FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
_____ _____
Commission File Number 1-7833
CBI INDUSTRIES, INC.
Incorporated in Delaware IRS Identification Number: 36-3009343
Principal Executive Offices: 800 Jorie Boulevard
Oak Brook, Illinois 60521-2268
Telephone Number: (708) 572-7000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
_____ _____
The number of shares outstanding of a single class of common stock as of
June 30, 1995 - 38,206,403.
1 of 18
CBI INDUSTRIES, INC. AND SUBSIDIARIES
Table of Contents
PART I. FINANCIAL INFORMATION
Financial Statements: Page
Statements of Income
Six Months Ended June 30, 1995 and 1994..................... 3
Balance Sheets
June 30, 1995 and December 31, 1994......................... 4
Statements of Cash Flows
Six Months Ended June 30, 1995 and 1994..................... 5
Notes to Financial Statements............................... 6
Management's Discussion and Analysis of Operating
Performance and Financial Condition......................... 9
PART II. OTHER INFORMATION............................................ 14
SIGNATURE PAGE.......................................................... 18
2
PART I - FINANCIAL INFORMATION
CBI INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENTS OF INCOME
Three Months Six Months
Thousands of dollars, except per share amounts Ended June 30, Ended June 30,
1995 1994 1995 1994
Revenues
Industrial Gases $251,007 $228,238 $502,776 $425,763
Contracting Services 175,782 208,532 349,777 383,016
Investments 47,009 33,220 84,548 63,094
Total Revenues 473,798 469,990 937,101 871,873
Costs of Products and Services Sold
Industrial Gases (169,151)(155,245) (344,753)(295,738)
Contracting Services (155,479)(177,809) (310,328)(325,316)
Investments (38,584) (26,852) (66,051) (51,061)
Total Costs of Products and Services Sold (363,214)(359,906) (721,132)(672,115)
Gross Profit from Operations 110,584 110,084 215,969 199,758
Selling and Administrative Expense
Industrial Gases (44,500) (42,090) (89,835) (74,529)
Contracting Services (17,771) (20,712) (36,466) (40,526)
Investments (1,455) (1,503) (2,999) (2,726)
Corporate (4,145) (5,424) (8,008) (10,190)
Total Selling and Administrative Expense (67,871) (69,729) (137,308)(127,971)
Income from Operations 42,713 40,355 78,661 71,787
Interest Expense (13,136) (9,656) (22,363) (17,802)
Income before Income Taxes and Minority Interest 29,577 30,699 56,298 53,985
Provision for Income Taxes (13,000) (14,200) (25,600) (25,700)
Income before Minority Interest 16,577 16,499 30,698 28,285
Minority Interest in Income (2,561) (2,928) (6,488) (5,041)
Net Income 14,016 13,571 24,210 23,244
Dividends on Preferred Shares (2,612) (1,507) (4,150) (3,008)
Net Income to Common Shareholders $11,404 $12,064 $20,060 $20,236
Net Income per Common Share
Primary $0.30 $0.32 $0.53 $0.54
Fully Diluted $0.27 $0.29 $0.48 $0.49
Average Common Shares Outstanding (thousands)
Primary 38,183 37,791 38,137 37,736
Fully Diluted 43,535 43,198 43,489 43,143
Dividends on Common Shares
Amount $4,584 $4,544 $9,154 $9,079
Per Share $0.12 $0.12 $0.24 $0.24
<F1>
The accompanying notes are an integral part of these financial statements.
3
CBI INDUSTRIES, INC. AND SUBSIDIARIES
BALANCE SHEETS
Thousands of dollars June 30, Dec. 31,
1995 1994
Current Assets
Cash $8,307 $14,013
Temporary Cash Investments 34,890 36,953
Accounts Receivable, less allowances
of 13,800 and 14,800 275,603 295,542
Contracts in Progress with Earned Revenues
exceeding related Progress Billings 64,468 60,143
Inventories (Note 2) 91,919 73,226
Other Current Assets 49,549 37,977
524,736 517,854
Other Assets
Notes Receivable 31,176 37,397
Real Estate Properties 25,875 26,542
Equity in and Advances to Unconsolidated Affiliates 30,498 31,082
Intangible Assets 78,157 78,783
Other Non-Current Assets 68,822 70,124
234,528 243,928
Property and Equipment 1,989,405 1,876,329
Accumulated Depreciation (675,737) (629,399)
1,313,668 1,246,930
Total Assets $2,072,932 $2,008,712
Current Liabilities
Notes Payable $76,374 $72,589
Current Maturities of Long-Term Debt (Note 3) 17,305 17,241
Accounts Payable 74,268 94,523
Dividends Payable 2,816 2,675
Accrued Liabilities 124,396 117,851
Contracts in Progress with Progress Billings
exceeding related Earned Revenues 43,979 42,813
Income Taxes Payable 18,851 31,360
357,989 379,052
Long-Term Debt and Other Liabilities
Long-Term Debt (Note 3) 677,063 666,730
Other Non-Current Liabilities 137,717 143,065
Deferred Income Taxes 45,592 41,687
Minority Interest in Subsidiaries 67,558 62,342
Capital Stock
Preferred Stock
Series D (Note 4) 55,000 -
Series C (Note 4) 113,876 115,244
Unamortized ESOP Debt (Note 6) (72,900) (77,106)
40,976 38,138
Common Stock
Common Stock (Note 5) 99,459 99,459
Additional Paid-in Capital 214,320 214,320
Retained Earnings 472,256 460,683
Unamortized Restricted Stock Awards (9,280) (9,780)
Unamortized ESOP Debt (Note 6) (16,231) (17,167)
Cost of Reacquired Common Stock (Note 5) (33,242) (34,676)
Cumulative Translation Adjustment (36,245) (35,141)
691,037 677,698
Total Liabilities and Capital Stock $2,072,932 $2,008,712
The accompanying notes are an integral part of these financial statements.
4
CBI INDUSTRIES, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
Six Months
Thousands of dollars Ended June 30,
1995 1994
Cash Flows from Operating Activities
Net Income $24,210 $23,244
Depreciation 57,921 50,783
82,131 74,027
Decrease in Accounts Receivable 20,600 29,493
(Increase) in Contracts in Progress, net (3,159) (6,313)
(Decrease) in Accounts Payable,
Accrued Liabilities and Income Taxes Payable, net (28,345) (13,044)
Increase/(Decrease) in Deferred Income Taxes 3,035 (3,974)
(Increase)/Decrease in Undistributed Earnings
of Unconsolidated Affiliates (109) 468
Other, net (21,327) (4,800)
Total Cash Flows from Operating Activities 52,826 75,857
Cash Flows from Capital Investment Activities
Purchase of Property and Equipment (112,224) (122,367)
Cost of Business Acquisitions, net of cash acquired (8,304) -
Disposition of Property and Equipment 3,839 12,323
Decrease in Other Assets, net 8,088 3,599
Other, net (3,270) 5,311
Total Cash Flows from Capital Investment Activities (111,871) (101,134)
Cash Flows from Financing and Shareholder Activities
Issuance of Debt 54,555 75,476
Repayment of Debt (40,635) (24,446)
13,920 51,030
Sale of Preferred Stock and Common Stock 55,928 2,407
Purchase of Common Stock (4,538) (1,899)
Dividends Paid (14,034) (13,275)
Total Cash Flows from Financing and Shareholder Activitie 51,276 38,263
(Decrease)/Increase in Cash and Temporary Cash Investments ($7,769) $12,986
The accompanying notes are an integral part of these financial statements.
5
CBI INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Financial Statements
June 30, 1995
Thousands of dollars
(1) Additional Information
The consolidated financial statements included herein have been prepared
by CBI Industries, Inc. and Subsidiaries (CBI), without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures, normally included in
financial statements prepared in accordance with generally accepted
accounting principles, have been condensed or omitted pursuant to such
rules and regulations, although CBI believes that the disclosures are
adequate to make the information presented not misleading. These
consolidated financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto included in the
1994 annual report on Form 10-K of CBI.
In the opinion of CBI, all adjustments necessary to present fairly the
financial position of CBI as of June 30, 1995 and the results of its
operations and cash flows for the period then ended have been included.
The results of operations for such interim periods are not necessarily
indicative of the results for the full year.
(2) Inventories
Inventories by component and valuation method at June 30, 1995:
Raw materials and supplies $39,562
Work in process 7,727
Finished goods 44,630
_______
Total inventories $91,919
=======
Average cost method $62,076
First-in, first-out method 29,843
_______
Total inventories $91,919
=======
6
(3) Long-Term Debt
Summary of long-term debt at June 30, 1995:
Commercial Paper and Other Similar Borrowings with a weighted
average quarter-end interest rate of 6.2% $221,681
Senior ESOP Notes with a quarter-end interest rate of 8.354%,
maturing in 1995 through 2002 89,710
6-1/4% Notes, $75,000 face amount, due 2000 74,774
6-5/8% Notes, $75,000 face amount, due 2003 74,533
Variable Rate Unsecured Notes with a weighted average quarter-
end interest rate of 7.1%, maturing in 1995 through 2001 140,311
Variable Rate Secured Notes with a weighted average quarter-
end interest rate of 6.7%, maturing in 1995 through 2000 60,100
Fixed Rate Medium-Term Notes, Series A, with a weighted average
quarter-end interest rate of 7.7%, maturing in 1999 and 2004 31,000
Other 2,259
________
694,368
Less: current maturities (17,305)
________
$677,063
========
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.
Minimum annual principal payments of long-term debt are as follows:
July 1 through December 31, 1995 $ 9,223
Year ending December 31, 1996 20,328
Year ending December 31, 1997 247,571
Year ending December 31, 1998 56,978
Year ending December 31, 1999 115,752
Year ending December 31, 2000 98,388
After 2000 146,128
________
$694,368
========
7
(4) Preferred Stock - $1.00 par value; authorized - 20,000,000 shares.
Series A - No shares have been issued. 800,000 shares are reserved as
Series A Junior Participating Preferred Stock.
Series C - 3,514,696 shares were issued and outstanding as Convertible
Voting Preferred Stock, Series C, at June 30, 1995 and 3,556,918 shares
at December 31, 1994. The annual dividend is $2.27 per share, payable
semi-annually.
Series D - 550,000 shares were issued and outstanding as 7.48%
Cumulative Preferred Stock, Series D, on March 31, 1995. CBI sold these
shares on March 31, 1995 at $100 per share. The annual dividend is $7.48
per share, payable quarterly. No dividends may be paid on CBI's
Common Stock or Series A Junior Participating Preferred Stock, unless
all dividends payable on outstanding shares of Series D Preferred Stock
have been paid, and shall rank on parity with the Series C Preferred
Stock as to payment of dividends. The holders of shares of Series D
Preferred Stock have no voting rights. The Series D Preferred Stock is
mandatorily redeemable on, but not prior to, April 1, 2000 at a price of
$100 per share.
(5) Common Stock
Common stock - $2.50 par value; authorized - 240,000,000 shares at
June 30, 1995; issued - 39,783,614 shares at June 30, 1995 and
December 31, 1994.
Reacquired stock - The number of reacquired shares of common stock was
1,577,211 at June 30, 1995 and 1,686,650 at December 31, 1994.
(6) Employee Stock Ownership Plan (ESOP)
Unamortized ESOP debt - The Senior ESOP Notes, which were issued in
1988, in an amount of $125,000, were initially offset by a like amount
of unamortized ESOP debt in capital stock. As company contributions
plus the dividends on the shares held by the ESOP are used to meet
interest and principal payments on the loan over its 14-year term,
shares acquired with the loan proceeds are allocated to eligible
employees. As of June 30, 1995, 704,507 common shares and 1,787,387
Series C preferred shares are subject to future allocation.
8
Management's Discussion and Analysis
of Operating Performance and Financial Condition
The following discussion and analysis should be read in conjunction with the
consolidated financial statements and accompanying notes.
OPERATING PERFORMANCE
OVERVIEW. Consolidated net income for the quarter ended June 30, 1995 was
$14.0 million ($0.30 per common share), as compared to $13.6 million ($0.32
per common share) for the second quarter of 1994. Net income for the first
half of 1995 was $24.2 million ($0.53 per common share), compared to $23.2
million ($0.54 per common share) in the first half of 1994.
Revenues in the second quarter of 1995 were $473.8 million, up 0.8% from the
$470.0 million recorded in the comparable 1994 quarter. For the first six
months of 1995, revenues of $937.1 million were 7.5% greater than the $871.9
million realized in the first half of 1994. In the second quarter of 1994,
Liquid Carbonic consolidated for the first time the financial results of
certain of its Canadian distributors (the "Canadian consolidation"),
incorporating the results of these distributors for both the first and second
quarters of 1994. Excluding the first quarter 1994 revenues from the Canadian
consolidation, revenues for the second quarter of 1994 would have been $457.4
million, resulting in a 3.6% increase in revenues between the second quarters
of 1995 and 1994.
Gross profit for the second quarter of 1995 was $110.6 million (23.3% of
revenues), essentially level with 1994's second quarter. Excluding the effect
of the Canadian consolidation, gross profit would have increased 5.3% between
years. For the first six months of 1995, gross profit of $216.0 million
(23.0% of revenues) was up 8.1% over the $199.8 million (22.9% of revenues)
recorded in 1994's first half. Gross margins for the six months improved from
1994 in the Industrial Gases and Investments segments, but declined in
Contracting Services. Selling and administrative expense declined 2.7% from
the second quarter of 1994 to $67.9 million in the current quarter, although
increasing 4.6% if the effect of the Canadian consolidation is excluded. For
the year to date, selling and administrative expense of $137.3 million was up
7.3% from 1994.
CBI's income from operations in the second quarter and first half of 1995 was
$42.7 million (9.0% of revenues) and $78.7 million (8.4% of revenues),
respectively, compared to $40.4 million (8.6% of revenues) and $71.8 million
(8.2% of revenues), respectively, in 1994. Cash flow from operations for the
second quarter and first half of 1995 was $74.5 million and $141.4 million,
respectively, compared to $78.7 million and $147.6 million, respectively, in
1994.
CBI's comparative operating performance, before interest and taxes, for the
three and six month periods ending June 30, 1995 and 1994 was as follows
(dollars in thousands):
Three Months Six Months
_____________________ _________________
1995 1994 1995 1994
____ ____ ____ ____
Revenues $473,798 $469,990 $937,101 $871,873
Costs (363,214) (359,906) (721,132) (672,115)
_________ ________ ________ ________
Gross profit 110,584 110,084 215,969 199,758
Gross margin - % 23.3% 23.4% 23.0% 22.9%
Selling and administrative (67,871) (69,729) (137,308) (127,971)
________ ________ ________ ________
Income from operations 42,713 40,355 78,661 71,787
Operating margin - % 9.0% 8.6% 8.4% 8.2%
Depreciation 30,712 25,946 57,921 50,783
Other non-cash charges 1,071 12,427 4,819 25,019
________ ________ ________ ________
Cash flow from operations $ 74,496 $ 78,728 $141,401 $147,589
======== ======== ======== ========
9
INDUSTRIAL GASES. Liquid Carbonic's results for the periods ending June 30,
1995 and 1994 were as follows (dollars in thousands):
Three Months Six Months
____________________ ___________________
1995 1994 1995 1994
____ ____ ____ ____
Revenues $251,007 $228,238 $502,776 $425,763
Costs (169,151) (155,245) (344,753) (295,738)
________ ________ ________ ________
Gross profit 81,856 72,993 158,023 130,025
Gross margin - % 32.6% 32.0% 31.4% 30.5%
Selling and administrative (44,500) (42,090) (89,835) (74,529)
________ ________ ________ ________
Income from operations $ 37,356 $ 30,903 $ 68,188 $ 55,496
Operating margin - % 14.9% 13.5% 13.6% 13.0%
======== ======== ======== ========
Liquid Carbonic's revenues for the second quarter of 1995 were 10.0% greater
than in the second quarter of 1994; excluding the effect in 1994 of the
Canadian consolidation, revenues for the quarter would have increased 16.4%.
For the year to date, revenues grew 18.1%. Most of the growth in revenues
occurred outside the United States, particularly in Brazil, where a
combination of higher volumes and prices in U.S. dollar terms resulted in
revenue growth in excess of 40% for both the quarter and year to date. All
major markets of Liquid Carbonic outside the United States except for Mexico
and Argentina, where operations have been affected by difficult local economic
conditions, registered double-digit increases in revenues for both the quarter
and six-month periods. Revenues in the United States increased approximately
nine percent between years due to the effects of increased prices for carbon
dioxide, increased sales of oxygen, nitrogen and hydrogen from new facilities,
and increased sales of methanol and formaldehyde.
Gross profit in the second quarter increased 20.4% (after adjusting for the
Canadian consolidation effect) and was up 21.5% for the year to date from a
combination of increased revenues and improved gross margins. Gross margins
were favorably impacted by higher sales pricing and more efficient new
facilities in the U.S. and by increased volumes throughout the rest of the
world, particularly in products with higher profit margins.
Selling and administrative expense increases of $7.2 million in the quarter
(excluding the Canadian consolidation effect) and $15.3 million for the year
to date were generally in line with the increases in revenue, but were also
affected by the foreign exchange impacts of expenditures in countries whose
currencies have recently appreciated against the U.S. dollar and by greater
marketing costs in certain countries.
Liquid Carbonic's income from operations increased 21.7% between quarters
(adjusting for the effect of the Canadian consolidation) and 22.9% for the
comparable six-month periods.
10
CONTRACTING SERVICES. The operating results of Chicago Bridge & Iron Company
for the periods ending June 30, 1995 and 1994 were as follows (dollars in
thousands):
Three Months Six Months
_________________________________________
1995 1994 1995 1994
____ ____ ____ ____
Revenues $175,782 $208,532 $349,777 $383,016
Costs (155,479) (177,809) (310,328) (325,316)
________ ________ ________ ________
Gross profit 20,303 30,723 39,449 57,700
Gross margin - % 11.6% 14.7% 11.3% 15.1%
Selling and administrative (17,771) (20,712) (36,466) (40,526)
________ ________ ________ ________
Income from operations $ 2,532 $ 10,011 $ 2,983 $ 17,174
Operating margin - % 1.4% 4.8% 0.9% 4.5%
======== ======== ======== ========
Revenues for the Contracting Services segment in the second quarter of 1995
declined 15.7% from the comparable 1994 quarter and were down 8.7% for the six
months to date. In the United States, a low volume of work put in place,
primarily reflecting a reduced level of new business awards in 1994, was the
principal factor in driving domestic revenues down more than 12% in 1995's
second quarter, when compared to the second quarter of 1994. Outside the
United States, revenues declined more than 20% in the quarter and year to date
from the higher level of work put in place in 1994, principally in the
Caribbean, Southeast Asia and Africa.
Gross and operating margins for the segment decreased for both the quarter and
year to date, compared to 1994, due mainly to unabsorbed overheads caused by
the low level of work put in place worldwide in the first half of 1995 and to
highly competitive conditions which have existed for the last six quarters.
Margins for Chicago Bridge are expected to remain under pressure until its
level of work increases and the mix of new business opportunities improves in
favor of higher-margined projects.
New contract awards for the second quarter of 1995 totalled $184.6 million, up
35.0% from the comparable quarter of 1994. For the six months of 1995 to
date, new contract awards of $416.7 million are 16.2% above those in the first
half of 1994. Approximately two-thirds of the awards for the year to date are
in the United States and reflect a near-term demand for peakshaving LNG
facilities and continuing demand for turnarounds and other service type work.
The backlog of work to be executed in the future stood at $347.6 million as of
June 30, 1995, up from $287.5 million at the end of 1994, but lower than the
$384.5 million of backlog at June 30, 1994.
11
Investments. The operating results of Statia Terminals and the contributions
from financial investments, which together comprise the Investments segment,
were as follows for the periods ending June 30, 1995 and 1994 (dollars in
thousands):
Three Months Six Months
__________________ __________________
1995 1994 1995 1994
____ ____ ____ ____
Revenues $47,009 $33,220 $84,548 $63,094
Costs (38,584) (26,852) (66,051) (51,061)
_______ _______ _______ _______
Gross profit 8,425 6,368 18,497 12,033
Gross margin - % 17.9% 19.2% 21.9% 19.1%
Selling and administrative (1,455) (1,503) (2,999) (2,726)
_______ _______ _______ _______
Income from operations $ 6,970 $ 4,865 $15,498 $ 9,307
Operating margin - % 14.8% 14.6% 18.3% 14.8%
======= ======= ======= =======
Revenues for the second quarter and for the year to date increased from the
prior year by 41.5% and 34.0%, respectively, primarily due to growth in
bunkering and storage revenues at Statia Terminals' St. Eustatius facility. A
five-million-barrel facility which became operational at St. Eustatius in the
first quarter of 1995 contributed substantially to this increase in revenues
in both periods.
Income from operations improved 43.3% for the quarter and 66.5% for the six
months to date due to the increase in revenues, improvements in Statia
Terminal's operating margins and an increase in income from other Investments
segment assets.
12
OTHER INCOME STATEMENT MATTERS. Interest expense of $13.1 million for the
second quarter and $22.4 million for the first half of 1995 was greater than
that of the year previous, due to higher levels of debt and an increase in
interest rates. The effective income tax rate for the first six months of
1995 was 45.5%, compared to 47.6% for the comparable 1994 period, as effective
tax rates on non-U.S. source earnings declined.
Fully diluted earnings per common share, assuming the conversion of the
company's Series C Convertible Voting Preferred Stock, as required by
accounting disclosure rules, was $0.27 and $0.48, respectively, for the second
quarter and first half of 1995, as compared to $0.29 and $0.49, respectively,
for the counterpart 1994 periods.
FINANCIAL CONDITION
BALANCE SHEET. Cash and temporary cash investments totalled $43.2 million at
June 30, 1995, down from $51.0 million at December 31, 1994. Working capital
increased from $138.8 million at the end of 1994 to $166.7 million at June 30,
1995, primarily reflecting an increase in inventories and payment of
international tax liabilities. Total debt (notes payable plus current and
non-current long-term debt) at June 30, 1995 was $770.7 million, up 1.9% from
the $756.6 million of debt at December 31, 1994. On March 31, 1995, CBI
issued $55 million of Series D preferred shares, the proceeds of which were
used to reduce short-term borrowings. The ratio of total debt to total
capitalization (total debt plus capital stock) declined from 51.4% at December
31, 1994 to 49.5% as of June 30, 1995. With CBI's ESOP debt considered as
equity, which will occur as the common and preferred shares held by the ESOP
Trust are allocated to eligible employees, debt as a percent of capitalization
was 45.0% at December 31, 1994 and 43.7% at June 30, 1995.
CAPITAL EXPENDITURES. Expenditures for new plant and equipment were $49.9
million in the second quarter of 1995 and $112.2 million for the first six
months of 1995, compared to $54.8 million and $122.4 million, respectively, in
1994. $19.8 million of expenditures in the second quarter of 1995 and $61.0
million in the first six months represented investments in increased capacity.
13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
MARATHON/TEXAS CITY LITIGATION. On October 30, 1987, CBI Na-Con, Inc.
("CBI Na-Con") was working in the Marathon Petroleum Company refinery in
Texas City, Texas. While a lift was being made by a crane supplied and
operated by others, the crane became unstable, causing the operator to
drop the load on a hydrofluoric (HF) 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 of the 4,300 (approximate) plaintiffs who originally brought
suit as a result of the incident.
After CBI's insurers declined to indemnify CBI Na-Con for the Texas City
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 filed a motion asking the Supreme
Court to reconsider its decision, which is pending.
While neither the filing of additional lawsuits nor the outcome of any
particular lawsuit can be predicted with certainty, CBI's management
believes that remaining potential liabilities resulting from the
occurrence at Texas City will not have a materially adverse effect on
the Company's operations or financial condition.
ANTITRUST MATTERS. Liquid Carbonic Industries Corporation ("Liquid
Carbonic") has been or is currently involved in various legal
proceedings relating to antitrust matters.
Liquid Carbonic and its subsidiaries from time to time furnish documents
and witnesses in connection with governmental investigations of alleged
violations of the antitrust laws. While the outcome of any particular
governmental investigation cannot be predicted with certainty, Liquid
Carbonic believes that these investigations and the results thereof will
not have a materially adverse effect on its operations or financial
condition.
Since April, 1992, several lawsuits have been filed against Liquid
Carbonic and various competitors which 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 as part of 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 treble damages, civil penalties,
injunctive relief, costs and attorney's fees. The management of Liquid
Carbonic believes that the allegations made against Liquid Carbonic in
this litigation are without merit and that the damages alleged are
exaggerated and do not have sound economic and business support. Trial
is set for early 1996. Liquid Carbonic intends to defend itself
vigorously in this lawsuit and believes that it will either prevail or
that the ultimate outcome will not have a material adverse effect on its
operations or financial condition. However, litigation is unpredictable,
and an unexpected adverse jury verdict and judgment on that verdict in
14
Item 1. Legal Proceedings (Continued)
an amount approximating the amount of damages alleged by the plaintiffs
would have a severe adverse financial effect on CBI and Liquid Carbonic.
An agreement was reached in the second quarter of 1995 to settle,
subject to Court approval, the lawsuit brought against Liquid Carbonic
and others under the antitrust laws of the State of California based
upon the allegations of the Florida case.
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 without merit and the company intends to vigorously
defend against these claims. While the outcome of any particular
lawsuit cannot be predicted with certainty, Liquid Carbonic believes
that these Canadian antitrust claims 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.
CORPORATE LITIGATION. A purported class action on behalf of all holders
of CBI common stock is pending in the Chancery Court of Delaware against
the company and certain of its Directors. This lawsuit, WWILLIAM STEINER
V. CBI INDUSTRIES, et al, was commenced on December 22, 1994. It alleges
that the defendants breached their fiduciary duty to shareholders by
rejecting proposals by Airgas, Inc. for the Company to either merge with
Airgas or to sell Liquid Carbonic to Airgas, and by amending the
Amendment and Restatement of Rights Agreement dated as of August 8,
1989, between the Company and First Chicago Trust Company of New York,
as Rights Agent (the "Rights Agreement"). Plaintiff seeks to (a) enjoin
the Directors to carry out their fiduciary duties; (b) declare the
Rights Agreement null and void; (c) enjoin the Company and its Directors
from erecting unlawful barriers to the acquisition of the Company; and
(d) recover from defendants unspecified monetary damages sustained by
shareholders of CBI as a result of the alleged acts of the Board of
Directors. The Company intends to vigorously defend against this action.
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.
RESERVES FOR LEGAL PROCEEDINGS. 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.
15
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders of CBI Industries, Inc. was held
on May 11, 1995. The matters voted upon at the Meeting are
described in (c) below.
(c) (i) To elect five directors to serve for a three year term
expiring in 1998.
Nominee Votes For Votes Withheld
_______________________ __________ ______________
E. Hubert Clark 35,033,431 730,450
John T. Horton 35,081,954 681,927
Stephanie Pace Marshall 34,987,338 776,543
George L. Schueppert * 35,052,874 711,007
Robert L. Stewart 35,057,849 706,032
* George L. Schueppert, Executive Vice President - Finance,
Chief Financial Officer and Director, elected to retire on
August 4, 1995.
(ii) To adopt the CBI Industries, Inc. 1995 Stock Option Plan.
Votes For - 33,621,541
Votes Against - 1,656,822
Votes Abstaining - 485,518
(iii) To amend the Company's Certificate of Incorporation to permit
the Company to increase the number of authorized shares of
common stock from one hundred twenty million to two hundred
forty million shares.
Votes For - 29,972,181
Votes Against - 5,350,107
Votes Abstaining - 441,593
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3. (i) Articles of Incorporation
As amended June 21, 1995.
(ii) By-Laws
As amended August 9, 1995.
4. Instruments Defining the Rights of Security Holders,
Including Indentures
4.1 Description of 7.48% Cumulative Preferred Stock, Series D
can be found in CBI's Form 8-K dated April 5, 1995 and is
incorporated herein by reference.
4.2 Series A Preferred Stock Purchase Rights Agreement as
amended can be found in CBI's Form 8-K dated April 21,
1995 and is incorporated herein by reference.
10. Material Contracts.
Executive Contracts and Compensation Plans.
10.1 CBI Industries, Inc. 1995 Stock Option Plan can be
found in CBI's Form S-8 dated May 16, 1995 and is
incorporated herein by reference.
11. Computation of Earnings per Common Share
27. Financial Data Schedule
16
Item 6. Exhibits and Reports on Form 8-K (Continued)
(b) Reports on Form 8-K
A Form 8-K was filed under Item 5, Other Events and Item 7,
Financial Statements, Pro Forma Financial Information and Exhibits.
The date of that report was April 5, 1995.
A Form 8-K was filed under Item 5, Other Events and Item 7,
Financial Statements, Pro Forma Financial Information and Exhibits.
The date of that report was April 21, 1995.
17
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CBI INDUSTRIES, INC.
BY /s/ Alan J. Schneider
______________________________
Alan J. Schneider
Vice President - Finance
and Chief Financial Officer
Date: August 11, 1995
18