1
CHICAGO BRIDGE & IRON COMPANY N.V.
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The following table sets forth Selected Consolidated Financial and Other Data
for the periods and as of the dates indicated. The selected consolidated income
statement and cash flow data for each of the years in the five-year period ended
December 31, 2000 and the selected consolidated balance sheet data as of
December 31, 2000, 1999, 1998, 1997 and 1996 have been derived from the audited
consolidated financial statements of Chicago Bridge & Iron Company N.V. and
Subsidiaries (the "Company").
(In thousands, except share and employee data)
<Table>
<Caption>
Years Ended December 31, 2000 1999 1998 1997 1996
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INCOME STATEMENT DATA
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Revenues $ 611,691 $ 674,386 $ 775,692 $ 672,811 $ 663,721
Cost of revenues 542,733 596,707 703,363 609,173 590,030
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Gross profit 68,958 77,679 72,329 63,638 73,691
Selling and administrative expenses 42,500 49,499 46,959 44,988 42,921
Other operating income, net (1) (2,401) (2,788) (991) (4,807) (493)
Special charges (2) 55,664 -- -- -- --
Management Plan charge (3) -- -- -- 16,662 --
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(Loss) income from operations (26,805) 30,968 26,361 6,795 31,263
Interest expense (5,187) (2,980) (3,488) (3,892) (5,002)
Interest income 430 766 1,616 1,416 990
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(Loss) income before taxes and minority interest (31,562) 28,754 24,489 4,319 27,251
Income tax benefit (expense) 4,859 (8,061) (7,347) 730 (7,789)
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(Loss) income before minority interest (26,703) 20,693 17,142 5,049 19,462
Minority interest in (income) loss (1,341) (1,171) (105) 354 (2,900)
(Loss) income from continuing operations (28,044) 19,522 17,037 5,403 16,562
Discontinued operations (Note 16):
(Loss) from discontinued operations,
net of taxes (5,731) (1,138) -- -- --
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Net (loss) income $ (33,775) $ 18,384 $ 17,037 $ 5,403 $ 16,562
===================================================================================================================================
PER SHARE DATA
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Net (loss) income per share
Basic (2)(4):
(Loss)income from continuing operations $ (2.98) $ 1.77 $ 1.41 $ 0.43 N/A
(Loss) from discontinued operations (0.61) 0.10 -- -- --
Net (loss) income $ (3.59) $ 1.67 $ 1.41 $ 0.43 N/A
Diluted (2)(4):
(Loss)income from continuing operations $ (2.98) $ 1.75 $ 1.40 0.43 N/A
(Loss) from discontinued operations (0.61) (0.10) -- -- --
Net (loss) income $ (3.59) $ 1.65 $ 1.40 $ 0.43 N/A
Dividends (4) 0.24 0.24 0.24 0.18 N/A
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BALANCE SHEET DATA
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Total assets $ 538,415 $ 336,773 $ 348,709 $ 400,650 $ 351,496
Long-term debt 101,800 25,000 5,000 44,000 53,907
Total shareholders' equity 155,747 104,410 101,656 103,826 90,746
Contract capital (5) 61,286 71,148 76,969 95,243 121,926
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CASH FLOW DATA
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Cash flows from operating activities $ 4,086 $ 22,461 $ 50,824 $40,407 $ 25,159
Cash flows from investing activities (65,568) (8,911) (2,142) (21,907) (11,348)
Cash flows from financing activities 50,618 (779) (53,286) (20,124) (14,797)
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OTHER FINANCIAL DATA
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Depreciation and amortization $ 16,826 $ 17,751 $ 17,710 $16,911 $ 17,281
Adjusted EBITDA (6) 45,685 48,719 44,071 40,368 48,544
Capital expenditures 6,353 13,379 12,249 34,955 20,425
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OTHER DATA
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Number of employees:
Salaried 1,676 1,371 1,525 1,464 1,516
Hourly and craft 3,618 4,257 4,928 4,630 4,432
New business taken (7) $ 680,776 $ 712,973 $ 760,989 $ 757,985 $ 687,227
Backlog (7) 597,350 507,472 507,783 554,982 485,704
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</Table>
2
FOOTNOTES FOR PREVIOUS TABLE
(1) Other operating income, net generally represents gains on the sale of
property, plant and equipment. 1997 was favorably impacted by non-recurring
income of approximately $4.0 million from the recognition of income related
to a favorable appeals court decision and the resolution of disputed
liabilities. In addition, 1997 includes a $1.6 million gain from the sale of
assets, primarily from the sale of the Cordova, Alabama, manufacturing
facility.
(2) In 2000, the Company recognized special charges of $55.7 million ($44.1
million after-tax), which is equivalent to a net loss per common share of
$4.69. Excluding the special charges, net income per common share was $1.10.
Included in special charges were a $28.2 million non-cash valuation
allowance against a net long-term receivable for the Indonesian Tuban
(T.P.P.I.) Project; $22.2 million in special charges for payments associated
with the Company's voluntary resignation offer, severance and other
benefits-related costs; and $5.3 million in facilities-related expenses.
(3) Upon consummation of the Offering (Note 1), the Company made a contribution
to the Chicago Bridge & Iron Management Defined Contribution Plan (the
"Management Plan") in the form of 925,670 shares having a value of $16.7
million. Accordingly, the Company recorded expense of $16.7 million in 1997.
Except as described in Note 13, all shares have vested and have been
distributed.
(4) A Reorganization (Note 1) was completed in March 1997 and did not materially
affect the carrying amounts of the Company's assets and liabilities. The
Reorganization is reflected in the Company's financial statements as of
January 1, 1997. Also in March 1997, the Company completed a common share
offering (the "Offering"--Note 1). Thus, net income per share and dividend
data are not applicable for years prior to 1997.
(5) Contract capital is defined as contract receivables plus net contracts in
progress less accounts payable.
(6) Adjusted EBITDA is defined as income (loss) from operations plus special
charges, plus the Management Plan charge, plus depreciation and amortization
expenses. While EBITDA should not be construed as a substitute for operating
income (loss) or a better measure of liquidity than cash flow from operating
activities, which are determined in accordance with United States GAAP, it
is included herein to provide additional information regarding the ability
of the Company to meet its capital expenditures, working capital
requirements and any future debt service. EBITDA is not necessarily a
measure of the Company's ability to fund its cash needs, particularly
because it does not include capital expenditures. See "Management's
Discussion and Analysis of Results of Operations and Financial Condition."
(7) New business taken represents the value of new project commitments received
by the Company during a given period. Such commitments are included in
backlog until work is performed and revenue recognized or until
cancellation. Backlog may also fluctuate with currency movements.
3
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and accompanying Notes.
RESULTS OF OPERATIONS
The following table indicates new business taken by geographic area for the
years ended December 31, 2000, 1999 and 1998:
(In millions)
2000 1999 1998
NEW BUSINESS TAKEN BY GEOGRAPHIC AREA
North America $384 $290 $276
Europe, Africa, Middle East 83 296 211
Asia Pacific 57 75 108
Central and South America 157 52 166
Total $681 $713 $761
2000 VERSUS 1999
NEW BUSINESS TAKEN/BACKLOG--New business taken during 2000 was $680.8 million
compared with $713.0 million in 1999. Over 56% of the new business taken during
2000 was for contracts awarded in North America. During 2000, new business taken
increased 200% in the Central and South America (CSA) area and included the
following significant awards: a liquefied natural gas (LNG) storage tank in the
Caribbean, an LNG terminal in the Dominican Republic for an electric power
project and tankage for a heavy crude oil storage terminal in Venezuela. New
business in North America increased 33% during 2000 and included awards for
process vessels and tankage for a Canadian oil sands project, pressure vessels
for a refinery turnaround project in California and a grassroots storage
terminal in North America. New business during 2000 declined 72% in the Europe,
Africa, Middle East (EAME) area and 24% in the Asia Pacific (AP) area. The
decline was due in large measure to softer regional demand from the Company's
core hydrocarbon customers, coupled with the fact that the EAME area received an
order in 1999 for an LNG expansion project valued in excess of $100 million.
Backlog at December 31, 2000 was $597.4 million (including backlog of $125.1
million from the acquisition of Howe-Baker International, L.L.C. ["HBI"])
compared with the backlog at December 31, 1999 of $507.5 million. During 2000,
the Company removed the $50.0 million remaining on the Tuban (T.P.P.I.) Project
(Note 4) from backlog.
Including the backlog acquired from the Engineered Construction Division and
the Water Division ("PDM Divisions") of Pitt-Des Moines, Inc. ("PDM") in
February 2001, backlog increased to approximately $750 million at December 31,
2000 on a pro forma basis. The Company anticipates new business in 2001 to
increase due to the following factors: additional business opportunities
resulting from recent acquisitions, an emerging upturn in the energy market and
an upturn in capital spending by customers in the hydrocarbon industry.
REVENUES--Revenues were $611.7 million in 2000 compared with $674.4 million
in 1999. The decline in revenues year over year was due primarily to reduced
capital spending in the hydrocarbon industry and the resultant impact on the
Company's base business. The Company's revenues fluctuate based on the changing
project mix and are dependent on the amount and timing of new awards, and on
other matters such as project schedules. During 2000, revenues increased 11% in
the EAME area and 6% in North America, but declined 44% in the CSA area and 40%
in the AP area. The decrease in revenue in the CSA area resulted from a
significant volume of work being put in place in 1999 following a record level
of new business awarded during 1998. Included in the 2000 results was $21.5
million in revenues from start-up and recently acquired businesses. HBI has not
been included in the results of operations for 2000, but will be reflected
effective January 1, 2001.
The Company expects improving market conditions in the second half of 2001
and anticipates that total revenue for 2001, including HBI and 11 months for the
PDM Divisions, should exceed $1.1 billion. Achievement of this expectation is
dependent on the amount and timing of new awards, and on other matters such as
project schedules. Revenues in 2001 are expected to improve as contract awards,
particularly in CSA, taken in 2000 are put into place. The Company's flow of
revenue will fluctuate based on the changing mix of projects worldwide. Based on
the current backlog, it is expected that there will be a shift in the geographic
distribution of revenues with an increase in North America and CSA and a decline
in EAME.
GROSS PROFIT--Gross profit decreased $8.7 million to $69.0 million in 2000
from $77.7 million in 1999. Gross profit as a percentage of revenues ("gross
margin") was 11.3% in 2000 and 11.5% in 1999.
SPECIAL CHARGES--During 2000, the Company took additional actions to size its
operations appropriately for the level of base business going forward and to
position its core business in advance of the acquisition and integration of HBI.
The Company recognized special charges of $55.7 million in 2000. The Company
recorded charges of $17.7 million for involuntary and voluntary terminations of
275 employees (including 230 salaried employees, a 16% reduction in the
Company's pre-HBI number of salaried employees) and $4.5 million for other
benefits-related charges. The Company also recognized charges of $5.3 million
reflecting the commitment to downsize or lower costs at five facilities
worldwide and other exit costs including asset write-downs and lease termination
costs. A special charge of $28.2 million in the fourth quarter resulted from a
full valuation allowance against a net long-term receivable for the Tuban
(T.P.P.I.) Project and was based on the Company's assessment of the status of
the project. For a further discussion of the special charges, see Note 4 to the
Consolidated Financial Statements.
4
The Company anticipates integration costs and synergies for the recent
acquisitions to be about equal at $4.0 - $5.0 million each during 2001.
Restructuring costs including facility rationalizations are expected to be
higher than the integration savings during the first half of 2001.
(LOSS) INCOME FROM OPERATIONS--Income from operations, excluding the special
charges, decreased 6.8% to $28.9 million in 2000, compared with $31.0 million in
1999. Including the special charges, the loss from operations was $26.8 million.
The fourth quarter of 2000 results include the recognition of $3.1 million of
income related to a favorable trial court decision from a claim against certain
of the Company's insurers to recover legal fees expended in an environmental
litigation. Selling and administrative expenses decreased to $42.5 million, or
6.9% of revenues, in 2000 compared with $49.5 million, or 7.3% of revenues, in
1999. The 2000 selling and administrative expenses included a $3.8 million
decrease in performance-based and variable pay compared with 1999.
Interest expense increased $2.2 million to $5.2 million in 2000 from $3.0
million in 1999. The increase was mostly due to higher average debt levels in
2000. Interest income consisted primarily of interest earned on cash balances at
non-U.S. subsidiaries and decreased to $0.4 million in 2000 compared with $0.8
million in 1999. Net interest expense increased $2.6 million to $4.8 million in
2000 compared with $2.2 million in 1999. The Company expects interest expense to
increase in 2001 compared with 2000 due to higher average debt levels, primarily
from recent acquisitions, and additional cash requirements for the repurchase of
shares from PDM.
The Company recorded a $4.9 million income tax benefit in 2000 compared with
a $8.1 million income tax expense in 1999. Excluding the special charges, income
tax expense would have been $6.7 million in 2000, or an effective tax rate of
27.8% in 2000 compared with 28.0% in 1999. The Company believes the inclusion of
HBI will generate U.S. taxable income and as a result is anticipating an
effective tax rate of 34% in 2001.
Net income for 2000 was $10.3 million, or $1.10 per diluted share, excluding
the special charges, compared with net income of $18.4 million, or $1.65 per
diluted share, for 1999. Including the special charges, the net loss for 2000
was $33.8 million or $3.59 per diluted share, and the fourth quarter net loss
was $39.4 million or $4.08 per diluted share.
1999 VERSUS 1998
NEW BUSINESS TAKEN/BACKLOG--New business taken during 1999 was $713.0 million
compared with a historically high level of $761.0 million in 1998. The level of
new business taken was achieved in spite of challenging market conditions for
the engineering and construction industry. Included in the 1999 new business
taken was an order for an LNG expansion project in Nigeria worth in excess of
$100 million, one of the Company's largest single project awards in over a
decade, and tankage for a crude export terminal in Russia on the Black Sea at
the terminus of the Caspian pipeline. Over 59% of the new business taken during
1999 was for contracts awarded outside of North America. During 1999, new
business taken increased 40% in the EAME area and 5% in North America, but
declined 68% in the CSA area and 31% in the AP area. The CSA decline is a result
of returning to a more historic level of new business after the record level of
new business achieved in 1998. Backlog at December 31, 1999 was $507.5 million
compared with the backlog at December 31, 1998 of $507.8 million.
REVENUES--Revenues were $674.4 million in 1999 compared with $775.7 million
in 1998, reflecting the difficult industry conditions. Revenues in 1999 were
lower in all areas except CSA. The increase in revenue in the CSA area resulted
from a significant volume of work being put in place following a record level of
new business awarded during 1998, including three heavy crude oil projects in
Venezuela. Compared with the prior year, 1999 revenues declined primarily due to
mechanical work put in place on the Saldanha Steel project in South Africa
during 1998.
GROSS PROFIT--Gross profit increased $5.4 million to $77.7 million in 1999
from $72.3 million in 1998. Gross margin was 11.5% in 1999 and 9.3% in 1998.
Gross profit increased as a result of project cost savings, contract extras and
expanded scope. Gross profit also benefited from favorable developments related
to outstanding legal exposures, including reductions of $1.0 million from
product liability litigation and $0.8 million from potential liability claims.
INCOME FROM OPERATIONS--Income from operations increased 17.4% to $31.0
million in 1999, compared with $26.4 million in 1998. The significant turnaround
in CSA, driven by increased volume and improved project execution, was a key
reason for the increase. Selling and administrative expenses increased to $49.5
million, or 7.3% of revenues, in 1999 compared with $47.0 million, or 6.1% of
revenues, in 1998. Most of the increase came in the fourth quarter of 1999 and
reflects the cost of stock and performance-based pay and selling expense for
pursuing work in new geographies.
Interest expense decreased $0.5 million to $3.0 million in 1999 from $3.5
million in 1998. The decrease primarily reflected lower average debt levels.
Interest income consisted primarily of interest earned on cash balances at
non-U.S. subsidiaries and decreased to $0.8 million in 1999 compared with $1.6
million in 1998. Net interest expense increased $0.3 million to $2.2 million in
1999 compared with $1.9 million in 1998.
The Company recorded income tax expense of $8.1 million in 1999 compared with
a $7.3 million income tax expense in 1998. The effective tax rate was 28.0% in
1999 compared with 30.0% in 1998. The lower effective tax rate was the result of
higher earnings in countries with lower tax rates.
Net income for 1999 was $18.4 million, or $1.65 per diluted share, an 18%
increase, compared with net income of $17.0 million, or $1.40 per diluted share,
for 1998.
5
LIQUIDITY AND CAPITAL RESOURCES
In 2000, the Company generated cash from operations of $4.1 million compared
with $22.5 million in 1999. The reduction in operating cash flow was due
primarily to $7.1 million of payments related to special charges and $11.0
million from reduced operating income and increased net interest expense.
In 2000, the Company expended $6.4 million for capital expenditures and
realized $4.9 million in proceeds from the sale of property and equipment. The
capital expenditures in 2000 included $3.9 million for field equipment, $0.9
million for the improvement of facilities and $1.6 million for information
systems. In 1999, the Company expended $13.4 million for capital expenditures
and realized $4.5 million in proceeds from the sale of field equipment and an
excess warehouse facility. The capital expenditures in 1999 included $5.9
million for information systems, $4.7 million for field equipment and $2.8
million for the improvement of facilities.
On December 1, 2000, the Company and a group of five banks entered into a
three-year, unsecured $200 million revolving credit facility replacing the
Company's prior $100 million revolving credit facility. Under the new revolving
credit facility, committed amounts are available for general corporate purposes,
including working capital, letters of credit, share repurchase, acquisitions and
other requirements of the Company. Letters of credit may be issued, subject to a
$100 million sublimit, on a committed basis and expire one year after issuance,
unless otherwise provided. The revolving credit facility will terminate on
December 1, 2003.
At December 31, 2000, the Company's long-term debt stood at $101.8 million
compared with $25.0 million at the end of 1999. This increase reflects
expenditures for business acquisitions of $58.3 million, assumed debt of $5.7
million from the HBI acquisition and $18.8 million for the purchase of 1,183,664
shares of the Company's stock, or 12% of shares outstanding as of year-end 1999.
During 1999, the Company had repurchased 1,354,033 shares, or 12% of shares
outstanding as of year-end 1998 for $17.5 million. The Company ended 2000 with
contract capital of $61.3 million, a $9.9 million decrease from December 31,
1999. Cash and cash equivalents at year-end were $7.5 million compared with
$18.4 million at the end of 1999.
On December 28, 2000, the Company acquired the entire ownership interest of
Howe-Baker International, L.L.C. from WEDGE Group Incorporated ("WEDGE") for a
consideration of 8,146,665 shares of the Company (valued at $12.8875 per share),
$43.0 million in cash and the assumption of certain liabilities. The issuance of
these shares resulted in a 85% increase in shares outstanding at the date of
acquisition. Immediately following this transaction, First Reserve Fund VIII,
L.P. ("First Reserve") acquired from WEDGE 4,323,333 shares of the Company. As
part of this transaction, First Reserve purchased an additional 530,000 shares
of the Company from WEDGE and one of its affiliates and the Company agreed to
grant First Reserve a warrant to purchase 82,118 shares of the Company at an
exercise price of NLG .01 per share. First Reserve exercised this warrant on
February 22, 2001.
On February 7, 2001, the Company acquired substantially all of the assets of
the Engineered Construction Division and the Water Division of Pitt-Des Moines,
Inc. (Note 16) for 2,848,172 shares of the Company (including 282,575 collar
shares for price protection, if required) and $40.0 million in cash. PDM is
obligated to remit to the Company net proceeds from the disposition of these
shares in excess of $44.0 million. The source of funds for the cash portion of
the purchase price was a private placement of 837,692 shares of the Company to
Farinvest, Ltd., an affiliate of WEDGE (for a price of $13.6 million) and
1,623,846 shares of the Company plus a warrant to purchase 251,598 shares of the
Company at an exercise price of NLG .01 per share to First Reserve (for a total
price of $26.4 million), plus a warrant for 250,000 shares of the Company,
subject to decrease depending on the number of shares repurchased by the Company
prior to June 30, 2001. The issuance of a total of 5,309,710 shares represents a
30% increase in shares outstanding from December 31, 2000. First Reserve
exercised the warrant to purchase 251,598 shares on February 22, 2001. On March
15, 2001, the Company called 524,781 shares from PDM priced at $9.0 million and
a return of the 282,575 collar shares issued for price protection. The Company
sold these 807,356 shares at $17.75 (less expenses), based on an agreement
entered into on February 23, 2001, to an unaffiliated group of investors for a
total price of $14.3 million. PDM has the right to require the Company to
repurchase the remaining 2,040,816 shares at $17.15 per share, for a total price
of $35.0 million. The Company has certain rights to call these shares prior to
June 28, 2001. The Company intends to repurchase these shares from PDM. In order
to accomplish the buyback of these shares, the Company is in negotiations for
the sale and leaseback of its administrative office and has reflected this as an
asset held for sale on its balance sheet. In addition, the Company will utilize
its revolving credit facility and is also considering the sale and leaseback of
other property and equipment, as well as other alternatives to finance the share
buyback.
The Company expects its revolving credit facility will be more fully utilized
due to debt from the HBI acquisition, the increased size of the Company's
operations resulting from recent acquisitions and additional cash requirements
for the buyback of shares from PDM. As the Company manages the integration
activities of its recent acquisitions, it anticipates reduced liquidity during
the first half of 2001 with improvements expected as the year progresses.
However, the Company expects to be able to operate within the covenants defined
in its existing credit agreement. The Company is also considering the private
placement market as an additional financing source.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company is exposed to market risk from changes in foreign currency exchange
rates, which may adversely affect its results of operations and financial
condition. The Company seeks to minimize the risks from these foreign currency
exchange rate fluctuations through its regular operating and financing
activities and, when deemed appropriate, through its limited use of foreign
currency forward contracts. The Company's exposure to changes in foreign
currency exchange rates arises from receivables, payables and firm commitments
from international transactions, as well as intercompany loans utilized to
finance non-U.S. subsidiaries. The Company does not use financial instruments
for trading or other speculative purposes.
The Company uses various methods and assumptions to estimate the fair value
of each class of financial instrument. Due to their nature, the carrying value
of cash and cash equivalents, trade and accounts receivable, payables, notes
payable and long-term debt
6
approximates fair value. The Company's accounting policies and a quantification
of its derivative financial instruments are included in Note 2 (Significant
Accounting Policies) of the Notes to Consolidated Financial Statements.
EURO CONVERSION
The Euro was introduced on January 1, 1999, at which time the conversion rates
between the currencies of the 11 participating European countries that are
members of the European Economic and Monetary Union (EMU) and the Euro were set.
The local currencies will continue to be used as legal tender through January 1,
2002. Thereafter, the local currencies will be canceled and Euro bills and coins
will be used in the 11 participating countries. The Company does not anticipate
that the transition to the Euro will have a significant impact on its results of
operations, financial position or cash flows.
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133, as amended by SFAS 138, is
effective for fiscal years beginning after June 15, 2000 (quarter ended March
31, 2001, for the Company). The Company has adopted the new Statement effective
as of January 1, 2001. Adoption requires the Company to record all derivative
instruments on the balance sheet at their fair value and changes in the
derivative's fair value are to be recorded each period in earnings, unless
specific hedge accounting criteria are met. The effect of this change in
accounting does not have a significant effect on the Company's results of
operations or its financial position.
FORWARD-LOOKING STATEMENTS
Any statements contained herein that are not based on historical fact are
forward-looking statements and represent management's best judgment as to what
may occur in the future. The actual outcome and results are not guaranteed, are
subject to risks, uncertainties and assumptions and may differ materially from
what is expressed. A variety of factors could cause business conditions and
results to differ materially from what is contained in the forward-looking
statements including, but not limited to, the uncertain timing and the funding
of new contract awards; project cancellations and operating risks; cost overruns
on fixed-priced contracts; risks associated with percentage of completion
accounting; increase in competition by competitors; fluctuating revenues
resulting from the cyclical nature of the individual markets in which the
Company's customers operate; reduced activity in the hydrocarbon industry,
demand from which is the largest component of the Company's revenue; lack of the
liquidity needed to finance expenditures prior to receipt of payment for the
performance of contracts and to provide bid and performance bonds and letters of
credit securing the Company's obligations under its bids and contracts; risks
inherent in the Company's acquisition strategy and the ability to obtain
financing for proposed acquisitions; and the Company's ability to integrate and
successfully operate acquired businesses, including Howe-Baker International,
L.L.C. and the Engineered Construction Division and the Water Division of
Pitt-Des Moines, Inc., and manage the risks associated with those businesses. In
addition, while all mandatory waiting periods for antitrust review have passed,
the Federal Trade Commission ("FTC") continues to review certain aspects of the
Company's acquisition of PDM's assets and the Company continues to cooperate
with the FTC. Additional factors are set forth in the Company's most recent
Annual Report on Form 10-K, Quarterly Report on Form 10-Q and Current Report on
Form 8-K (as amended) which describe other factors that could cause actual
results to differ from such forward-looking statements, as well as the Company's
other filings with the Securities and Exchange Commission. The Company does not
undertake to update any forward-looking statements contained herein, whether as
a result of new information, future events or otherwise.
7
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and the Supervisory Board of Chicago Bridge & Iron Company
N.V.:
We have audited the accompanying consolidated balance sheets of CHICAGO BRIDGE &
IRON COMPANY N.V. (a Netherlands corporation) and SUBSIDIARIES as of December
31, 2000 and 1999, and the related consolidated statements of income, changes in
shareholders' equity and cash flows for each of the three years ended December
31, 2000. 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 auditing standards generally
accepted in the United States of America and The Netherlands. Those standards
require that we plan and perform the audits 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 financial statements referred to above present fairly, in
all material respects, the financial position of CHICAGO BRIDGE & IRON COMPANY
N.V. and SUBSIDIARIES as of December 31, 2000 and 1999, and the results of its
operations and cash flows for each of the three years ended December 31, 2000,
in conformity with accounting principles generally accepted in the United States
of America.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to the
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
Arthur Andersen
Amsterdam, The Netherlands
February 12, 2001 (except with respect to the discontinued operations matter
discussed in Note 16, as to which the date is September 14,
2001.)
8
CHICAGO BRIDGE & IRON COMPANY N.V.
CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
<Table>
<Caption>
Years Ended December 31, 2000 1999 1998
----------------------------------------------------------------------------------------------------------------------
Revenues $611,691 $674,386 $775,692
Cost of revenues 542,733 596,707 703,363
----------------------------------------------------------------------------------------------------------------------
Gross profit 68,958 77,679 72,329
Selling and administrative expenses 42,500 49,499 46,959
Other operating income, net (2,401) (2,788) (991)
Special charges (Note 4) 55,664 -- --
----------------------------------------------------------------------------------------------------------------------
(Loss) income from operations (26,805) 30,968 26,361
Interest expense (5,187) (2,980) (3,488)
Interest income 430 766 1,616
----------------------------------------------------------------------------------------------------------------------
(Loss) income before taxes and minority interest (31,562) 28,754 24,489
Income tax benefit (expense) 4,859 (8,061) (7,347)
----------------------------------------------------------------------------------------------------------------------
(Loss) income before minority interest (26,703) 20,693 17,142
Minority interest in income (1,341) (1,171) (105)
----------------------------------------------------------------------------------------------------------------------
(Loss) income from continuing operations (28,044) 19,522 17,037
Discontinued operations (Note 16):
(Loss) from discontinued operations, net of taxes (5,731) (1,138) --
----------------------------------------------------------------------------------------------------------------------
Net (loss) income $(33,775) $ 18,384 $ 17,037
Net (loss) income per share (Note 2)
Basic
----------------------------------------------------------------------------------------------------------------------
(Loss) income from continuing operations $ (2.98) $ 1.77 $ 1.41
(Loss) from discontinued operations (0.61) (0.10) --
Net (loss) income $ (3.59) $ 1.67 $ 1.41
----------------------------------------------------------------------------------------------------------------------
Diluted
----------------------------------------------------------------------------------------------------------------------
(Loss) income from continuing operations $ (2.98) $ 1.75 $ 1.40
(Loss) from discontinued operations (0.61) (0.10) --
Net (loss) income (3.59) 1.65 1.40
----------------------------------------------------------------------------------------------------------------------
</Table>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
9
CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
YEARS ENDED DECEMBER 31, 2000 1999
--------------------------------------------------------------------------------------------------------------------
ASSETS
--------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents $ 7,451 $ 18,357
Accounts receivable, net of allowance for doubtful accounts
of $1,300 in 2000 and $1,054 in 1999 125,259 93,333
Contracts in progress with earned revenues exceeding related progress billings (Note 5) 57,888 48,391
Deferred income taxes 14,417 1,266
Assets held for sale 13,391 --
Net assets of discontinued operations 11,614 738
Other current assets 10,740 6,093
--------------------------------------------------------------------------------------------------------------------
Total current assets 240,760 168,178
--------------------------------------------------------------------------------------------------------------------
Property and equipment, net (Note 8) 98,723 103,933
Long-term receivables (Notes 9 and 4) 19,785 28,739
Deferred income taxes 28,332 8,773
Goodwill (Note 2) 132,426 18,010
Other non-current assets 18,389 9,140
--------------------------------------------------------------------------------------------------------------------
Total assets $ 538,415 $ 336,773
====================================================================================================================
LIABILITIES
--------------------------------------------------------------------------------------------------------------------
Notes payable (Note 7) $ 276 $ 665
Accounts payable 62,934 44,317
Accrued liabilities (Note 8) 58,389 42,167
Contracts in progress with progress billings exceeding related earned revenues (Note 5) 58,927 53,112
Income taxes payable 3,321 4,942
--------------------------------------------------------------------------------------------------------------------
Total current liabilities 183,847 145,203
--------------------------------------------------------------------------------------------------------------------
Long-term debt (Note 6) 101,800 25,000
Other non-current liabilities (Note 8) 63,794 57,309
Minority interest in subsidiaries (Note 9) 33,227 4,851
--------------------------------------------------------------------------------------------------------------------
Total liabilities 382,668 232,363
--------------------------------------------------------------------------------------------------------------------
Commitments and Contingencies (Note 10)
SHAREHOLDERS' EQUITY
--------------------------------------------------------------------------------------------------------------------
Common stock, NLG .01 par value; authorized: 35,000,000 in 2000 and 1999;
issued: 17,743,030 in 2000 and 11,295,687 in 1999 (Note 12) 91 67
Additional paid-in capital 174,320 93,393
Retained earnings 8,626 44,621
Stock held in Trust (Note 13) (17,193) (12,700)
Treasury stock, at cost: 13,922 in 2000 and 1,022,705 in 1999 (225) (13,729)
Cumulative translation adjustment (9,872) (7,242)
--------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 155,747 104,410
--------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 538,415 $ 336,773
====================================================================================================================
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
10
CHICAGO BRIDGE & IRON COMPANY N.V.
CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
YEARS ENDED DECEMBER 31, 2000 1999 1998
--------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
--------------------------------------------------------------------------------------------------------------------------
Net (loss) income $(33,775) $ 18,384 $ 17,037
Adjustments to reconcile net (loss) income to net cash provided by operating
activities:
Special charges, net of deferred income taxes of $11,559 44,105 -- --
Payments related to special charges (7,069) -- --
Depreciation and amortization 16,826 17,751 17,710
Gain on sale of property and equipment (2,400) (2,028) (991)
Loss on discontinued operations 5,731 1,138 --
Change in operating assets and liabilities (see below) (10,414) (11,704) 17,068
--------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Continuing Operating Activities 13,004 23,541 50,824
Net Cash Used by Discontinued Activities (8,918) (1,080) --
Net Cash Provided by Operating Activities 4,086 22,461 50,824
--------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
--------------------------------------------------------------------------------------------------------------------------
Cost of business acquisitions, net of cash acquired (Note 3) (56,469) -- --
Capital expenditures (6,353) (13,379) (12,249)
Proceeds from sale of property and equipment 4,914 5,214 10,107
--------------------------------------------------------------------------------------------------------------------------
Net Cash Used in Continuing Investing Activities (57,908) (8,165) (2,142)
Net Cash Used by Discontinued Investing Activities (7,660) (746) --
Net Cash Used by Investing Activities (65,568) (8,911) (2,142)
--------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
--------------------------------------------------------------------------------------------------------------------------
(Decrease)/increase in notes payable (578) (2,423) 1,930
Net borrowing/(repayment) under Revolving Credit Facility 71,100 20,000 (39,000)
Purchase of treasury stock (18,757) (17,484) (13,970)
Issuance of treasury stock 1,060 1,742 652
Dividends paid (2,220) (2,614) (2,898)
--------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by/(Used in) Continuing Financing Activities 50,605 (779) (53,286)
Net Cash Provided by Discontinued Financing Activities 13 -- --
--------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by/(Used in) Financing Activities 50,618 (779) (53,286)
--------------------------------------------------------------------------------------------------------------------------
(Decrease)/increase in cash and cash equivalents from continuing operations (10,864) 12,771 (4,604)
Change in cash and cash equivalents of discontinued operations (42) (50) --
Cash and cash equivalents, beginning of the year 18,357 5,636 10,240
--------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of the year $ 7,451 $ 18,357 $ 5,636
==========================================================================================================================
CHANGE IN OPERATING ASSETS AND LIABILITIES
--------------------------------------------------------------------------------------------------------------------------
(Increase)/decrease in receivables, net $ 8,247 $ 13,833 $ 13,874
(Increase)/decrease in contracts in progress, net (3,602) (20,685) 15,768
Increase/(decrease) in accounts payable (2,386) 5,133 (11,368)
Change in contract capital 2,259 (1,719) 18,274
(Increase)/decrease in other current assets (1,544) (599) 6,318
Increase/(decrease) in income taxes payable and deferred income taxes (3,118) (1,629) (1,141)
Increase/(decrease) in accrued and other non-current liabilities (7,039) (5,230) (3,275)
(Increase)/decrease in other (972) (2,527) (3,108)
--------------------------------------------------------------------------------------------------------------------------
Total $(10,414) $(11,704) $ 17,068
==========================================================================================================================
SUPPLEMENTAL CASH FLOW DISCLOSURES
--------------------------------------------------------------------------------------------------------------------------
Cash paid for interest $ 5,921 $ 2,939 $ 3,899
Cash paid for income taxes 7,140 9,456 5,200
--------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
11
CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands)
TOTAL
ADDITIONAL STOCK TREASURY CUMULATIVE SHARE-
COMMON PAID-IN RETAINED HELD IN STOCK, TRANSLATION HOLDERS'
STOCK CAPITAL EARNINGS TRUST AT COST ADJUSTMENT EQUITY
------------------------------------------------------------------------------------------------------------------------------
Balance at January 1, 1998 $ 74 $ 93,691 $ 14,712 $ -- $ -- $ (4,651) $ 103,826
Comprehensive income (loss) -- -- 17,037 -- -- (3,511) 13,526
Dividends to common shareholders -- -- (2,898) -- -- -- (2,898)
Long-Term Incentive Plan amortization -- 520 -- -- -- -- 520
Purchase of treasury stock -- -- -- -- (13,970) -- (13,970)
Issuance of treasury stock -- (174) -- -- 826 -- 652
------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 74 94,037 28,851 -- (13,144) (8,162) 101,656
Comprehensive income -- -- 18,384 -- -- 920 19,304
Dividends to common shareholders -- -- (2,614) -- -- -- (2,614)
Long-Term Incentive Plan amortization -- 1,806 -- -- -- -- 1,806
Stock held in Trust (Note 13) -- 12,700 -- (12,700) -- -- --
Purchase of treasury stock -- -- -- -- (17,484) -- (17,484)
Issuance of treasury stock -- (1,406) -- -- 3,148 -- 1,742
Cancellation of treasury stock (7) (13,744) -- -- 13,751 -- --
------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 67 93,393 44,621 (12,700) (13,729) (7,242) 104,410
Comprehensive (loss) -- -- (33,775) -- -- (2,630) (36,405)
Dividends to common shareholders -- -- (2,220) -- -- -- (2,220)
Long-Term Incentive Plan amortization -- 2,969 -- -- -- -- 2,969
Stock held in Trust (Note 13) -- 35 -- (35) -- -- --
Issuance of common stock
to Trust (Note 13) 1 4,457 -- (4,458) -- -- --
Issuance of common stock
for acquisition 35 104,655 -- -- -- -- 104,690
Purchase of treasury stock -- -- -- -- (18,757) -- (18,757)
Issuance of treasury stock -- (2,037) -- -- 3,097 -- 1,060
Cancellation of treasury stock (12) (29,152) -- -- 29,164 -- --
------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2000 $ 91 $ 174,320 $ 8,626 $ (17,193) $ (225) $ (9,872) $ 155,747
==============================================================================================================================
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
12
CHICAGO BRIDGE & IRON COMPANY N.V.
CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
1. ORGANIZATION AND NATURE OF OPERATIONS
Chicago Bridge & Iron Company N.V. and Subsidiaries (the "Company"), is a global
engineering and construction company specializing in the design and engineering,
fabrication, field erection and repair of bulk liquid terminals, storage tanks,
process vessels, low temperature and cryogenic storage facilities and other
steel plate structures and their associated systems. Based on its knowledge of
and experience in its industry, the Company believes it is the leading provider
of field erected steel tanks and other steel plate structures, associated
systems and related services in North America and one of the leading providers
of these specialized products and services in the world. The Company seeks to
maintain its leading industry position by focusing on its technological
expertise in design, metallurgy and welding, along with its ability to complete
logistically and technically complex metal plate projects virtually anywhere in
the world. The Company has been continuously engaged in the engineering and
construction industry since its founding in 1889. On December 28, 2000, the
Company acquired Howe-Baker International, L.L.C. (Note 3), a global technology
company specializing in the engineering and construction of hydrocarbon
processing plants for customers in the refining, petrochemical and natural gas
industries, which was organized and began operations in 1947.
HISTORICAL ORGANIZATION--During the periods and as of the dates prior to
January 1, 1996, Chicago Bridge & Iron Company ("CB&I")was a wholly owned
subsidiary of Chi Bridge Holdings, Inc. ("Holdings"), which in turn was a wholly
owned subsidiary of CBI Industries, Inc. ("Industries"). On January 12, 1996,
pursuant to the merger agreement dated December 22, 1995, Industries became a
subsidiary of Praxair, Inc. ("Praxair" and "former Parent Company"). This merger
transaction was reflected in CB&I's consolidated financial statements as a
purchase effective January 1, 1996.
COMMON STOCK OFFERING--In December 1996, the Company filed a registration
statement with the Securities and Exchange Commission for an initial public
offering (the "Offering") of a majority of the shares of the Company's Common
Stock, par value NLG .01 (the "Common Stock"). Effective March 1997, after the
Reorganization discussed below, the Company completed the Offering of 11,045,941
shares of Common Stock at $18.00 per share. The Company did not receive any
proceeds from the Offering, but paid a portion of the Offering costs.
REORGANIZATION--In March 1997, Holdings effected a reorganization (the
"Reorganization") whereby Holdings transferred the business of CB&I to Chicago
Bridge & Iron Company N.V., a corporation organized under the laws of The
Netherlands. The Reorganization did not affect the carrying amounts of CB&I's
assets and liabilities, nor result in any distribution of its cash or other
assets to Praxair. The Reorganization is reflected in the Company's financial
statements effective January 1, 1997.
NATURE OF OPERATIONS--Projects for the worldwide petroleum and petrochemical
industry accounted for approximately 60-70% of the Company's revenues in 2000,
1999 and 1998. Numerous factors influence capital expenditure decisions in this
industry, which are beyond the control of the Company. Therefore, no assurance
can be given that the Company's business, financial condition and results of
operations will not be adversely affected because of reduced activity due to the
price of oil or changing taxes, price controls and laws and regulations related
to the petroleum and petrochemical industry.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING AND CONSOLIDATION--These financial statements are
prepared in accordance with generally accepted accounting principles in the
United States. The consolidated financial statements include all majority owned
subsidiaries. Significant intercompany balances and transactions are eliminated
in consolidation. Investments in non-majority owned affiliates are accounted for
by the equity method.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities. Management is also required to make judgments regarding
the disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
13
REVENUE RECOGNITION--Revenues are recognized using the percentage of
completion method. Contract revenues are accrued based generally on the
percentage that costs-to-date bear to total estimated costs. The cumulative
impact of revisions in total cost estimates during the progress of work is
reflected in the period in which these changes become known. Contract revenue
reflects the original contract price adjusted for agreed upon change orders and
estimated minimum recoveries of claims. At December 31, 2000, the Company had
net outstanding claims recognized of $11,000. Losses expected to be incurred on
contracts in process are charged to income as soon as such losses are known.
A significant portion of the Company's work is performed on a fixed price or
lump sum basis. The balance of projects are primarily performed on variations of
cost reimbursable and target price approaches. Progress billings in accounts
receivable are currently due and exclude retentions until such amounts are due
in accordance with contract terms. Cost of revenues includes direct contract
costs such as material and construction labor, and indirect costs which are
attributable to contract activity.
FOREIGN CURRENCY TRANSLATION AND EXCHANGE--The primary effects of foreign
currency translation adjustments are recognized in shareholders' equity as
cumulative translation adjustment, net of tax. Foreign currency exchange
gains/(losses) are included in the determination of income, and were $1,481 in
2000, $(550) in 1999 and $615 in 1998.
PER SHARE COMPUTATIONS--
<Table>
<Caption>
2000 1999 1998
(Loss) income from continuing operations $ (28,044) $ 19,522 $ 17,037
(Loss) from discontinued operations (5,731) (1,138) --
Net (loss) income $ (33,775) $ 18,384 $ 17,037
Weighted average shares outstanding--basic 9,405,789 10,998,872 12,117,573
Effect of restricted stock units * 141,282 29,438
Effect of performance share units * 14,064 5,127
Effect of directors deferred fee shares * 7,626 711
Effect of stock options * 6,997 --
Weighted average shares outstanding--diluted 9,405,789 11,168,841 12,152,849
NET (LOSS) INCOME PER SHARE
Basic
(Loss) income from continuing operations (2.98) 1.77 1.41
(Loss) from discontinued operations (0.61) (0.10) --
Net (loss) income $ (3.59) $ 1.67 $ 1.41
Diluted
(Loss) income from continuing operations (2.98) 1.75 1.40
(Loss) from discontinued operations (0.61) (0.10) --
Net (loss) income (3.59)* 1.65 1.40
</Table>
* The effect of restricted stock and performance share units, directors
deferred fee shares and stock options were not included in the calculation
of diluted earnings per as they were antidulutive due to the net loss for
the year.
CASH EQUIVALENTS--Cash equivalents are considered to be all highly liquid
securities with original maturities of three months or less.
PROPERTY AND EQUIPMENT--Property and equipment are recorded at cost and
depreciated on a straight-line basis over their estimated useful lives:
buildings and imrovements, 10 to 40 years; plant and field equipment, 3 to 20
years. Renewals and betterments, which substantially extend the useful life of
an asset, are capitalized and depreciated. Depreciation expense was $16,239 in
2000, $17,249 in 1999 and $17,222 in 1998.
GOODWILL--The Company records the excess of cost over the fair value of
identifiable net assets as goodwill on the balance sheet. Goodwill is amortized
on a straight-line basis over periods of 7 to 40 years. Amorization expense was
$587 in 2000, $587 in 2000, $502 in 1999 and $488 in 1998. Accumulated
amortization was $2,553 as of December 31, 2000 and $1,996 as of December 31,
1999. The carrying value of goodwill is reviewed periodically based on the
undiscounted cash flows of the entity over the remaining amortized period. If
this review indicates that goodwill is not recoverable, the Company's carrying
value of goodwill would be reduced to fair value.
The Company's valuation allowance of $27,155 for deferred tax assets
recorded in connection with the Praxair acquisition accounting reduced the
Company's remaining IPO goodwill of $17,075 following the acquisition of HBI in
2000. The Company believes that it will generate sustained U.S. taxable income
as a result of inclusion of HBI's operating results in the U.S. consolidated
income tax return.
PRECONTRACT COSTS--Precontract costs are charged to cost of revenues as
incurred. However, certain precontract costs are deferred to the balance sheet
if their recoverability from the contract is probable. Precontract costs
deferred to the balance sheet were $1,838 as of December 31, 2000 and $952 as of
December 31, 1999.
14
CHICAGO BRIDGE & IRON COMPANY N.V.
FINANCIAL INSTRUMENTS--The Company uses various methods and assumptions to
estimate the fair value of each class of financial instrument. Due to their
nature, the carrying value of cash and cash equivalents, accounts receivable,
accounts payable, notes payable and long-term debt approximates fair value. The
Company's other financial instruments are not significant.
FORWARD CONTRACTS--Although the Company does not engage in currency
speculation, it periodically uses forward contracts to hedge foreign currency
transactions. Gains or losses on forward contracts are included in income. At
December 31, 2000, the Company had $2,495 of outstanding foreign currency
exchange contracts to sell Dutch guilders, $1,368 of outstanding foreign
currency exchange contracts to buy Euros, $1,041 of outstanding foreign currency
exchange contracts to buy Canadian dollars, $688 of outstanding foreign currency
exchange contracts to sell British pounds and a $355 outstanding foreign
exchange contract to buy Spanish pesetas. These forward contracts hedged
intercompany loans utilized to finance non-U.S. subsidiaries and will mature
within 10 days after year-end. The fair value of these forward contracts
approximated their carrying value in the financial statements at December 31,
2000. The counterparties to the Company's forward contracts are major financial
institutions, which the Company continually evaluates as to their
creditworthiness. The Company has never experienced, nor does it anticipate,
nonperformance by any of its counterparties.
NEW ACCOUNTING STANDARDS--In June 1998, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133, as
amended by SFAS 138, is effective for fiscal years beginning after June 15, 2000
(quarter ended March 31, 2001, for the Company). The Company has adopted the new
Statement effective as of January 1, 2001. Adoption requires the Company to
record all derivative instruments on the balance sheet at their fair value and
changes in the derivative's fair value are to be recorded each period in
earnings, unless specific hedge accounting criteria are met. The effect of this
change in accounting does not have a significant effect on the Company's results
of operations or its financial position.
RESEARCH AND DEVELOPMENT--Expenditures for research and development
activities, which are charged to income as incurred, amounted to $1,385 in 2000,
$1,294 in 1999 and $860 in 1998.
RECLASSIFICATION OF PRIOR YEAR BALANCES--Certain prior year balances have
been reclassified to conform with current year presentation.
3. ACQUISITIONS
On December 28, 2000, the Company acquired Howe-Baker International, L.L.C. from
WEDGE Group Incorporated, a private investment firm that owned 100% of HBI. HBI
is a leading U.S.-based engineering and construction firm specializing in the
design and construction of hydrocarbon processing plants for customers in the
refining, petrochemical and natural gas processing industries. Under the terms
of the transaction, the Company paid $28,000 in cash, issued 8,146,665 shares
(valued at $104,990 at $12.8875 per share) to WEDGE and assumed certain
liabilities (including $5,700 in long-term debt). These consideration amounts
exclude the value of future earnout obligations assumed in the transaction.
Under the purchase agreement, an upward adjustment in purchase price of $15,000
was made based on the actual level of cash in HBI working capital on the closing
date. Immediately following the transaction, WEDGE sold 4,323,333 shares of the
Company's Common Stock to First Reserve Fund VIII, L. P. at a price of $16.25
per share. First Reserve purchased an additional 530,000 shares from WEDGE for
which the Company provided a warrant to First Reserve for the purchase of 82,118
shares of the Company's Common Stock at an exercise price of NLG .01 per share.
Shareholder agreements with WEDGE and First Reserve include board
representations, standstill provisions, registration rights and restrictions
with respect to voting rights. The cash portion of the purchase price was funded
out of borrowings under the Company's revolving credit facility. This
acquisition was accounted for under the purchase method of accounting. The
purchase price has been allocated to assets acquired and liabilities assumed
based on estimated fair values at the date of acquisition and the balance of
approximately $130,000 was recorded as goodwill. Goodwill will be amortized on a
straight-line basis over 40 years. The fair values of assets acquired and
liabilities assumed are subject to final adjustment. The results of operations
for HBI will be included in the Company's results of operations effective
January 1, 2001.
The following presents (unaudited) pro forma results of operations for the
years ended December 31, 2000 and 1999 as if HBI had been combined as of January
1, 1999. These pro forma results do not purport to be indicative of the combined
results of operations that would have occurred had the acquisition been made
as of January 1, 1999 or of results which may occur in the future.
15
PRO FORMA
(UNAUDITED)
YEAR END
DECEMBER 31,
2000 1999
--------------------------------------------------------------------------------
Revenues $ 848,560 $ 983,955
(Loss) income from continuing operations (19,239) 33,197
(Loss) income per share from continuing operations
Basic $ (1.10) $ 1.73
Diluted (1.10) 1.71
================================================================================
On May 17, 2000, the Company purchased the assets and assumed certain
liabilities of Pacific Pure Water Asia Pte Ltd. ("Pacific Pure") for
approximately $2,300. Pacific Pure provides ultra pure systems for customers in
the microelectronics, pharmaceutical and biotechnology industries. The purchase
price has been allocated to assets acquired and liabilities assumed based on
estimated fair values at the date of acquisition and the balance of
approximately $1,800 was recorded as goodwill. This acquisition was accounted
for under the purchase method of accounting. Goodwill is amortized on a
straight-line basis over seven years. The fair values of assets acquired and
liabilities assumed are subject to final adjustment. Pro forma presentation of
financial information has not been presented, as the amounts were not
significant.
On January 28, 2000, the Company purchased the assets and assumed certain
liabilities of the business now known as CB&I Trusco Tank ("Trusco") for
approximately $9,400. Trusco designs, fabricates and erects steel structures,
including storage and shop-built tanks, and services municipal and industrial
customers primarily in the water, wastewater and petroleum markets on the U.S.
West Coast. The purchase price has been allocated to assets acquired and
liabilities assumed based on estimated fair values at the date of acquisition
and the balance of approximately $1,500 was recorded as goodwill. This
acquisition was accounted for under the purchase method of accounting. Goodwill
is amortized on a straight-line basis over 40 years. Pro forma presentation of
financial information has not been presented, as the amounts were not
significant.
4. SPECIAL CHARGES
The Company's accrued expense balances and activity relating to the special
charges for the year ended December 31, 2000 were as follows:
<Table>
<Caption>
VOLUNTARY
RESIGNATION TUBAN
OFFER, PROJECT
SEVERANCE AND VALUATION
OTHER BENEFITS ALLOWANCE FACILITIES TOTAL
-----------------------------------------------------------------------------------------------------------------------
Special charges $ 22,182 $ 28,200 $ 5,282 $ 55,664
Cash payments (6,646) -- (423) (7,069)
Non-cash activities (4,662) (28,200) (4,021) (36,883)
-----------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2000 $ 10,874 $ -- $ 838 $ 11,712
=======================================================================================================================
</Table>
VOLUNTARY RESIGNATION OFFER, SEVERANCE AND OTHER BENEFITS--In October 2000,
the Company presented a voluntary resignation offer (the "Offer") to 156 of its
U.S. and U.S. expatriate salaried employees who had accumulated a combination of
years of service and age that added up to at least 80. The Company recorded a
special charge in the fourth quarter of $13,400 for the anticipated payments
associated with 107 employees accepting the Offer. In 2000, the Company recorded
severance and other charges of $4,277 reflecting the Company's commitment to
plans primarily associated with the integration of HBI and the Company. The
plans include reorganization costs, primarily severance related. Severance
charges related to the involuntary termination of approximately 48 employees in
the United States and 120 employees in non-U.S. operations. The $4,505 of other
benefits-related charges include non-cash costs of $2,505 related to the
Company's Long-Term Incentive Plan resulting from change of control provisions
triggered as a result of the Company's acquisition of HBI. The remaining charge
is attributable to the Company's wind-up of a defined benefit plan. Cash
payments related to the remaining liability will be substantially made in 2001.
TUBAN PROJECT VALUATION ALLOWANCE--In November 2000, the Company was
carrying a net $28,200 long-term receivable on its balance sheet related to the
Tuban (T.P.P.I.) Project, and had approximately $50,000 remaining in its backlog
for the Tuban Project. The Company recognized a charge of $28,200 in the fourth
quarter of 2000 as a full valuation allowance against this net long-term
receivable and removed the $50,000 for the Tuban Project from its backlog as the
Company determined that the realizability of this long-term receivable and
backlog was no longer probable. This decision was based on the Company's
assessment of the status of the Tuban Project
16
CHICAGO BRIDGE & IRON COMPANY N.V.
and the extended period of time that the Tuban project has been suspended. While
the Company continues to believe the Tuban Project is viable, and will
ultimately restart, the Company felt it was appropriate to establish this
valuation allowance to properly reflect its current status in the Company's
financial statements.
FACILITIES--In the fourth quarter of 2000, the Company recorded charges of
$5,282 reflecting the Company's commitment to downsize or lower costs at five
facilities worldwide and other exit costs including asset write-downs and lease
termination costs. These charges are for the anticipated sale of three
facilities and the termination of leases at two others.
5. CONTRACTS IN PROGRESS
Contract terms generally provide for progress billings based on completion of
certain phases of the work. The excess of revenues recognized for construction
contracts over progress billings on contracts in progress is reported as a
current asset and the excess of progress billings over revenues recognized on
contracts in progress is reported as a current liability as follows:
<Table>
<Caption>
2000 1999
------------------------------------------------------------------------------------------------------------------------------------
CONTRACTS IN PROGRESS
------------------------------------------------------------------------------------------------------------------------------------
Revenues recognized on contracts in progress $1,122,770 $808,172
Billings on contracts in progress 1,123,809 (812,893)
------------------------------------------------------------------------------------------------------------------------------------
$ (1,039) $ (4,721)
====================================================================================================================================
Shown on balance sheet as:
Contracts in progress with earned revenues exceeding related progress billings $ 57,888 $ 48,391
Contracts in progress with progress billings exceeding related earned revenues (58,927) (53,112)
------------------------------------------------------------------------------------------------------------------------------------
$ (1,039) $ (4,721)
====================================================================================================================================
</Table>
6. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable consist primarily of short-term loans borrowed under credit
facilities made available by commercial banks. The Company's weighted average
interest rate for notes payable was 8.7% at December 31, 2000 and 8.5% at
December 31, 1999.
On December 1, 2000, the Company and a group of five banks entered into a
three-year, unsecured $200,000 revolving credit facility (the "Revolving Credit
Facility"). The Revolving Credit Facility replaced the Company's prior $100,000
revolving credit facility, which was terminated by the Company effective
December 1, 2000. Under the Revolving Credit Facility, committed amounts are
available for general corporate purposes, including working capital, letters of
credit, share repurchase, acquisitions and other requirements of the Company. A
commitment fee is applied to the amount by which the aggregate commitment
exceeds the revolving credit obligation. Letters of credit may be issued,
subject to a $100,000 sublimit, on a committed basis and expire one year after
issuance, unless otherwise provided. The rate of interest under the Revolving
Credit Facility is based on the British Banker's Association interest settlement
rate, plus an interest margin determined by the Company's quarterly leverage
ratio. The weighted average interest rate was 9.2% at December 31, 2000 and 6.9%
at December 31, 1999. The Revolving Credit Facility contains certain restrictive
covenants including net worth, interest coverage, fixed charge and leverage
ratios, among other restrictions. In February 2001, the Company executed an
amendment to its Revolving Credit Facility for the acquisition of the PDM
Divisions, which provided for changes to certain restrictive covenants. The
Revolving Credit Facility will terminate on December 1, 2003.
In connection with the HBI acquisition on December 28, 2000, the Company
assumed a $5,700 note payable bearing interest at 6.0%, with accrued interest
and principal due June 30, 2002.
Capitalized interest was insignificant in 2000, 1999 and 1998.
7. LEASES
Certain facilities and equipment, including project-related field equipment, are
rented under operating leases that expire at various dates through 2006. Rental
expense on operating leases was $12,156 in 2000 ($7,373 for operating leases,
primarily project-related field equipment, with lease terms in excess of one
month but less than one year), $14,404 in 1999 and $12,596 in 1998. Future
rental commitments (for operating leases having initial or remaining
noncancellable lease terms in excess of one year) during the years ending in
2001 through 2005 and thereafter are $5,476, $1,614, $884, $627, $580 and
$108, respectively.
17
8. SUPPLEMENTAL BALANCE SHEET DETAIL
2000 1999
--------------------------------------------------------------------------------
COMPONENTS OF PROPERTY AND EQUIPMENT
--------------------------------------------------------------------------------
Land and improvements $ 9,629 $ 10,937
Buildings and improvements 26,823 40,961
Plant and field equipment 107,480 105,381
--------------------------------------------------------------------------------
Total property and equipment 143,932 157,280
Accumulated depreciation (45,209) (53,346)
--------------------------------------------------------------------------------
Net property and equipment $ 98,723 $103,933
================================================================================
COMPONENTS OF ACCRUED LIABILITIES
--------------------------------------------------------------------------------
Payroll, vacation, bonuses and profit-sharing $ 14,021 $15,770
Self-insurance/retention reserves 6,137 6,155
Postretirement benefit obligations 2,674 2,283
Pension obligation 1,831 1,520
Voluntary resignation offer 8,211 --
Contract cost and other accruals 25,515 16,439
--------------------------------------------------------------------------------
Accrued liabilities $ 58,389 $42,167
================================================================================
COMPONENTS OF OTHER NON-CURRENT LIABILITIES
--------------------------------------------------------------------------------
Self-insurance/retention reserves $ 11,632 $14,626
Postretirement benefit obligations 24,122 22,959
Pension obligation 11,774 11,513
Other 16,266 8,211
--------------------------------------------------------------------------------
Other non-current liabilities $ 63,794 $57,309
================================================================================
9. MINORITY INTEREST AND RELATED LONG-TERM RECEIVABLE
As part of its acquisition of HBI, the Company assumed $27,000 of minority
interest related to HBI's acquisition of Schedule A, Ltd. ("Schedule A") on
October 1, 1998. Effective on this date, Schedule A was admitted as a partner in
Howe-Baker, LP ("HBLP"). Howe-Baker contributed $19,785 to HBLP and Schedule A
contributed contracts in process and its net operating assets ($4,886) and
intangible assets ($22,114). At closing, HBLP loaned to Schedule A $19,785
(carried as a long-term receivable on the balance sheet). Interest accrues at
LIBOR plus a variable rate of interest of 1.9 percent through June 1, 2003, 2.9
percent through June 1, 2004, 3.9 percent through June 1, 2005, and 4.9 percent
through the date of maturity of June 1, 2006. Interest is payable semiannually.
Beginning January 1, 2003, and ending May 1, 2006, Schedule A has the option
to require HBLP to redeem, or Howe-Baker to purchase, all or part of Schedule
A's partnership interest. Any partnership interest not voluntarily redeemed or
sold by Schedule A prior to May 1, 2006 will be deemed offered on that date.
Schedule A has the right to exercise its option in whole, or the right may be
exercised proportionately by Schedule A on behalf of a Schedule A partner. The
consideration paid for Schedule A's partnership interest will be $19,785, plus
an additional amount based on the profitability of Howe-Baker as calculated in
accordance with the terms of the related option agreement. As of December 31,
2000, the additional undiscounted consideration was estimated to be $3,639,
resulting in a total redemption price of approximately $23,424 for the Schedule
A partnership interest.
10. COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL MATTERS--The Company's facilities have operated for many years
and substances, which currently are or might be considered hazardous, were used
and disposed of at some locations, which will or may require the Company to make
expenditures for remediation. In addition, the Company has agreed to indemnify
parties to whom it has sold facilities for certain environmental liabilities
arising from acts occurring before the dates those facilities were transferred.
The Company is aware of no manifestation by a potential claimant of awareness by
such claimant of a possible claim or assessment with respect to such facilities.
The Company does not consider it to be probable that a claim will be asserted
with respect to such facilities which claim is reasonably possible to have an
unfavorable outcome, which in each case would be material to the Company. The
Company believes that any potential liability for these matters will not have a
material adverse effect on its business, financial condition or results of
operations.
18
CHICAGO BRIDGE & IRON COMPANY N.V.
The Company does not anticipate incurring material capital expenditures for
environmental controls or for investigation or remediation of environmental
conditions during the current or succeeding fiscal year. Nevertheless, the
Company can give no assurance that it, or entities for which it may be
responsible, will not incur liability in connection with the investigation and
remediation of facilities it currently (or formerly) owns or operates or other
locations in a manner that could materially and adversely affect the Company.
OTHER CONTINGENCIES--The Company is a defendant in a number of other
lawsuits arising in the normal course of its business. The Company believes that
an estimate of the possible loss or range of possible loss relating to such
matters cannot be made. While it is impossible at this time to determine with
certainty the ultimate outcome of these lawsuits and although no assurance can
be given with respect thereto, based on information currently available to the
Company and based on the Company's belief as to the reasonable likelihood of
the outcomes of such matters, the Company's management believes that adequate
provision has been made for probable losses with respect thereto as best as can
be determined at this time. The Company believes that the ultimate outcome,
after provisions therefore, will not have a material adverse effect, either
individually or in the aggregate, on the Company's business, financial condition
or results of operations. 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.
The Company is jointly and severally liable for certain liabilities of
partnerships and joint ventures. At December 31, 2000, the Company and certain
subsidiaries had provided $237,477 of performance bonds and letters of credit to
support its contracting activities arising in the ordinary course of business.
This amount fluctuates based on the level of contracting activity.
The Company has elected to retain portions of anticipated losses through the
use of deductibles and self-insured retentions for its exposures related to
third-party liability and workers' compensation. Liabilities in excess of these
amounts are the responsibilities of an insurance carrier. To the extent the
Company self insures for these exposures, reserves have been provided for based
on management's best estimates with input from the Company's legal and insurance
advisors. Changes in assumptions, as well as changes in actual experience,
could cause these estimates to change in the near term. The Company's management
believes that the reasonably possible losses, if any, for these matters, to the
extent not otherwise disclosed and net of recorded reserves, will not be
material to its financial position or results of operations. At December 31,
2000, the Company had outstanding surety bonds and letters of credit of $23,273
relating to its insurance program.
11. POSTRETIREMENT BENEFITS
DEFINED CONTRIBUTION PLANS--Effective January 1, 1997, the Company adopted a
tax-qualified defined contribution plan ("Chicago Bridge & Iron Savings Plan")
for eligible employees. This Plan substantially replaced the former Parent
Company-sponsored pension and 401(k) plans discussed below. This Plan consists
of a voluntary pre-tax salary deferral feature under Section 401(k) of the
Internal Revenue Code, a Company matching contribution, and an additional
Company profit-sharing contribution in the form of cash or the Company's Common
Stock to be determined annually by the Company. The Company expensed $7,569 in
2000, $7,369 in 1999 and $7,845 in 1998 for the Chicago Bridge & Iron Savings
Plan.
Effective January 1, 1998, the Company established a defined contribution
plan ("International Savings and Benefit Plan") for eligible employees. This
Plan consists of a voluntary salary deferral feature, a Company matching
contribution, and an additional Company profit-sharing contribution to be
determined annually by the Company. The Company expensed $328 in 2000, $433 in
1999 and $200 in 1998 for the International Savings and Benefit Plan.
The Company is the sponsor for several other defined contribution plans that
cover salaried and hourly employees for which the Company does not provide
matching contributions. The cost of these plans to the Company was not
significant in 2000, 1999 and 1998.
DEFINED BENEFIT PLANS--The Company has participated in three defined benefit
plans sponsored by the Company's Canadian subsidiary and makes contributions to
union sponsored multi-employer pension plans.
19
The following tables reflect information for the Canadian plans:
2000 1999 1998
--------------------------------------------------------------------------------------------------
COMPONENTS OF NET PERIODIC PENSION COST
--------------------------------------------------------------------------------------------------
Service cost $ -- $ -- $ --
Interest cost 501 576 687
Expected return on plan assets (1,108) (1,227) (1,513)
Recognized net actuarial (gain)/loss (115) 92 (1,116)
Settlement (gain)/loss due to annuity purchase -- (44) 147
Settlement loss due to distribution of surplus to members 521 -- 1,016
--------------------------------------------------------------------------------------------------
Net periodic pension income $ (201) $ (603) $ (779)
==================================================================================================
CHANGE IN PENSION BENEFIT OBLIGATION 2000 1999
------------------------------------------------------------------------------------
Benefit obligation at beginning of year $ 6,658 $ 8,433
Interest cost 501 576
Actuarial loss/(gain) 569 (44)
Benefits paid (751) (974)
Annuity purchase -- (1,862)
Currency translation (276) 529
------------------------------------------------------------------------------------
Benefit obligation at end of year $ 6,701 $ 6,658
------------------------------------------------------------------------------------
CHANGE IN PLAN ASSETS
------------------------------------------------------------------------------------
Fair value at beginning of year $ 15,881 $ 15,983
Actual return on plan assets 903 1,791
Benefits paid (1,272) (974)
Annuity purchase -- (1,862)
Employer contribution (238) --
Employer reversion (1,090) --
Currency translation (50) 943
------------------------------------------------------------------------------------
Fair value at end of year 14,134 15,881
------------------------------------------------------------------------------------
Funded status 7,433 9,223
Unrecognized net prior service costs 114 127
Unrecognized net actuarial gains (859) (1,588)
Accrued settlement loss (2,000) --
------------------------------------------------------------------------------------
Prepaid pension asset $ 4,688 $ 7,762
====================================================================================
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 the Company's pension expense and the related
pension obligations were:
2000 1999 1998
--------------------------------------------------------------------------------------------------
Discount rate 7.50% 7.50-8.50% 6-8.50%
Long-term rate of return on plan assets 7.50% 7.50% 7.50%
--------------------------------------------------------------------------------------------------
In 1997, a portion of the salaried plan was converted from a defined benefit
to a defined contribution arrangement. All active members ceased accruing
benefits under the defined benefit provision and commenced participation in the
defined contribution arrangement. The remaining members (retirees and deferreds)
continue to have benefits under the plan. In 2000, the Company recognized a
$2,000 special charge attributable to the wind-up of the defined benefit
provision of the plan. In 1994, CB&I announced its intention to terminate the
field construction plan. During 1998, members who elected to transfer their
balance from this plan were paid out, and annuities were purchased for members
who elected the pension option and for the pensioners. The remaining surplus
assets reverted to the Company. In 1996, CB&I announced its intention to
terminate the hourly plan. During 1999, annuities were purchased for all hourly
plan members entitled to basic benefits. Benefit settlements under the hourly
plan have been settled and no benefit liabilities remain.
20
CHICAGO BRIDGE & IRON COMPANY N.V.
A surplus sharing agreement with the participants was developed in 1998, and was
presented to the plan members. During 1999, the hourly plan members agreed to
the surplus sharing agreement. During 2000, the hourly plan members received
their portion of the surplus assets pursuant to the surplus sharing agreement
and the remaining portion of the hourly plan assets reverted to the Company.
The Company, through its acquisition of HBI, assumed an unfunded
non-qualified defined benefit plan for a select group of former and current
senior management employees. Provisions for these benefits will be charged to
operations ratably over the employees' expected terms of employment. The
following table sets forth the plans' funded status and amounts recognized in
the Company's consolidated balance sheet as of December 31, 2000:
2000
--------------------------------------------------------------------------------
CHANGE IN BENEFIT OBLIGATION
--------------------------------------------------------------------------------
Benefit obligation at beginning of year $2,391
Service cost --
Interest cost 161
Actuarial loss 697
Benefits paid (401)
--------------------------------------------------------------------------------
Benefit obligation at end of year $2,848
================================================================================
The significant assumptions used in determining the related pension
obligations were:
2000
--------------------------------------------------------------------------------
Discount rate 7.0%
Rate of compensation increase 5.0%
--------------------------------------------------------------------------------
The Company made contributions of $2,788 in 2000, $3,275 in 1999 and $2,773
in 1998 to certain union sponsored multiemployer pension plans. Benefits under
these defined benefit plans are based on years of service and compensation
levels.
Prior to 1997, CB&I participated in a defined benefit plan sponsored by the
former Parent Company (the "CBI Industries Pension Plan"). The CBI Industries
Pension Plan was the principal non-contributory tax qualified defined benefit
plan of CB&I and covered most U.S. salaried employees of CB&I. Benefit accruals
under the CBI Industries Pension Plan for CB&I employees were discontinued as of
December 31, 1996. The Company's obligation to fund its portion of the
accumulated benefit obligation for its participants in excess of plan assets was
fixed at $17,270 as of December 31, 1996, as agreed to by CB&I and Praxair. This
obligation is payable ratably to Praxair over a 12-year period beginning
December 1, 1997 with interest at 7.5%. The Company incurred $963 in 2000,
$1,070 in 1999 and $1,178 in 1998 of pension expense and has a remaining pension
liability to Praxair of $11,585 and $13,033 as of December 31,2000 and 1999.
POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS--The Company
participates in two health care and life insurance benefit programs. These
programs provide certain separate health care and life insurance benefits for
retired Company employees. Retiree health care benefits are provided under an
established formula, which limits costs based on prior years of service of
retired employees. These plans may be changed or terminated by the Company at
any time.
Effective January 1, 1997, CB&I discontinued its participation in the program
sponsored by the former Parent Company, and the future obligation for CB&I's
active employees as of December 31, 1996 under this program has been assumed by
the Company. Because this medical plan offers a defined dollar benefit, the
accumulated postretirement benefit obligation, service cost and interest cost
are unaffected by a one percentage point increase or decrease in the assumed
rate of medical inflation.
The following tables reflect information for the assumed and current
employees of the Company:
<Table>
<Caption>
2000 1999 1998
-------------------------------------------------------------------------------------------------------------------------
COMPONENTS OF NET PERIODIC POSTRETIREMENT BENEFIT COST
-------------------------------------------------------------------------------------------------------------------------
Service cost $ 214 $278 $298
Interest cost 582 457 519
Unrecognized prior service cost (108) (85) --
Recognized net actuarial gain (12) -- (7)
-------------------------------------------------------------------------------------------------------------------------
Net periodic postretirement benefit cost $ 676 $650 $810
=========================================================================================================================
</Table>
21
The significant assumptions used in determining the other postretirement
benefit expense were a discount rate of 7.75% in 2000, 6.75% in 1999 and 7.0% in
1998 and a salary scale of 4.25% in 2000, 1999 and 1998. During 1999, the
Company changed its postretirement life insurance benefits program.
<Table>
<Caption>
2000 1999
-------------------------------------------------------------------------------------------------------
CHANGE IN POSTRETIREMENT BENEFIT OBLIGATION
-------------------------------------------------------------------------------------------------------
Benefit obligation at beginning of year $ 7,301 $ 7,946
Service cost 214 278
Interest cost 582 457
Assumption change 293 63
Effect of plan change -- (1,276)
Retiree contributions 357 255
Benefits paid (933) (422)
Acquisition 3,249 --
-------------------------------------------------------------------------------------------------------
Benefit obligation at end of year 11,063 7,301
=======================================================================================================
Funded status (11,063) (7,301)
Unrecognized prior service cost (1,083) (1,192)
Unrecognized net actuarial gain (294) (599)
=======================================================================================================
Accrued postretirement benefit obligation $ (12,440) $ (9,092)
=======================================================================================================
</Table>
The acquisition amount in 2000 primarily reflects the assumption of HBI's
postretirement benefit plan.
Under the HBI program, increasing the assumed health care cost trends by one
percentage point is estimated to increase the accumulated postretirement benefit
obligation at December 31, 2000 by $343. A decrease of one percentage point is
estimated to decrease the December 31, 2000 obligation by $292.
The Company's financial obligation with respect to retired employees of CB&I
as of December 31, 1996 was fixed at $21,400 as of December 31, 1996, as agreed
to by CB&I and Praxair. This obligation is payable ratably to Praxair over a
12-year period beginning December 1, 1997 with interest at 7.5%. The Company
incurred $1,193 in 2000, $1,326 in 1999 and $1,457 in 1998 of other
postretirement expense for these retirees and has a remaining postretirement
benefit liability to Praxair of $14,356 and $16,150 as of December 31, 2000 and
1999.
12. COMMON STOCK
The changes in the number of outstanding common shares were:
<Table>
<Caption>
2000 1999 1998
---------------------------------------------------------------------------------------------------------
Balance at beginning of year 10,272,982 11,414,294 12,517,552
Purchases of treasury shares (1,183,664) (1,354,033) (1,158,300)
Shares issued under employee and director stock plans 80,553 87,251 55,042
Shares issued under the Long-Term Incentive Plan 112,404 45,893 --
Shares issued to Trust 300,168 -- --
Shares issued in business acquisition 8,146,665 -- --
Shares contributed to the Chicago Bridge & Iron Savings Plan -- 79,577 --
---------------------------------------------------------------------------------------------------------
Balance at end of year 17,729,108 10,272,982 11,414,294
=========================================================================================================
</Table>
At the Annual Meeting of Shareholders held on May 11, 2000, the shareholders
granted authority for the Company to cancel up to 30% of any share capital held
by the Company. Any cancellation is not to exceed 10% of the then issued share
capital of the Company. Under the authority granted at the Annual Meeting of
Shareholders held on May 12, 1999, the Company has cancelled its owned share
capital consisting of 869,922 shares on May 8, 2000, 1,129,568 shares on January
11, 2000 and 1,221,865 shares on July 28, 1999.
22
CHICAGO BRIDGE & IRON COMPANY N.V.
EMPLOYEE STOCK PURCHASE PLAN--The Company's Employee Stock Purchase Plan
provides that employees may purchase shares of Common Stock beginning January 1,
1998 at 85% of the Common Stock closing price per share on the New York Stock
Exchange on the first trading day following the end of the calendar quarter. The
plan provides for the purchase of up to 250,000 of authorized and unissued
shares of Common Stock or treasury shares. As of December 31, 2000, 30,356
shares remain available for purchase.
LONG-TERM INCENTIVE PLAN (THE "INCENTIVE PLAN")--Under the Company's 1999
Long-Term Incentive Plan, as amended in December 2000, up to 2,930,000 shares
and under the Company's 1997 Long-Term Incentive Plan up to 1,251,755 shares may
be granted to its executive officers, other management employees and Supervisory
Directors in the form of stock options, performance shares or restricted stock
units. Total compensation expense of $2,969 was recognized in 2000, $1,806 in
1999 and $520 in 1998 under the Incentive Plan. Included in 2000 was a $2,505
special charge under the change of control provisions of the Company's Long-Term
Incentive Plan (Note 4). At December 31, 2000, 1,731,334 shares remain available
for grant under the Incentive Plan.
STOCK OPTIONS--In accordance with APB Opinion No. 25, no compensation cost
related to stock options granted has been recognized in the Company's Income
Statement. Had compensation expense for the Employee Stock Purchase Plan and
stock options granted under the Incentive Plan been determined consistent with
FASB Statement No. 123 (using the Black-Scholes option pricing model), the
Company's net income and net income per common share would have been reduced to
the following pro forma amounts:
<Table>
<Caption>
2000 1999 1998
----------------------------------------------------------------------------------------------------------------------
NET (LOSS) INCOME
----------------------------------------------------------------------------------------------------------------------
As reported $ (33,775) $ 18,384 $ 17,037
Pro forma (34,937) 17,442 16,677
----------------------------------------------------------------------------------------------------------------------
NET (LOSS) INCOME PER SHARE--BASIC
----------------------------------------------------------------------------------------------------------------------
As reported $ (3.59) $ 1.67 $ 1.41
Pro forma (3.71) 1.59 1.38
----------------------------------------------------------------------------------------------------------------------
NET (LOSS) INCOME PER SHARE--DILUTED
----------------------------------------------------------------------------------------------------------------------
As reported $ (3.59) $ 1.65 $ 1.40
Pro forma (3.71) 1.56 1.37
----------------------------------------------------------------------------------------------------------------------
</Table>
Using the Black-Scholes option pricing model, the fair value of each option
grant is estimated on the date of grant based on the following weighted-average
assumptions:
<Table>
<Caption>
2000 1999 1998
----------------------------------------------------------------------------------------------------------------------
Risk-free interest rate 5.44% 5.42% 5.53%
Expected dividend yield 1.45% 1.83% 1.64%
Expected volatility 41.03% 44.19% 37.73%
Expected life in years 10 10 10
----------------------------------------------------------------------------------------------------------------------
</Table>
The following table summarizes the changes in stock options for the years
ended December 31, 2000, 1999 and 1998:
<Table>
<Caption>
WEIGHTED AVERAGE
STOCK EXERCISE PRICE EXERCISE PRICE
OPTIONS PER SHARE PER SHARE
---------------------------------------------------------------------------------------------------------------------
Outstanding at January 1, 1998 504,303 $18.00 - $22.88 $18.06
Granted 241,900 $9.19 - $16.88 $13.84
Forfeited (58,128) $18.00 $18.00
---------------------------------------------------------------------------------------------------------------------
Outstanding at December 31, 1998 688,075 $9.19 - $18.00 $16.54
Granted 175,106 $12.50 - $14.00 $13.13
Forfeited (7,500) $18.00 $18.00
---------------------------------------------------------------------------------------------------------------------
Outstanding at December 31, 1999 855,681 $9.19 - $18.00 $15.83
Granted 1,194,249 $14.69 - $16.69 $16.43
Forfeited (27,666) $13.13 - $18.00 $16.42
Exercised (2,375) $13.13 $13.13
---------------------------------------------------------------------------------------------------------------------
Outstanding at December 31, 2000 2,019,889 $9.19- $18.00 $16.24
=====================================================================================================================
</Table>
23
The option exercise price equals the Common Stock's market price on date of
grant. The weighted average fair value of options granted during 2000, 1999 and
1998 was $8.36, $6.57 and $6.56. At December 31, 2000, there were options
outstanding with a weighted-average remaining contractual life of 9.15 years,
and 329,243 of these options were exercisable with a weighted average exercise
price of $15.63.
Options on 895,316 shares were granted during December 2000 and vest over a
three-year period at a rate of one-third each year. These options were granted
as a result of executive officers and other senior officers who consented to the
amendment of certain benefit agreements curtailing the benefits they would
otherwise obtain by reason of the change in control provisions under said
agreements.
Options on 172,800 shares granted in 2000, 161,700 shares granted in 1999 and
158,900 shares granted in 1998 vest over a four-year period at a rate of
one-fourth each year. Options on 14,000 shares granted in 2000, 3,500 shares
granted in 1999 and 7,000 shares granted in 1998 vest in one year. In
conjunction with the vesting of the Management Plan shares and restricted stock
units, options on 112,133 shares were granted in 2000 and options on 9,906
shares were granted in 1999. These options will vest in seven years from the
date of grant; however, if all of the shares issued with respect to the
restricted stock units remain held by the participant on the third anniversary
of the option grant date, vesting is accelerated to three years from the date of
grant.
Of the outstanding options on 425,175 shares granted in 1997, options on
145,638 became vested and exercisable in 2000 in connection with either the HBI
acquisition change of control or the voluntary resignation offer, and the
remaining options on 279,537 shares will become exercisable in 2002. Of the
outstanding options on 76,000 shares granted in 1998, options on 20,000 shares
became vested and exercisable in 2000 in connection with the HBI acquisition
change of control, and the remaining options on 56,000 shares will become
exercisable in 2003. Options on 6,900 shares granted in 1997 to non-executive
employees, having an exercise price of $21.38 or $22.88, were repriced to $18.00
in 1998.
PERFORMANCE SHARES--Performance shares of 57,100 were granted during 2000,
53,300 were granted during 1999 and 52,300 were granted during 1998 under the
Incentive Plan. The shares are targeted to vest one-third each year over a
three-year period, subject to achievement of specific Company performance goals.
Performance shares of 49,026 were issued during 2000 and 20,331 were issued
during 1999. The remaining 99,732 performance shares were converted to
time-vested restricted shares and transferred to a Trust (Note 13), as a result
of the participants waiving their change of control provisions under the
Incentive Plan.
RESTRICTED STOCK UNITS--Restricted stock units of 75,205 were granted during
2000, 62,055 were granted during 1999 and 100,920 were granted in 1998 under the
Incentive Plan. The units vest one-fourth each year over a four-year period. In
1999, 50,000 restricted stock units were granted to one executive officer as
additional consideration (Note 13), and vest upon the earlier of April 1, 2002
or a change of control. Restrictions on 53,595 units lapsed during 2000 and
restrictions on 25,562 units lapsed during 1999. Restricted stock units of 6,300
were forfeited during 2000 and 1,440 restricted stock units were forfeited
during 1999. The remaining 200,296 restricted stock units were converted to
restricted shares and transferred to a Trust (Note 13), as a result of the
participants waiving their change of control provisions under the Incentive
Plan.
13. STOCK HELD IN TRUST
The Management Plan and associated Trust was amended and restated in 1999 to
provide for the transfer of 705,560 unvested shares (valued for the balance
sheet at the original Trust amount of $18.00 per share) of two executive
officers into a separate Trust. These two participants agreed to exchange their
interest in these shares on a one-for-one basis into restricted stock units,
which vested in March 2000, and represent a right to receive Common Stock on the
earliest to occur of (i) the first business day after April 1, 2002, (ii) the
first business day after termination of employment, or (iii) a change of
control; and for additional consideration. During January 2000, the restricted
stock units transferred to this Trust were adjusted to 707,495 units. The
increase of 1,935 units resulted from forfeitures under the Management Plan. The
total value of those shares placed into the Trust was $12,735.
During December 2000, 300,168 shares were issued and transferred to the
Trust. The total value of these shares placed into the Trust was $4,458. The
vesting of these shares will follow the terms of the Incentive Plan (Note 12).
24
CHICAGO BRIDGE & IRON COMPANY N.V.
14. INCOME TAXES
<Table>
<Caption>
2000 1999 1998
---------------------------------------------------------------------------------------------------------------------
SOURCES OF (LOSS) INCOME
BEFORE INCOME TAXES AND MINORITY INTEREST
---------------------------------------------------------------------------------------------------------------------
U.S. $ (23,874) $ (4,990) $ (143)
Non-U.S. (7,688) 33,744 24,632
---------------------------------------------------------------------------------------------------------------------
Total $ (31,562) $ 28,754 $ 24,489
=====================================================================================================================
INCOME TAX BENEFIT (EXPENSE)
Current income taxes
U.S. $ -- $ -- $ --
Non-U.S. (4,046) (6,580) (4,721)
---------------------------------------------------------------------------------------------------------------------
(4,046) (6,580) (4,721)
---------------------------------------------------------------------------------------------------------------------
Deferred income taxes
U.S. 7,285 (1,904) 418
Non-U.S. 1,620 423 (3,044)
---------------------------------------------------------------------------------------------------------------------
8,905 (1,481) (2,626)
---------------------------------------------------------------------------------------------------------------------
Total income tax benefit (expense) $ 4,859 $ (8,061) $(7,347)
=====================================================================================================================
RECONCILIATION OF INCOME TAXES AT THE STATUTORY RATE
AND INCOME TAX BENEFIT (EXPENSE)
---------------------------------------------------------------------------------------------------------------------
Tax income (expense) at statutory rate $ 11,047 $ (10,064) $(8,571)
State income taxes -- (65) --
Non-statutory tax rate differential (5,408) 1,150 1,973
Other, net (780) 918 (749)
---------------------------------------------------------------------------------------------------------------------
Income tax benefit (expense) $ 4,859 $ (8,061) $(7,347)
=====================================================================================================================
Effective tax rate (18.0)% 28.0% 30.0%
---------------------------------------------------------------------------------------------------------------------
</Table>
The Company's statutory rate was The Netherlands' rate of 35% in 2000, 1999
and 1998.
The principal temporary differences included in deferred income taxes
reported on the December 31, 2000 and 1999 balance sheets were:
<Table>
<Caption>
2000 1999
-------------------------------------------------------------------------------------------------
CURRENT DEFERRED TAXES
-------------------------------------------------------------------------------------------------
Insurance $ 67 $ 2,390
Employee benefits 880 474
Voluntary resignation offer 3,417 --
Contracts 3,673 2,627
Tax benefit of U.S. operating losses and credits 4,883 4,564
Other 1,497 893
-------------------------------------------------------------------------------------------------
14,417 10,948
Valuation allowance -- (10,948)
-------------------------------------------------------------------------------------------------
14,417 --
-------------------------------------------------------------------------------------------------
NON-CURRENT DEFERRED TAXES
-------------------------------------------------------------------------------------------------
Employee benefits 8,809 14,132
Insurance 6,832 9,675
Non-U.S. activity 10,817 5,304
Other 6,698 7,288
-------------------------------------------------------------------------------------------------
33,156 36,399
Valuation allowance -- (16,207)
Depreciation (8,686) (11,035)
-------------------------------------------------------------------------------------------------
NET DEFERRED TAX ASSETS $ 38,887 $ 9,157
=================================================================================================
</Table>
25
The Company's valuation allowance was $27,155 as of December 31, 1999 for its
U.S. deferred tax assets, as realization is dependent on sustained U.S.
taxable income. Following the acquisition of HBI in 2000, the Company believes
that it will generate sustained U.S. taxable income as a result of inclusion of
HBI operating results in the U.S. consolidated income tax return. As of December
31, 2000, the Company had United States net operating loss carryforwards of
approximately $36,800, which expire in 2012 to 2020. The Company did not record
any Netherlands deferred income taxes on indefinitely reinvested undistributed
earnings of its subsidiaries and affiliates at December 31, 2000. If any such
undistributed earnings were distributed, the Netherlands participation exemption
should become available under current law to significantly reduce or eliminate
any resulting Netherlands income tax liability.
15. SEGMENT INFORMATION
The Company manages its operations by four geographic segments: North America;
Europe, Africa, Middle East; Asia Pacific; and Central and South America. Each
geographic area offers similar services. The Chief Executive Officer evaluates
the performance of these four segments based on revenues and income from
operations. Each segment's performance reflects the allocation of corporate
costs, which were based primarily on revenues. No customer accounted for more
than 10% of revenues. Intersegment revenues are not material.
The following table represents revenues by geographic segment:
2000 1999 1998
-------------------------------------------------------------------------------
REVENUES
-------------------------------------------------------------------------------
North America $304,520 $288,132 $314,975
Europe, Africa, Middle East 176,542 159,580 225,548
Asia Pacific 55,482 93,241 135,861
Central and South America 75,147 133,433 99,308
-------------------------------------------------------------------------------
Total revenues $611,691 $674,386 $775,692
===============================================================================
The following list indicates revenues for individual countries in excess of
10% of consolidated revenues during any of the three years ended December 31,
2000, based on where the Company performed the work:
2000 1999 1998
-------------------------------------------------------------------------------
United States $242,024 $243,532 $288,162
Venezuela 37,132 78,126 51,019
Australia 16,711 51,476 77,828
South Africa 19,468 18,040 79,251
-------------------------------------------------------------------------------
The following tables present income from operations, assets and capital
expenditures by geographic segment:
2000(1) 1999 1998
-------------------------------------------------------------------------------
INCOME FROM OPERATIONS
-------------------------------------------------------------------------------
North America $ 15,398 $ 8,298 $ 11,411
Europe, Africa, Middle East 5,468 9,416 18,962
Asia Pacific 3,298 3,019 4,905
Central and South America 4,695 10,235 (8,917)
-------------------------------------------------------------------------------
Total income from operations $ 28,859 $ 30,968 $ 26,361
===============================================================================
(1)Excluding special charges
2000 1999 1998
-------------------------------------------------------------------------------
(LOSS) INCOME FROM OPERATIONS
-------------------------------------------------------------------------------
North America $ (6,238) $ 8,298 $11,411
Europe, Africa, Middle East 2,169 9,416 18,962
Asia Pacific (26,155) 3,019 4,905
Central and South America 3,419 10,235 (8,917)
-------------------------------------------------------------------------------
Total (loss) income from operations $ (26,805) $ 30,968 $26,361
===============================================================================
26
CHICAGO BRIDGE & IRON COMPANY N.V.
2000 1999 1998
--------------------------------------------------------------------------------
ASSETS
--------------------------------------------------------------------------------
North America $389,958 $161,039 $137,538
Europe, Africa, Middle East 81,182 92,610 92,854
Asia Pacific 23,605 51,458 68,133
Central and South America 43,670 31,668 50,184
--------------------------------------------------------------------------------
Total assets $538,415 $336,775 $348,709
================================================================================
The Company's revenues earned and assets attributable to operations in The
Netherlands were not significant in any of the three years ended December 31,
2000. The Company's long-lived assets are considered to be net property and
equipment. Approximately 69% of these assets were located in the United States
for the three years ended December 31, 2000, while the other 31% were
strategically located throughout the world.
2000 1999 1998
--------------------------------------------------------------------------------
CAPITAL EXPENDITURES
--------------------------------------------------------------------------------
North America $ 4,981 $ 9,288 $ 6,374
Europe, Africa, Middle East 736 1,611 3,550
Asia Pacific 343 1,639 1,367
Central and South America 293 841 958
--------------------------------------------------------------------------------
Total capital expenditures $ 6,353 $ 13,379 $ 12,249
================================================================================
Although the Company manages its operations by the four geographic segments,
revenues by product line are shown below:
2000 1999 1998
--------------------------------------------------------------------------------
REVENUES
--------------------------------------------------------------------------------
Flat Bottom Tanks $234,049 $295,697 $287,382
Low Temperature/Cryogenic Tanks and Systems 90,481 82,147 107,725
Repairs and Modifications 79,045 67,087 63,523
Specialty and Other Structures 54,150 65,262 129,949
Elevated Tanks 61,998 51,648 38,287
Turnarounds 46,017 49,102 84,748
Pressure Vessels 45,951 63,443 64,078
--------------------------------------------------------------------------------
Total revenues $611,691 $674,386 $775,692
================================================================================
16. SUBSEQUENT EVENTS
DISCONTINUED OPERATIONS--During the second quarter of 2001, the Company
decided to exit its high purity piping business, UltraPure Systems ("UPS") due
primarily to continuing weak market conditions in the microelectronics
industry. As a result of this operation being classified as a discontinued
operation, amounts for all periods presented in the consolidated financial
statements and notes have been reclassified to conform to this presentation.
The loss from disposal recorded in the quarter ended June 30, 2001 was $9,898
(net of tax benefit of $2,338) or $0.43 per diluted share. The losses from
discontinued operations for the year ended December 31, 2000 was $5,731 (net of
tax benefit of $2,161) and for the year ended December 31, 1999 was $1,138 (net
of tax benefits of $456). Revenues for these operations were $22,417 for the
year ended December 31, 2000 and $384 for the year ended December 31, 1999.
The Company expects to sell substantially all of the property and equipment and
wind-up all remaining operations by December 31, 2001.
ACQUISITION--On February 7, 2001, the Company purchased substantially all of
the assets (the "Assets") of the PDM Divisions. The Engineered Construction
Division, headquartered in Houston, engineers, fabricates and constructs storage
tanks and systems, process systems, and unique plate structures for the
petroleum, petrochemical, cryogenic, liquid natural gas, defense and aerospace
industries. The Water Division, headquartered in Pittsburgh, designs, fabricates
and constructs water storage tank projects including conventional styles such as
ground storage reservoirs and standpipes, steel elevated tanks and composite
elevated tanks as well as unique projects involving one-of-a-kind tanks designed
for specific applications. The Divisions will be integrated with the Company's
current business units and the Assets will continue to be used in the same lines
of business.
Under the terms of the transaction, which was negotiated based on stock
prices prevailing during the 45 days before closing, the Company provided
consideration of 2,848,172 shares of the Company (including 282,575 collar
shares for price protection, if required) and $40,000 in cash. PDM is obligated
to remit to the Company net proceeds from the disposition of these shares in
excess of $44,000. The source of funds for the cash portion of the purchase
price was a private placement of 837,692 shares of the Company to Farinvest,
Ltd., an affiliate of WEDGE (for a price of $13,600) and 1,623,846 shares of the
Company plus a warrant to purchase 251,598 shares of the Company at an exercise
price of NLG .01 per share to First Reserve (for a total price of $26,400), plus
a warrant for 250,000 shares of the Company, subject to decrease depending on
the number of shares repurchased from PDM by the Company prior to June 30, 2001.
Shareholder agreements with PDM, WEDGE and First Reserve include standstill
provisions, registration rights and restrictions
27
with respect to voting rights. First Reserve exercised the warrant to purchase
251,598 shares on February 22, 2001. On March 15, 2001, the Company called
524,781 shares from PDM priced at $9,000 and a return of the 282,575 collar
shares issued for price protection. The Company sold these 807,356 shares at
$17.75 (less expenses), based on an agreement entered into on February 23, 2001,
to an unaffiliated group of investors for a total price of $14,300. PDM has the
right to require the Company to repurchase the remaining 2,040,816 shares at
$17.15 per share, for a total price of $35,000. The Company has certain rights
to call these shares prior to June 28, 2001. The Company intends to repurchase
these shares from PDM. In order to accomplish the buyback of these shares, the
Company is in negotiations for the sale and leaseback of its administrative
office and has reflected this as an asset held for sale on its balance sheet. In
addition, the Company will utilize its Revolving Credit Facility and is also
considering the sale and leaseback of other property and equipment, as well as
other alternatives to finance the share buyback. This acquisition will be
accounted for under the purchase method of accounting. The purchase price has
been allocated to assets acquired and liabilities assumed based on estimated
fair values at the date of acquisition and the balance of approximately $29,000
was recorded as goodwill. The fair values of assets acquired and liabilities
assumed are subject to final adjustment. The PDM Divisions will be included in
the Company's results of operations effective February 1, 2001.
The following presents (unaudited) pro forma results of operations of the
PDM Divisions for the year ended December 31, 2000 as if the PDM Divisions had
been combined as of January 1, 2000. These pro forma results do not purport to
be indicative of the combined results of operations that would have occurred had
the acquisition been made as of January 1, 2000 or results which may occur in
the future. These results are additive to those pro forma amounts from the HBI
acquisition (Note 3).
PRO FORMA
(UNAUDITED)
YEAR END
DECEMBER 31,
2000
--------------------------------------------------------------
Revenues $1,061,174
(Loss) income from continuing operations $ (15,809)
(Loss) income per share from continuing
operations
Basic $ (.69)
Diluted $ (.69)
==============================================================
17. QUARTERLY OPERATING RESULTS AND COMMON STOCK DIVIDENDS AND PRICES
(UNAUDITED)
QUARTERLY OPERATING RESULTS--The following table sets forth selected
unaudited consolidated income statement information for the Company on a
quarterly basis for the two years ended December 31, 2000:
<Table>
<Caption>
Quarter Ended 2000 March 31 June 30 Sept. 30 Dec. 31
---------------------------------------------------------------------------------------------------------
Revenues $153,892 $153,711 $149,552 $154,536
Gross profit 16,459 15,686 14,885 19,937
Income (loss) from continuing operations 3,555 3,401 2,790 (37,790)
(Loss) from discontinued operations (1,103) (1,448) (1,572) (1,608)
Net income (loss) 2,452 1,953 1,218 (39,398)
Net income (loss) per share - Basic
Income (loss) from continuing operations $ .37 $ .37 $ .30 $ (3.91)
(Loss) from discontinued operations (.11) (.16) (.17) (.17)
Net income (loss) per share $ .26 $ .21 $ .13 $ (4.08)
Net income (loss) per share - Diluted
Income (loss) from continuing operations $ .36 $ .36 $ .30 $ (3.91)
(Loss) from discontinued operations (.11) (.15) (.17) (.17)
Net income (loss) per share $ .25 $ .21 $ .13 $ (4.08)*
---------------------------------------------------------------------------------------------------------
Quarter Ended 1999 March 31 June 30 Sept. 30 Dec. 31
---------------------------------------------------------------------------------------------------------
Revenues $170,681 $181,202 $157,195 $165,308
Gross profit 18,002 18,873 18,006 22,798
Income from continuing operations 4,226 4,366 4,703 6,227
(Loss) from discontinued operations -- -- -- (1,138)
Net income (loss) 4,226 4,366 4,703 5,089
Net income per share - Basic
Income from continuing operations $ .37 $ .39 $ .43 $ .60
(Loss) from discontinued operations -- -- -- (.11)
Net income per share $ .37 $ .39 $ .43 $ .49
Net income per share - Diluted
Income from continuing operations $ .37 $ .38 $ .42 $ .58
(Loss) from discontinued operations -- -- -- (.10)
Net income per share $ .37 $ .38 $ .42 $ .48
---------------------------------------------------------------------------------------------------------
</Table>
* The effect of dilutive shares was not included in the calculation of diluted
earnings per share as they were antidilutive due to the net loss for the year.
28
CHICAGO BRIDGE & IRON COMPANY N.V.
COMMON STOCK DIVIDENDS AND PRICES--The Company's Common Stock is traded on
the New York Stock Exchange and Euronext Amsterdam Exchange. Even though the
Company is listed on the Euronext Amsterdam Exchange, minimal shares were traded
there during 2000 and 1999. As of February 2001, the Company had approximately
2,400 shareholders. The following table presents the quarterly common shares
outstanding, dividends on Common Stock and range of Common Stock prices on the
New York Stock Exchange for the years ended December 31, 2000 and 1999:
<Table>
<Caption>
QUARTER ENDED 2000 MARCH 31 JUNE 30 SEPT. 30 DEC. 31
------------------------------------------------------------------------------------------------------------------
Common shares outstanding 9,174,674 9,201,782 9,250,149 17,729,108
Common dividends per share $ .06 $ .06 $ .06 $ .06
------------------------------------------------------------------------------------------------------------------
RANGE OF COMMON STOCK PRICES
------------------------------------------------------------------------------------------------------------------
New York Stock Exchange
High $17 $17 $17 1/16 $18
Low 13 3/4 14 3/16 11 5/8 14 3/16
Close 16 3/4 14 11/16 14 1/4 17 15/16
------------------------------------------------------------------------------------------------------------------
QUARTER ENDED 1999 MARCH 31 JUNE 30 SEPT. 30 DEC. 31
------------------------------------------------------------------------------------------------------------------
Common shares outstanding 11,284,530 11,275,734 10,435,144 10,272,982
Common dividends per share $ .06 $ .06 $ .06 $ .06
------------------------------------------------------------------------------------------------------------------
RANGE OF COMMON STOCK PRICES
------------------------------------------------------------------------------------------------------------------
New York Stock Exchange
High $12 3/4 $14 1/8 $15 1/4 $14 3/4
Low 9 3/8 10 1/4 13 11 5/8
Close 11 7/8 13 15/16 14 5/8 13 3/4
------------------------------------------------------------------------------------------------------------------
</Table>