Chicago Bridge & Iron Company (Chicago Bridge & Iron Company N.V.), (NYSE: CBI), known commonly as CB&I, is a large multinational conglomerate engineering, procurement and construction (EPC) company. CB&I specializes in projects for oil and gas companies. CB&I operates from more than 80 locations around the world, and as of August 1, 2009, CB&I has a total of approximately 16,000 employees.
Forward-looking statements involve known and unknown risks and uncertainties. In addition to the material risks
listed under “Item 1A. Risk Factors” above that may cause business conditions or our actual results, performance or
achievements to be materially different from those expressed or implied by any forward-looking statements, the
following are some, but not all, of the factors that might cause business conditions or our actual results, performance or
achievements to be materially different from those expressed or implied by any forward-looking statements, or
contribute to such differences: the impact (and potential worsening) of the current turmoil or weakness in worldwide
financial, credit, and economic markets on us or our backlog, prospects, clients, vendors or subcontractors, credit
facilities, or compliance with lending covenants; our ability to realize cost savings from our expected performance of
contracts, whether as a result of improper estimates, performance, or otherwise; uncertain timing and funding of new
contract awards, as well as project cancellations; cost overruns on fixed price or similar contracts, whether as a result of
improper estimates, performance, or otherwise; risks associated with labor productivity; risks associated with
percentage-of-completion accounting; our ability to settle or negotiate unapproved change orders and claims; changes
in the costs or availability of, or delivery schedule for, equipment, components, materials, labor or subcontractors;
adverse impacts from weather affecting our performance and timeliness of completion, which could lead to increased
costs and affect the quality, costs or availability of, or delivery schedule for, equipment, components, materials, labor or
subcontractors; operating risks, which could lead to increased costs and affect the quality, costs or availability of, or
delivery schedule for, equipment, components, materials, labor or subcontractors; increased competition; fluctuating
revenue resulting from a number of factors, including a decline in energy prices and the cyclical nature of the individual
markets in which our customers operate; delayed or lower than expected activity in the hydrocarbon industry, demand
from which is the largest component of our revenue; lower than expected growth in our primary end markets, including
but not limited to LNG and energy processes; risks inherent in acquisitions and our ability to complete or obtain
financing for proposed acquisitions; our ability to integrate and successfully operate and manage acquired businesses
and the risks associated with those businesses; the non-competitiveness or unavailability of, or lack of demand or loss of
legal protection for, our intellectual property rights; failure to keep pace with technological changes; failure of our
patents or licensed technologies to perform as expected or to remain competitive, current, in demand, profitable or
enforceable; adverse outcomes of pending claims or litigation or the possibility of new claims or litigation, and the
potential effect of such claims or litigation on our business, financial condition, or results of operations; lack of
necessary liquidity to provide bid, performance, advance payment and retention bonds, guarantees, or letters of credit
securing our obligations under our bids and contracts or to finance expenditures prior to the receipt of payment for the
performance of contracts; proposed and actual revisions to U.S. and non-U.S. tax laws, and interpretation of said laws,
Dutch tax treaties with foreign countries and U.S. tax treaties with non-U.S. countries (including, but not limited to The
Netherlands), which would seek to increase income taxes payable; political and economic conditions including, but not
limited to, war, conflict or civil or economic unrest in countries in which we operate; compliance with applicable laws
and regulations in any one or more of the countries in which we operate including, without limitation, the Foreign
Corrupt Practices Act and those concerning the environment, export controls and sanctions program; our inability to
properlymanage or hedge currency or similar risks; and a downturn, disruption, or stagnation in the economy in general.
Although we believe the expectations reflected in our forward-looking statements are reasonable, we cannot
guarantee future performance or results. You should not unduly rely on any forward-looking statements. Eachforward-looking statement is made and applies only as of the date of the particular statement, and we are not
obligated to update, withdraw, 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. All
forward-looking statements attributed or attributable to us or to persons acting on our behalf are expressly qualified
in their entirety by this paragraph entitled “Forward-Looking Statements”.
Our primary internal source of liquidity is cash flow generated from operations. Capacity under a revolving
credit facility is also available, if necessary, to fund operating or investing activities. We have a five-year
$1.1 billion, committed and unsecured revolving credit facility (the “Revolving Facility”), with JPMorgan Chase
Bank, N.A., as administrative agent, and Bank of America, N.A., as syndication agent, which terminates in October
2011. As of December 31, 2009, no direct borrowings were outstanding under the facility, but we had issued
$406.6 million of letters of credit. Such letters of credit are generally issued to customers in the ordinary course of
business to support advance payments and performance guarantees or in lieu of retention on our contracts. As of
December 31, 2009, we had $693.4 million of available capacity under the facility. The facility has a borrowing
sublimit of $550.0 million and certain restrictive covenants, the most restrictive of which include a maximum
leverage ratio, a minimum fixed charge coverage ratio and a minimum net worth level. It also places restrictions
regarding subsidiary indebtedness, sales of assets, liens, investments, type of business conducted and mergers and
acquisitions, among other restrictions. In the event that we were to borrow funds under the facility, interest would be
assessed at either prime plus an applicable floating margin or LIBOR plus an applicable floating margin.
In addition to the Revolving Facility, we have three committed and unsecured letter of credit and term loan
agreements (the “LC Agreements”) with Bank of America, N.A., as administrative agent, JPMorgan Chase Bank,
N.A., and various private placement note investors. Under the terms of the LC Agreements, either banking
institution (the “LC Issuers”) can issue letters of credit. In the aggregate, they provide up to $275.0 million of
capacity. As of December 31, 2009, no direct borrowings were outstanding under the LC Agreements, but all three
tranches were fully utilized. Tranche A, a $50.0 million facility, and Tranche B, a $100.0 million facility, are both
five-year facilities which terminate in November 2011. Tranche C is an eight-year, $125.0 million facility expiring
in November 2014. The LC Agreements have certain restrictive covenants, the most restrictive of which include a
minimum net worth level, a minimum fixed charge coverage ratio and a maximum leverage ratio. They also include
restrictions with regard to subsidiary indebtedness, sales of assets, liens, investments, type of business conducted,
affiliate transactions, sales and leasebacks, and mergers and acquisitions, among other restrictions. In the event of
default under the LC Agreements, including our failure to reimburse a draw against an issued letter of credit, the LC
Issuers could transfer their claim against us, to the extent such amount is due and payable by us under the LC
Agreements, to the private placement lenders, creating a term loan that is due and payable no later than the stated
maturity of the respective LC Agreement. In addition to quarterly letter of credit fees that we pay under the LC
Agreements, to the extent that a term loan is in effect, we would be assessed a floating rate of interest over LIBOR.
Estimated Reserves for Insurance Matters —We maintain insurance coverage for various aspects of our
business and operations. However, we retain a portion of anticipated losses through the use of deductibles and selfinsured
retentions for our exposures related to third-party liability and workers’ compensation. Management
regularly reviews estimates of reported and unreported claims through analysis of historical and projected trends, in
conjunction with actuaries and other consultants, and provides for losses through insurance reserves. As claims
develop and additional information becomes available, adjustments to loss reserves may be required. If actual
results are not consistent with our assumptions, we may be exposed to gains or losses that could be material. A
hypothetical ten percent change in our self-insurance reserves at December 31, 2009 would have impacted our pretax
income by approximately $3.6 million for 2009.
Cumulative cost and earnings recognized to date less cumulative billings is reported on the Consolidated
Balance Sheets as costs and estimated earnings in excess of billings. Cumulative billings in excess of cumulative
costs and earnings recognized to date is reported on the Consolidated Balance Sheets as billings in excess of costs
and estimated earnings. Any billed revenue that has not been collected is reported as accounts receivable. The
timing of when we bill our customers is generally based upon advance billing terms or contingent upon completion
of certain phases of the work, as stipulated in the contract. At December 31, 2009 and 2008, accounts receivable
included contract retentions totaling $23,200 and $32,900, respectively, to be collected within one year. Contract
retentions collectible beyond one year are included in non-current contract retentions on the Consolidated Balance
Sheets and totaled $7,146 (of which $5,160 is expected to be collected in 2011) and $1,973 at December 31, 2009
and 2008, respectively. Cost of revenue includes direct contract costs such as material and construction labor, and
indirect costs which are attributable to contract activity.
Forward-looking statements involve known and unknown risks and uncertainties. In addition to the material risks
listed under “Item 1A. Risk Factors” above that may cause business conditions or our actual results, performance or
achievements to be materially different from those expressed or implied by any forward-looking statements, the
following are some, but not all, of the factors that might cause business conditions or our actual results, performance or
achievements to be materially different from those expressed or implied by any forward-looking statements, or
contribute to such differences: the impact (and potential worsening) of the current turmoil or weakness in worldwide
financial, credit, and economic markets on us or our backlog, prospects, clients, vendors or subcontractors, credit
facilities, or compliance with lending covenants; our ability to realize cost savings from our expected performance of
contracts, whether as a result of improper estimates, performance, or otherwise; uncertain timing and funding of new
contract awards, as well as project cancellations; cost overruns on fixed price or similar contracts, whether as a result of
improper estimates, performance, or otherwise; risks associated with labor productivity; risks associated with
percentage-of-completion accounting; our ability to settle or negotiate unapproved change orders and claims; changes
in the costs or availability of, or delivery schedule for, equipment, components, materials, labor or subcontractors;
adverse impacts from weather affecting our performance and timeliness of completion, which could lead to increased
costs and affect the quality, costs or availability of, or delivery schedule for, equipment, components, materials, labor or
subcontractors; operating risks, which could lead to increased costs and affect the quality, costs or availability of, or
delivery schedule for, equipment, components, materials, labor or subcontractors; increased competition; fluctuating
revenue resulting from a number of factors, including a decline in energy prices and the cyclical nature of the individual
markets in which our customers operate; delayed or lower than expected activity in the hydrocarbon industry, demand
from which is the largest component of our revenue; lower than expected growth in our primary end markets, including
but not limited to LNG and energy processes; risks inherent in acquisitions and our ability to complete or obtain
financing for proposed acquisitions; our ability to integrate and successfully operate and manage acquired businesses
and the risks associated with those businesses; the non-competitiveness or unavailability of, or lack of demand or loss of
legal protection for, our intellectual property rights; failure to keep pace with technological changes; failure of our
patents or licensed technologies to perform as expected or to remain competitive, current, in demand, profitable or
enforceable; adverse outcomes of pending claims or litigation or the possibility of new claims or litigation, and the
potential effect of such claims or litigation on our business, financial condition, or results of operations; lack of
necessary liquidity to provide bid, performance, advance payment and retention bonds, guarantees, or letters of credit
securing our obligations under our bids and contracts or to finance expenditures prior to the receipt of payment for the
performance of contracts; proposed and actual revisions to U.S. and non-U.S. tax laws, and interpretation of said laws,
Dutch tax treaties with foreign countries and U.S. tax treaties with non-U.S. countries (including, but not limited to The
Netherlands), which would seek to increase income taxes payable; political and economic conditions including, but not
limited to, war, conflict or civil or economic unrest in countries in which we operate; compliance with applicable laws
and regulations in any one or more of the countries in which we operate including, without limitation, the Foreign
Corrupt Practices Act and those concerning the environment, export controls and sanctions program; our inability to
properlymanage or hedge currency or similar risks; and a downturn, disruption, or stagnation in the economy in general.
Although we believe the expectations reflected in our forward-looking statements are reasonable, we cannot
guarantee future performance or results. You should not unduly rely on any forward-looking statements. Eachforward-looking statement is made and applies only as of the date of the particular statement, and we are not
obligated to update, withdraw, 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. All
forward-looking statements attributed or attributable to us or to persons acting on our behalf are expressly qualified
in their entirety by this paragraph entitled “Forward-Looking Statements”.
Our primary internal source of liquidity is cash flow generated from operations. Capacity under a revolving
credit facility is also available, if necessary, to fund operating or investing activities. We have a five-year
$1.1 billion, committed and unsecured revolving credit facility (the “Revolving Facility”), with JPMorgan Chase
Bank, N.A., as administrative agent, and Bank of America, N.A., as syndication agent, which terminates in October
2011. As of December 31, 2009, no direct borrowings were outstanding under the facility, but we had issued
$406.6 million of letters of credit. Such letters of credit are generally issued to customers in the ordinary course of
business to support advance payments and performance guarantees or in lieu of retention on our contracts. As of
December 31, 2009, we had $693.4 million of available capacity under the facility. The facility has a borrowing
sublimit of $550.0 million and certain restrictive covenants, the most restrictive of which include a maximum
leverage ratio, a minimum fixed charge coverage ratio and a minimum net worth level. It also places restrictions
regarding subsidiary indebtedness, sales of assets, liens, investments, type of business conducted and mergers and
acquisitions, among other restrictions. In the event that we were to borrow funds under the facility, interest would be
assessed at either prime plus an applicable floating margin or LIBOR plus an applicable floating margin.
In addition to the Revolving Facility, we have three committed and unsecured letter of credit and term loan
agreements (the “LC Agreements”) with Bank of America, N.A., as administrative agent, JPMorgan Chase Bank,
N.A., and various private placement note investors. Under the terms of the LC Agreements, either banking
institution (the “LC Issuers”) can issue letters of credit. In the aggregate, they provide up to $275.0 million of
capacity. As of December 31, 2009, no direct borrowings were outstanding under the LC Agreements, but all three
tranches were fully utilized. Tranche A, a $50.0 million facility, and Tranche B, a $100.0 million facility, are both
five-year facilities which terminate in November 2011. Tranche C is an eight-year, $125.0 million facility expiring
in November 2014. The LC Agreements have certain restrictive covenants, the most restrictive of which include a
minimum net worth level, a minimum fixed charge coverage ratio and a maximum leverage ratio. They also include
restrictions with regard to subsidiary indebtedness, sales of assets, liens, investments, type of business conducted,
affiliate transactions, sales and leasebacks, and mergers and acquisitions, among other restrictions. In the event of
default under the LC Agreements, including our failure to reimburse a draw against an issued letter of credit, the LC
Issuers could transfer their claim against us, to the extent such amount is due and payable by us under the LC
Agreements, to the private placement lenders, creating a term loan that is due and payable no later than the stated
maturity of the respective LC Agreement. In addition to quarterly letter of credit fees that we pay under the LC
Agreements, to the extent that a term loan is in effect, we would be assessed a floating rate of interest over LIBOR.
Estimated Reserves for Insurance Matters —We maintain insurance coverage for various aspects of our
business and operations. However, we retain a portion of anticipated losses through the use of deductibles and selfinsured
retentions for our exposures related to third-party liability and workers’ compensation. Management
regularly reviews estimates of reported and unreported claims through analysis of historical and projected trends, in
conjunction with actuaries and other consultants, and provides for losses through insurance reserves. As claims
develop and additional information becomes available, adjustments to loss reserves may be required. If actual
results are not consistent with our assumptions, we may be exposed to gains or losses that could be material. A
hypothetical ten percent change in our self-insurance reserves at December 31, 2009 would have impacted our pretax
income by approximately $3.6 million for 2009.
Cumulative cost and earnings recognized to date less cumulative billings is reported on the Consolidated
Balance Sheets as costs and estimated earnings in excess of billings. Cumulative billings in excess of cumulative
costs and earnings recognized to date is reported on the Consolidated Balance Sheets as billings in excess of costs
and estimated earnings. Any billed revenue that has not been collected is reported as accounts receivable. The
timing of when we bill our customers is generally based upon advance billing terms or contingent upon completion
of certain phases of the work, as stipulated in the contract. At December 31, 2009 and 2008, accounts receivable
included contract retentions totaling $23,200 and $32,900, respectively, to be collected within one year. Contract
retentions collectible beyond one year are included in non-current contract retentions on the Consolidated Balance
Sheets and totaled $7,146 (of which $5,160 is expected to be collected in 2011) and $1,973 at December 31, 2009
and 2008, respectively. Cost of revenue includes direct contract costs such as material and construction labor, and
indirect costs which are attributable to contract activity.