLY DILUTED (Note 1) Accounting Changes $ 1.10 $ (.89) $ 1.59
Cumulative Effect of Accounting Changes - - (.17)
______________________________________________________________________________________________________
Net Income/(Loss) to Common Shareholders $ 1.10 $ (.89) $ 1.42
____________________________________________________________________________________________________________________________________
The accompanying notes are an integral part of these financial statements.
XXX BEGIN PAGE 30 HERE XXX
BALANCE SHEETS CBI Industries, Inc. and Subsidiaries
____________________________________________________________________________________________________________________________________
Thousands of dollars; Years ended December 31 1994 1993 1992
____________________________________________________________________________________________________________________________________
CURRENT ASSETS Cash $ 14,013 $ 6,224 $ 5,291
Temporary Cash Investments at cost, which
approximates market 36,953 17,005 32,498
Accounts Receivable less allowances of $14,800
in 1994, $11,500 in 1993 and $8,000 in 1992 295,542 283,952 236,333
Contracts in Progress with Earned Revenues
exceeding related Progress Billings (Note 1) 60,143 61,823 67,140
Inventories (Note 2) 73,226 63,644 61,622
Other Current Assets 37,977 38,626 31,276
______________________________________________________________________________________________________
517,854 471,274 434,160
____________________________________________________________________________________________________________________________________
OTHER ASSETS Notes Receivable 37,397 33,057 45,308
Real Estate Properties 26,542 26,721 30,420
Equity in and Advances to Unconsolidated Affiliates 31,082 65,506 73,561
Intangible Assets (Note 1) 78,783 78,278 54,468
Other Non-Current Assets 70,124 64,444 73,815
______________________________________________________________________________________________________
243,928 268,006 277,572
____________________________________________________________________________________________________________________________________
PROPERTY AND EQUIPMENT (Note 3) 1,246,930 1,130,965 973,593
____________________________________________________________________________________________________________________________________
TOTAL ASSETS $2,008,712 $1,870,245 $1,685,325
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
CURRENT LIABILITIES Notes Payable (Note 4) $ 72,589 $ 43,472 $ 45,618
Current Maturities of Long-Term Debt (Note 4) 17,241 25,226 20,039
Accounts Payable 94,523 66,558 86,286
Dividends Payable 2,675 2,790 2,866
Accrued Liabilities 117,851 137,871 106,079
Contracts in Progress with Progress Billings
exceeding related Earned Revenues (Note 1) 42,813 52,198 34,741
Income Taxes Payable 31,360 16,955 29,829
______________________________________________________________________________________________________
379,052 345,070 325,458
____________________________________________________________________________________________________________________________________
LONG-TERM DEBT AND
OTHER LIABILITIES Long-Term Debt (Note 4) 666,730 607,579 410,998
Other Non-Current Liabilities 143,065 130,494 105,307
Deferred Income Taxes (Note 10) 41,687 42,867 77,138
Minority Interest in Subsidiaries 62,342 67,623 50,943
____________________________________________________________________________________________________________________________________
CAPITAL STOCK Preferred Stock (Note 7)
Authorized 20,000,000 Shares, $1.00 par value,
issued serially, Series C, 3,556,918 shares
issued in 1994, 3,713,519 shares issued in
1993 and 3,795,279 shares issued in 1992 115,244 120,318 122,967
Unallocated ESOP Shares (Note 9) - (3,654) (7,309)
Unamortized ESOP Debt (Note 9) (77,106) (83,584) (88,471)
______________________________________________________________________________________________________
38,138 33,080 27,187
______________________________________________________________________________________________________
COMMON STOCK (Note 8)
Authorized 120,000,000 Shares, $2.50 par value,
39,783,614 shares issued in 1994, 1993 and 1992 99,459 99,459 99,459
Additional Paid-in Capital 214,320 214,320 214,320
Retained Earnings 460,683 427,828 479,614
Unamortized Restricted Stock Awards (Note 8) (9,780) (8,498) (8,477)
Unallocated ESOP Shares (Note 9) - (931) (1,862)
Unamortized ESOP Debt (Note 9) (17,167) (18,609) (19,697)
Cost of Reacquired Common Stock (Note 8) (34,676) (45,353) (57,095)
Cumulative Translation Adjustment (35,141) (24,684) (17,968)
______________________________________________________________________________________________________
677,698 643,532 688,294
____________________________________________________________________________________________________________________________________
TOTAL LIABILITIES
AND CAPITAL STOCK $2,008,712 $1,870,245 $1,685,325
____________________________________________________________________________________________________________________________________
The accompanying notes are an integral part of these financial statements.
XXX BEGIN PAGE 31 HERE XXX
STATEMENTS OF CASH FLOWS CBI Industries, Inc. and Subsidiaries
____________________________________________________________________________________________________________________________________
Thousands of dollars; Years ended December 31 1994 1993 1992
____________________________________________________________________________________________________________________________________
CASH FLOWS FROM Net Income/(Loss) $ 51,484 $ (34,013) $ 63,963
OPERATING ACTIVITIES Special Charge, net of tax benefit (Note 14) - 68,400 -
Cumulative Effect of Accounting
Changes (Notes 10 and 11) - - 7,170
Depreciation 107,123 100,700 91,551
------- ------- ------
158,607 135,087 162,684
(Increase) in Accounts Receivable (3,581) (20,527) (3,783)
(Increase)/Decrease in Contracts in Progress, net (6,746) 20,892 (30,827)
Increase/(Decrease) in Accounts Payable,
Accrued Liabilities and Income Taxes Payable, net 16,625 (55,762) 15,101
Increase/(Decrease) in Deferred Income Taxes 1,397 2,604 (10,393)
Decrease in Undistributed Earnings of
Unconsolidated Affiliates 819 3,144 1,387
Other, net 24,399 20,752 28,475
______________________________________________________________________________________________________
191,520 106,190 162,644
____________________________________________________________________________________________________________________________________
CASH FLOWS FROM CAPITAL Purchase of Property and Equipment (239,025) (230,926) (237,555)
INVESTMENT ACTIVITIES Cost of Business Acquisitions, net of cash acquired (13,137) (29,996) (42,313)
Disposition of Property and Equipment 14,438 16,551 10,679
Decrease/(Increase) in Other Assets, net 17,084 (14,139) (48,849)
Other, net 6,436 8,211 11,523
______________________________________________________________________________________________________
(214,204) (250,299) (306,515)
____________________________________________________________________________________________________________________________________
CASH FLOWS FROM FINANCING Issuance of Debt 114,298 198,341 280,041
AND SHAREHOLDER ACTIVITIES Repayment of Debt (39,107) (43,629) (117,044)
------- ------- -------
75,191 154,712 162,997
Sale of Common Stock 3,985 3,236 4,230
Purchase of Common Stock (2,272) (1,979) (137)
Dividends Paid (26,483) (26,420) (26,338)
______________________________________________________________________________________________________
50,421 129,549 140,752
____________________________________________________________________________________________________________________________________
INCREASE/(DECREASE) IN CASH AND
TEMPORARY CASH INVESTMENTS $ 27,737 $ (14,560) $ (3,119)
____________________________________________________________________________________________________________________________________
The accompanying notes are an integral part of these financial statements.
XXX BEGIN PAGE 32 HERE XXX
STATEMENTS OF
COMMON CAPITAL STOCK CBI Industries, Inc. and Subsidiaries
____________________________________________________________________________________________________________________________________
Thousands of dollars; Years ended December 31 1994 1993 1992
____________________________________________________________________________________________________________________________________
COMMON STOCK Balance at Beginning and End of Year $ 99,459 $ 99,459 $ 99,459
____________________________________________________________________________________________________________________________________
ADDITIONAL PAID-IN CAPITAL Balance at Beginning and End of Year 214,320 214,320 214,320
____________________________________________________________________________________________________________________________________
RETAINED EARNINGS Balance at Beginning of Year 427,828 479,614 432,879
Net Income/(Loss) to Common Shareholders 45,454 (39,846) 58,367
Dividends on Common Shares, net of tax benefits
of $158 in 1994, $176 in 1993 and $188 in 1992 (18,012) (17,647) (17,378)
Excess of Market Value over Cost for Shares Granted
under Restricted Stock Award Plan 1,978 993 2,078
Excess of Market Value over Cost of Allocated
ESOP Shares 1,676 2,807 2,727
Excess of Market Value over Cost for Shares Sold
under Stock Plans 765 488 874
Excess of Market Value over Cost of Shares
Contributed to Pension Plan 702 - -
Excess of Market Value over Cost for Exchange of
Series C Preferred Shares 292 139 67
Excess of Market Value over Cost of Shares Issued
in Business Acquisition - 1,280 -
______________________________________________________________________________________________________
Balance at End of Year 460,683 427,828 479,614
____________________________________________________________________________________________________________________________________
UNAMORTIZED RESTRICTED Balance at Beginning of Year (8,498) (8,477) (6,438)
STOCK AWARDS Restricted Stock Awards Granted, net of forfeitures (5,619) (2,894) (4,934)
Restricted Stock Awards Amortization 4,337 2,873 2,895
______________________________________________________________________________________________________
Balance at End of Year (9,780) (8,498) (8,477)
____________________________________________________________________________________________________________________________________
UNALLOCATED ESOP SHARES Balance at Beginning of Year (931) (1,862) (2,793)
Allocation of ESOP Shares 931 931 931
______________________________________________________________________________________________________
Balance at End of Year - (931) (1,862)
____________________________________________________________________________________________________________________________________
UNAMORTIZED ESOP DEBT Balance at Beginning of Year (18,609) (19,697) (20,671)
Amortization of ESOP Debt 1,442 1,088 974
______________________________________________________________________________________________________
Balance at End of Year (17,167) (18,609) (19,697)
____________________________________________________________________________________________________________________________________
COST OF REACQUIRED Balance at Beginning of Year (45,353) (57,095) (64,448)
COMMON STOCK Cost of Shares Reacquired (2,272) (1,979) (137)
Cost of Shares Exchanged for Series C
Preferred Shares 4,607 2,404 1,278
Cost of Shares Granted under Restricted
Stock Award Plan, net of forfeitures 3,641 1,901 2,856
Cost of Shares Sold under Stock Plans 3,309 2,748 3,356
Cost of Shares Contributed to Pension Plan 1,392 - -
Cost of Shares Issued in Business Acquisition - 6,668 -
______________________________________________________________________________________________________
Balance at End of Year (34,676) (45,353) (57,095)
____________________________________________________________________________________________________________________________________
CUMULATIVE TRANSLATION
ADJUSTMENT Balance at Beginning of Year (24,684) (17,968) (6,717)
Translation Adjustment, net of tax benefits
of $5,348 in 1994, $4,324 in 1993 and
$5,790 in 1992 (10,457) (6,716) (11,251)
______________________________________________________________________________________________________
Balance at End of Year (35,141) (24,684) (17,968)
____________________________________________________________________________________________________________________________________
COMMON CAPITAL STOCK $677,698 $643,532 $688,294
____________________________________________________________________________________________________________________________________
The accompanying notes are an integral part of these financial statements.
XXX BEGIN PAGE 33 HERE XXX
NOTES TO
FINANCIAL STATEMENTS CBI Industries, Inc. and Subsidiaries
______________________________________________________________________________
Thousands of Dollars, except per share amounts
______________________________________________________________________________
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION The consolidated financial statements include CBI
Industries, Inc. and its subsidiaries (CBI). Significant intercompany
balances and transactions are eliminated. Investments in non-majority owned
affiliates are accounted for by the equity method. Effective with 1993, the
year-end of the Industrial Gases international subsidiaries was changed from
November to December.
REVENUE RECOGNITION Revenues and related costs are recognized by
Industrial Gases and Investments subsidiaries when products are shipped or
services are rendered to the customer. Revenues from Contracting Services are
recognized on the percentage of completion method. Earned revenue is based on
the percentage that incurred costs to date bear to total estimated costs after
giving effect to the most recent estimates of total cost. The cumulative
impact of revisions in total cost estimates during the progress of work is
reflected in the year in which these changes become known. Earned revenue
reflects the original contract price adjusted for agreed upon claim and change
order revenue, if any. Losses expected to be incurred on jobs in process,
after consideration of estimated minimum recoveries from claims and change
orders, are charged to income as soon as such losses are known. Progress
billings in accounts receivable are currently due and exclude retentions until
such amounts are due in accordance with contract terms.
INTANGIBLE ASSETS The excess of cost over the fair value of tangible net
assets of acquired businesses is amortized on a straight-line basis over the
periods of expected benefit which do not exceed 40 years. Amortization expense
was $5,087 in 1994, $5,326 in 1993 and $4,203 in 1992.
FOREIGN CURRENCY TRANSLATION AND EXCHANGE The primary effects of foreign
currency translation adjustments in non-highly inflationary countries are
recognized in capital stock as cumulative translation adjustment. Charges for
foreign currency translation adjustments in highly inflationary countries and
other exchange losses are included in the determination of income, and were
$12,551 in 1994, $10,944 in 1993 and $7,169 in 1992.
RESEARCH AND DEVELOPMENT Expenditures for research and development
activities, which are charged to income as incurred, amounted to $13,831 in
1994, $13,694 in 1993 and $11,726 in 1992.
NET INCOME/(LOSS) PER COMMON SHARE Primary earnings per common share are
computed by dividing net income/(loss) to common shareholders by the weighted
average number of common shares outstanding during each year (37,855,000 in
1994, 37,166,000 in 1993 and 36,601,000 in 1992). Fully diluted earnings per
common share are computed by dividing net income/(loss), adjusted for the
additional after-tax company contribution to the ESOP that would be required
under the assumption that the Series C preferred stock had been converted to
common stock, by the weighted average number of common and common equivalent
shares outstanding plus the additional common shares resulting from the
assumed conversion of the leveraged Series C preferred shares (43,148,000 in
1994, 42,604,000 in 1993 and 41,957,000 in 1992).
______________________________________________________________________________
2. INVENTORIES
The components of inventories are:
1994 1993 1992
______________________________________________________________________________
Raw Material and Supplies $30,718 $32,683 $28,373
Work in Process 4,806 3,922 5,579
Finished Goods 37,702 27,039 27,670
______________________________________________________________________________
$73,226 $63,644 $61,622
______________________________________________________________________________
Inventories are valued at the lower of cost (average and first-in, first-out)
or market. Approximately 69% of 1994, 80% of 1993 and 76% of 1992 inventories
were valued under the average cost method.
______________________________________________________________________________
3. Property and Equipment
The components of property and equipment are:
1994 1993 1992
______________________________________________________________________________
Land and Improvements $ 72,912 $ 67,700 $ 63,542
Buildings and Improvements 198,650 187,203 160,394
Plant Machinery and Terminals 944,708 848,710 704,723
Field and Office Equipment 660,059 596,239 631,459
______________________________________________________________________________
1,876,329 1,699,852 1,560,118
Accumulated Depreciation (629,399) (568,887) (586,525)
______________________________________________________________________________
$1,246,930 $1,130,965 $ 973,593
______________________________________________________________________________
Property and equipment are recorded at cost and depreciated on a straight-line
basis over their estimated useful lives: land improvements, 10 to 30 years;
buildings and improvements, 8 to 40 years; plant machinery and terminals, 2 to
20 years; and field and office equipment, 3 to 25 years. Renewals and
betterments which substantially extend the useful life of an asset are
capitalized and depreciated. Certain facilities used under capital leases are
recorded as property and equipment, and are depreciated.
XXX BEGIN PAGE 34 HERE XXX
______________________________________________________________________________
4. DEBT
The weighted average interest rate on notes payable was 9.9% at December 31,
1994, 7.0% at December 31, 1993 and 11.4% at December 31, 1992. At December
31, 1994, CBI had $129,357 of unused bank overdraft and borrowing privileges
available at prevailing interest rates. Certain of these credit arrangements
require payment of commitment fees. While informal arrangements exist as to
the level of compensating bank balances required, withdrawal of such balances
is not legally restricted.
The components of long-term debt are:
1994 1993 1992
______________________________________________________________________________
Commercial Paper and Other Similar
Borrowings with weighted average
year-end interest rates of 6.2% in 1994,
3.6% in 1993 and 4.1% in 1992 $237,395 $240,758 $232,615
Senior ESOP Notes with year-end interest rates
of 8.354% in 1994 and 1993, and 8.43%
in 1992, maturing in 1995 through 2002 94,273 103,042 111,124
6 1/4% Notes, $75,000 face amount, due 2000 74,756 74,720 -
6 5/8% Notes, $75,000 face amount, due 2003 74,509 74,465 -
Variable Rate Unsecured Notes with
weighted average year-end interest rates
of 5.8% in 1994, 4.6% in 1993 and 7.2%
in 1992, maturing in 1995 through 1999 107,055 72,518 67,651
Variable Rate Secured Notes with weighted
average year-end interest rates of 6.7% in
1994, 4.8% in 1993 and 6.3% in 1992,
maturing in 1995 through 2001 61,500 60,384 5,891
Fixed Rate Medium-Term Notes, Series A, with
a weighted average year-end interest rate of
7.7%, maturing in 1999 and 2004 31,000 - -
Other 3,483 6,918 13,756
______________________________________________________________________________
683,971 632,805 431,037
Less: Current Maturities (17,241) (25,226) (20,039)
______________________________________________________________________________
$666,730 $607,579 $410,998
______________________________________________________________________________
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, 1997, extendible annually for one additional
year by mutual consent. Amounts borrowed under the agreement may be prepaid
under certain options and a commitment fee is payable on any unused portion.
The unsecured credit and Senior ESOP Note agreements contain restrictive
covenants regarding working capital, debt to capitalization and capital stock,
among other restrictions. The company was in compliance with all covenants at
December 31, 1994.
Minimum annual principal payments of long-term debt during the years ending
in 1995 through 1999 are $17,241, $20,732, $264,917, $29,875 and $110,637,
respectively. Capitalized interest was $4,033 in 1994, $5,935 in 1993 and
$6,117 in 1992. Cash payments for interest, net of amounts capitalized, were
$38,222 in 1994, $27,835 in 1993 and $20,170 in 1992.
The estimated fair value of long-term debt, including current maturities,
was $674,000 at December 31, 1994. The fair value of long-term debt was
estimated based on current interest rates available in the marketplace for
debt with similar characteristics.
In 1991, CBI entered into an interest rate swap agreement, based on a
notional amount of $80 million, whereby CBI makes quarterly interest payments
at an annual rate of 9.59% through December 15, 1998 in exchange for the right
to receive interest payments quarterly at floating rates (6.4375% at December
31, 1994) through December 15, 1998. This swap agreement is extendible up to
three additional years at the option of the counterparty.
In 1993, Statia Terminals entered into an interest rate swap agreement, of
which CBI is the guarantor, based on a notional amount of $20 million, whereby
Statia Terminals makes semi-annual interest payments at an annual rate of
5.91% through October 21, 1996 in exchange for the right to receive interest
payments at floating rates (5.8125% at December 31, 1994) semi-annually
through October 21, 1996. This swap agreement is extendible for two additional
years at Statia Terminals' option.
These interest rate swap and related option agreements include an estimated
unrealized market value loss of $5,335 as of December 31, 1994. The impact of
the interest rate swap agreements was estimated based upon the net amount that
would be paid to terminate the agreements, utilizing quoted prices for
comparable contracts and discounted cash flows. The counterparties to CBI's
interest rate swap agreements are major financial institutions, which the
company continually evaluates as to their creditworthiness. CBI has never
experienced, nor does it anticipate, nonperformance by any of its
counterparties.
______________________________________________________________________________
5. Leases
Certain facilities and equipment are rented under operating leases that expire
at various dates through 2009. Rental expense on operating leases was $33,171
in 1994, $36,785 in 1993 and $38,249 in 1992. Future rental commitments during
the years ending in 1995 through 1999 and thereafter are $27,809, $23,047,
$21,435, $16,973, $13,779 and $163,580, respectively.
In November 1993, Statia Terminals entered into an agreement to lease five
million barrels of new storage capacity, together with a related single-point
mooring system at the island of St. Eustatius. In June 1994, Liquid Carbonic
entered into an agreement to lease a carbon monoxide/hydrogen plant in Lake
Charles, Louisiana. Both of these facilities are scheduled to be operational
in the first quarter of 1995 and the required rentals associated with these
two agreements are included in future rental commitments.
Capital leases, which are not significant, are included in property and
equipment, and the related obligations are reported in long-term debt.
XXX BEGIN PAGE 35 HERE XXX
______________________________________________________________________________
6. COMMITMENTS AND CONTINGENT LIABILITIES
FORWARD CONTRACTS CBI selectively enters into forward contracts in its
management of foreign currency balance sheet and transaction exposures. Gains
or losses on forward contracts designated to hedge a foreign currency
transaction are included in the measurement of income, while gains or losses
on contracts which are effective as net investment hedges are recognized in
capital stock as cumulative translation adjustments. At December 31, 1994, CBI
had forward contracts, which mature through 1996, for foreign currencies
totaling $20,501. The fair value of forward contracts approximated their
carrying value in the financial statements at December 31, 1994. The
counterparties to CBI's forward contracts are major financial institutions,
which the company continually evaluates as to their creditworthiness. CBI has
never experienced, nor does it anticipate, nonperformance by any of its
counterparties.
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 6 of the
4,300 (approximate) third-party plaintiffs who brought suit as a result of the
incident.
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
accepted the case for review. On March 2, 1995, the Texas Supreme Court
reversed the Court of Appeals and affirmed the judgment of the Trial Court
that coverage did not exist. CBI will file a motion asking the Supreme Court
to reconsider its decision. CBI's management presently believes that its
reserves are adequate to cover remaining potential liabilities resulting from
the occurrence at Texas City.
ANTITRUST MATTERS 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 all
of 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.
In 1994, several claims were filed against Liquid Carbonic, Inc., a wholly
owned Canadian subsidiary of Liquid Carbonic, and various competitors
generally alleging that for the period 1954 to 1990 the defendants conspired
to fix prices for bulk and cylinder gas oxygen in Canada in violation of the
Canadian competition laws. The complainants consist mainly of hospitals
located in the Provinces of British Columbia and Ontario. The company believes
that the damages sought by the plaintiffs are wholly without merit and the
company intends to vigorously defend against these claims.
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 other lawsuits arising from the conduct of its business. While it
is impossible at this time to determine with certainty the ultimate outcome of
these other lawsuits, 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.
CBI also is jointly and severally liable for some liabilities of
partnerships and joint ventures and has also given certain guarantees in
connection with the performance of contracts and repayment of obligations by
its subsidiaries and other ventures in which CBI has financial interest. CBI's
management believes that the aggregate liability, if any, for these matters
will not be material to its financial position.
BEGIN PAGE 36 HERE XXX
______________________________________________________________________________
7. PREFERRED STOCK
The authorized preferred stock is 20,000,000 shares with a $1.00 par value.
The Board of Directors may authorize issuance of one or more series of
preferred stock without shareholder approval.
SERIES A No shares have been issued; 800,000 shares are reserved as Series A
Junior Participating Preferred Stock. On March 4, 1986, the Board of Directors
declared a dividend of one Series A preferred stock purchase right for each
share of outstanding common stock to the stockholders of record on March 18,
1986. These rights, which are attached to the common stock and expire March
18, 1996, entitle the registered holder to purchase from CBI a "unit"
consisting of one one-hundredth of a share of Series A preferred stock at
$50.00 per unit. The rights are not exercisable until certain events occur as
set forth in a rights agreement between CBI and the First Chicago Trust
Company of New York as Rights Agent. These rights are junior to any other
series of preferred stock as to the payment of dividends and the distribution
of assets.
SERIES B No shares are currently authorized or outstanding.
SERIES C In April 1988, CBI sold to the ESOP, as further discussed in
Note 9, 3,945,000 shares of Convertible Voting Preferred Stock, Series C, at
$32.40 per share, totaling $127,818. The Series C preferred stock has a $2.27
annual dividend per share payable semi-annually and is convertible into CBI
common stock, at the rate of one and one-half common shares for each preferred
share, at the option of the holder or automatically in the event the Series C
preferred stock is no longer held by the Trustee for the ESOP. The Series C
preferred stock may be redeemed, in whole or in part, at CBI's option, and has
a liquidation value of $32.40 per share plus accrued and unpaid dividends. The
Series C preferred stock is entitled to vote the number of shares equal to the
number of shares of common stock into which the Series C preferred stock could
be converted on the record date on all matters on which the common stock is
entitled to vote. Through December 31, 1994, 388,082 shares of the Series C
preferred stock have been acquired and retired with respect to former
employees who had been participants in the ESOP.
______________________________________________________________________________
8. COMMON STOCK
At December 31, 1994, 5,335,377 shares of authorized and unissued common
shares were reserved for the conversion of the Series C preferred shares. The
number of reacquired common shares was 1,686,650 at December 31, 1994,
2,273,761 at December 31, 1993 and 2,905,146 at December 31, 1992. The number
of outstanding common shares are:
1994 1993 1992
______________________________________________________________________________
Balance at Beginning of Year 37,439,589 36,737,940 36,287,720
Reacquired Shares (74,420) (71,005) (3,980)
Exchange of Series C Preferred Shares 234,897 122,636 65,308
Restricted Stock Awards, net of forfeitures 186,903 99,625 147,600
Shares Sold under Stock Plans 168,750 140,129 171,028
Shares Contributed to Pension Plan 70,981 - -
Allocation of ESOP Shares 70,264 70,264 70,264
Shares Issued in Business Acquisition - 340,000 -
______________________________________________________________________________
Balance at End of Year 38,096,964 37,439,589 36,737,940
______________________________________________________________________________
EMPLOYEE STOCK PURCHASE PLANS These plans provide that employees may
purchase, semi-annually, through regular payroll deductions, common shares at
85% of market value at the date of purchase. The current plans provide that up
to 1,150,000 of reacquired common shares or authorized and unissued common
shares may be purchased through January 16, 1997. As of December 31, 1994,
460,584 shares remain available for future purchase.
STOCK OPTION PLAN Under this plan, key employees may be granted the right
to purchase common stock at not less than the market value at the date of
grant. The plan provides for granting tax-qualified incentive stock options,
non-qualified stock options or stock appreciation rights, up to a maximum of
1,800,000 shares. Options generally may be exercised during the period of one
to ten years after the date of grant and payment may be made in any
combination of cash and shares of CBI common stock.
The following table summarizes the stock options outstanding, exercised and
granted during the three-year period ended December 31, 1994:
1994 1993 1992
______________________________________________________________________________
Outstanding at Beginning
of Year 1,139,200 949,050 832,500
Option Price per Share $16.00 - $33.75 $16.00 - $33.75 $16.00 - $31.17
Exercised (44,450) (30,150) (99,800)
Option Price per Share $17.67 - $25.67 $16.00 - $19.83 $16.00 - $25.67
Granted 229,950 220,300 216,350
Option Price per Share $30.13 $28.00 $33.75
______________________________________________________________________________
Outstanding at End of Year 1,324,700 1,139,200 949,050
Option Price per Share $16.00 - $33.75 $16.00 - $33.75 $16.00 - $33.75
______________________________________________________________________________
As of December 31, 1994, 1,094,750 options were exercisable (261,500 shares
at prices from $16.00 to $25.63 and 833,250 shares at prices from $25.64 to
$33.75) and 222,900 shares remain available for future grant.
RESTRICTED STOCK AWARD PLANS Under the 1994 Restricted Stock Award Plan,
up to 1,250,000 shares of common stock may be awarded to management employees.
At the beginning of each year, performance goals and target awards are
established. Target awards are allocated 50% to the current year for which
performance is measured, 25% to the first year following and 25% to the second
year following. First and second year target awards are subject to adjustment
based upon actual performance achieved during periods ending in each of those
respective years. Shares are granted based upon measurement of actual
performance relative to the goals over a three-year period. Shares are granted
in the name of the employee, who has all rights of a shareholder, subject to
certain restrictions or forfeitures. Restrictions generally expire five years
from the beginning of the year in which final actual performance is measured.
The number of shares established for 1994 target awards as of December 31,
1994 was 154,700. The number of common shares granted as awards under the 1994
Restricted Stock Award Plan was 1,803 in 1994. As of December 31, 1994,
1,248,197 shares remain available for award grant under the 1994 plan and no
shares granted remain subject to restrictions under the 1994 plan.
XXX BEGIN PAGE 37 HERE XXX
______________________________________________________________________________
The number of common shares awarded under the 1989 Restricted Stock Award Plan
was 189,050 in 1994, 110,200 in 1993 and 157,150 in 1992. Shares are awarded
in the name of the employee, who has all rights of a shareholder, subject to
certain restrictions or forfeitures. Restrictions on 50% of the award
generally expire five years from the award date.
The market value of shares awarded under the plans is recorded as unamortized
restricted stock awards and shown as a separate component of capital stock.
This deferred charge is amortized to costs and expenses ($4,337 in 1994,
$2,873 in 1993 and $2,895 in 1992) over the periods in which participants
perform services.
______________________________________________________________________________
9. EMPLOYEE STOCK OWNERSHIP PLAN
(ESOP)
In 1987, CBI established an ESOP to provide most U.S. salaried employees an
additional opportunity to share in the ownership of CBI. Initial funding for
the ESOP consisted of a transfer of surplus assets, including 819,458 common
shares and $23,909 of cash investments, arising from the termination and
restructuring of CBI's principal defined benefit pension plans. In 1988, the
ESOP received additional funding through a $125,000 loan. With the proceeds
from the loan and funds from the pension reversion, the ESOP purchased an
additional 1,230,719 shares of CBI common stock and 3,945,000 shares of Series
C preferred stock.
The loan, which is reflected as long-term debt on the balance sheets, was
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. Debt service requirements on the Senior ESOP Notes, which are
funded through dividends ($9,005 in 1994, $9,332 in 1993 and $9,543 in 1992)
on the shares held by the ESOP and company contributions ($7,952 in 1994,
$7,646 in 1993 and $6,454 in 1992) amounted to $16,957 in 1994, $16,978 in
1993 and $15,997 in 1992, and are reported as dividends on preferred and
common stock, and as costs and expenses included in the measurement of income
from operations. The unamortized ESOP debt offset in capital stock is reduced
as shares are allocated.
Shares received and purchased from the transfer of the surplus assets from
the terminated and restructured defined benefit pension plans have been
reflected as unallocated ESOP shares. These shares have been allocated to
eligible employees over a period of eight years ending in 1994. The value of
the shares allocated is reflected in the statements of income as a charge,
based upon the market value of the stock at each year-end, to costs and
expenses included in the measurement of income from operations and on the
balance sheets as a reduction of unallocated ESOP shares in capital stock.
Such shares have now been fully allocated.
The number of common shares allocated to eligible employees was 165,629 in
1994, 165,795 in 1993 and 159,754 in 1992. The number of Series C preferred
shares allocated was 357,275 in 1994, 357,703 in 1993 and 342,238 in 1992.
______________________________________________________________________________
10. INCOME TAXES
In the fourth quarter of 1992, CBI adopted the provisions of Statement of
Financial Accounting Standards No. 109 - Accounting for Income Taxes,
retroactive to the first quarter of 1992. The cumulative non-cash effect of
changing the method of accounting for income taxes as of January 1, 1992, from
the requirements previously followed under Statement of Financial Accounting
Standards No. 96, was to increase net income by $14,310. This increase
resulted primarily from the elimination of the requirement to provide deferred
income taxes on non-monetary assets which are subject to indexation in certain
highly inflationary countries and the recognition of additional tax benefits.
This credit is reflected in the cumulative effect of accounting changes
reported on the statements of income.
The sources of income/(loss) before income taxes, minority interest and
cumulative effect of accounting changes are:
1994 1993 1992
______________________________________________________________________________
U.S.<FN1> $(25,062) $(104,838) $ 18,375
Non-U.S. 143,972 102,603 127,125
______________________________________________________________________________
$118,910 $ (2,235) $145,500
______________________________________________________________________________
[FN]
<FN1>Income/(loss) before taxes, minority interest and cumulative effect of
accounting changes from U.S. sources is after deducting corporate and
business segment administrative headquarters' costs, and the majority of
research and development expenditures and interest costs, which are
incurred within the United States but which provide benefit and support
to CBI's operations on a global basis; therefore, the reported U.S.
sources of pre-tax income/(loss) are not indicative of the level of
pre-tax income/(loss) earned solely from U.S. operations and are not
comparable to the amounts reported from non-U.S. sources. The 1993 U.S.
sources loss is primarily related to the special charge discussed in Note
14.
The (provision for) income taxes consisted of:
1994 1993 1992
______________________________________________________________________________
Taxes Payable
U.S. $ (1,675) $ 9,326 $ (8,111)
State (1,321) (878) (2,571)
Non-U.S. (52,700) (51,773) (63,309)
______________________________________________________________________________
(55,696) (43,325) (73,991)
______________________________________________________________________________
Deferred Income Taxes
U.S. 363 18,650 (1,919)
Non-U.S. 33 4,075 13,210
______________________________________________________________________________
396 22,725 11,291
______________________________________________________________________________
$(55,300) $(20,600) $(62,700)
______________________________________________________________________________
The components of the deferred income taxes (provision)/benefit are:
1994 1993 1992
______________________________________________________________________________
Depreciation Expense $ 1,499 $ (2,325) $ 6,127
Non-U.S. Activity 1,686 164 335
Employee and Retiree Benefits 2,006 (434) 1,855
Special Charge (11,618) 21,317 -
Insurance 2,547 605 (1,163)
Other, net 4,276 3,398 4,137
______________________________________________________________________________
$ 396 $ 22,725 $ 11,291
______________________________________________________________________________
XXXX BEGIN PAGE 38 HERE XXX
______________________________________________________________________________
10. INCOME TAXES (CONTINUED)
A reconciliation of income taxes at the U.S. statutory rate and the (provision
for) income taxes follows:
1994 1993 1992
______________________________________________________________________________
Income/(Loss) before Income Taxes,
Minority Interest and Cumulative Effect
of Accounting Changes $118,910 $(2,235) $145,500
______________________________________________________________________________
Tax (Provision)/Benefit at U.S.
Statutory Rate $(41,619) $ 782 $(49,470)
State Income Taxes (1,321) (878) (2,571)
Non-U.S. Tax Rate Differential and
Losses without Tax Benefit (8,568) (9,066) (7,531)
Extra Tax due to Allocation of U.S. Expenses
to Non-U.S. Sources (4,038) (2,982) (2,307)
Special Charge - (8,860) -
Other, net 246 404 (821)
______________________________________________________________________________
(Provision for) Income Taxes $(55,300) $(20,600) $(62,700)
______________________________________________________________________________
Effective Tax Rates 46.5% <FN1> 43.1%
______________________________________________________________________________
[FN]
<FN1>The effective tax rate in 1993 is not meaningful due to the special
charge. Excluding the effect of the special charge, which was tax
benefited at an effective rate of 25.3%, the 1993 effective tax rate was
49.0%.
The principal temporary differences included in deferred income taxes reported
on the balance sheets are:
1994 1993 1992
______________________________________________________________________________
Depreciation Expense $ 98,190 $100,885 $ 95,725
Non-U.S. Activity (21,878) (14,362) (8,963)
Employee and Retiree Benefits (23,377) (22,168) (20,048)
Special Charge (6,329) (20,792) -
Insurance (12,273) (13,159) (8,491)
Other, net 7,354 12,463 18,915
______________________________________________________________________________
$ 41,687 $ 42,867 $ 77,138
______________________________________________________________________________
At December 31, 1994, CBI had $1,074 of investment tax and other general
business credits that are available to utilize against 1994 and future U.S.
income tax liabilities through 2003, which were recognized as deferred tax
assets at December 31, 1994. CBI has not recorded any additional U.S.
deferred income taxes on indefinitely reinvested undistributed earnings of
non-U.S. subsidiaries and affiliates at December 31, 1994. If any such
undistributed earnings were distributed, foreign tax credits should become
available under current law to significantly reduce or eliminate any resulting
U.S. income tax liability. At December 31, 1994, CBI had unrecorded excess
foreign tax credits of $13,350 available to offset against U.S. income tax
liabilities. Total cash payments for income taxes were $36,274 in 1994,
$49,803 in 1993 and $57,506 in 1992.
______________________________________________________________________________
11. POSTRETIREMENT BENEFITS
PENSION PLANS CBI sponsors defined benefit and contribution pension plans,
and makes contributions to union sponsored multi-employer pension plans. The
principal non-contributory defined benefit plan covers most U.S. salaried
employees. Benefits under the principal defined benefit plan are based on
years of service and compensation levels.
The funded status of the defined benefit plans is:
1994 1993 1992
______________________________________________________________________________
Market Value of Plan Assets $ 93,735 $ 86,969 $ 73,443
______________________________________________________________________________
Accumulated Benefit Obligation including
Vested Benefits of $83,146 in 1994,
$79,102 in 1993 and $63,470 in 1992 (92,005) (80,603) (64,857)
Additional Benefits Based on Projected
Salary Levels (23,516) (34,568) (24,524)
______________________________________________________________________________
Projected Benefit Obligation (115,521) (115,171) (89,381)
______________________________________________________________________________
Projected Benefit Obligation (Over) Plan Assets (21,786) (28,202) (15,938)
Unrecognized Loss 20,969 29,102 14,785
Unrecognized Net Transition Asset (5,940) (6,967) (7,987)
Unrecognized Prior Service Costs 6,578 8,294 8,144
Additional Minimum Liability (3,579) (1,249) -
______________________________________________________________________________
Pension (Liability)/Asset $ (3,758) $ 978 $ (996)
______________________________________________________________________________
The principal defined benefit plan assets consist of long-term investments,
including equity and fixed income securities, and cash. The significant
assumptions used in determining pension expense and the related pension
obligations were: discount rate, 8.5% in 1994, 7.5% in 1993 and 8.5% in 1992;
increase in compensation levels, 4.5% in 1994 and 1993, and 5.0% in 1992; and
long-term rate of return on plan assets, 9.0% in 1994 and 1993, and 10.0% in
1992. CBI funds pension costs as required. As discussed in Note 9, CBI also
maintains an ESOP which offsets certain benefit obligations of the principal
defined benefit pension plan. Total pension plan expense for all plans was
$18,579 in 1994, $15,170 in 1993 and $14,769 in 1992.
Pension expense for the defined benefit plans include the following
components:
1994 1993 1992
______________________________________________________________________________
Service Cost $ 5,997 $ 4,846 $ 4,150
Interest Cost 9,039 8,044 6,947
Actual Return on Assets (2,737) (10,221) (4,192)
Net Amortization and Deferral (5,100) 3,684 (2,029)
______________________________________________________________________________
Net Defined Benefit Pension Plans Expense $ 7,199 $ 6,353 $ 4,876
______________________________________________________________________________
XXX BEGIN PAGE 39 HERE XXX
______________________________________________________________________________
POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS CBI currently
provides certain separate health care and life insurance benefits for
employees retiring under the principal non-contributory defined benefit
pension plan. Retiree health care benefits are provided under an established
formula which limits company costs based on prior years of service of retired
employees. This plan may be changed or terminated by the company at any time
for any reason with no liability to current or future retirees. In 1992, CBI
adopted Statement of Financial Accounting Standards No. 106 - Employers'
Accounting for Postretirement Benefits Other Than Pensions. The cumulative
effect of adopting this accounting requirement as of January 1, 1992, which is
included in the cumulative effect of accounting changes reported on the
statements of income, amounted to a non-cash, after-tax, charge of $21,480
($34,983 before income tax benefit).
Postretirement health care and life insurance benefits expense includes the
following components:
1994 1993 1992
______________________________________________________________________________
Service Cost $ 683 $ 568 $ 991
Interest Cost 2,582 2,688 2,617
Actual Return on Assets (23) (45) (44)
______________________________________________________________________________
Postretirement Health Care and
Life Insurance Benefits Expense $3,242 $3,211 $3,564
______________________________________________________________________________
A reconciliation of the accumulated postretirement benefit obligation to the
accrued and other non-current liabilities reported on the balance sheets
follows:
1994 1993 1992
______________________________________________________________________________
Accumulated Postretirement Benefit Obligation
Applicable to:
Retirees $(24,553) $(25,846) $(26,001)
Active Employees (11,535) (15,118) (10,863)
______________________________________________________________________________
(36,088) (40,964) (36,864)
Plan Assets - 1,169 1,081
Unrecognized (Gain)/Loss (1,272) 4,215 -
Unrecognized Prior Service Costs 577 - -
______________________________________________________________________________
Postretirement Health Care and Life
Insurance Benefits (Liability) $(36,783) $(35,580) $(35,783)
______________________________________________________________________________
The significant assumptions used in determining other postretirement benefit
expense were: discount rate, 8.5% in 1994, 7.5% in 1993 and 8.5% in 1992; and
long-term rate of return on plan assets, 9.0% in 1993 and 10.0% in 1992.
______________________________________________________________________________
12. OPERATIONS BY BUSINESS SEGMENT AND GEOGRAPHIC AREA
CBI has three major business segments:
Industrial Gases is organized under Liquid Carbonic Industries Corporation.
CBI believes Liquid Carbonic is the world's largest supplier of carbon dioxide
in its various forms. Liquid Carbonic also produces, processes and markets a
wide variety of other industrial/medical, specialty gases and chemicals, and
assembles and sells industrial gas-related equipment. Carbon dioxide is used
in the refrigeration, freezing, processing and preservation of food, beverage
carbonation, water treatment and chemical production. Other gases are used in
a variety of industrial, medical and specialty applications. Liquid Carbonic
currently has operations in the United States, Canada and 23 other countries.
Contracting Services is organized under Chicago Bridge & Iron Company as a
world-wide construction group that provides, through separate subsidiaries, a
broad range of services including design, engineering, fabrication, project
management, general contracting and specialty construction services, including
non-destructive inspection and post-weld heat treatment, primarily associated
with metal plate vessels as well as water and wastewater treatment structures.
Investments include Statia Terminals, which provides transshipment,
storage, bunkering and blending services for hydrocarbon products in the
Caribbean and Nova Scotia, Canada, and operates a special products terminal in
Brownsville, Texas; and other financial investments.
Revenues, income from operations, assets, capital expenditures and
depreciation by business segment are presented in the Financial Summary.
CBI operates in the United States, Western Hemisphere (outside of the
United States) and Eastern Hemisphere. Transactions between companies in the
same or different geographic areas are recorded on the same basis as
transactions with unrelated customers. No customer accounted for more than 10%
of revenues. Export sales, to unrelated customers outside of the United
States, were less than 10% of revenues in each period reported. Transfers
between geographic areas are not material.
Revenues, income/(loss) from operations and assets by geographic area are:
1994 1993 1992
______________________________________________________________________________
Revenues
United States $ 881,636 $ 808,679 $ 832,021
Western Hemisphere 727,067 609,487 548,094
Eastern Hemisphere 282,204 253,578 292,659
______________________________________________________________________________
$1,890,907 $1,671,744 $1,672,774
______________________________________________________________________________
Income/(Loss) from Operations
United States<FN1> $ (12,906) $ (92,200) $ 6,146
Western Hemisphere 132,838 98,103 116,293
Eastern Hemisphere 40,608 20,242 43,841
______________________________________________________________________________
$ 160,540 $ 26,145 $ 166,280
______________________________________________________________________________
Assets
United States $ 972,425 $ 907,165 $ 868,071
Western Hemisphere 808,163 727,180 611,994
Eastern Hemisphere 228,124 235,900 205,260
______________________________________________________________________________
$2,008,712 $1,870,245 $1,685,325
______________________________________________________________________________
[FN]
<FN1>Income/(loss) from operations in the United States is after deducting
corporate and business segment administrative headquarters' costs and the
majority of research and development expenditures, both of which are
incurred within the United States, but which provide benefit on a global
basis; therefore, the reported level of U.S. operating income is not
indicative of the level of income earned solely from U.S. operations and
is not comparable to the amounts reported from non-U.S. sources. The 1993
United States loss from operations is primarily related to the special
charge discussed in Note 14.
XXX BEGIN PAGE 40 HERE XXX
______________________________________________________________________________
13. ACQUISITIONS AND DISPOSITION
In October 1994, a company now known as Liquid Carbonic Costa Rica was
acquired. This company produces and distributes a variety of atmospheric
gases. In October 1993, CBI purchased the other outstanding interests in, and
became the 100% owner of, Point Tupper Terminals Corporation, which is
strategically located in Canada to service global oil producing and trading
customers which market their products in the northeastern part of North
America. In May 1993, Ershigs, Inc., an engineering, manufacturing and
contracting company, which specializes in fiberglass reinforced plastic and
dual-laminate vessels, tanks and other structures for corrosion-resistant
applications, was acquired. In April 1993, CBI acquired a majority interest in
two business units of Polgaz, the Polish state-owned industrial gas company.
Both companies are now known as Liquid Carbonic Polska, Spzoo, and manufacture
industrial gases, fill gas cylinders and operate air separation facilities.
The outstanding stock of Cooperheat, Inc., which provides post-weld heat
treating and refractory bake-outs as field services and sells associated
equipment, was acquired on December 31, 1992. In September 1992, Quimica
Industrial Barra Do Pirai S.A. was acquired and expanded Liquid Carbonic's
Latin American presence in precipitated calcium carbonate, a key ingredient
used in the manufacture of a broad range of consumer and industrial products.
During March 1992, CBI acquired the assets of MQS Inspection, Inc., which
provides non-destructive examination and inspection services to its clients in
the utility, petroleum, petrochemical and other markets. These acquisitions
were recorded under the purchase method of accounting. CBI also acquired
certain other entities during the three years ended December 31, 1994.
On February 17, 1993, CBI sold the net operating assets of Indrex as
discussed in the Financial Review.
______________________________________________________________________________
14. SPECIAL CHARGE
In the fourth quarter of 1993, CBI recorded a special charge of $91,600
($68,400 after-tax), which was equivalent to a net loss per common share of
$1.84 ($1.60 on a fully diluted basis), to provide for costs, identified
through its re-engineering and quality programs, to more efficiently align
capabilities to customer needs, and for non-operational regulatory and legal
costs. Included within the special charge were non-cash provisions totaling
$42,000 for the write-downs of excess, non-performing, assets and for
increases in certain liability reserves. The remaining $49,600 of the special
charge included provisions for costs associated with certain workforce
realignments and reductions, and selected regulatory and legal issues. The
actions anticipated by the special charge are proceeding as expected.
______________________________________________________________________________
XXX BEGIN PAGE 41 HERE XXX
REPORTS CBI Industries, Inc. and Subsidiaries
______________________________________________________________________________
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of CBI Industries, Inc.:
We have audited the accompanying consolidated balance sheets of CBI
Industries, Inc. (a Delaware corporation) and Subsidiaries as of December 31,
1994, 1993 and 1992, and the related consolidated statements of income, cash
flows and common capital stock for each of the three years in the period ended
December 31, 1994. These financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CBI
Industries, Inc. and Subsidiaries as of December 31, 1994, 1993 and 1992, and
the results of its operations and its cash flows for each of the three years
in the period ended December 31, 1994, in conformity with generally accepted
accounting principles.
As discussed in Notes 10 and 11 to the financial statements, effective January
1, 1992, the company changed its methods of accounting for income taxes and
for postretirement benefits other than pensions.
/s/ ARTHUR ANDERSEN LLP
_______________________
ARTHUR ANDERSEN LLP
Chicago, Illinois
February 6, 1995 (except with respect to the matter
discussed in Note 6, as to which the date is March 2, 1995)
______________________________________________________________________________
REPORT OF MANAGEMENT ON RESPONSIBILITY
FOR FINANCIAL REPORTING
CBI is responsible for the financial statements and other information
presented in this report. The financial statements were prepared in accordance
with generally accepted accounting principles and necessarily include some
informed judgments and estimates in accounting for transactions and events.
Other financial information included in this report is consistent with these
financial statements.
CBI maintains a system of internal controls designed to provide reasonable
assurance of the proper execution and recording of transactions. In addition,
emphasis is placed on the careful selection and training of personnel, an
organizational structure which provides for an appropriate division of
responsibility and authority, and the communication of written policies and
procedures. CBI has an internal audit program to examine and evaluate the
adequacy of controls and procedures, and the resultant recording of
transactions and events.
The Board of Directors, as a whole and through its Audit Committee, monitors
the financial and accounting operations of CBI, including the review and
discussion of financial statements and reports, the evaluation and acceptance
of budgets, and the basis of the engagement and report of the independent
auditors. All members of the Audit Committee are outside directors. The Audit
Committee meets periodically with the independent auditors, the internal
auditors and management personnel to assure each is discharging its
responsibilities. The independent auditors and internal auditors have access
to the Audit Committee without the presence of management personnel.
XXX BEGIN PAGE 44 HERE XXX
QUARTERLY FINANCIAL DATA CBI Industries, Inc. and Subsidiaries
____________________________________________________________________________________________________________________________________
Thousands of Dollars, except per share amounts
____________________________________________________________________________________________________________________________________
QUARTERLY OPERATING RESULTS, AND COMMON STOCK PRICES AND DIVIDENDS
The following table summarizes the unaudited quarterly operating results
for the years ended December 31, 1994 and 1993:
Net Income/(Loss)
Income/ Net per Common Share
(Loss) from Income/ ______________________
Quarter Ended Revenues Operations (Loss) Primary Fully Diluted
____________________________________________________________________________________________________________________________________
1994 December 31 $ 529,843 $ 55,902 $ 18,848 $ .46 $ .41
September 30 489,191 32,851 9,392 .20 .20
June 30 469,990 40,355 13,571 .32 .29
March 31 401,883 31,432 9,673 .22 .20
____________________________________________________________________________________________________________________________________
$1,890,907 $160,540 $ 51,484 $ 1.20 $ 1.10
____________________________________________________________________________________________________________________________________
1993 December 31<FN1> $ 437,604 $(56,281) $(58,312) $(1.61) $(1.39)
September 30 408,372 31,523 10,297 .24 .22
June 30 427,842 29,524 8,418 .19 .17
March 31 397,926 21,379 5,584 .11 .11
____________________________________________________________________________________________________________________________________
$1,671,744 $ 26,145 $(34,013) $(1.07) $ (.89)
____________________________________________________________________________________________________________________________________
<FN>
<FN1> Operating results in the fourth quarter and annual 1993 are after a special charge
of $91,600 ($68,400 after-tax), which was equivalent to a net loss per common share
of $1.84 ($1.60 on a fully diluted basis), to provide for costs to more efficiently
align capabilities to customer needs, and for non-operational regulatory and legal costs.
The following table presents the quarterly common shares outstanding, range of closing
common stock prices and dividends declared on common shares for the years ended
December 31, 1994 and 1993:
Common Shares Range of Closing Common Stock Prices Common
Outstanding at ____________________________________ Dividends
Quarter Ended Quarter End High Low Quarter End per Share
____________________________________________________________________________________________________________________________________
1994 December 31 38,096,964 $ 27 1/8 $ 20 1/8 $ 25 5/8 $.12
September 30 38,000,229 30 3/8 25 7/8 27 1/8 .12
June 30 37,822,566 31 3/8 26 5/8 28 .12
March 31 37,749,078 35 28 7/8 29 7/8 .12
____________________________________________________________________________________________________________________________________
$.48
____________________________________________________________________________________________________________________________________
1993 December 31 37,439,589 $ 32 $ 23 7/8 $ 30 3/8 $.12
September 30 37,362,915 28 7/8 25 1/4 25 1/4 .12
June 30 37,273,091 29 1/4 21 7/8 25 .12
March 31 36,887,273 30 3/4 26 3/8 26 3/4 .12
____________________________________________________________________________________________________________________________________
$.48
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