CB&I Announces Third Quarter 2017 Results

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Price: $16.39 --0%

Overall Analyst Rating:
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THE WOODLANDS, Texas, Oct. 30, 2017 /PRNewswire/ -- CB&I (NYSE: CBI) today announced financial results for the third quarter of 2017.

CB&I reported net income of $10 million, or $0.10 per diluted share, in the third quarter of 2017, compared to net income of $121.8 million, or $1.20 per diluted share, in the third quarter of 2016.

Net income for the third quarter of 2017 was impacted by restructuring charges of $27 million, or $0.17 per share, related to the company's cost reduction program, and excess interest expense of $22 million, or $0.14 per share, due to accelerated amortization of debt issuance costs.

Continuing operations consist of CB&I's Engineering & Construction (E&C) and Fabrication Services businesses. The results of the company's Technology and former Engineered Products and Capital Services operations have been classified as discontinued operations for all periods presented.

"We have made significant progress on the decisive actions we announced last quarter, including our cost reduction program, the continued improvement of our project execution and risk management processes, and the intended sale of our Technology operations," said Patrick K. Mullen, President and Chief Executive Officer of CB&I. "Our cost reduction program is on track, with a positive impact on our financial performance already apparent. We are also extremely pleased with the sale process for our Technology operations and the interest from bidders on developing a long-term strategic alliance with CB&I.

"Our results this quarter were impacted by unusual items totaling $49 million, or $0.31 per share. We experienced continued cost pressure during the quarter, primarily on the IPL and Calpine power projects, with execution on our other projects continuing as planned. New awards were lower than expected, primarily within E&C, due to the delay of certain key projects. However, we have a significant pipeline and anticipate a strong fourth quarter and first half of 2018 for new awards."

Continuing OperationsRevenue for the third quarter of 2017 was $1.7 billion, compared to revenue of $2.1 billion in the third quarter of 2016.

New awards in the third quarter of 2017 totaled $437 million, compared to $1.7 billion in the third quarter of last year. Backlog at September 30, 2017, was $10.7 billion, compared to backlog of $13.2 billion at September 30, 2016.

Engineering & Construction Operating Group E&C operating group revenue was $1.3 billion in the third quarter of 2017, compared to $1.7 billion in the year-ago quarter. The E&C group reported operating income of $13.1 million, compared to $126.8 million in the third quarter of 2016. Results were impacted by changes in estimated margins on two U.S. gas turbine power projects of $38 million and additional costs on U.S. LNG projects of approximately $16 million due in part to the direct effects of Hurricane Harvey. The E&C group's new awards in the third quarter totaled $65.2 million, compared with $1.5 billion in the third quarter of 2016, and backlog as of September 30, 2017, was $9.2 billion.

Fabrication Services Operating Group Fabrication Services operating group revenue was $389.7 million compared to $467.0 million in the year-ago quarter. The Fabrication Services group reported operating income of $26.1 million compared to $27.8 million in the third quarter of 2016. The Fabrication Services group's new awards in the third quarter were $371.8 million, compared with $215.3 million in the third quarter of 2016. Backlog as of September 30, 2017, was $1.5 billion.

Discontinued OperationsThe Technology operations revenue was $170.1 million, compared to $183.3 million in the year-ago quarter. Technology operations reported operating income of $61.2 million compared to $55.9 million in the third quarter of 2016.

GuidanceThe company currently expects revenue for the fourth quarter of 2017 to be between $1.8 and $2.0 billion and diluted earnings per share in the range of $0.50 to $0.60. The company's updated guidance for the fourth quarter of 2017 includes continuing and discontinued operations but excludes the continuation of incremental interest expense and any additional restructuring charge that may be required. Guidance also excludes any significant benefits from the cost reduction program, which are expected to be fully realized in 2018.

Earnings Conference CallCB&I will host a conference call and webcast October 30, 2017, at 4:00 p.m. CDT (5:00 p.m. EDT) to discuss financial and operating results and answer questions from investors. The webcast will be available on the Investor Relations page of www.CBI.com, and the conference call can be accessed by telephone at 1-800-301-8321 (U.S.) or 1-706-634-2259 (outside the U.S.) with conference ID # 6097289.

About CB&I CB&I (NYSE: CBI) is a leading provider of technology and infrastructure for the energy industry. With more than 125 years of experience, CB&I provides reliable solutions to our customers around the world while maintaining a relentless focus on safety and an uncompromising standard of quality. For more information, visit www.CBI.com.

Important Information For Investors And Shareholders

Cautionary Statement Regarding Forward-Looking Statements

This press release contains forward-looking statements regarding CB&I and represents our expectations and beliefs concerning future events. These forward-looking statements are intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties. The forward looking statements in this press release include: statements about CB&I's new awards and backlog, to the extent these may be indicators of future revenue or profitability; the intended sale of the Technology operating group, including the timing with respect to the completion of that sale; the execution of activities on and completion of specific projects, including timing to complete, future productivity and cost to complete; estimates of percentage of completion and contract profits or losses.

When considering these and any other statements that are predictive in nature, depend upon or refer to future events or conditions, or use or contain words, terms, phrases or expressions such as "achieve," "forecast," "plan," "propose," "strategy," "envision," "hope," "will," "continue," "potential," "expect," "believe," "anticipate," "project," "estimate," "predict," "intend," "should," "could," "may," "might" or similar forward-looking statements, we refer you to the cautionary statements concerning risk factors and "Forward-Looking Statements" described under "Risk Factors" in Item 1A of our Annual Report filed on Form 10-K filed with the SEC for the year ended December 31, 2016, and any updates to those risk factors or "Forward-Looking Statements" included in our subsequent Quarterly Reports on Form 10-Q filed with the SEC, which cautionary statements are incorporated herein by reference.

Investors: Scott Lamb, +1 832 513 1068, [email protected] Media: Gentry Brann, +1 832 513 1031, [email protected]

Chicago Bridge & Iron Company N.V.
Consolidated Statements of Operations
(in thousands, except per share data)

	Three Months						Nine Months
	Ended September 30,						Ended September 30,
	2017			2016			2017			2016

Revenue	$	1,737,764		$	2,137,877		$	4,668,690		$	6,200,713
Cost of revenue	1,655,002			1,920,894			4,919,206			5,591,393
Gross profit (loss)	82,762			216,983			(250,516)			609,320
% of Revenue	4.8		%	10.1		%	(5.4)		%	9.8		%

Selling and administrative expense	51,458			62,913			173,594			190,207
% of Revenue	3.0		%	2.9		%	3.7		%	3.1		%

Intangibles amortization	1,891			1,937			5,771			6,451
Equity earnings	(9,727)			(2,632)			(21,210)			(1,875)
Restructuring related costs	26,882			—			30,882			—
Other operating (income) expense, net	(53)			189			(415)			1,112
Operating income (loss) from continuing operations	12,311			154,576			(439,138)			413,425
% of Revenue	0.7		%	7.2		%	(9.4)		%	6.7		%

Interest expense	(5,288)			(1,586)			(9,036)			(4,666)
Interest income	574			2,292			2,684			7,187
Income (loss) from continuing operations before taxes	7,597			155,282			(445,490)			415,946

Income tax (expense) benefit	(3,112)			(22,206)			177,347			(83,280)
Net income (loss) from continuing operations	4,485			133,076			(268,143)			332,666
Net income (loss) from discontinued operations	7,061			35,343			(90,916)			88,263
Net income (loss)	11,546			168,419			(359,059)			420,929

Less: Net income attributable to noncontrolling interests ($0, $930, $870and $1,815 related to discontinued operations)	(1,507)			(46,659)			(31,666)			(68,405)
Net income (loss) attributable to CB&I	$	10,039		$	121,760		$	(390,725)		$	352,524

Net income (loss) attributable to CB&I per share (Basic):
Continuing operations	$	0.03		$	0.86		$	(2.96)		$	2.57
Discontinued operations	0.07			0.34			(0.91)			0.83
Total	$	0.10		$	1.20		$	(3.87)		$	3.40

Net income (loss) attributable to CB&I per share (Diluted):
Continuing operations	$	0.03		$	0.86		$	(2.96)		$	2.54
Discontinued operations	0.07			0.34			(0.91)			0.83
Total	$	0.10		$	1.20		$	(3.87)		$	3.37

Weighted average shares outstanding:
Basic	101,177			101,102			100,834			103,725
Diluted	101,736			101,863			100,834			104,555

Chicago Bridge & Iron Company N.V.
Segment Information
(in thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016

NEW AWARDS (1)			% of			% of			% of			% of
NEW AWARDS (1)			Total			Total			Total			Total
Engineering & Construction	$	65,181	15%	$	1,508,301	88%	$	2,787,690	71%	$	2,839,032	78%
Fabrication Services	371,769		85%	215,254		12%	1,121,137		29%	819,962		22%
Total	$	436,950		$	1,723,555		$	3,908,827		$	3,658,994

REVENUE			% of			% of			% of			% of
REVENUE			Total			Total			Total			Total
Engineering & Construction	$	1,348,033	78%	$	1,670,879	78%	$	3,409,081	73%	$	4,794,000	77%
Fabrication Services	389,731		22%	466,998		22%	1,259,609		27%	1,406,713		23%
Total	$	1,737,764		$	2,137,877		$	4,668,690		$	6,200,713

OPERATING INCOME(LOSS) FROM CONTINUINGOPERATIONS			% ofRevenue			% ofRevenue			% ofRevenue			% ofRevenue
OPERATING INCOME(LOSS) FROM CONTINUINGOPERATIONS			% ofRevenue			% ofRevenue			% ofRevenue			% ofRevenue
Engineering & Construction	$	13,051	1.0%	$	126,824	7.6%	$	(505,855)	(14.8)%	$	323,891	6.8%
Fabrication Services	26,142		6.7%	27,752		5.9%	97,599		7.7%	89,534		6.4%
Total operating groups	39,193		2.3%	154,576		7.2%	(408,256)		(8.7)%	413,425		6.7%
Restructuring related costs	(26,882)			—			(30,882)			—
Total	$	12,311	0.7%	$	154,576	7.2%	$	(439,138)	(9.4)%	$	413,425	6.7%

BACKLOG (1)	September 30, 2017			% of Total			December 31, 2016			% of Total
Engineering & Construction	$	9,190,401		86%			$	9,998,322		85%
Fabrication Services	1,482,218			14%			1,818,963			15%
Total	$	10,672,619					$	11,817,285

(1)

New awards represent the value of new project commitments received by the Company during a given period, as well as scope growth on existing commitments. Backlog includes the value of new awards until work is performed and revenue is recognized or until cancellation. Backlog may fluctuate with currency movements.

Chicago Bridge & Iron Company N.V.
Discontinued Operations Statements of Operations
(in thousands, except per share data)

	Three Months Ended September 30,
	2017									2016
	CapitalServices			Technology			Total			CapitalServices			Technology			Total

Revenue	$	—		$	170,143		$	170,143		$	530,912		$	183,321		$	714,233
Cost of revenue	—			103,345			103,345			490,758			113,890			604,648
Gross profit	—			66,798			66,798			40,154			69,431			109,585
% of Revenue	—		%	39.3		%	39.3		%	7.6		%	37.9		%	15.3		%

Selling and administrative expense	—			8,991			8,991			14,312			10,589			24,901
% of Revenue	—		%	5.3		%	5.3		%	2.7		%	5.8		%	3.5		%

Intangibles amortization	—			1,520			1,520			4,030			4,518			8,548
Equity earnings	—			(4,879)			(4,879)			—			(1,609)			(1,609)
Other operating expense (income), net	—			8			8			(1,201)			—			(1,201)
Operating income from discontinuedoperations	—			61,158			61,158			23,013			55,933			78,946
% of Revenue	—		%	35.9		%	35.9		%	4.3		%	30.5		%	11.1		%

Interest expense	—			(55,512)			(55,512)			(5,989)			(18,858)			(24,847)
Interest income	—			—			—			302			14			316
Income from discontinued operationsbefore taxes	—			5,646			5,646			17,326			37,089			54,415

Income tax benefit (expense)	5,166			(3,751)			1,415			(6,236)			(12,836)			(19,072)
Net income from discontinued operations	5,166			1,895			7,061			11,090			24,253			35,343

Less: Net income from discontinued operationsattributable to noncontrolling interests	—			—			—			(930)			—			(930)
Net income from discontinued operationsattributable to CB&I	$	5,166		$	1,895		$	7,061		$	10,160		$	24,253		$	34,413


	Nine Months Ended September 30,
	2017									2016
	CapitalServices			Technology			Total			CapitalServices			Technology			Total

Revenue	$	1,114,655		$	454,840		$	1,569,495		$	1,655,583		$	491,858		$	2,147,441
Cost of revenue	1,047,614			281,870			1,329,484			1,546,823			301,239			1,848,062
Gross profit	67,041			172,970			240,011			108,760			190,619			299,379
% of Revenue	6.0		%	38.0		%	15.3		%	6.6		%	38.8		%	13.9		%

Selling and administrative expense	29,541			27,079			56,620			39,499			33,436			72,935
% of Revenue	2.7		%	6.0		%	3.6		%	2.4		%	6.8		%	3.4		%

Intangibles amortization	2,550			10,503			13,053			12,260			13,545			25,805
Equity earnings	—			(9,662)			(9,662)			—			(8,030)			(8,030)
Loss on net assets sold	64,817			—			64,817			—			—			—
Other operating expense (income), net	504			38			542			(1,505)			4			(1,501)
Operating (loss) income from discontinuedoperations	(30,371)			145,012			114,641			58,506			151,664			210,170
% of Revenue	(2.7)		%	31.9		%	7.3		%	3.5		%	30.8		%	9.8		%

Interest expense	(13,440)			(110,579)			(124,019)			(17,699)			(56,039)			(73,738)
Interest income	16			—			16			916			53			969
(Loss) income from discontinuedoperations before taxes	(43,795)			34,433			(9,362)			41,723			95,678			137,401

Income tax expense	(62,392)			(19,162)			(81,554)			(15,915)			(33,223)			(49,138)
Net (loss) income from discontinuedoperations	(106,187)			15,271			(90,916)			25,808			62,455			88,263

Less: Net income from discontinued operationsattributable to noncontrolling interests	(870)			—			(870)			(1,815)			—			(1,815)
Net (loss) income from discontinuedoperations attributable to CB&I	$	(107,057)		$	15,271		$	(91,786)		$	23,993		$	62,455		$	86,448

Chicago Bridge & Iron Company N.V.
Condensed Consolidated Balance Sheets
(in thousands)

	September 30,		December 31,
	2017		2016
ASSETS

Current assets	$	1,816,413	$	1,937,976
Equity investments	66,164		35,541
Property and equipment, net	393,015		434,252
Goodwill and other intangibles, net	2,413,419		2,395,474
Assets of discontinued operations	1,103,888		1,986,480
Other non-current assets	1,284,114		1,049,697
Total assets	$	7,077,013	$	7,839,420

LIABILITIES AND SHAREHOLDERS' EQUITY

Current maturities of long-term debt and other borrowings, net	$	2,079,913	$	911,410
Other current liabilities	2,981,531		3,062,222
Long-term debt, net	—		1,287,923
Liabilities of discontinued operations	349,340		600,907
Other non-current liabilities	407,383		415,621

Shareholders' equity	1,258,846		1,561,337
Total liabilities and shareholders' equity	$	7,077,013	$	7,839,420


Condensed Consolidated Statements of Cash Flows and Other Financial Data
(in thousands)

	Nine Months
	Ended September 30,
	2017		2016
CASH FLOWS

Cash flows from operating activities	$	(687,998)	$	495,041
Cash flows from investing activities	747,038		(151,686)
Cash flows from financing activities	(298,735)		(268,422)
Effect of exchange rate changes on cash and cash equivalents	76,408		(10,188)
(Decrease) increase in cash and cash equivalents	(163,287)		64,745
Cash and cash equivalents, beginning of the year	505,156		550,221
Cash and cash equivalents, end of the period	341,869		614,966
Cash and cash equivalents, end of period - discontinued operations	—		(16,412)
Cash and cash equivalents, end of period - continuing operations	$	341,869	$	598,554

OTHER FINANCIAL DATA

(Increase) decrease in receivables, net	$	(197,532)	$	46,418
Change in contracts in progress, net	34,994		(252,857)
Decrease in inventory	65,841		49,473
(Decrease) increase in accounts payable	(48,801)		11,830
Change in contract capital	$	(145,498)	$	(145,136)

Depreciation and amortization	$	65,637	$	93,285
Capital expenditures	$	40,089	$	37,855