UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 2001
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from ____ to ____
Commission File Number 1-12815
CHICAGO BRIDGE & IRON COMPANY N.V.
Incorporated in The Netherlands IRS Identification Number: not applicable
Polarisavenue 31
2132 JH Hoofddorp
The Netherlands
31-23-5685660
(Address and telephone number of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of each exchange on which registered:
Common Stock; Euro .01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: none
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [X]
Aggregate market value of common stock held by non-affiliates, based on a New
York Stock Exchange closing price of $28.46 as of February 28, 2002, was
$262,786,605.
The number of shares outstanding of a single class of common stock as of
February 28, 2002 was 21,005,567.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the 2001 Annual Report to Shareholders Part I and Part II
Portions of the 2002 Proxy Statement Part III
CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
----
PART I.
Item 1. Business 3
Item 2. Properties 17
Item 3. Legal Proceedings 19
Item 4. Submission of Matters to a Vote of Security Holders 20
PART II.
Item 5. Market for Registrant's Common Equity and Related 21
Stockholder Matters
Item 6. Selected Financial Data 21
Item 7. Management's Discussion and Analysis of Results of 21
Operations and Financial Condition
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 21
Item 8. Financial Statements and Supplementary Data 21
Item 9. Changes in and Disagreements with Accountants on 21
Accounting and Financial Disclosure
PART III.
Item 10. Directors and Executive Officers of the Registrant 22
Item 11. Executive Compensation 26
Item 12. Security Ownership of Certain Beneficial Owners and 26
Management
Item 13. Certain Relationships and Related Transactions 26
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports 27
on Form 8-K
SIGNATURES 29
2
PART I
ITEM 1. BUSINESS
HISTORICAL ORGANIZATION
We are a global specialty engineering and construction (E&C) company
serving the hydrocarbon, energy, power generation, and water and wastewater
treatment industries. We have been helping our customers store and process the
earth's natural resources for more than 100 years by supplying a comprehensive
range of engineered steel structures and systems. Prior to January 12, 1996, our
business was operated by Chicago Bridge & Iron Company, 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. In March 1997, Holdings effected a
reorganization (the "Reorganization") whereby Holdings transferred the business
of Chicago Bridge & Iron Company to Chicago Bridge & Iron Company N.V., a
corporation organized under the laws of The Netherlands. Effective March 26,
1997, an initial public offering of a majority of the shares of our common stock
was made.
BUSINESS
We offer a complete package of design, engineering, fabrication,
construction and maintenance services. Our products include hydrocarbon
processing plants, LNG terminals and peak shaving plants, bulk liquid terminals,
water storage and treatment facilities, and other steel structures and their
associated systems. Our customers include:
- large U.S., multinational and state-owned oil companies, such as
Shell, ExxonMobil, Koch Industries, BP Amoco, Phillips Petroleum,
Conoco, Saudi Aramco and PDVSA;
- leading engineer/procure/construct (EPC) companies, such as Fluor
Daniel, Bechtel, Foster Wheeler, Kellogg Brown & Root, and
Technip;
- liquefied natural gas (LNG) and natural gas producers and
distributors, such as Williams Energy Services, Distrigas and
Woodside Energy Ltd.;
- power generators, such as Conectiv, Constellation Power and
Commonwealth Edison; and
- municipal and private water companies.
We believe that our comprehensive global E&C capabilities and our broad
range of products and services position us to capitalize on the expected growth
in our primary end markets. Projects for the hydrocarbon, energy and power
generation industries collectively represent a majority of our 2001 revenues.
Growth in the hydrocarbon market is being driven by increasing global demand for
oil and the need to meet more stringent environmental requirements worldwide.
Growth in worldwide demand for natural gas for electricity generation has
accelerated the development of LNG projects around the globe. For the period
between 2002 and 2004, we are tracking more than 29 LNG opportunities worldwide
with a combined value in
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excess of $1.8 billion. We are positioned to benefit from these market trends
with our strengths in hydrocarbon process plants, petroleum storage terminals,
natural gas processing, LNG storage, power plant component construction and
thermal energy storage systems. In addition, the water and water treatment
market is expected to maintain consistent growth, due in part to the need to
comply with safe drinking water requirements in North America. We supply an
extensive range of elevated and aboveground water storage tanks, as well as
water treatment systems.
RECENT ACQUISITIONS
Our recent acquisitions of Howe-Baker International, L.L.C. ("Howe-Baker")
and the Engineered Construction and Water Divisions of Pitt-Des Moines, Inc.
(the "PDM Divisions") have significantly enhanced our product and service
offerings.
Howe-Baker. On December 28, 2000, we acquired Howe-Baker, a globally
recognized engineering and construction company which specializes in providing
hydrocarbon processing plants to customers in the refining, petrochemical and
natural gas industries. We expect to generate new business by leveraging
Howe-Baker's advanced hydrocarbon processing engineering and technical
capabilities across our worldwide marketing and execution platform. In a recent
example of the strategic benefits of the acquisition, we were awarded a natural
gas processing plant project in South America during the second quarter of 2001
and a gas/oil separation plant (GOSP) project in Saudi Arabia during the first
quarter of 2002. Both awards were achieved by combining the global market
presence of CB&I and the technological expertise of Howe-Baker.
PDM Divisions. On February 7, 2001, we acquired the Engineered Construction
and Water Divisions of Pitt-Des Moines, Inc., which specialize in the design and
engineering, fabrication and construction of products for the petroleum,
petrochemical, cryogenic, liquefied natural gas, defense and aerospace
industries, as well as water storage and treatment facilities. This acquisition
enhances our engineering and execution capabilities, provides access to an
expanded customer base, and is producing significant synergies from the
application of best practices and the elimination of duplicative costs.
COMPETITIVE STRENGTHS
We believe that our core competencies enable us to deliver the best overall
combination of experience, reliability, quality and performance that produces a
lower-risk, higher-value equation for our customers. These core competencies,
which we believe are significant competitive strengths, include:
Worldwide Record of Excellence. We have established a record as a leader in
the international Engineering & Construction industry by providing consistently
superior project performance for more than 112 years. The addition of Howe-Baker
and the PDM Divisions to our family has further enhanced our capabilities for
excellence in project design and execution.
Fully-Integrated Specialty Engineering & Construction Service Provider. We
are one of a very few global E&C service providers that can deliver a project
from conception to commissioning, including conceptual design, detail
engineering, procurement, fabrication, field erection, mechanical installation,
start-up assistance and operator training. We generally engineer what we build
and build what we engineer, which allows us to provide our customers
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with innovative engineering solutions, aggressive schedules and work plans, and
optimal quality and reliability.
Global Execution Capabilities. With a global network of some 35 offices and
established labor and supplier relationships, we have the ability to rapidly
mobilize people, materials and equipment virtually anywhere in the world to
execute projects in locations ranging from highly industrialized countries to
the world's most remote regions. We completed nearly 700 projects in more than
50 different countries in 2001. Our global reach makes us an attractive partner
for large, global energy and industrial companies with geographically dispersed
operations and also allows us to allocate our internal resources to geographies
and industries with the greatest current demand. At the same time, because of
our long-standing presence in numerous markets around the world, we have a
prominent position as a local contractor in those markets.
History of Innovation. We established a reputation for product innovation
when we introduced the first floating roof tank to the petroleum industry in
1923. We have since maintained a strong culture of developing technological
innovations and currently possess some 75 active U.S. patents. We develop
innovative technologies on behalf of our customers that are immediately
applicable to improving hydrocarbon processing, storage technology and field
erection procedures. Our acquisition of Howe-Baker has equipped us with
well-established technology and proprietary know-how in refinery processes,
desalting/dehydration, synthesis gas production and gas-to-liquids processing.
Howe-Baker's recent acquisition of TPA, Inc., strengthens our technology and
know-how in sulfur removal and recovery processes, an important element for the
production of low sulfur transportation fuels.
Our in-house engineering team includes internationally recognized experts
in site-erected metal plate structures, pre-stress concrete structures, stress
analysis, metallurgy, nondestructive examination, and cryogenic storage and
processing. Many of our senior engineers sit on committees that have helped
develop worldwide standards for storage structures and process vessels for the
petroleum and water industries, including the American Petroleum Institute,
American Water Works Association and American Society of Mechanical Engineers.
Strong Focus on Project Risk Management. We are experienced in managing the
risk associated with bidding on and executing complex projects, including
extensive bid review and approval procedures. Our position as a fully-integrated
E&C service provider, combined with our experience in risk management, allows us
to execute global projects on a competitively bid fixed-price, lump-sum basis by
actively controlling project costs. Lump-sum contracting, which is part of the
ingrained culture at both CB&I and Howe-Baker, enables us to achieve
historically higher returns versus those available from variable cost
(cost-plus) contracts and provides significant advantages to the customer in
terms of cost and schedule control. In addition, our ability to execute lump-sum
contracts provides us with access to a growing segment of the E&C market that is
demanding these types of contracts.
Strong Safety Performance. Success in our industry depends in part on
strong safety performance. Because of our long and outstanding safety record, we
are invited to bid on projects for which other competitors do not qualify.
According to the Bureau of Labor Statistics, the national average Lost Workday
Cases Incidence Rate for construction companies similar to CB&I was 4.3 per 100
full-time employees for 2000 (the last reported year), while our comparable rate
for such year was only 0.2 per hundred. Our excellent safety performance also
5
translates directly to lower cost, timely completion of projects, and reduced
risk to our employees, subcontractors and customers.
Management Team with Deep Engineering & Construction Industry Experience.
Members of our senior leadership team have an average of more than 20 years of
experience in the E&C industry. In addition to their CB&I background, many of
our senior managers have international experience with recognized EPC companies.
Our experience, particularly in risk management and project execution, enables
us to recognize and capitalize upon attractive opportunities in our primary end
markets.
GROWTH STRATEGY
We intend to increase shareholder value by executing the following growth
strategies:
Leveraging the Strengths of Howe-Baker and the PDM Divisions. Our recent
acquisitions of Howe-Baker and the PDM Divisions have broadened our capabilities
and resources to meet customer needs in our growing end markets. By leveraging
Howe-Baker's process capabilities across our global sales and execution
platform, we expect to grow this business significantly outside the United
States. In addition, we are creating synergistic growth by integrating the PDM
Divisions' storage tank technology, execution capabilities and customer
relationships with our existing businesses to expand our product offerings. We
will also focus on imparting best practices and technologies from each business
throughout the organization.
Expanding our Market Share in the High-Growth Energy Infrastructure
Business. Rapid growth in LNG trade (approximately 8% per year since 1980) has
created strong global demand for LNG transportation and storage systems. We
intend to utilize our substantial expertise and experience in LNG and cryogenic
systems to expand our presence in the worldwide sales of LNG infrastructure
facilities. We have long been a leader in the turnkey design and construction of
low temperature and cryogenic storage facilities, including LNG tanks, and have
provided more than 40 turnkey terminals and peak shaving plants and more than
190 low temperature and cryogenic tanks. We expect that growing worldwide demand
for natural gas, and the need to monetize stranded gas reserves, will create
opportunities for Howe-Baker's gas processing and gas-to-liquids technologies.
In addition, we expect greater opportunities for refinery revamp and expansion
projects prompted by more stringent environmental regulations for transportation
fuels.
Marketing our Expanded Capabilities. We will continue to expand our
marketing programs to identify and capitalize on attractive customer bases and
end markets. We will focus our sales and marketing resources on cultivating and
expanding relationships with large global companies in our target industry
segments that traditionally have been heavy consumers of our products and
services. We recently moved our administrative offices to The Woodlands, Texas
(near Houston) to facilitate more frequent interaction with the energy and power
generation community. We have also assigned senior members of our sales and
marketing staff to pursue targeted prospects in high potential markets, focusing
in particular on LNG projects and EPC opportunities utilizing the combined CB&I
and Howe-Baker resources. We believe that our ability to identify attractive
customers and rapid growth markets will provide a competitive advantage during
changing market conditions.
Continuing to Improve Project Execution and Cost Control. Consistently
profitable E&C companies deliver projects at or above the initial estimated
margin by effectively managing the
6
construction process and controlling direct costs. We intend to maintain and
enhance our successful track record in project execution (as measured by our
internal metrics) through training and the application of best practices. In
addition, identifying and controlling non-project expenses and capital
expenditures is also an essential part of our ongoing efforts to improve
profitability. Current programs include controlling staffing levels, limiting
capital spending through leasing arrangements, and careful control of
precontract expenses. Moreover, strategic investments in information technology
have enabled us to lower communication costs, achieve a common reporting
platform and deliver engineering documents electronically on a worldwide basis.
Creating Growth from Acquisitions and Other Business Combinations. We are
committed to achieving growth through selective acquisitions of businesses or
assets that will expand or complement our current portfolio of products and
services. Our recent acquisitions of Howe-Baker and the PDM Divisions were
significant steps in the implementation of this strategy. We will continue to
seek future acquisition targets that (i) enable us to provide more
cost-effective solutions, (ii) are well-managed, (iii) have strong growth
prospects, (iv) can be acquired without excessive leverage, (v) have
above-average margins, (vi) give us the ability to leverage our core skills and
infrastructure, (vii) have a strong cultural fit and (viii) are priced fairly.
PRODUCTS AND SERVICES
We provide a wide range of innovative and value-added E&C products and
services, including:
Process Plants. Through our acquisition of Howe-Baker, we are able to
provide E&C services for customers in the hydrocarbon industry, specializing in
natural gas processing plants, refinery and petrochemical process units, and
hydrogen and synthesis gas plants. Natural gas processing plants treat natural
gas to meet pipeline requirements and to recover valuable liquids and other
enhanced products, through such technologies as cryogenic separation, amine
treating, dehydration and liquids fractionation. Refinery and petrochemical
process units enable customers to extract products from the top and middle
streams of the crude oil barrel using technologies such as electrical desalting,
catalytic reforming, vacuum and atmospheric distillation, fuels and distillate
hydrotreating, hydrodesulfurization, alkylation and isomerization. Synthesis gas
plants generate industrial gases for use in a variety of industries through
technologies such as steam methane and auto-thermal reforming, partial oxidation
reactors and pressure swing adsorption purification.
Refrigerated Storage and Process Systems. These facilities are used
primarily for the storage and handling of liquefied gases. We specialize in
providing refrigerated turnkey terminals and tanks. Refrigerated tanks are built
from special steels and alloys that have properties to withstand cold
temperatures at the storage pressure. These systems usually include special
refrigeration systems to maintain the gases in liquefied form at the storage
pressure. Applications extend from low temperature (+30(degree)F to
-100(degree)F) to cryogenic (-100(degree)F to -423(degree)F). Customers in the
petroleum, chemical, petrochemical, specialty gas, natural gas, power generation
and agricultural industries use these tanks and systems to store and handle
liquefied gases such as LNG, methane, ethane, ethylene, LPG, propane, propylene,
butane, butadiene, anhydrous ammonia, oxygen, nitrogen, argon and hydrogen.
Pressure Vessels. Pressure vessels are built primarily from high strength
carbon steel plates which have been formed in one of our fabrication shops and
are welded together at the job site.
7
Pressure vessels are constructed in a variety of shapes and sizes, some weighing
in excess of 700 tons, with wall thickness in excess of four inches. Existing
customers represent a cross section of the petroleum, petrochemical, chemical,
and pulp and paper industries, where process applications of high pressure
and/or temperature are required. Typical pressure vessel usage includes process
and storage vessels in the petroleum, petrochemical, and chemical industry and
as digesters in the pulp and paper industry. We have designed and erected
pressure vessels throughout the world.
Aboveground Storage Systems. Aboveground storage tanks are sold primarily
to customers operating in the petroleum, petrochemical and chemical industries
around the world. This industrial customer group includes nearly all of the
major oil and chemical companies on every continent. Depending on the industry
and application, flat bottom tanks can be used for storage of crude oil, refined
products such as gasoline, raw water, potable water, chemicals, petrochemicals
and a large variety of feedstocks for the manufacturing industry.
Water Storage and Treatment. The water storage line includes single
pedestal, fluted column and concrete pedestal tanks, as well as standpipes and
reservoirs. These products have a capacity range of 25,000 gallons to in excess
of 30,000,000 gallons. These structures provide potable water reserves and
supply pressure to the water distribution system. Products for water and
wastewater treatment include solids contact clarifiers, egg-shaped anaerobic
digesters and standpipe mixing systems.
Specialty and Other Structures. Our specialty and other structures are
marketed to a diverse group of customers in such industries as metals and
mining, power generation, telecommunications, aerospace, wastewater treatment,
as well as government customers. Examples of specialty structures include
processing facilities or components used in the iron, aluminum and mining
industries, hydroelectric structures such as penstocks and spiral cases, and
turnkey vacuum facilities (non-thermal) for testing prototype spacecraft, rocket
engines and satellites before launch. In a recent highly technical project
completed for the National Science Foundation, we produced stainless steel
vacuum (non-thermal) beam tubes for the LIGO (Laser Interferometer Gravitational
Wave Observatory) Project, which is designed to detect cosmic gravitational
waves.
Turnarounds. A turnaround is a planned shutdown of a refinery, chemical
plant or other process unit for repair and maintenance of equipment and
associated systems. The work is usually scheduled on a multi-shift, seven
day-per-week basis to minimize downtime of the facility. Personnel, materials
and equipment must come together at precisely the right time to accomplish this
labor-intensive operation. This service often requires short cycle times and
unique construction procedures. We offer this service to our customers in the
petroleum, petrochemical and chemical industries throughout the world.
Repairs and Modifications. Repair, maintenance and modification services
are performed primarily on flat bottom tanks and pressure vessels. While we have
focused on providing these services primarily in the United States, efforts are
under way to expand these services throughout the world. Customers in the
petroleum, chemical, petrochemical and water industries generally require these
types of services.
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COMPETITION
We believe that we are a leading competitor in the product segments which
we sell. Price, quality, reputation, safety record and timeliness of completion
are the principal competitive factors within the industry. There are numerous
regional, national and international competitors that offer products and
services similar to ours.
MARKETING AND CUSTOMERS
Through our global network of sales offices, we sell our products directly
to hundreds of customers in a wide variety of industries. We rely primarily on
direct contact between our technically qualified sales and engineering staff and
our customers' engineering and contracting departments. Dedicated sales
representatives are located in each of our global offices.
Our largest customers, with many of whom we have had longstanding
relationships, are primarily in the hydrocarbon sector and are inclusive of both
major petroleum companies (i.e., Shell, ExxonMobil and Conoco) and large
engineering and construction companies (i.e., Fluor, Bechtel, Kellogg Brown &
Root and Technip).
We are not dependent upon any single customer on an ongoing basis and the
loss of any single customer would not have a material adverse effect on our
business. On a pro forma combined basis, no single customer accounted for over
10% of our revenues during the last two years.
SEGMENT FINANCIAL INFORMATION
Financial information by geographic area of operation can be found on pages
48 and 49 of the Company's 2001 Annual Report to Shareholders and is
incorporated herein by reference.
BACKLOG/NEW BUSINESS TAKEN
We had a backlog of work to be completed on contracts of $835.3 million as
of December 31, 2001 compared with $597.4 million as of December 31, 2000. New
business taken increased 70% to $1.2 billion for the year ended December 31,
2001 compared with $681 million for the year ended December 31, 2000.
New Business Taken
(in thousands)
Years Ended December 31,
2001 2000
---- ----
North America $ 818,459 $ 384,346
Europe, Africa, Middle East 87,724 82,690
Asia Pacific 105,788 57,033
Central and South America 148,403 156,707
---------- ----------
Total New Business Taken $1,160,374 $ 680,776
========== ==========
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TYPES OF CONTRACTS
Contracts are usually awarded on a competitive bid basis. We are primarily
a fixed-price, lump-sum contractor. Our significant experience in estimating and
controlling project costs, combined with our knowledge of international
logistics and execution, enable us to define and control the risks of
fixed-price contracts.
RAW MATERIALS AND SUPPLIERS
The principal raw materials that we use are metal plate and structural
steel. These materials are available from numerous suppliers worldwide. We do
not anticipate having difficulty obtaining adequate amounts of raw materials in
the foreseeable future.
ENVIRONMENTAL MATTERS
Our operations are subject to extensive and changing federal, state and
foreign laws and regulations establishing health and environmental quality
standards, including those governing discharges and pollutants into the air and
water and the management and disposal of hazardous substances and wastes. We are
also subject to laws and regulations governing remediation of contamination at
facilities that we currently or formerly owned or operated or to which we send
hazardous substances or wastes for treatment, recycling or disposal. We believe
that we are currently in compliance, in all material respects, with all
environmental laws and regulations.
PATENTS
We hold patents and licenses for certain items incorporated into our
products. However, none is so essential that its loss would materially affect
our businesses. We continue to market our innovative tank building process
called CoilBuild(TM) in which the tank shell is formed from continuous steel
coils rather than individual plates. CoilBuild is particularly suited for
smaller-diameter, stainless steel tanks used in certain petrochemical, chemical,
pharmaceutical and food applications where corrosion resistance and cleanliness
are vital. We have exclusive rights to the CoilBuild process in North America.
EMPLOYEES
We employed over 7,200 persons as of December 31, 2001. Approximately 15%
of our worldwide employees are represented by unions. Our unionized subsidiary,
CBI Services, Inc., has agreements with various unions representing groups of
its employees. The largest agreement is with the Boilermakers Union which
represents some of our welders. We have multiple contracts with various
Boilermakers Unions across the country, and each contract has a three-year term.
We enjoy very good relations with all our unions and have not experienced a
significant work stoppage in any of our facilities in over ten years.
Additionally, to preserve our project management and technological expertise as
core competencies, we recruit, develop and maintain ongoing training programs
for engineers and field supervision personnel.
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RISK FACTORS AND FORWARD LOOKING STATEMENTS
RISK FACTORS
RISK FACTORS RELATING TO OUR BUSINESS
OUR REVENUES AND CASH FLOW MAY FLUCTUATE.
Our revenues, cash flow and earnings may fluctuate from quarter to quarter
due to a number of factors. Our businesses are dependent upon major construction
projects in cyclical industries, including the hydrocarbon, chemical, electric
and gas utility, and water and wastewater industries, for revenues and cash
flow. The selection of, timing of or failure to obtain projects, delays in
awards of projects, cancellations of projects or delays in completion of
contracts could result in the under-utilization of our resources which could
have a material adverse impact on our business, financial condition, results of
operations and cash flows. Moreover, construction projects for which our
services are contracted may require significant expenditures by us prior to
receipt of relevant payments by a customer. Such expenditures could have a
material adverse impact on our cash flows. Finally, revenues may be negatively
affected by the winding down or completion of work on significant projects that
were active in previous periods if such significant projects have not been
replaced in the current period.
WE MAY NOT BE ABLE TO FULLY REALIZE THE REVENUE VALUE REPORTED IN OUR BACKLOG.
We have a backlog of work to be completed on contracts. Backlog develops as
a result of new business taken, which represents the revenue value of new
project commitments received by us during a given period. Backlog consists of
projects which have either (i) not yet been started or (ii) are in progress and
are not yet complete. In the latter case, the revenue value reported in backlog
is the remaining amount that has not yet been completed. From time to time,
projects are cancelled that appeared to have a high certainty of going forward
at the time they were recorded as new business taken. In the event of a project
cancellation, we may be reimbursed for certain costs but typically have no
contractual right to the total revenues reflected in our backlog. If we were to
experience significant cancellations or delays of projects in our backlog, our
financial condition would be adversely affected. Backlog may also fluctuate with
currency movements.
OUR BUSINESS IS DEPENDENT UPON THE LEVEL OF ACTIVITY IN THE HYDROCARBON
INDUSTRY.
In recent years, demand from the worldwide hydrocarbon industry has been
the largest generator of our revenues. Numerous factors influence capital
expenditure decisions in the hydrocarbon industry, including current and
projected oil and gas prices; exploration, extraction, production and
transportation costs; the discovery rate of new oil and gas reserves; the sale
and expiration dates of leases and concessions; local and international
political and economic conditions; technological advances; and the ability of
oil and gas companies to generate capital. These factors are beyond our control.
Our business, financial condition and results of operations may be materially
adversely affected because of reduced activity in the hydrocarbon industry. In
addition, we may be materially adversely affected by changing taxes, price
controls and laws and regulations relating to the hydrocarbon industry.
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WE COULD LOSE MONEY IF WE FAIL TO ACCURATELY ESTIMATE OUR COSTS OR FAIL TO
EXECUTE WITHIN OUR COST ESTIMATES ON FIXED-PRICE, LUMP SUM CONTRACTS.
Most of our net revenue is derived from fixed-price, lump-sum contracts.
Under these contracts, we perform our services and provide our products at a
fixed price and, as a result, benefit from cost savings, but we may be unable to
recover for any cost overruns. If our cost estimates for a contract are
inaccurate, or if we do not execute the contract within our cost estimates, cost
overruns may cause us to incur losses or cause the project not to be as
profitable as we expected. This, in turn, could have a material adverse effect
on our business and results of operations.
Political and Economic Conditions in Foreign Countries in Which We Operate Could
Adversely Affect Us.
A significant number of our projects are performed outside the United
States. We expect non-U.S. sales and operations to continue to contribute
materially to our earnings for the foreseeable future. Non-U.S. contracts and
operations expose us to risks inherent in doing business outside the United
States, including:
- unstable economic conditions in the foreign countries in which we
make capital investments, operate and sell products and services;
- the lack of well-developed legal systems in some countries in
which we operate, which could make it difficult for us to enforce
our contracts;
- expropriation of property;
- restriction on the right to convert or repatriate currency; and
- political upheaval, including risks of loss due to civil strife,
terrorism, acts of war, guerrilla activities and insurrections.
WE ARE EXPOSED TO FOREIGN EXCHANGE RISKS.
We are exposed to market risk from changes in foreign currency exchange
rates, which may adversely affect our results of operations and financial
condition. We seek to minimize the risks from these foreign currency exchange
rate fluctuations through our regular operating and financing activities and,
when deemed appropriate, through limited use of foreign currency forward
contracts. Our exposure to changes in foreign currency exchange rates arises
from receivables, payables and firm commitments from international transactions,
as well as intercompany loans used to finance non-U.S. subsidiaries. We do not
use financial instruments for trading or speculative purposes.
OUR ACQUISITION STRATEGY INVOLVES A NUMBER OF RISKS.
We intend to pursue growth through the opportunistic acquisition of
companies or assets that will enable us to expand our product lines to provide
more cost-effective customer solutions. We routinely review potential
acquisitions. This strategy involves certain risks, including difficulties in
the integration of operations and systems, the diversion of management's
attention from other
12
business concerns, and the potential loss of key employees of acquired
companies. We may not be able to successfully integrate acquired businesses into
our operations.
WE HAVE A RISK THAT OUR GOODWILL MAY BE IMPAIRED AND RESULT IN A CHARGE TO
INCOME.
We accounted for the Howe-Baker and PDM Divisions acquisitions using the
"purchase" method of accounting. Under the purchase method we recorded, at fair
value, the assets acquired and liabilities assumed and we recorded as goodwill
the difference between the cost of acquisition and the sum of the fair value of
the tangible and identifiable assets acquired, less liabilities assumed. In June
2001, the Financial Accounting Standards Board issued Statements of Financial
Accounting Standards ("SFAS") No. 141 "Business Combinations" and SFAS No. 142
"Goodwill and Other Intangible Assets." These pronouncements change the
accounting for business combinations, goodwill and intangible assets. SFAS No.
141 further clarifies the criteria to recognize intangible assets separately
from goodwill. SFAS No. 142 states that goodwill and indefinite lived intangible
assets are no longer amortized but are reviewed for impairment at least
annually. If our goodwill or other intangible assets were determined to be
impaired, the impairment would result in a charge to income from operations in
the year of the impairment with a resulting decrease in net worth.
IF WE ARE UNABLE TO RETAIN KEY PERSONNEL, OUR BUSINESS COULD BE ADVERSELY
AFFECTED.
Our business is dependent, to a large degree, upon the continued service of
key members of our management. Our future success will also depend on our
ability to attract, retain and motivate highly skilled personnel in various
areas, including engineering, project management and senior management. If we do
not succeed in retaining and motivating our current employees and attracting new
high quality employees, our business could be adversely affected.
13
OUR PROJECTS EXPOSE US TO POTENTIAL PROFESSIONAL LIABILITY, PRODUCT LIABILITY,
OR WARRANTY OR OTHER CLAIMS.
We engineer and construct (and our products typically are installed in)
large industrial facilities in which system failure can be disastrous.
Notwithstanding the fact that we generally will not accept liability for
consequential damages in our contracts, any catastrophic occurrence in excess of
insurance limits at projects where our products are installed or services are
performed could result in significant professional liability, product liability
or warranty or other claims against us. Such liabilities could potentially
exceed our current insurance coverage and the fees we derive from those products
and services. A partially or completely uninsured claim, if successful and of a
significant magnitude, could potentially result in substantial losses.
WE ARE EXPOSED TO POTENTIAL ENVIRONMENTAL LIABILITIES.
We are subject to environmental laws and regulations, including those
concerning:
- emissions into the air;
- discharge into waterways;
- generation, storage, handling, treatment and disposal of waste
materials; and
- health and safety.
Our businesses often involve working around and with volatile, toxic and
hazardous substances and other highly regulated materials, the improper
characterization, handling or disposal of which could constitute violations of
foreign, federal, state or local statutes and laws, and result in criminal and
civil liabilities. Environmental laws and regulations generally impose
limitations and standards for certain pollutants or waste materials and require
us to obtain a permit and comply with various other requirements. Governmental
authorities may seek to impose fines and penalties on us, or revoke or deny
issuance or renewal of operating permits, for failure to comply with applicable
laws and regulations.
The environmental health and safety laws and regulations to which we are
subject are constantly changing, and it is impossible to predict the effect of
such laws and regulations on us in the future. We cannot assure that our
operations will continue to comply with future laws and regulations or that
these laws and regulations will not significantly adversely affect us.
We work around and with volatile, toxic and hazardous substances, which
exposes us to potential liability for personal injury or property damage caused
by any release, spill or other accident involving such substances that occurs as
a result of the conduct of such businesses. Although we maintain liability
insurance, this insurance is subject to coverage limitations, deductibles and
exclusions and may exclude coverage for losses or liabilities relating to
pollution damage. We may incur liabilities that may not be covered by insurance
policies, or, if covered, the dollar amount of such liabilities may exceed our
policy limits. Even a partially uninsured claim, if successful and of
significant magnitude, could have a material adverse effect on our business,
financial condition and results of operations.
14
WE ARE UNCERTAIN AS TO THE OUTCOME OF A PENDING FEDERAL TRADE COMMISSION
PROCEEDING.
On October 25, 2001, the U.S. Federal Trade Commission ("FTC") announced
its decision to file an administrative complaint (the "Complaint") challenging
our February 2001 acquisition of certain assets of the Engineered Construction
Division of PDM. The Complaint alleges that the acquisition violated Federal
antitrust laws by substantially lessening competition in certain field erected
specialty industrial storage tank product lines in the United States: LNG tanks,
LPG tanks, LIN/LOX/LAR tanks, and thermal vacuum chambers. The FTC is seeking
various remedies, including an order that would re-establish two distinct and
separate viable competing businesses engaged in the design, engineering,
fabrication, construction and sale of the relevant product lines.
We believe that the Complaint is without merit and on February 4, 2002
filed a formal answer denying the substantive allegations in the Complaint.
While we expect the impact of the FTC proceeding on our earnings will be minimal
in 2002, we are unable to assess the ultimate outcome or potential effect of the
Complaint on our business, financial condition and results of operation.
RISK FACTORS ASSOCIATED WITH OUR COMMON STOCK
LIMITED TRADING VOLUME OF OUR COMMON STOCK MAY CONTRIBUTE TO ITS PRICE
VOLATILITY.
Our common stock is traded on The New York Stock Exchange ("NYSE"). From
January 2, 2002 through March 26, 2002, the average daily trading volume for
our common stock as reported by the NYSE was approximately 40,000 shares. We are
uncertain as to whether a more active trading market in our common stock will
develop. As a result, relatively small trades may have a significant impact on
the price of our common stock.
CERTAIN PROVISIONS OF OUR ARTICLES OF ASSOCIATION, SHAREHOLDER AGREEMENTS AND
NETHERLANDS LAW MAY HAVE POSSIBLE ANTI-TAKEOVER EFFECTS.
WEDGE Engineering B.V. ("WEDGE"), an affiliate of WEDGE Group Incorporated,
owns approximately 18% of our outstanding common shares and First Reserve Fund
VIII, L.P. ("First Reserve") owns approximately 31.9% of our outstanding common
shares. Both WEDGE and First Reserve are generally bound to vote, tender or
otherwise act as recommended by the Supervisory Board with respect to proposed
business combinations pursuant to their respective shareholder agreements. In
addition, our Articles of Association and the applicable law of The Netherlands
contain provisions that may be deemed to have anti-takeover effects. Among other
things, these provisions provide for a staggered board of Supervisory Directors,
a binding nomination process and supermajority voting requirements in the case
of shareholder approval for certain significant transactions. Such provisions
may delay, defer or prevent a takeover attempt that a shareholder might consider
in the best interests of our shareholders. In addition, certain United States
tax laws, including those described immediately below, may discourage third
parties from accumulating significant blocks of our common stock.
15
EXISTING SHAREHOLDERS MAY SELL THEIR SHARES, WHICH COULD DEPRESS THE MARKET
PRICE OF OUR COMMON STOCK.
Under an existing shelf registration statement, 807,356 shares held by
certain unaffiliated shareholders of the Company are eligible to be resold from
time to time into the public market. If these shareholders sell a large number
of these shares into the market, the market price of our common stock could
decline as a result.
WEDGE holds 3,852,764 shares of our common stock and First Reserve holds
6,810,895 shares of our common stock. WEDGE and First Reserve each have certain
rights under their respective Shareholder Agreements to require us to register
these shares of common stock under the Securities Act of 1933 to permit the
public sale of such shares, as well as the ability to resell such shares into
the public market pursuant to Rule 144. Significant sales of such shares, or the
prospect of such sales, may depress the price of our shares.
WE HAVE A RISK OF BEING CLASSIFIED AS A CONTROLLED FOREIGN CORPORATION.
As a company incorporated in The Netherlands, we would be classified as a
"controlled foreign corporation" if any United States person acquires 10% or
more of our common stock (including ownership through the attribution rules of
Section 958 of the Internal Revenue Code of 1986, as amended (the "Code")) and
the sum of the percentage ownership by all such persons exceeds 50% (by voting
power or value) of our common stock. We do not believe we are a "controlled
foreign corporation". However, we may be determined to be a controlled foreign
corporation in the future. In the event that such a determination were made, all
U.S. holders of 10% or more of our common stock would be subject to taxation
under Subpart F of the Code. The ultimate consequences of this determination are
fact-specific to each 10% or greater U.S. shareholder, but could include
possible taxation of such U.S. shareholder on a pro rata portion of our income,
even in the absence of any distribution of such income.
IF WE NEED TO SELL OR ISSUE ADDITIONAL SHARES OF COMMON STOCK AND/OR INCUR
ADDITIONAL DEBT TO FINANCE FUTURE ACQUISITIONS, YOUR STOCK OWNERSHIP COULD BE
DILUTED.
Part of our business strategy is to expand into new markets and enhance our
position in existing markets throughout the world through acquisition of
complementary businesses. In order to successfully complete targeted
acquisitions or fund our other activities, we may issue additional equity
securities that could be dilutive to our earnings per share and to your stock
ownership. We may also incur additional debt and amortize expenses related
certain tangible assets if we acquire another company, and this could negatively
impact our results of operations and stock price. To the extent an acquisition
transaction financed by non-equity consideration results in additional goodwill,
it will reduce our tangible net worth, which might have an adverse effect on our
credit and bonding capacity.
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements. You
should read carefully any statements containing the words "expect," "believe,"
"anticipate," "project," "estimate," "predict," "intend," "should," "could,"
"may," "might," or similar expressions or the negative of any of these terms.
16
Forward-looking statements involve known and unknown risks and
uncertainties. Various factors, such as those listed under "Risk Factors," may
cause our actual results, performance or achievements to be materially different
from those expressed or implied by any forward-looking statements. Among the
factors that could cause our results to differ are the following:
- our ability to realize cost savings from our expected execution
performance of contracts;
- the uncertain timing and the funding of new contract awards, and
project cancellations and operations risks;
- the expected growth in our primary end markets does not occur;
- cost overruns on fixed price contracts, and risks associated with
percentage of completion accounting;
- lack of necessary liquidity to finance expenditures prior to the
receipt of payment for the performance of contracts and to
provide bid and performance bonds and letters of credit securing
our obligations under our bids and contracts;
- risks inherent in our acquisition strategy and our ability to
obtain financing for proposed acquisitions; and
- a broad downturn in the economy in general.
Although we believe the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future performance or results. We
are not obligated to update or revise any forward-looking statements, whether as
a result of new information, future events or otherwise. You should consider
these risks when reading any forward-looking statements.
ITEM 2. PROPERTIES
We own or lease the properties used to conduct our business. The capacities
of these facilities depend upon the composition of products being fabricated and
constructed. As the product composition is constantly changing, the extent of
utilization of these facilities cannot be accurately stated. We believe these
facilities are adequate to meet our current requirements. The following list
summarizes our principal properties:
Location Type of Facility Interest
-------- ---------------- --------
North America
Beaumont, Texas Engineering, fabrication facility, Owned
operations and administrative office
Beggs, Oklahoma Fabrication facility Owned
Clive, Iowa Fabrication facility, warehouse, operations Owned
and administrative office
Everett, Washington Fabrication facility, warehouse, operations Leased
and administrative office
17
Fort Saskatchewan, Canada Warehouse, operations and Owned
administrative office
Houston, Texas (1) Engineering, fabrication facility, warehouse, Owned
operations and administrative office
Kankakee, Illinois Warehouse Owned
Liberty, Texas Fabrication facility Leased
Pittsburgh, Pennsylvania Warehouse Owned
Plainfield, Illinois (2) Engineering, operations and administrative Leased
office
Provo, Utah Fabrication facility, warehouse, operations Owned
and administrative office
San Luis Obispo,
California Warehouse and fabrication facility Owned
Tulsa, Oklahoma Engineering, fabrication facility, Leased
operations and administrative office
Tyler, Texas Engineering, fabrication facility, Owned
operations and administrative office
Warren, Pennsylvania Fabrication facility Leased
The Woodlands, Texas Administrative office Leased
Europe, Africa, Middle East
Al Aujam, Saudi Arabia Fabrication facility and warehouse Owned
Dubai, United Arab Emirates Engineering, operations, administrative Leased
office and warehouse Owned
Hoofddorp, The Netherlands Principal executive office Leased
Secunda, South Africa Fabrication facility and warehouse Leased
Asia Pacific
Batangas, Philippines Fabrication facility and warehouse Leased
Cilegon, Indonesia Fabrication facility and warehouse Leased
Kwinana, Australia Fabrication facility, warehouse and Owned
administrative office
Laem Chabang, Thailand Warehouse, operations and Leased
administrative office
Central and South America
Caracas, Venezuela Administrative and engineering office Leased
Puerto Ordaz, Venezuela Fabrication facility and warehouse Leased
(1) Warehouse and administrative offices are assets held for sale.
(2) Sold and leased back on June 30, 2001.
We also own or lease a number of sales, administrative and field
construction offices, warehouses and equipment maintenance centers strategically
located throughout the world.
18
ITEM 3. LEGAL PROCEEDINGS
Antitrust Proceedings. On October 25, 2001, the U.S. Federal Trade Commission
("FTC") announced its decision to file an administrative complaint (the
"Complaint") challenging our February 2001 acquisition of certain assets of the
Engineered Construction Division of PDM. The Complaint alleges that the
acquisition violated Federal antitrust laws by substantially lessening
competition in certain field erected specialty industrial storage tank product
lines in the United States: LNG tanks, LPG tanks, LIN/LOX/LAR tanks, and thermal
vacuum chambers. The FTC is seeking various remedies, including an order that
would re-establish two distinct and separate viable and competing businesses
engaged in the design, engineering, fabrication, construction and sale of the
relevant product lines.
We believe that the Complaint is without merit and on February 4, 2002,
filed a formal answer denying the substantive allegations in the Complaint.
While we expect the impact of the FTC proceeding on our earnings will be minimal
in 2002, we are unable to assess the ultimate outcome or potential effect of the
Complaint on our business, financial condition and results of operation.
Environmental Matters. Our 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 us to make expenditures
for remediation. In addition, we have agreed to indemnify parties to whom we
have sold facilities for certain environmental liabilities arising from acts
occurring before the dates those facilities were transferred. We are aware of no
manifestation by a potential claimant of awareness by such claimant of a
possible claim or assessment with respect to such facilities. We do 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 us. We believe that any potential liability for these
matters will not have a material adverse effect on our business, financial
condition or results of operations.
We do 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, we can
give no assurance that we, or entities for which we may be responsible, will not
incur liability in connection with the investigation and remediation of
facilities we currently (or formerly) own or operate or other locations in a
manner that could materially and adversely affect us.
Other Contingencies. We are a defendant in a number of other lawsuits arising in
the normal course of our business. We believe 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 us and based on our belief as to the
reasonable likelihood of the outcomes of such matters, our management believes
that adequate provision has been made for probable losses with respect thereto.
We believe that the ultimate outcome, after provisions therefore, will not have
a material adverse effect, either individually or in the aggregate, on our
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.
19
We are jointly and severally liable for certain liabilities of partnerships
and joint ventures. At December 31, 2001, we and certain subsidiaries had
provided $365,587,000 of performance bonds and letters of credit to support our
contracting activities arising in the ordinary course of business. This amount
fluctuates based on the level of contracting activity.
We have elected to retain portions of anticipated losses through the use of
deductibles and self-insured retentions for our 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 we self insure for
these exposures, reserves have been provided based on management's best
estimates with input from our legal and insurance advisors. Changes in
assumptions, as well as changes in actual experience, could cause these
estimates to change in the near term. Our 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 our
financial position or results of operations. At December 31, 2001, we had
outstanding surety bonds and letters of credit of $19,968,000 relating to our
insurance program.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter ended December 31, 2001.
20
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Information required by this item can be found on page 51 of the 2001
Annual Report to Shareholders and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Information required by this item can be found on pages 22 and 23 of the
2001 Annual Report to Shareholders and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Information required by this item can be found on pages 24 through 28 of
the 2001 Annual Report to Shareholders and is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by this item can be found on page 27 of the 2001
Annual Report to Shareholders and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated financial statements and Report of Independent Public
Accountants can be found on pages 29 through 50 of the 2001 Annual Report to
Shareholders and are incorporated herein by reference.
Quarterly financial data can be found on page 50 of the 2001 Annual Report
to Shareholders and is incorporated herein by reference.
Additional financial information and schedules can be found in Part IV of
this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
We have neither changed our independent public accountants nor had any
disagreements on accounting and financial disclosure with our independent public
accountants during the prior two years.
21
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding the
Supervisory Directors of Chicago Bridge & Iron Company N.V. ("CB&I N.V."), the
executive officers of Chicago Bridge & Iron Company ("CBIC") and the Managing
Directors of Chicago Bridge & Iron Company B.V. ("CB&I B.V."). As permitted
under the law of The Netherlands, CB&I N.V. does not have executive officers.
CB&I B.V. serves as the Managing Director of CB&I N.V.
Name Age Position(s)
---- --- -----------
Gerald M. Glenn 59 Chairman of the Supervisory Board of CB&I
N.V.; Chairman, President and Chief
Executive Officer and Director of CBIC,
Chairman, President and Chief Executive
Officer and Managing Director of CB&I B.V.
Jerry H. Ballengee 63 Supervisory Director
J. Dennis Bonney 70 Supervisory Director
Ben A. Guill 50 Supervisory Director
J. Charles Jennett 61 Supervisory Director
Vincent L. Kontny 63 Supervisory Director
William E. Macaulay 56 Supervisory Director
Gary L. Neale 61 Supervisory Director
L. Donald Simpson 65 Supervisory Director
William H. White 46 Supervisory Director
Marsha C. Williams 50 Supervisory Director
Michael D. Winfield 62 Supervisory Director
Philip K. Asherman 50 Executive Vice President and Chief
Marketing Officer of CBIC; Managing
Director of CB&I B.V.
David P. Bordages 51 Vice President - Human Resources and
Administration of CBIC
Stephen P. Crain 48 President - Western Hemisphere Operations
of CBIC; Managing Director of CB&I B.V.
Richard E. Goodrich 57 Executive Vice President and Chief
Financial Officer of CBIC; Managing
Director of CB&I B.V.
Robert B. Jordan 51 Executive Vice President and Chief
Operating Officer of CBIC;
Managing Director of CB&I B.V.
Tom C. Rhodes 48 Vice President, Corporate Controller and
Chief Accounting Officer of CBIC
Robert H. Wolfe 52 Secretary of CB&I N.V.; Vice President,
General Counsel and Secretary of CBIC;
Secretary of CB&I B.V.
22
There are no family relationships between any executive officers and
Supervisory Directors. Executive officers of CBIC are elected annually by the
CBIC Board of Directors. The Managing Directors of CB&I B.V. serve until
successors are elected.
GERALD M. GLENN has served as Chairman of the Supervisory Board of CB&I
N.V. since April 1997. He has been President and Chief Executive Officer of CBIC
since May 1996, and has been a Managing Director of CB&I B.V. since March 1997.
Since April 1994, Mr. Glenn has been a principal in The Glenn Group LLC. From
November 1986 to April 1994, he served as Group President-Fluor Daniel, Inc.
JERRY H. BALLENGEE has served as a Supervisory Director of the Company
since April 1997. Since October 2001, he has served as Chairman of the Board of
Morris Material Handling Company (MMH). He served as President and Chief
Operating Officer of Union Camp Corporation from July 1994 to May 1999 and has
served in various other executive capacities and as a member of the Board of
Directors of Union Camp Corporation from 1988 to 1999 when the company was
acquired by International Paper Company.
J. DENNIS BONNEY has served as a Supervisory Director of the Company since
April 1997. He served as Vice Chairman of the Board of Chevron Corporation from
1987 to 1995. He currently serves as Chairman of the Board of Aeromovel USA and
Aeromovel Global Corporation. From 1996 to 1998, he was a director of Alumax
Inc. and United Meridian Corporation.
BEN A. GUILL has served as a Supervisory Director of the Company since
January 2001. He is the President of First Reserve Corporation where he has
served since September 1998. Prior to joining First Reserve Corporation, Mr.
Guill was a Partner and Managing Director of Simmons & Company International, an
investment banking firm located in Houston, Texas which focuses on the oil
service and equipment industry. Mr. Guill had been with Simmons & Company since
1980. He is a member of the board of directors of National-Oilwell, Inc.,
Superior Energy Services, Inc., Destiny Resources Services Corp., James River
Coal, Transmoutaigne Inc., T3 Energy Services Inc. and Dresser, Inc. Mr. Guill
received his Bachelor of Arts Degree from Princeton University and his Masters
Degree in Finance from the Wharton Graduate School of Business at the University
of Pennsylvania.
J. CHARLES JENNETT has served as a Supervisory Director of the Company
since April 1997. Since 2001, he was served as President Emeritus of Texas A&M
International University and was President from 1996 to 2001. He was Provost and
Vice President of Academic Affairs at Clemson University from 1992 through 1996.
VINCENT L. KONTNY has served as a Supervisory Director of the Company since
April 1997. He has served since April 2000 as Chief Operating Officer of
Washington Group International, which filed a petition under Chapter 11 of the
U.S. Bankruptcy Code on May 14, 2001. Since 1992 he has been the owner and CEO
of the Double Shoe Cattle Company. Mr. Kontny was President and Chief Operating
Officer of Fluor Corporation from 1990 until September 1994.
WILLIAM E. MACAULAY has served as a Supervisory Director of the Company
since January 2001. He is the Chairman and Chief Executive Officer of First
Reserve Corporation where he has been employed since 1983. First Reserve
Corporation is the general partner of First Reserve Fund VIII, L.P. He is a
member of the Board of Directors of Weatherford International, Inc., an oilfield
services company; National Oilwell, Inc., a leading international provider of
contract drilling and associated services related to the oil and gas exploration
and production
23
industry, both onshore and offshore; Superior Energy Services, Inc., a provider
of specialized oilfield services and equipment; and Grant Prideco, Inc., a
company engaged in drill stem technology development and drill pipe
manufacturing. Mr. Macaulay holds a B.A. degree in Economics from City College
of New York and an M.B.A. from the Wharton Graduate School of Business at the
University of Pennsylvania, where he has also served as a member of the
Executive Board.
GARY L. NEALE has served as a Supervisory Director of the Company since
April 1997. He is currently President, CEO and Chairman of the Board of
NiSource, Inc., whose primary business is the distribution of electricity and
gas through utility companies. Mr. Neale has served as a director of NiSource,
Inc. since 1991, a director of Northern Indiana Public Service Company since
1989, and a director of Modine Manufacturing Company (heat transfer products)
since 1977.
L. DONALD SIMPSON has served as a Supervisory Director of the Company since
April 1997. From December 1996 to December 1999, Mr. Simpson served as Executive
Vice President of Great Lakes Chemical Corporation. Prior thereto, beginning in
1992, he served in various executive capacities at Great Lakes Chemical
Corporation.
WILLIAM H. WHITE has served as a Supervisory Director of the Company since
January 2001. He has been the President, Chief Executive Officer and Vice
Chairman of WEDGE Group Incorporated since April 1997. WEDGE is a diversified
firm with subsidiaries in engineering and construction, hotel, oil and gas, and
real estate businesses. Mr. White served as Deputy Secretary and Chief Operating
Officer of the Department of Energy from 1993 to 1995. Prior to his service at
the Department of Energy, Mr. White practiced law and served on the management
committee of the law firm of Susman Godfrey L.L.P. and taught law at the
University of Texas at Austin. Mr. White is a director of Pioneer Drilling
Company (AMEX), a contract drilling company; and TGC Industries, Inc. (NASDAQ),
a geophysical contracting firm. He serves on the board of North American
Electric Reliability.
MARSHA C. WILLIAMS has served as a Supervisory Director of the Company
since April 1997. Since May 1998, she has served as Chief Administrative Officer
of Crate & Barrel, a specialty retail company. Prior to that, she served as Vice
President and Treasurer of Amoco Corporation from December 1997 to May 1998, and
Treasurer from 1993 to 1997. Ms. Williams is a director of Selected Funds, Davis
Funds and Modine Manufacturing Company (heat transfer products).
MICHAEL D. WINFIELD has served as a Supervisory Director of the Company
since January 2001. He has been a member of the Board of Managers of UOP L.L.C.,
a general partnership of Honeywell International Inc. and Dow Chemical
Corporation engaged in the licensing of technologies to the oil refining and
petrochemical industries since January 2001. From February 1992 until January
2001, he was President and Chief Executive Officer of UOP. Mr. Winfield has
served as a director of Landauer Inc. (a firm providing services related to
radiation monitoring) since 1994 and Metallurg, Inc. (a firm providing specialty
metals, alloys and chemicals to the steel industry) since 2001. Mr. Winfield
holds a degree in Chemical Engineering from Ohio State University and an M.B.A.
from the University of Chicago.
24
PHILIP K. ASHERMAN has been Executive Vice President and Chief Marketing
Officer of CBIC since August 2001. From May 2001 to July 2001, he was Vice
President - Strategic Sales, Eastern Hemisphere of CBIC. Prior thereto, Mr.
Asherman was Senior Vice President of Fluor Global Services and held other
executive positions with Fluor Daniel, Inc. operating subsidiaries.
DAVID P. BORDAGES has been the Vice President - Human Resources and
Administration of CBIC since February 2002. Prior to that time, Mr. Bordages was
Vice President - Human Resources of the Fluor Corporation from April 1989
through February 2002.
STEPHEN P. CRAIN has been President-Western Hemisphere Operations of CBIC
since August 2001 and a Managing Director of CB&I B.V. since August 1998. From
November 2000 to July 2001, he was Executive Vice President and Chief Marketing
Officer of CBIC. From July 1997 to November 2000, Mr. Crain was Vice President -
Global Sales and Marketing of CBIC. Prior to that time, Mr. Crain was employed
by CBIC or its affiliates in an executive or management capacity.
RICHARD E. GOODRICH has been the Executive Vice President and Chief
Financial Officer of CBIC since July 2001. From November 2000 to July 2001, he
was Group Vice President - Western Hemisphere Operations of CBIC. From February
1999 to November 2000, Mr. Goodrich was Vice President - Financial Operations of
CBIC. Mr. Goodrich was the Vice President - Area Director of Finance, Western
Hemisphere for CBIC from June 1998 through February 1999. Prior to that time,
Mr. Goodrich was the Director of Strategic Planning - Energy and Chemicals Group
of Fluor Daniel, Inc.
ROBERT B. JORDAN has been the Executive Vice President of CBIC since
November 2000 and the Chief Operating Officer of CBIC since March 2000 and a
Managing Director of CB&I B. V. since February 1998. From February 1998 to
November 2000, Mr. Jordan was Vice President - Operations of CBIC. From May 1996
to February 1998, Mr. Jordan was the Senior Vice President - Sales and
Operations for the Process Division of BE&K Incorporated located in Birmingham,
Alabama. Prior to that time, Mr. Jordan was the Senior Vice President - Sales
and Operations for the Process and Industrial Division of Rust Engineering &
Construction Inc.
TOM C. RHODES has been the Corporate Controller of CBIC since August 2001.
From November 2000 to August 2001, Mr. Rhodes was Vice President - Financial
Operations for CBIC and from February 1999 to November 2000, he was Vice
President - Area Director of Finance, Western Hemisphere of CBIC. Prior to that
time, he was Finance Director of Americas Region for Fluor Daniel, Inc.
ROBERT H. WOLFE has been the Vice President, General Counsel and Secretary
of CBIC since November 1996, and the Secretary of CB&I N.V. since its inception.
From June 1996 to November 1996, Mr. Wolfe served as a private consultant to
Rust Engineering & Construction Inc. ("Rust"). Prior to that time, he served as
Vice President, General Counsel and Secretary to Rust.
Information appearing under "Section 16(a) Beneficial Ownership Reporting
Compliance" in the Company's 2002 Proxy Statement is incorporated herein by
reference.
25
ITEM 11. EXECUTIVE COMPENSATION
Information appearing under "Executive Compensation" in the 2002 Proxy
Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information appearing under "Common Stock Ownership By Certain Persons and
Management" in the 2002 Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information appearing under "Certain Transactions and Relationships" in the
2002 Proxy Statement is incorporated herein by reference.
26
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Financial Statements
The following consolidated financial statements and Report of Independent
Public Accountants previously incorporated by reference under Item 8 of Part II
of this report are herein incorporated by reference.
Report of Independent Public Accountants
Consolidated Statements of Income - For the years ended December 31,
2001, 2000 and 1999
Consolidated Balance Sheets - As of December 31, 2001 and 2000
Consolidated Statements of Cash Flows - For the years ended December
31, 2001, 2000 and 1999
Consolidated Statements of Changes in Shareholders' Equity - For the
years ended December 31, 2001, 2000 and 1999
Notes to Consolidated Financial Statements
Financial Statement Schedules
Supplemental Schedule V - Valuation and Qualifying Accounts and Reserves
for each of the years ended December 31, 2001, 2000 and 1999 can be found on
page 31 of this report.
Schedules, other than the one above, have been omitted because the
schedules are either not applicable or the required information is shown in the
financial statements or notes thereto previously incorporated by reference under
Item 8 of Part II of this report.
Quarterly financial data for the years ended December 31, 2001 and 2000 is
shown in the Notes to Consolidated Financial Statements previously incorporated
by reference under Item 8 of Part II of this report.
Our interest in 50 percent or less owned affiliates, when considered in the
aggregate, does not constitute a significant subsidiary; therefore, summarized
financial information has been omitted.
Exhibits
The Exhibit Index on page 32 and Exhibits being filed are submitted as a
separate section of this report.
Reports on Form 8-K
We filed current reports on Form 8-K during the three months ended December
31, 2001.
We filed a current report on From 8-K on November 1, 2001. Under Item 5
(Other Events), we reported that on October 25, 2001, the U.S. Federal Trade
Commission announced its
27
decision to file an administrative complaint challenging our February 2001
acquisition of certain assets of the Engineered Construction Division of PDM. We
also issued a press release dated November 1, 2001 announcing our results of
operations for the third quarter ended September 30, 2001. Exhibits required
were included under Item 7.
28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Chicago Bridge & Iron Company N.V.
Date: April 1, 2002 /s/ Richard E. Goodrich
--------------------------------------
By: Chicago Bridge & Iron Company B.V.
Its: Managing Director
Richard E. Goodrich
Managing Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated on April 1, 2002.
Signature Title
/s/ Gerald M. Glenn Chairman of the Supervisory Board
------------------------
Gerald M. Glenn of Registrant, and President, Chief
Executive Officer of CBIC
(Principal Executive Officer)
/s/ Richard E. Goodrich Executive Vice President and
------------------------
Richard E. Goodrich Chief Financial Officer of CBIC
(Principal Financial Officer)
/s/ Tom C. Rhodes Vice President and Corporate
------------------------
Tom C. Rhodes Controller of CBIC
(Principal Accounting Officer)
/s/ Jerry H. Ballengee Supervisory Director
------------------------
Jerry H. Ballengee
/s/ J. Dennis Bonney Supervisory Director
------------------------
J. Dennis Bonney
/s/ Ben A. Guill Supervisory Director
------------------------
Ben A. Guill
/s/ J. Charles Jennett Supervisory Director
------------------------
J. Charles Jennett
29
/s/ Vincent L. Kontny Supervisory Director
------------------------
Vincent L. Kontny
/s/ William E. Macaulay Supervisory Director
------------------------
William E. Macaulay
/s/ Gary L. Neale Supervisory Director
------------------------
Gary L. Neale
/s/ L. Donald Simpson Supervisory Director
------------------------
L. Donald Simpson
/s/ William H. White Supervisory Director
------------------------
William H. White
/s/ Marsha C. Williams Supervisory Director
------------------------
Marsha C. Williams
/s/ Michael D. Winfield Supervisory Director
------------------------
Michael D. Winfield
Registrant's Agent for Service in the United States
/s/ Robert H. Wolfe
------------------------
Robert H. Wolfe
30
SCHEDULE V. SUPPLEMENTAL INFORMATION ON VALUATION AND QUALIFYING
ACCOUNTS AND RESERVES
CHICAGO BRIDGE & IRON COMPANY N.V.
Valuation and Qualifying Accounts and Reserves
For Each of the Three Years Ended December 31, 2001
(in thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Additions
Balance Charged to Balance
At Costs and at
Descriptions January 1 Expenses(1) Deductions(2) December 31
------------ --------- -------- ---------- -----------
Allowance for
doubtful accounts
2001 $1,300 527 (571) $1,256
2000 $1,054 552 (306) $1,300
1999 $2,050 1,326 (2,322) $1,054
(1) Includes $537 of allowances obtained through our acquisition of HBI in 2000.
(2) Deductions generally represent utilization of previously established
reserves or adjustments to reverse unnecessary reserves due to subsequent
collections.
31
EXHIBIT INDEX
3 (11) Amended Articles of Association of the Company (English
translation)
4.1 (2) Specimen Stock Certificate
10.1 (2) Form of Indemnification Agreement between the Company and its
Supervisory and Managing Directors
10.2 (3) The Company's Annual Incentive Compensation Plan
10.3 (4) The Company's 1997 Long-Term Incentive Plan
As amended September 1, 1998
10.4 (3) The Company's Deferred Compensation Plan
10.5 The Company's Management Defined Contribution Plan
As amended September 1, 1999 (7)
(a) Agreement between the Company and Gerald M. Glenn dated
September 1, 1999 (7)
(b) Agreement between the Company and Timothy J. Wiggins dated
September 1, 1999 (7)
(c) Amended Agreement between the Company and Gerald M. Glenn
dated February 21, 2002 (1)
10.6 (3) The Company's Excess Benefit Plan
10.7 (2) Form of the Company's Supplemental Executive Death Benefits Plan
10.8 (2) Employment Agreements Including Special Stock-Based, Long-Term
Compensation Related to the Common Share Offering between the
Company and Certain Executive Officers
10.9 (6) Form of Amended Termination Agreements between the Company and
Certain Executive Officers
10.10 (2) Separation Agreement
10.11 (2) Form of Amended and Restated Tax Disaffiliation Agreement
10.12 (2) Employee Benefits Separation Agreement
32
10.13 (2) Conforming Agreement
10.14 (3) Employment Agreement Letters between the Company and Robert B.
Jordan
10.16 (4) The Company's Supervisory Board of Directors Fee Payment Plan
10.17 (4) The Company's Supervisory Board of Directors Stock Purchase Plan
10.18 (9) The Chicago Bridge & Iron 1999 Long-Term Incentive Plan As
amended December 15, 2000.
10.19 (5) The Company's Incentive Compensation Program
10.20 (6) The Company's Equity Forward Purchase Contract
10.21 Revolving Credit Facility Agreement dated September 30, 1999 (7)
(a) Termination Notice dated November 28, 2000 (9)
10.22 Revolving Credit Facility Agreement dated December 1, 2000 (9)
(a) Amendment No. 1 dated February 6, 2001 (8)
(b) Amendment No. 2 dated March 26, 2001 (10)
(c) Amendment No. 3 dated April 30, 2001 (10)
10.23 (9) Change of Control Severance Agreements between the Company and
certain Executive Officers
10.23(a)(11) Waiver to Certain Sections of Change of Control Severance
Agreements between the Company and Certain Executive Officers
10.24 (12) Senior Executive Relocation Loan Agreements between the Company
and Certain Executive Officers.
(a) Agreement between the Company and Gerald M. Glenn dated
September 13, 2001
(b) Agreement between the Company and Stephen P. Crain dated
September 13, 2001
(c) Agreement between the Company and Robert B. Jordan dated
September 13, 2001
(d) Agreement between the Company and Robert H. Wolfe dated
September 13, 2001
13 (1) Portion of the 2001 Annual Report to Shareholders
21 (1) List of Significant Subsidiaries
23 (1) Consent and Report of the Independent Public Accountants
99 (1) Letter to Securities and Exchange Commission regarding
Arthur Andersen.
33
----------------------
(1) Filed herewith
(2) Incorporated by reference from the Company's Registration Statement on Form
S-1 (File No. 333-18065)
(3) Incorporated by reference from the Company's 1997 Form 10-K dated March 31,
1998
(4) Incorporated by reference from the Company's 1998 Form 10-Q dated November
12, 1998
(5) Incorporated by reference from the Company's 1999 Form 10-Q dated May 14,
1999
(6) Incorporated by reference from the Company's 1999 Form 10-Q dated August 13,
1999
(7) Incorporated by reference from the Company's 1999 Form 10-Q dated November
12, 1999
(8) Incorporated by reference from the Company's Form 8-K dated January 18, 2000
(9) Incorporated by reference from the Company's 2000 Form 10-K dated March 29,
2001
(10) Incorporated by reference from the Company's 2001 Form 10-Q dated May 15,
2001
(11) Incorporated by reference from the Company's 2001 Form 10-Q dated August
14, 2001
(12) Incorporated by reference from the Company's 2001 Form 10-Q dated November
14, 2001
34