NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2017
($ and share values in thousands, except per share data)
(Unaudited)
1
.
ORGANIZATION AND NATURE OF OPERATIONS
Organization and Nature of Operations
—Founded in
1889
, Chicago Bridge & Iron Company N.V. (“CB&I”, “we”, “our” or “us”) provides a wide range of services, including conceptual design, technology, engineering, procurement, fabrication, modularization, construction and commissioning services to customers in the energy infrastructure market throughout the world. Our business is aligned into
three
operating groups, which represent our reportable segments: Engineering & Construction; Fabrication Services; and Technology. See
Note 2
and
Note 4
for discussions of our discontinued operations and
Note 15
for a discussion of our reportable segments and related financial information.
2
.
SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting and Consolidation
—The accompanying unaudited interim Condensed Consolidated Financial Statements (“Financial Statements”) are prepared in accordance with the rules and regulations of the United States (“U.S.”) Securities and Exchange Commission (the “SEC”) and accounting principles generally accepted in the United States of America (“U.S. GAAP”). These Financial Statements include all wholly-owned subsidiaries and those entities which we are required to consolidate. See the “Partnering Arrangements” section of this footnote for further discussion of our consolidation policy for those entities that are not wholly-owned. Intercompany balances and transactions are eliminated in consolidation.
Basis of Presentation
—We believe these Financial Statements include all adjustments, which are of a normal recurring nature, necessary for a fair presentation of our results of operations for the
three and six months ended June 30, 2017
and
2016
, our financial position as of
June 30, 2017
and our cash flows for the
six months ended June 30, 2017
and
2016
. The
December 31, 2016
Condensed Consolidated Balance Sheet (the “Balance Sheet”) was derived from our
December 31, 2016
audited Consolidated Balance Sheet, adjusted to conform to our current year presentation.
On February 27, 2017, we entered into a definitive agreement (the “CS Agreement”) with CSVC Acquisition Corp (“CSVC”), under which CSVC agreed to acquire our capital services operations, which are primarily comprised of our former Capital Services reportable segment and provides comprehensive and integrated maintenance services, environmental engineering and remediation, construction services, program management, and disaster response and recovery services for private-sector customers and governments (the “Capital Services Operations”). We completed the sale of our Capital Services Operations on June 30, 2017 (the “Closing Date”). We considered the Capital Services Operations to be a discontinued operation in the first quarter 2017, as the divestiture represented a strategic shift and will have a material effect on our operations and financial results. Operating results of the Capital Services Operations have been classified as a discontinued operation within the Condensed Consolidated Statements of Operations (the “Statement of Operations”) for the
three and six months ended June 30, 2017
and
2016
. Further, the assets and liabilities of the Capital Services Operations have been classified as assets and liabilities of discontinued operations within our
December 31, 2016
Balance Sheet, and our June 30, 2017 Balance Sheet reflects the impact of the sale. Cash flows of the Capital Services Operations are not reported separately within our Condensed Consolidated Statements of Cash flows. Unless otherwise noted, the footnotes to our Financial Statements relate to our continuing operations. See
Note 4
for additional discussion of our discontinued operations and the impact of the sale of the Capital Services Operations.
In July 2017, we initiated a plan to market and sell our Technology operations (primarily comprised of our Technology reportable segment) and Engineered Products operations (representing a portion of our Fabrication Services reportable segment) (collectively, the “Technology Operations”), the proceeds of which will be used to significantly reduce our outstanding debt. We anticipate classifying the Technology Operations as held for sale during the third quarter 2017.
We believe the disclosures accompanying these Financial Statements are adequate to make the information presented not misleading. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC for interim reporting periods. The results of operations and cash flows for the interim periods are not necessarily indicative of the results to be expected for the full year. The accompanying Financial Statements should be read in conjunction with our Consolidated Financial Statements and notes thereto included in our
2016
Annual Report on Form 10-K (“
2016
Annual Report”).
Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Use of Estimates
—The preparation of our Financial Statements in conformity with U.S. GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosures of contingent assets and liabilities. We believe the most significant estimates and judgments are associated with revenue recognition for our contracts, including estimating costs and the recognition of incentive fees and unapproved change orders and claims; fair value and recoverability assessments that must be periodically performed with respect to long-lived tangible assets, goodwill and other intangible assets; valuation of deferred tax assets and financial instruments; the determination of liabilities related to self-insurance programs and income taxes; and consolidation determinations with respect to our partnering arrangements. If the underlying estimates and assumptions upon which our Financial Statements are based change in the future, actual amounts may differ from those included in the accompanying Financial Statements.
Revenue Recognition
—Our revenue is primarily derived from long-term contracts and is generally recognized using the percentage of completion (“POC”) method, primarily based on the percentage that actual costs-to-date bear to total estimated costs to complete each contract. We follow the guidance of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Revenue Recognition Topic 605-35 for accounting policies relating to our use of the POC method, estimating costs, and revenue recognition, including the recognition of incentive fees, unapproved change orders and claims, and combining and segmenting contracts. We primarily utilize the cost-to-cost approach to estimate POC as we believe this method is less subjective than relying on assessments of physical progress. Under the cost-to-cost approach, the use of estimated costs to complete each contract is a significant variable in the process of determining recognized revenue and is a significant factor in the accounting for contracts. Significant estimates that impact the cost to complete each contract are costs of engineering, materials, components, equipment, labor and subcontracts; labor productivity; schedule durations, including subcontractor or supplier progress; liquidated damages; contract disputes, including claims; achievement of contractual performance requirements; and contingency, among others. The cumulative impact of revisions in total cost estimates during the progress of work is reflected in the period in which these changes become known, including, to the extent required, the reversal of profit recognized in prior periods and the recognition of losses expected to be incurred on contracts in progress. Due to the various estimates inherent in our contract accounting, actual results could differ from those estimates. See
Note 14
for discussion of projects with significant changes in estimated margins during the
three and six months ended June 30, 2017
and
2016
.
Our long-term contracts are awarded on a competitively bid and negotiated basis and the timing of revenue recognition may be impacted by the terms of such contracts. We use a range of contracting options, including cost-reimbursable, fixed-price and hybrid, which has both cost-reimbursable and fixed-price characteristics. Fixed-price contracts, and hybrid contracts with a more significant fixed-price component, tend to provide us with greater control over project schedule and the timing of when work is performed and costs are incurred, and accordingly, when revenue is recognized. Cost-reimbursable contracts, and hybrid contracts with a more significant cost-reimbursable component, generally provide our customers with greater influence over the timing of when we perform our work, and accordingly, such contracts often result in less predictability with respect to the timing of revenue recognition. Contract revenue for our long-term contracts recognized under the POC method reflects the original contract price adjusted for approved change orders and estimated recoveries for incentive fees, unapproved change orders and claims, and liquidated damages. We recognize revenue associated with incentive fees when the value can be reliably estimated and recovery is probable. We recognize revenue associated with unapproved change orders and claims to the extent the related costs have been incurred, the value can be reliably estimated and recovery is probable. Our recorded incentive fees, unapproved change orders and claims reflect our best estimate of recovery amounts; however, the ultimate resolution and amounts received could differ from these estimates. Liquidated damages are reflected as a reduction to contract price to the extent they are deemed probable. See
Note 14
for additional discussion of our recorded unapproved change orders, claims and incentives.
With respect to our engineering, procurement, and construction (“EPC”) services, our contracts are not segmented between types of services, such as engineering and construction, if each of the EPC components is negotiated concurrently or if the pricing of any such services is subject to the ultimate negotiation and agreement of the entire EPC contract. However, an EPC contract including technology or fabrication services may be segmented if we satisfy the segmenting criteria in ASC 605-35. Revenue recorded in these situations is based on our prices and terms for similar services to third party customers. Segmenting a contract may result in different interim rates of profitability for each scope of service than if we had recognized revenue without segmenting. In some instances, we may combine contracts that are entered into in multiple phases, but are interdependent and include pricing considerations by us and the customer that are impacted by all phases of the project. Otherwise, if each phase is independent of the other and pricing considerations do not give effect to another phase, the contracts will not be combined.
Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Cost of revenue for our long-term contracts includes direct contract costs, such as materials and labor, and indirect costs that are attributable to contract activity. The timing of when we bill our customers is generally dependent upon advance billing terms, milestone billings based on the completion of certain phases of the work, or when services are provided. Projects with costs and estimated earnings recognized to date in excess of cumulative billings is reported on the Balance Sheet as costs and estimated earnings in excess of billings. Projects with cumulative billings in excess of costs and estimated earnings recognized to date is reported on the Balance Sheet as billings in excess of costs and estimated earnings. The net balances on our Balance Sheet are collectively referred to as Contracts in Progress, net and the components of these balances at
June 30, 2017
and
December 31, 2016
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
December 31, 2016
|
|
|
Asset
|
|
Liability
|
|
Asset
|
|
Liability
|
Costs and estimated earnings on contracts in progress
|
|
$
|
4,334,524
|
|
|
$
|
28,697,752
|
|
|
$
|
8,466,638
|
|
|
$
|
23,408,316
|
|
Billings on contracts in progress
|
|
(3,916,486
|
)
|
|
(30,402,216
|
)
|
|
(8,055,889
|
)
|
|
(24,803,665
|
)
|
Contracts in progress, net
|
|
$
|
418,038
|
|
|
$
|
(1,704,464
|
)
|
|
$
|
410,749
|
|
|
$
|
(1,395,349
|
)
|
Any uncollected billed amounts, including contract retentions, are reported as accounts receivable. At
June 30, 2017
and
December 31, 2016
, accounts receivable included contract retentions of approximately
$64,500
and
$72,100
, respectively. Contract retentions due beyond one year were approximately
$46,600
and
$37,500
at
June 30, 2017
and
December 31, 2016
, respectively.
Revenue for our service contracts that do not satisfy the criteria for revenue recognition under the POC method is recorded at the time services are performed. Revenue associated with incentive fees for these contracts is recognized when earned. Unbilled receivables for our service contracts are recorded within accounts receivable and were approximately
$9,600
and
$16,100
at
June 30, 2017
and
December 31, 2016
, respectively.
Revenue for our pipe and steel fabrication and catalyst manufacturing contracts that are independent of an EPC contract, or for which we satisfy the segmentation criteria discussed above, is recognized upon shipment of the fabricated or manufactured units. During the fabrication or manufacturing process, all related direct and allocable indirect costs are capitalized as work in process inventory and such costs are recorded as cost of revenue at the time of shipment.
Our billed and unbilled revenue may be exposed to potential credit risk if our customers should encounter financial difficulties, and we maintain reserves for specifically-identified potential uncollectible receivables. At
June 30, 2017
and
December 31, 2016
, our allowances for doubtful accounts were not material.
Other Operating Expense (Income), Net
—
Other operating expense (income), net
generally represents (gains) losses associated with the sale or disposition of property and equipment. For the
three and six months ended June 30, 2017
, other operating (income) expense, net also included accrued future operating lease expense for vacated facility capacity where we remain contractually obligated to a lessor of approximately
$3,000
.
Recoverability of Goodwill
—Goodwill is not amortized to earnings, but instead is reviewed for impairment at least annually at a reporting unit level, absent any indicators of impairment or when other actions require an impairment assessment (such as a change in reporting units). We perform our annual impairment assessment during the fourth quarter of each year based upon balances as of October 1. We identify a potential impairment by comparing the fair value of the applicable reporting unit to its net book value, including goodwill. If the net book value exceeds the fair value of the reporting unit, an indication of potential impairment exists, and we measure the impairment by comparing the carrying value of the reporting unit’s goodwill to its implied fair value. To determine the fair value of our reporting units and test for impairment, we utilize an income approach (discounted cash flow method) as we believe this is the most direct approach to incorporate the specific economic attributes and risk profiles of our reporting units into our valuation model. This is consistent with the methodology used to determine the fair value of our reporting units in previous years. We generally do not utilize a market approach given the lack of relevant information generated by market transactions involving comparable businesses. However, to the extent market indicators of fair value become available, we consider such market indicators in our discounted cash flow analysis and determination of fair value. See
Note 6
for additional discussion of our goodwill.
Recoverability of Other Long-Lived Assets
—We amortize our finite-lived intangible assets on a straight-line basis with lives ranging from
6
to
20
years, absent any indicators of impairment. We review tangible assets and finite-lived intangible assets for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. If a recoverability assessment is required, the estimated future cash flow associated with the asset or asset group will be compared to their respective carrying amounts to determine if an impairment exists. See
Note 6
for additional discussion of our intangible assets.
Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Earnings Per Share (“EPS”)—
Basic EPS is calculated by dividing net income attributable to CB&I by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the assumed conversion of dilutive securities, consisting of restricted shares, performance based shares (where performance criteria have been met), stock options and directors’ deferred-fee shares. See
Note 3
for calculations associated with basic and diluted EPS.
Cash Equivalents
—Cash equivalents are considered to be highly liquid securities with original maturities of three months or less.
Inventory
—Inventory is recorded at the lower of cost and net realizable value and cost is determined using the first-in-first-out or weighted-average cost method. The cost of inventory includes acquisition costs, production or conversion costs, and other costs incurred to bring the inventory to a current location and condition. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. An allowance for excess or inactive inventory is recorded based upon an analysis that considers current inventory levels, historical usage patterns, estimates of future sales expectations and salvage value. See
Note 5
for additional discussion of our inventory.
Foreign Currency
—The nature of our business activities involves the management of various financial and market risks, including those related to changes in foreign currency exchange rates. The effects of translating financial statements of foreign operations into our reporting currency are recognized as a cumulative translation adjustment in accumulated other comprehensive income (loss) (“AOCI”) which is net of tax, where applicable. Foreign currency transactional and re-measurement exchange gains (losses) are included within cost of revenue and were not material for the
three and six months ended June 30, 2017
and
2016
.
Financial Instruments
—We do not engage in currency speculation; however, we utilize foreign currency exchange rate derivatives on an ongoing basis to hedge against certain foreign currency related operating exposures. We generally seek hedge accounting treatment for contracts used to hedge operating exposures and designate them as cash flow hedges. Therefore, gains and losses, exclusive of credit risk and forward points (which represent the time value component of the fair value of our derivative positions), are included in AOCI until the associated underlying operating exposure impacts our earnings. Changes in the fair value of (1) credit risk and forward points, (2) instruments deemed ineffective during the period, and (3) instruments that we do not designate as cash flow hedges are recognized within cost of revenue.
For those contracts designated as cash flow hedges, we document all relationships between the derivative instruments and associated hedged items, as well as our risk-management objectives and strategy for undertaking hedge transactions. This process includes linking all derivatives to specific firm commitments or highly-probable forecasted transactions. We continually assess, at inception and on an ongoing basis, the effectiveness of derivative instruments in offsetting changes in the cash flow of the designated hedged items. Hedge accounting designation is discontinued when (1) it is determined that the derivative is no longer highly effective in offsetting changes in the cash flow of the hedged item, including firm commitments or forecasted transactions, (2) the derivative is sold, terminated, exercised, or expires, (3) it is no longer probable that the forecasted transaction will occur, or (4) we determine that designating the derivative as a hedging instrument is no longer appropriate. See
Note 9
for additional discussion of our financial instruments.
Income Taxes
—
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis using currently enacted income tax rates for the years in which the differences are expected to reverse. A valuation allowance (“VA”) is provided to offset any net deferred tax assets (“DTA(s)”) if, based upon the available evidence, it is more likely than not that some or all of the DTAs will not be realized. The realization of our net DTAs depends upon our ability to generate sufficient future taxable income of the appropriate character and in the appropriate jurisdictions.
Income tax and associated interest and penalty reserves, where applicable, are recorded in those instances where we consider it more likely than not that additional tax will be due in excess of amounts reflected in income tax returns filed worldwide, irrespective of whether or not we have received tax assessments. We continually review our exposure to additional income tax obligations and, as further information is known or events occur, changes in our tax and penalty reserves may be recorded within income tax expense and changes in interest reserves may be recorded in interest expense.
Partnering Arrangements
—
In the ordinary course of business, we execute specific projects and conduct certain operations through joint venture, consortium and other collaborative arrangements (collectively referred to as “venture(s)”). We have various ownership interests in these ventures, with such ownership typically proportionate to our decision making and distribution rights. The ventures generally contract directly with the third party customer; however, services may be performed directly by the ventures, or may be performed by us, our partners, or a combination thereof.
Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Venture net assets consist primarily of working capital and property and equipment, and assets may be restricted from being used to fund obligations outside of the venture. These ventures typically have limited third party debt or have debt that is non-recourse in nature; however, they may provide for capital calls to fund operations or require participants in the venture to provide additional financial support, including advance payment or retention letters of credit.
Each venture is assessed at inception and on an ongoing basis as to whether it qualifies as a VIE under the consolidations guidance in ASC 810. A venture generally qualifies as a VIE when it (1) meets the definition of a legal entity, (2) absorbs the operational risk of the projects being executed, creating a variable interest, and (3) lacks sufficient capital investment from the partners, potentially resulting in the venture requiring additional subordinated financial support, if necessary, to finance its future activities.
If at any time a venture qualifies as a VIE, we perform a qualitative assessment to determine whether we are the primary beneficiary of the VIE and, therefore, need to consolidate the VIE. We are the primary beneficiary if we have (1) the power to direct the economically significant activities of the VIE and (2) the right to receive benefits from, and obligation to absorb losses of, the VIE. If the venture is a VIE and we are the primary beneficiary, or we otherwise have the ability to control the venture, we consolidate the venture. If we are not determined to be the primary beneficiary of the VIE, or only have the ability to significantly influence, rather than control the venture, we do not consolidate the venture. We account for unconsolidated ventures using either proportionate consolidation for both the Balance Sheet and Statement of Operations, when we meet the applicable accounting criteria to do so, or utilize the equity method. See
Note 7
for additional discussion of our material partnering arrangements.
New Accounting Standards
—In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, which provides a single comprehensive accounting standard for revenue recognition for contracts with customers and supersedes current industry-specific guidance, including ASC 605-35. The new standard prescribes a five-step revenue recognition model that focuses on transfer of control and entitlement to payment when determining the amount of revenue to be recognized. The new model requires companies to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time for each of these obligations. These concepts, as well as other aspects of the ASU, may change the method and/or timing of revenue recognition for certain of our contracts, primarily associated with our fabrication and manufacturing contracts. We expect that revenue generated from our EPC and engineering services contracts will continue to be recognized over time utilizing the cost-to-cost measure of progress consistent with current practice. We also expect our revenue recognition disclosures to significantly expand due to the new qualitative and quantitative requirements regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from our contracts. We will adopt the standard, including any updates to the standard, upon its effective date in the first quarter 2018 utilizing the modified retrospective approach. This approach will result in a cumulative adjustment to beginning equity in the first quarter 2018 for uncompleted contracts impacted by the adoption of the standard. We are continuing to assess the potential impact of the new standard on our Financial Statements.
In February 2016, the FASB issued ASU 2016-02, which requires the recognition of a right-of-use asset and a lease liability for most lease arrangements with a term greater than one year, and increases qualitative and quantitative disclosures regarding leasing transactions. The standard is effective for us in the first quarter 2019, although early adoption is permitted. Transition requires application of the new guidance at the beginning of the earliest comparative balance sheet period presented utilizing a modified retrospective approach. We are assessing the timing of adoption of the new standard and its potential impact on our Financial Statements.
In the first quarter 2017, we adopted ASU 2015-11, which simplifies the subsequent measurement of our inventory by requiring inventory to be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Our adoption of the standard did not have a material impact on our Financial Statements.
In the first quarter 2017, we adopted ASU 2016-09, which modified the accounting for excess tax benefits and tax deficiencies associated with share-based payments, amended the associated cash flow presentation, and allows for forfeitures to be either recognized when they occur, or estimated. ASU 2016-09 eliminated the requirement to recognize excess tax benefits in additional paid-in capital (“APIC”), and the requirement to evaluate tax deficiencies for APIC or income tax expense classification, and provided for these benefits or deficiencies to be recorded as an income tax expense or benefit in the Statement of Operations. Additionally, tax benefits of dividends on share-based payment awards are reflected as an income tax expense or benefit in the income statement. With these changes, tax-related cash flows resulting from share-based payments are classified as operating activities as opposed to financing, as previously presented. We have elected to recognize forfeitures as they occur, rather than estimating expected forfeitures. Our adoption of the standard did not have a material impact on our Financial Statements.
Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
In the first quarter 2017, the FASB issued, and we early adopted, ASU 2017-04, which eliminated the second step of the goodwill impairment test that required a hypothetical purchase price allocation. ASU 2017-04 requires that if a reporting unit’s carrying value exceeds its fair value, an impairment charge would be recognized for the excess amount, not to exceed the carrying amount of goodwill. Our early adoption of the standard in the first quarter 2017 did not have a material impact on our Financial Statements.
3
.
EARNINGS PER SHARE
A reconciliation of weighted average basic shares outstanding to weighted average diluted shares outstanding and the computation of basic and diluted EPS are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net (loss) income from continuing operations attributable to CB&I (net of $2,452, $8,272, $29,289 and $20,861 of noncontrolling interests)
|
|
$
|
(304,115
|
)
|
|
$
|
115,597
|
|
|
$
|
(288,541
|
)
|
|
$
|
216,931
|
|
Net (loss) income from discontinued operations attributable to CB&I (net of $457, $437, $870 and $885 of noncontrolling interests)
|
|
(121,304
|
)
|
|
8,242
|
|
|
(112,223
|
)
|
|
13,833
|
|
Net (loss) income attributable to CB&I
|
|
$
|
(425,419
|
)
|
|
$
|
123,839
|
|
|
$
|
(400,764
|
)
|
|
$
|
230,764
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding—basic
|
|
100,866
|
|
|
105,298
|
|
|
100,660
|
|
|
105,051
|
|
Effect of restricted shares/performance based shares/stock options
(1)
|
|
—
|
|
|
780
|
|
|
—
|
|
|
861
|
|
Effect of directors’ deferred-fee shares
(1)
|
|
—
|
|
|
13
|
|
|
—
|
|
|
13
|
|
Weighted average shares outstanding—diluted
|
|
100,866
|
|
|
106,091
|
|
|
100,660
|
|
|
105,925
|
|
Net (loss) income attributable to CB&I per share (Basic):
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(3.02
|
)
|
|
$
|
1.10
|
|
|
$
|
(2.87
|
)
|
|
$
|
2.07
|
|
Discontinued operations
|
|
(1.20
|
)
|
|
0.08
|
|
|
(1.11
|
)
|
|
0.13
|
|
Total
|
|
$
|
(4.22
|
)
|
|
$
|
1.18
|
|
|
$
|
(3.98
|
)
|
|
$
|
2.20
|
|
Net (loss) income attributable to CB&I per share (Diluted):
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(3.02
|
)
|
|
$
|
1.09
|
|
|
$
|
(2.87
|
)
|
|
$
|
2.05
|
|
Discontinued operations
|
|
(1.20
|
)
|
|
0.08
|
|
|
(1.11
|
)
|
|
0.13
|
|
Total
|
|
$
|
(4.22
|
)
|
|
$
|
1.17
|
|
|
$
|
(3.98
|
)
|
|
$
|
2.18
|
|
|
|
(1)
|
The effect of restricted shares, performance based shares, stock options and directors’ deferred-fee shares were not included in the calculation of diluted EPS for the
three and six months ended June 30, 2017
due to the net loss for the periods. Antidilutive shares excluded from diluted EPS were not material for the
three and six months ended June 30, 2016
.
|
Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
4
.
DISPOSITION OF CAPITAL SERVICES OPERATIONS
Transaction Summary
— As discussed in
Note 2
, on February 27, 2017, we entered into the CS Agreement, which provided for the sale of our Capital Services Operations and completed the sale on June 30, 2017. Under the CS Agreement, the initial purchase price was
$755,000
, subject to certain adjustments, including a working capital adjustment, whereby the purchase price would be adjusted to the extent actual working capital of the Capital Services Operations on the Closing Date differed from required working capital under the CS Agreement. Prior to the Closing Date, the CS Agreement was amended to, among other things, reduce the purchase price to
$700,000
. As a result, and after giving effect to working capital and other adjustments estimated prior to the Closing Date of approximately
$32,600
, we received cash proceeds of approximately
$667,400
(approximately
$645,500
net of cash sold) on the Closing Date. In addition, based on actual working capital of the Capital Services Operations on the Closing Date, we accrued our estimate of the final post-closing working capital adjustment within other current liabilities on our June 30, 2017 Balance Sheet, to be paid during the fourth quarter 2017. Accordingly, we estimate that our final net proceeds will be approximately
$599,000
, including approximately
$46,500
for transaction costs and the aforementioned post-closing working capital adjustment. As a result of the aforementioned, during the three and six months ended June 30, 2017, we recorded a pre-tax charge of approximately
$64,800
, and income tax expense of approximately
$61,000
resulting from a taxable gain on the transaction (due primarily to the non-deductibility of goodwill). The transaction will not result in any material cash taxes associated with the taxable gain due to the use of previously recorded net operating loss carryforwards. The proceeds received on the Closing Date were used to reduce our outstanding debt.
Assets and Liabilities
—The carrying values of the major classes of assets and liabilities of the discontinued Capital Services Operations included within our Balance Sheet on
December 31, 2016
were as follows:
|
|
|
|
|
|
|
|
December 31,
2016
|
Assets
|
|
|
Cash
|
|
$
|
14,477
|
|
Accounts receivable, net
|
|
239,146
|
|
Costs and estimated earnings in excess of billings
|
|
153,275
|
|
Other assets
|
|
7,834
|
|
Current assets of discontinued operations
|
|
414,732
|
|
|
|
|
Property and equipment, net
|
|
59,746
|
|
Goodwill
(1)
|
|
229,607
|
|
Other intangibles, net
|
|
148,440
|
|
Other assets
|
|
24,351
|
|
Non-current assets of discontinued operations
|
|
462,144
|
|
|
|
|
Total assets of discontinued operations
|
|
$
|
876,876
|
|
|
|
|
Liabilities
|
|
|
Accounts payable
|
|
$
|
141,028
|
|
Billings in excess of costs and estimated earnings
|
|
53,986
|
|
Other liabilities
|
|
52,455
|
|
Current liabilities of discontinued operations
|
|
247,469
|
|
|
|
|
Other liabilities
|
|
5,388
|
|
Non-current liabilities of discontinued operations
|
|
5,388
|
|
|
|
|
Total liabilities of discontinued operations
|
|
$
|
252,857
|
|
|
|
|
Noncontrolling interests of discontinued operations
|
|
$
|
6,874
|
|
|
|
(1)
|
The carrying value of goodwill for the Capital Services Operations includes the impact of a
$655,000
impairment charge recorded in the fourth quarter 2016 in connection with our annual impairment assessment.
|
Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Results of Operations
—The results of our Capital Services Operations which have been reflected within discontinued operations in our Statement of Operations for the
three and six months ended June 30, 2017
and
2016
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Revenue
|
|
$
|
561,708
|
|
|
$
|
559,690
|
|
|
$
|
1,114,655
|
|
|
$
|
1,124,671
|
|
Cost of revenue
|
|
528,927
|
|
|
523,119
|
|
|
1,047,614
|
|
|
1,056,065
|
|
Gross profit
|
|
32,781
|
|
|
36,571
|
|
|
67,041
|
|
|
68,606
|
|
Selling and administrative expense
|
|
16,503
|
|
|
13,536
|
|
|
29,541
|
|
|
25,187
|
|
Intangibles amortization
|
|
—
|
|
|
4,030
|
|
|
2,550
|
|
|
8,230
|
|
Loss on net assets sold
|
|
64,817
|
|
|
—
|
|
|
64,817
|
|
|
—
|
|
Other operating expense (income)
|
|
876
|
|
|
120
|
|
|
504
|
|
|
(304
|
)
|
Operating (loss) income from discontinued operations
|
|
(49,415
|
)
|
|
18,885
|
|
|
(30,371
|
)
|
|
35,493
|
|
Interest expense
(1)
|
|
(6,577
|
)
|
|
(5,877
|
)
|
|
(13,440
|
)
|
|
(11,710
|
)
|
Interest income
|
|
7
|
|
|
305
|
|
|
16
|
|
|
614
|
|
(Loss) income from discontinued operations before taxes
|
|
(55,985
|
)
|
|
13,313
|
|
|
(43,795
|
)
|
|
24,397
|
|
Income tax expense
(2)
|
|
(64,862
|
)
|
|
(4,634
|
)
|
|
(67,558
|
)
|
|
(9,679
|
)
|
Net (loss) income from discontinued operations
|
|
(120,847
|
)
|
|
8,679
|
|
|
(111,353
|
)
|
|
14,718
|
|
Net income from discontinued operations attributable to noncontrolling interests
|
|
(457
|
)
|
|
(437
|
)
|
|
(870
|
)
|
|
(885
|
)
|
Net (loss) income from discontinued operations attributable to CB&I
|
|
$
|
(121,304
|
)
|
|
$
|
8,242
|
|
|
$
|
(112,223
|
)
|
|
$
|
13,833
|
|
(1)
Interest expense was allocated to the Capital Services Operations due to a requirement to use the proceeds of the transaction to repay our debt. Proceeds from the transaction were initially used to repay our revolving facility borrowings as of June 30, 2017. The revolving facility was subsequently utilized to repay a portion of our senior notes in July 2017, as described in Note 8. The allocation of interest expense was based upon the debt amounts to be repaid.
(2)
As noted above, the transaction resulted in a taxable gain (due primarily to the non-deductibility of goodwill) resulting in additional tax expense of approximately
$61,000
during the three and six months ended June 30, 2017.
Cash Flows
—Cash flows for our Capital Services Operations for the
six months ended June 30, 2017
and
2016
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
2017
|
|
2016
|
Operating cash flows
|
|
$
|
(36,469
|
)
|
|
$
|
28,470
|
|
Investing cash flows
|
|
$
|
(1,459
|
)
|
|
$
|
(2,495
|
)
|
5
.
INVENTORY
The components of inventory at
June 30, 2017
and
December 31, 2016
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2017
|
|
December 31,
2016
|
Raw materials
|
|
$
|
97,231
|
|
|
$
|
65,969
|
|
Work in process
|
|
28,717
|
|
|
51,625
|
|
Finished goods
|
|
32,870
|
|
|
72,508
|
|
Total
|
|
$
|
158,818
|
|
|
$
|
190,102
|
|
Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
6
.
GOODWILL AND OTHER INTANGIBLES
Goodwill
—At
June 30, 2017
and
December 31, 2016
, our goodwill balances were
$2,829,214
and
$2,813,803
, respectively, attributable to the excess of the purchase price over the fair value of net assets acquired in connection with our acquisitions. The change in goodwill for the
six months ended June 30, 2017
is as follows:
|
|
|
|
|
|
|
|
Total
|
Balance at December 31, 2016
|
|
$
|
2,813,803
|
|
Foreign currency translation and other
|
|
16,596
|
|
Amortization of tax goodwill in excess of book goodwill
|
|
(1,185
|
)
|
Balance at June 30, 2017
(1)
|
|
$
|
2,829,214
|
|
|
|
(1)
|
At
June 30, 2017
, we had approximately
$453,100
of cumulative impairment losses which were recorded in our Engineering & Construction operating group during 2015 related to the sale of our nuclear power construction business (our “Nuclear Operations”) on December 31, 2015.
|
As discussed further in
Note 2
, goodwill is not amortized to earnings, but instead is reviewed for impairment at least annually at a reporting unit level, absent any indicators of impairment or when other actions require an impairment assessment (such as a change in reporting units). We perform our annual impairment assessment during the fourth quarter of each year based upon balances as of October 1. At
December 31, 2016
, we had the following
three
operating groups and reporting units:
|
|
•
|
Engineering & Construction
—Our Engineering & Construction operating group represented a reporting unit.
|
|
|
•
|
Fabrication Services
—Our Fabrication Services operating group represented a reporting unit.
|
|
|
•
|
Technology
—Our Technology operating group represented a reporting unit.
|
During the three months ended December 31, 2016, we performed a quantitative assessment of goodwill for each of the aforementioned reporting units. Based upon these quantitative assessments, the fair value of each of these reporting units substantially exceeded their respective net book values, and accordingly,
no
impairment charge was necessary as a result of our impairment assessments. During the three months ended June 30, 2017, we experienced a decline in our market capitalization and incurred charges on certain projects (as discussed further in
Note 14
) within our Engineering & Construction reporting unit that resulted in a net loss for the three and six months ended June 30, 2017. We believe these events and circumstances were indicators that goodwill of our Engineering & Construction reporting unit was potentially impaired. Accordingly, we performed a quantitative assessment of goodwill for our Engineering & Construction reporting unit as of June 30, 2017. Based on this quantitative assessment, the fair value of the Engineering & Construction reporting unit continued to substantially exceed its net book value, and accordingly, no impairment charge was necessary as a result of our interim impairment assessment. If we were to experience an additional decline in our market capitalization, or a prolonged market capitalization at our current levels, it could indicate that the goodwill of our reporting units is impaired, and require additional interim quantitative impairment assessments. If, based on future assessments our goodwill is deemed to be impaired, the impairment would result in a charge to earnings in the period of impairment. There can be no assurance that future goodwill impairment tests will not result in charges to earnings. See
Note 4
for discussion of our goodwill impairment for the Capital Services Operations recorded in the fourth quarter 2016 in connection with our annual impairment assessment.
Other Intangible Assets
—The following table presents our acquired finite-lived intangible assets at
June 30, 2017
and
December 31, 2016
, including the
June 30, 2017
weighted-average useful lives for each major intangible asset class and in total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
December 31, 2016
|
|
|
Weighted Average Life
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
Backlog and customer relationships
|
|
18 Years
|
|
$
|
99,086
|
|
|
$
|
(24,143
|
)
|
|
$
|
99,086
|
|
|
$
|
(21,374
|
)
|
Process technologies
|
|
15 Years
|
|
263,043
|
|
|
(140,717
|
)
|
|
258,516
|
|
|
(129,261
|
)
|
Tradenames
|
|
12 Years
|
|
27,327
|
|
|
(16,208
|
)
|
|
27,090
|
|
|
(14,648
|
)
|
Total
(1)
|
|
16 Years
|
|
$
|
389,456
|
|
|
$
|
(181,068
|
)
|
|
$
|
384,692
|
|
|
$
|
(165,283
|
)
|
|
|
(1)
|
The decrease in other intangibles, net during the
six months ended June 30, 2017
primarily related to amortization expense of approximately
$12,900
.
|
Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
7
.
PARTNERING ARRANGEMENTS
As discussed in
Note 2
, we account for our unconsolidated ventures using either proportionate consolidation, when we meet the applicable accounting criteria to do so, or the equity method. Further, we consolidate any venture that is determined to be a VIE for which we are the primary beneficiary, or which we otherwise effectively control.
Proportionately Consolidated Ventures
—The following is a summary description of our significant joint ventures which
have been accounted for using proportionate consolidation:
|
|
•
|
CB&I/Zachry—
We have a venture with Zachry (CB&I—
50%
/ Zachry—
50%
) to perform EPC work for
two
liquefied natural gas (“LNG”) liquefaction trains in Freeport, Texas. Our proportionate share of the venture project value is approximately
$2,700,000
. In addition, we have subcontract and risk sharing arrangements with Chiyoda to support our responsibilities to the venture. The costs of these arrangements are recorded in cost of revenue.
|
|
|
•
|
CB&I/Zachry/Chiyoda—
We have a venture with Zachry and Chiyoda (CB&I—
33.3%
/ Zachry—
33.3%
/ Chiyoda—
33.3%
) to perform EPC work for an additional LNG liquefaction train at the aforementioned project site in Freeport, Texas. Our proportionate share of the venture project value is approximately
$675,000
.
|
|
|
•
|
CB&I/Chiyoda—
We have a venture with Chiyoda (CB&I—
50%
/ Chiyoda—
50%
) to perform EPC work for
three
LNG liquefaction trains in Hackberry, Louisiana. Our proportionate share of the venture project value is approximately
$3,200,000
.
|
The following table presents summarized balance sheet information for our share of our proportionately consolidated ventures at
June 30, 2017
and
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2017
|
|
December 31,
2016
|
CB&I/Zachry
|
|
|
|
|
Current assets
(1)
|
|
$
|
251,237
|
|
|
$
|
260,934
|
|
Non-current assets
|
|
2,678
|
|
|
3,204
|
|
Total assets
|
|
$
|
253,915
|
|
|
$
|
264,138
|
|
Current liabilities
(1)
|
|
$
|
387,466
|
|
|
$
|
379,339
|
|
CB&I/Zachry/Chiyoda
|
|
|
|
|
Current assets
(1)
|
|
$
|
88,593
|
|
|
$
|
84,279
|
|
Non-current assets
|
|
1,539
|
|
|
1,969
|
|
Total assets
|
|
$
|
90,132
|
|
|
$
|
86,248
|
|
Current liabilities
(1)
|
|
$
|
68,305
|
|
|
$
|
73,138
|
|
CB&I/Chiyoda
|
|
|
|
|
Current assets
(1)
|
|
$
|
186,278
|
|
|
$
|
337,479
|
|
Current liabilities
(1)
|
|
$
|
258,367
|
|
|
$
|
150,179
|
|
|
|
(1)
|
Our venture arrangements allow for excess working capital of the ventures to be advanced to the venture partners. Such advances are returned to the ventures for working capital needs as necessary. Accordingly, at a reporting period end a venture may have advances to its partners which are reflected as an advance receivable within current assets of the venture. At
June 30, 2017
and
December 31, 2016
, other current assets on the Balance Sheet included approximately
$324,400
and
$374,800
, respectively, related to our proportionate share of advances from the ventures to our venture partners, and other current liabilities included approximately
$347,300
and
$394,400
, respectively, related to advances to CB&I from the ventures.
|
Equity Method Ventures
—The following is a summary description of our significant joint ventures which have been accounted for using the equity method:
|
|
•
|
Chevron-Lummus Global (“CLG”)—
We have a venture with Chevron (CB&I—
50%
/ Chevron—
50%
) which provides proprietary process technology licenses and associated engineering services and catalyst, primarily for the refining industry. As sufficient capital investments in CLG have been made by the venture partners, it does not qualify as a VIE.
|
Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
|
|
•
|
NET Power—
We have a venture with Exelon and 8 Rivers Capital (CB&I—
33.3%
/ Exelon—
33.3%
/ 8 Rivers Capital—
33.3%
) to commercialize a new natural gas power generation system that recovers the carbon dioxide produced during combustion. NET Power is building a first-of-its-kind demonstration plant which is being funded by contributions and services from the venture partners and other parties. We have determined the venture to be a VIE; however, we do not effectively control NET Power and therefore do not consolidate it. Our cash commitment for NET Power totals
$47,300
and at
June 30, 2017
, we had made cumulative investments totaling approximately
$44,900
.
|
|
|
•
|
CB&I/CTCI—
We have a venture with CTCI (CB&I—
50%
/ CTCI—
50%
) to perform EPC work for a liquids ethylene cracker and associated units in Sohar, Oman. We have determined the venture to be a VIE; however, we do not effectively control the venture and therefore do not consolidate it. Our proportionate share of the venture project value is approximately
$1,400,000
. Our venture arrangement allows for excess working capital of the venture to be advanced to the venture partners. Such advances are returned to the venture for working capital needs as necessary. At
June 30, 2017
and
December 31, 2016
, other current liabilities included approximately
$205,900
and
$147,000
, respectively, related to advances to CB&I from the venture.
|
Consolidated Ventures—
The following is a summary description of our significant joint ventures we consolidate due to their designation as VIEs for which we are the primary beneficiary:
|
|
•
|
CB&I/Kentz—
We have a venture with Kentz (CB&I—
65%
/ Kentz—
35%
) to perform the structural, mechanical, piping, electrical and instrumentation work on, and to provide commissioning support for,
three
LNG trains, including associated utilities and a gas processing and compression plant, for the Gorgon LNG project, located on Barrow Island, Australia. Our venture project value is approximately
$5,900,000
and the project was substantially complete at June 30, 2017.
|
|
|
•
|
CB&I/AREVA—
We have a venture with AREVA (CB&I
—
52%
/ AREVA—
48%
) to design, license and construct a mixed oxide fuel fabrication facility in Aiken, South Carolina. Our venture project value is approximately
$5,800,000
.
|
The following table presents summarized balance sheet information for our consolidated ventures at
June 30, 2017
and
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2017
|
|
December 31,
2016
|
CB&I/Kentz
|
|
|
|
|
Current assets
|
|
$
|
26,486
|
|
|
$
|
68,867
|
|
Non-current assets
|
|
69,404
|
|
|
—
|
|
Total assets
|
|
$
|
95,890
|
|
|
$
|
68,867
|
|
Current liabilities
|
|
$
|
27,581
|
|
|
$
|
87,822
|
|
CB&I/AREVA
|
|
|
|
|
Current assets
|
|
$
|
24,416
|
|
|
$
|
16,313
|
|
Current liabilities
|
|
$
|
50,086
|
|
|
$
|
47,652
|
|
All Other
(1)
|
|
|
|
|
Current assets
|
|
$
|
33,099
|
|
|
$
|
69,785
|
|
Non-current assets
|
|
16,003
|
|
|
16,382
|
|
Total assets
|
|
$
|
49,102
|
|
|
$
|
86,167
|
|
Current liabilities
|
|
$
|
8,514
|
|
|
$
|
7,748
|
|
|
|
(1)
|
Other ventures that we consolidate are not individually material to our financial results and are therefore aggregated as “All Other”.
|
Other—
The use of these ventures exposes us to a number of risks, including the risk that our partners may be unable or unwilling to provide their share of capital investment to fund the operations of the venture or complete their obligations to us, the venture, or ultimately, our customer. Differences in opinions or views among venture partners could also result in delayed decision-making or failure to agree on material issues, which could adversely affect the business and operations of the venture. In addition, agreement terms may subject us to joint and several liability for our venture partners, and the failure of our venture partners to perform their obligations could impose additional performance and financial obligations on us. The aforementioned factors could result in unanticipated costs to complete the projects, liquidated damages or contract disputes, including claims against our partners.
Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
l
8
.
DEBT
Our outstanding debt at
June 30, 2017
and
December 31, 2016
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2017
|
|
December 31,
2016
|
Current
|
|
|
|
|
Revolving facility and other short-term borrowings
|
|
$
|
374,000
|
|
|
$
|
407,500
|
|
|
|
|
|
|
Current maturities of long-term debt
|
|
1,481,250
|
|
|
506,250
|
|
Less: unamortized debt issuance costs
|
|
(11,930
|
)
|
|
(2,340
|
)
|
Current maturities of long-term debt, net of unamortized debt issuance costs
|
|
1,469,320
|
|
|
503,910
|
|
Current debt, net of unamortized debt issuance costs
|
|
$
|
1,843,320
|
|
|
$
|
911,410
|
|
Long-Term
|
|
|
|
|
Term Loan: $1,000,000 term loan (interest at LIBOR plus a floating margin)
|
|
$
|
—
|
|
|
$
|
300,000
|
|
Second Term Loan: $500,000 term loan (interest at LIBOR plus a floating margin)
|
|
481,250
|
|
|
500,000
|
|
Senior Notes: $800,000 senior notes, series A-D (fixed interest ranging from 4.65% to 5.80%)
|
|
800,000
|
|
|
800,000
|
|
Second Senior Notes: $200,000 senior notes (fixed interest of 5.03%)
|
|
200,000
|
|
|
200,000
|
|
Less: unamortized debt issuance costs
|
|
—
|
|
|
(5,827
|
)
|
Less: current maturities of long-term debt
|
|
(1,481,250
|
)
|
|
(506,250
|
)
|
Long-term debt, net of unamortized debt issuance costs
|
|
$
|
—
|
|
|
$
|
1,287,923
|
|
Committed Facilities
—We have a
five
-year,
$1,150,000
committed revolving credit facility (the “Revolving Facility”) with Bank of America N.A. (“BofA”), as administrative agent, and BNP Paribas Securities Corp., BBVA Compass, Credit Agricole Corporate and Investment Bank (“Credit Agricole”) and TD Securities, each as syndication agents, which expires in October 2018. The Revolving Facility had a
$230,000
financial letter of credit sublimit at
June 30, 2017
. However, as a result of the amendments described below, effective
August 9, 2017
, the financial letter of credit sublimit was replaced with a
$100,000
total letter of credit sublimit. At
June 30, 2017
, we had
$204,000
and
$67,211
of outstanding borrowings and letters of credit (
none
of which were financial letters of credit) under the facility, respectively, providing
$878,789
of available capacity, of which
$32,789
was available for letters of credit based on our new total letter of credit sublimit.
We also have a
five
-year,
$800,000
committed revolving credit facility (the “Second Revolving Facility”) with BofA, as administrative agent, and BNP Paribas Securities Corp., BBVA Compass, Credit Agricole and Bank of Tokyo Mitsubishi UFJ, each as syndication agents, which expires in July 2020. The Second Revolving Facility supplements our Revolving Facility, and had a
$50,000
financial letter of credit sublimit at
June 30, 2017
. However, as a result of the amendments described below, effective
August 9, 2017
, the financial letter of credit sublimit was replaced with a
$100,000
total letter of credit sublimit. At
June 30, 2017
, we had
$170,000
and
$72,445
of outstanding borrowings and letters of credit (including
$2,757
of financial letters of credit) under the facility, respectively, providing
$557,555
of available capacity, of which
$27,555
was available for letters of credit based on our new total letter of credit sublimit.
During the
six months ended June 30, 2017
, maximum outstanding borrowings under our Revolving Facility and Second Revolving Facility (together, “Committed Facilities”) were approximately
$1,700,000
. We are assessed quarterly commitment fees on the unutilized portion of the facilities as well as letter of credit fees on outstanding letters of credit. Through the date of the amendments described below, the interest, commitment fee, and letter of credit fee percentages were based on our quarterly leverage ratio and interest on borrowings under the facilities was assessed at either prime plus an applicable floating margin (
4.25%
and
1.50%
, respectively at
June 30, 2017
), or LIBOR plus an applicable floating margin (
1.23%
and
2.50%
, respectively at
June 30, 2017
). However, as a result of the amendments, effective
August 9, 2017
, interest on borrowings under the amended facilities will be assessed at either prime plus
4.00%
or LIBOR plus
5.00%
. In addition, our fees for financial and performance letters of credit will be
5.00%
and
3.50%
, respectively. During the
six months ended June 30, 2017
, our weighted average interest rate on borrowings under the Revolving Facility and Second Revolving Facility was approximately
3.3%
and
4.9%
, respectively, inclusive of the applicable floating margin. The Committed Facilities have financial and restrictive covenants described further below.
Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Uncommitted Facilities
—We also have various short-term, uncommitted letter of credit facilities (the “Uncommitted Facilities”) across several geographic regions, under which we had
$1,624,089
of outstanding letters of credit as of
June 30, 2017
.
Term Loans
—On February 13, 2017, we paid the remaining
$300,000
of principal on our
four
-year,
$1,000,000
unsecured term loan (the “Term Loan”) with BofA as administrative agent. Interest was based upon LIBOR plus an applicable floating margin for the period (
0.98%
and
2.25%
, respectively). In conjunction with the repayment of the Term Loan, we also settled our associated interest rate swap that hedged against a portion of the Term Loan, which resulted in a weighted average interest rate of approximately
2.6%
during the first quarter 2017.
At
June 30, 2017
, we had
$481,250
outstanding under a
five
-year,
$500,000
term loan (the “Second Term Loan”) with BofA as administrative agent. Interest and principal under the Second Term Loan is payable quarterly in arrears beginning in June 2017, and through the date of the amendments described below, bore interest at LIBOR plus an applicable floating margin (
1.23%
and
2.50%
, respectively at
June 30, 2017
). However, as a result of the amendments, effective
August 9, 2017
, interest will be assessed at either prime plus
4.00%
or LIBOR plus
5.00%
. During the
six months ended June 30, 2017
, our weighted average interest rate on the Second Term Loan was approximately
3.1%
, inclusive of the applicable floating margin. Future annual maturities for the Second Term Loan are
$37,500
,
$75,000
,
$75,000
and
$293,750
for
2017
,
2018
,
2019
, and
2020
, respectively. The Second Term Loan has financial and restrictive covenants described further below.
Senior Notes—
We have a series of senior notes totaling
$800,000
in aggregate principal amount outstanding as of
June 30, 2017
(the “Senior Notes”). The Senior Notes include Series A through D and contained the following terms at
June 30, 2017
:
|
|
•
|
Series A—Interest due semi-annually at a fixed rate of
4.65%
, with principal of
$150,000
due in December 2017
|
|
|
•
|
Series B—Interest due semi-annually at a fixed rate of
5.07%
, with principal of
$225,000
due in December 2019
|
|
|
•
|
Series C—Interest due semi-annually at a fixed rate of
5.65%
, with principal of
$275,000
due in December 2022
|
|
|
•
|
Series D—Interest due semi-annually at a fixed rate of
5.80%
, with principal of
$150,000
due in December 2024
|
On July 28, 2017, we utilized
$211,800
of the proceeds from the sale of the Capital Services Operations to repay a portion of each series of senior notes in the following amounts: (Series A -
$44,600
, Series B -
$58,200
, Series C -
$78,500
and Series D -
$30,500
). The repayment dates for the remaining principal amounts remained the same.
We also have senior notes totaling
$200,000
in aggregate principal amount outstanding as of
June 30, 2017
(the “Second Senior Notes”) with BofA as administrative agent. At
June 30, 2017
, interest was due semi-annually at a fixed rate of
5.03%
, with principal of
$200,000
due in
July 2025
. On July 28, 2017, we utilized
$57,100
of the proceeds from the sale of the Capital Services Operations to repay a portion of the Second Senior Notes. The repayment date for the remaining principal amount remained the same.
The Senior Notes and Second Senior Notes (together, the “Notes”) have financial and restrictive covenants described further below. Further, as a result of the amendments described below, our fixed interest rate on the amended Notes was increased by an incremental
2.50%
over the rates in effect immediately prior to such amendments. The amended Notes also include provisions relating to our credit profile, which if not maintained will result in an incremental annual cost of up to
1.50%
of the outstanding balance under the Notes. Further, the Notes include provisions relating to our leverage, which if not maintained, could result in an incremental annual cost of up to
1.00%
(or
0.50%
depending on our leverage level) of the outstanding balance under the Notes, provided that the incremental annual cost related to our credit profile and leverage cannot exceed
2.00%
per annum. Finally, the Notes are subject to a make-whole premium in connection with certain prepayment events.
Compliance and Other
—On February 24, 2017, and effective for the period ended December 31, 2016, we amended our Revolving Facility, Second Revolving Facility, and Second Term Loan (collectively, “Bank Facilities”) and Notes (collectively, with Bank Facilities, “Senior Facilities”). The amendments:
|
|
•
|
Established a new maximum leverage ratio of
3.50
at December 31, 2016, decreasing to
3.00
at December 31, 2017, or 45 days subsequent to the closing of the sale of our Capital Services Operations (the “Closing Date”), if earlier.
|
|
|
•
|
Established a new minimum net worth of
$1,201,507
, maintained our required fixed charge coverage ratio at
1.75
, and reduced our Revolving Facility from
$1,350,000
to
$1,150,000
at the Closing Date.
|
|
|
•
|
Included other financial and restrictive covenants, including restrictions regarding subsidiary indebtedness, sales of assets, liens, investments, type of business conducted, and mergers and acquisitions, and restrictions on dividend payments and share repurchases, among other restrictions.
|
Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
On May 8, 2017, and effective for the period ended March 31, 2017, we further amended our Senior Facilities. The amendments:
|
|
•
|
Required us to secure the Senior Facilities through the pledge of cash, accounts receivable, inventory, fixed assets, and stock of subsidiaries, which was in the process of being completed as of June 30, 2017.
|
|
|
•
|
Required us to repay portions of the Senior Facilities with all of the net proceeds from the sale of our Capital Services Operations, the issuance of any unsecured debt that is subordinate (“Subordinated Debt”) to the Senior Facilities, the issuance of any equity securities, or the sale of any assets.
|
|
|
•
|
Established new maximum leverage ratios for borrowings under the Senior Facilities as follows:
4.00
at March 31, 2017;
4.50
at June 30, 2017 and September 30, 2017;
3.00
at December 31, 2017 and March 31, 2018; and
2.50
at June 30, 2018.
|
|
|
•
|
Established total maximum leverage ratios (in addition to those established for the Senior Facilities) for all borrowings among the Senior Facilities and any Subordinated Debt as follows:
5.25
at June 30, 2017;
6.00
at September 30, 2017;
4.00
at December 31, 2017 and March 31, 2018;
3.25
at June 30, 2018; and
3.00
at September 30, 2018.
|
|
|
•
|
Prohibited mergers and acquisitions, open-market share repurchases, and increases to dividends until our leverage ratio is below
3.00
for two consecutive quarters.
|
As a result of the project impacts in the second quarter 2017 (discussed further in Note 14), as of June 30, 2017, we would not have been in compliance with the previously amended financial covenants for our Senior Facilities, without certain waivers and amendments. Accordingly, effective
August 9, 2017
(the “Effective Date”), and effective for the period ended June 30, 2017, we are further amending our Senior Facilities.
The amendments, which are subject to final documentation, waive our noncompliance with our existing covenants as of June 30, 2017 and certain other defaults and events of default. In addition, the amendments:
|
|
•
|
Eliminate our Minimum Net Worth covenant required by our previous amendments.
|
|
|
•
|
Require minimum levels of trailing 12-month earnings before interest, taxes, depreciation and amortization (“EBITDA”), as defined by the amendments, as follows:
$500,000
at September 30, 2017;
$550,000
at December 31, 2017;
$500,000
at March 31, 2018;
$450,000
at June 30, 2018 and September 30, 2018; and
$425,000
at December 31, 2018 and thereafter (“Minimum EBITDA”). Trailing 12-month EBITDA for purposes of determining compliance with the Minimum EBITDA covenant will be adjusted to exclude: an agreed amount attributable to any restructuring or integration charges during the third and fourth quarters of 2017; an agreed amount attributable to previous charges on certain projects which occurred during the first and second quarters of 2017; and an agreed amount for potential future charges for the same projects if they were to be incurred during the third and fourth quarters of 2017 (collectively, the “EBITDA Addbacks”).
|
|
|
•
|
Provide for the replacement of our previous maximum leverage ratio and minimum fixed charge ratio with a new maximum leverage ratio of
1.75
(“Maximum Leverage Ratio”) and new minimum fixed charge coverage ratio of
2.25
(“Minimum Fixed Charge Coverage Ratio”), which are temporarily suspended and will resume as of March 31, 2018. Trailing 12-month EBITDA for purposes of determining compliance with the Maximum Leverage Ratio and consolidated net income for purposes of determining compliance with the Minimum Fixed Charge Coverage Ratio will be adjusted for the EBITDA Addbacks.
|
|
|
•
|
Require us to execute on our plan to market and sell our Technology Operations by December 27, 2017 (the “Technology Sale”), with an extension of up to 60 days at the discretion of the holders of a majority of the outstanding Notes and at the discretion of the administrative agents of the Bank Facilities.
|
|
|
•
|
Require us to maintain a minimum aggregate availability under our Revolving Facility and Second Revolving Facility, including borrowings and letters of credit, of
$150,000
at all times from the Effective Date through the date of the Technology Sale, and
$250,000
thereafter (“Minimum Availability”). Our amendments require the net cash proceeds from the Technology Sale be used to repay our Senior Facilities (“Mandatory Repayment Amount”). Further, our aggregate capacity under the Revolving Facility and Second Revolving Facility will be reduced by seventy percent (
70%
) of the portion of the Mandatory Repayment Amount allocable to the Revolving Facility and Second Revolving Facility, upon closing the Technology Sale and certain other mandatory prepayment events.
|
|
|
•
|
Limit the amount of certain of our funded indebtedness to
$3,000,000
prior to the Technology Sale and
$2,900,000
thereafter, in each case, subject to reduction pursuant to scheduled repayments and mandatory prepayments thereof (but, with respect to the Revolving Facility and Second Revolving Facility, only to the extent the commitments have been reduced by such prepayments) made by us after the Effective Date.
|
Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
|
|
•
|
Prohibit mergers and acquisitions, open-market share repurchases and dividend payments and certain inter-company transactions.
|
|
|
•
|
Replace the previous financial letter of credit sublimits for our Revolving Facility and Second Revolving Facility with a
$100,000
letter of credit sublimit for each, as described further above.
|
|
|
•
|
Adjust the interest rates on our Senior Facilities, as described further above.
|
As discussed above, our amended covenants require, among other things, the completion of our plan to sell the Technology Operations. Further, we are required to comply with various new restrictive and financial covenants, including the Minimum EBITDA and Minimum Availability covenants. Although we received temporary suspension of our Maximum Leverage Ratio and Minimum Fixed Charge Coverage Ratio, these covenants will resume effective March 31, 2018. Based on our forecasted EBITDA and cash flows, we project that future compliance with certain covenants subsequent to December 31, 2017 will require the completion of the Technology Sale and associated net proceeds consistent with our expectations. Accordingly, debt of approximately
$1,200,000
, which by its terms is due beyond one year and would otherwise be shown as long-term, has been classified as current, as certain factors regarding our compliance with such covenants is beyond our control.
In addition to providing letters of credit, we also issue surety bonds in the ordinary course of business to support our contract performance. At
June 30, 2017
, we had
$358,739
of outstanding surety bonds in support of our projects. In addition, we had
$473,194
of surety bonds maintained on behalf of our former Capital Services Operations, for which we have received an indemnity from CSVC. We also continue to maintain guarantees on behalf of our former Capital Services Operations in support of approximately
$166,000
of backlog, for which we have also received an indemnity.
Capitalized interest was insignificant for the
six months ended June 30, 2017
and
2016
.
9
.
FINANCIAL INSTRUMENTS
Derivatives
Foreign Currency Exchange Rate Derivatives
—At
June 30, 2017
, the notional value of our outstanding forward contracts to hedge certain foreign exchange-related operating exposures was approximately
$139,600
. These contracts vary in duration, maturing up to
five
years from period-end. We designate certain of these hedges as cash flow hedges and accordingly, changes in their fair value are recognized in AOCI until the associated underlying operating exposure impacts our earnings. Forward points, which are deemed to be an ineffective portion of the hedges, are recognized within cost of revenue and are not material.
Financial Instruments Disclosures
Fair Value
—Financial instruments are required to be categorized within a valuation hierarchy based upon the lowest level of input that is significant to the fair value measurement. The three levels of the valuation hierarchy are as follows:
|
|
•
|
Level 1
—Fair value is based upon quoted prices in active markets.
|
|
|
•
|
Level 2
—Fair value is based upon internally-developed models that use, as their basis, readily observable market parameters. Our derivative positions are classified within level 2 of the valuation hierarchy as they are valued using quoted market prices for similar assets and liabilities in active markets. These level 2 derivatives are valued utilizing an income approach, which discounts future cash flow based upon current market expectations and adjusts for credit risk.
|
|
|
•
|
Level 3
—Fair value is based upon internally-developed models that use, as their basis, significant unobservable market parameters. We did not have any level 3 classifications at
June 30, 2017
or
December 31, 2016
.
|
Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table presents the fair value of our foreign currency exchange rate derivatives and interest rate derivatives at
June 30, 2017
and
December 31, 2016
, respectively, by valuation hierarchy and balance sheet classification:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
December 31, 2016
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Derivative Assets
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current assets
|
|
$
|
—
|
|
|
$
|
4,766
|
|
|
$
|
—
|
|
|
$
|
4,766
|
|
|
$
|
—
|
|
|
$
|
1,146
|
|
|
$
|
—
|
|
|
$
|
1,146
|
|
Other non-current assets
|
|
—
|
|
|
561
|
|
|
—
|
|
|
561
|
|
|
—
|
|
|
82
|
|
|
—
|
|
|
82
|
|
Total assets at fair value
|
|
$
|
—
|
|
|
$
|
5,327
|
|
|
$
|
—
|
|
|
$
|
5,327
|
|
|
$
|
—
|
|
|
$
|
1,228
|
|
|
$
|
—
|
|
|
$
|
1,228
|
|
Derivative Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current liabilities
|
|
$
|
—
|
|
|
$
|
(551
|
)
|
|
$
|
—
|
|
|
$
|
(551
|
)
|
|
$
|
—
|
|
|
$
|
(3,509
|
)
|
|
$
|
—
|
|
|
$
|
(3,509
|
)
|
Other non-current liabilities
|
|
—
|
|
|
(908
|
)
|
|
—
|
|
|
(908
|
)
|
|
—
|
|
|
(725
|
)
|
|
—
|
|
|
(725
|
)
|
Total liabilities at fair value
|
|
$
|
—
|
|
|
$
|
(1,459
|
)
|
|
$
|
—
|
|
|
$
|
(1,459
|
)
|
|
$
|
—
|
|
|
$
|
(4,234
|
)
|
|
$
|
—
|
|
|
$
|
(4,234
|
)
|
|
|
(1)
|
We are exposed to credit risk on our hedging instruments associated with potential counterparty non-performance, and the fair value of our derivatives reflects this credit risk. The total level 2 assets at fair value above represent the maximum loss that we would incur on our outstanding hedges if the applicable counterparties failed to perform according to the hedge contracts. To help mitigate counterparty credit risk, we transact only with counterparties that are rated as investment grade or higher and monitor all counterparties on a continuous basis.
|
The carrying values of our cash and cash equivalents (primarily consisting of bank deposits), accounts receivable and accounts payable approximate their fair values because of the short-term nature of these instruments. At
June 30, 2017
, the fair value of our Second Term Loan, based upon the current market rates for debt with similar credit risk and maturities, approximated its carrying value as interest is based upon LIBOR plus an applicable floating margin. At June 30, 2017, the fair values of our Senior Notes and Second Senior Notes, based upon the current market rates for debt with similar credit risk and maturities, approximated their carrying values due to their classification as current on our Balance Sheet. At
December 31, 2016
, our Senior Notes and Second Senior Notes had a total fair value of approximately
$785,700
and
$206,400
, respectively, based on current market rates for debt with similar credit risk and maturities and were categorized within level 2 of the valuation hierarchy.
Derivatives Disclosures
Fair Value
—The following table presents the total fair value by underlying risk and balance sheet classification for derivatives designated as cash flow hedges and derivatives not designated as cash flow hedges at
June 30, 2017
and
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Current and
Non-Current Assets
|
|
Other Current and
Non-Current Liabilities
|
|
|
June 30,
2017
|
|
December 31,
2016
|
|
June 30,
2017
|
|
December 31,
2016
|
Derivatives designated as cash flow hedges
|
|
|
|
|
|
|
|
|
Interest rate
|
|
$
|
—
|
|
|
$
|
49
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Foreign currency
|
|
545
|
|
|
109
|
|
|
—
|
|
|
(536
|
)
|
Fair value
|
|
$
|
545
|
|
|
$
|
158
|
|
|
$
|
—
|
|
|
$
|
(536
|
)
|
Derivatives not designated as cash flow hedges
|
|
|
|
|
|
|
|
|
Foreign currency
|
|
$
|
4,782
|
|
|
$
|
1,070
|
|
|
$
|
(1,459
|
)
|
|
$
|
(3,698
|
)
|
Fair value
|
|
$
|
4,782
|
|
|
$
|
1,070
|
|
|
$
|
(1,459
|
)
|
|
$
|
(3,698
|
)
|
Total fair value
|
|
$
|
5,327
|
|
|
$
|
1,228
|
|
|
$
|
(1,459
|
)
|
|
$
|
(4,234
|
)
|
Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Master Netting Arrangements (“MNAs”)
—Our derivatives are executed under International Swaps and Derivatives Association MNAs, which generally allow us and our counterparties to net settle, in a single net payable or receivable, obligations due on the same day, in the same currency and for the same type of derivative instrument. We have elected the option to record all derivatives on a gross basis in our Balance Sheet. The following table presents our derivative assets and liabilities at
June 30, 2017
on a gross basis and a net settlement basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Amounts
Recognized
(i)
|
|
Gross Amounts
Offset on the
Balance Sheet
(ii)
|
|
Net Amounts
Presented on the
Balance Sheet
(iii) = (i) - (ii)
|
|
Gross Amounts Not Offset on
the Balance Sheet (iv)
|
|
Net Amount
(v) = (iii) - (iv)
|
|
|
Financial
Instruments
|
|
Cash Collateral Received
|
|
Derivative Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
|
|
5,327
|
|
|
—
|
|
|
5,327
|
|
|
(179
|
)
|
|
—
|
|
|
5,148
|
|
Total assets
|
|
$
|
5,327
|
|
|
$
|
—
|
|
|
$
|
5,327
|
|
|
$
|
(179
|
)
|
|
$
|
—
|
|
|
$
|
5,148
|
|
Derivative Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
|
|
(1,459
|
)
|
|
—
|
|
|
(1,459
|
)
|
|
179
|
|
|
—
|
|
|
(1,280
|
)
|
Total liabilities
|
|
$
|
(1,459
|
)
|
|
$
|
—
|
|
|
$
|
(1,459
|
)
|
|
$
|
179
|
|
|
$
|
—
|
|
|
$
|
(1,280
|
)
|
AOCI/Other
—The following table presents the total value, by underlying risk, recognized in other comprehensive income (“OCI”) and reclassified from AOCI to interest expense (interest rate derivatives) and cost of revenue (foreign currency derivatives) during the
three and six months ended June 30, 2017
and
2016
for derivatives designated as cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain (Loss) on Effective Derivative Portion
|
|
|
Recognized in OCI
|
|
Reclassified from AOCI into Earnings
(1)
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Derivatives designated as cash flow hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate
|
|
$
|
—
|
|
|
$
|
(248
|
)
|
|
$
|
—
|
|
|
$
|
(961
|
)
|
|
$
|
—
|
|
|
$
|
(163
|
)
|
|
$
|
49
|
|
|
$
|
(344
|
)
|
Foreign currency
|
|
497
|
|
|
(655
|
)
|
|
1,179
|
|
|
821
|
|
|
84
|
|
|
148
|
|
|
208
|
|
|
(914
|
)
|
Total
|
|
$
|
497
|
|
|
$
|
(903
|
)
|
|
$
|
1,179
|
|
|
$
|
(140
|
)
|
|
$
|
84
|
|
|
$
|
(15
|
)
|
|
$
|
257
|
|
|
$
|
(1,258
|
)
|
|
|
(1)
|
Net unrealized gains totaling approximately
$600
are anticipated to be reclassified from AOCI into earnings during the next
12 months
due to settlement of the associated underlying obligations.
|
The following table presents the total value recognized in cost of revenue for the
three and six months ended June 30, 2017
and
2016
for foreign currency derivatives not designated as cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain (Loss) Recognized in Earnings
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Derivatives not designated as cash flow hedges
|
|
|
|
|
|
|
|
|
Foreign currency
|
|
$
|
5,774
|
|
|
$
|
(4,930
|
)
|
|
$
|
(396
|
)
|
|
$
|
(9,159
|
)
|
Total
|
|
$
|
5,774
|
|
|
$
|
(4,930
|
)
|
|
$
|
(396
|
)
|
|
$
|
(9,159
|
)
|
Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
10
.
RETIREMENT BENEFITS
Our
2016
Annual Report disclosed anticipated
2017
defined benefit pension and other postretirement plan contributions of approximately
$17,000
and
$2,500
, respectively. The following table provides updated contribution information for these plans at
June 30, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plans
|
|
Other Postretirement Plans
|
Contributions made through June 30, 2017
|
|
$
|
9,720
|
|
|
$
|
1,040
|
|
Contributions expected for the remainder of 2017
|
|
8,183
|
|
|
1,238
|
|
Total contributions expected for 2017
|
|
$
|
17,903
|
|
|
$
|
2,278
|
|
The following table provides a breakout of the components of net periodic benefit cost (income) associated with our defined benefit pension and other postretirement plans for the
three and six months ended June 30, 2017
and
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Pension Plans
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
2,871
|
|
|
$
|
2,384
|
|
|
$
|
5,653
|
|
|
$
|
4,711
|
|
Interest cost
|
|
4,737
|
|
|
5,975
|
|
|
9,328
|
|
|
11,893
|
|
Expected return on plan assets
|
|
(5,968
|
)
|
|
(6,821
|
)
|
|
(11,754
|
)
|
|
(13,617
|
)
|
Amortization of prior service credits
|
|
(156
|
)
|
|
(158
|
)
|
|
(306
|
)
|
|
(312
|
)
|
Recognized net actuarial losses
|
|
1,529
|
|
|
1,475
|
|
|
3,027
|
|
|
2,936
|
|
Settlement expense
(1)
|
|
2,426
|
|
|
—
|
|
|
2,426
|
|
|
—
|
|
Net periodic benefit cost
|
|
$
|
5,439
|
|
|
$
|
2,855
|
|
|
$
|
8,374
|
|
|
$
|
5,611
|
|
Other Postretirement Plans
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
171
|
|
|
$
|
176
|
|
|
$
|
342
|
|
|
$
|
352
|
|
Interest cost
|
|
342
|
|
|
341
|
|
|
684
|
|
|
681
|
|
Recognized net actuarial gains
|
|
(685
|
)
|
|
(841
|
)
|
|
(1,370
|
)
|
|
(1,681
|
)
|
Net periodic benefit income
|
|
$
|
(172
|
)
|
|
$
|
(324
|
)
|
|
$
|
(344
|
)
|
|
$
|
(648
|
)
|
|
|
(1)
|
Net periodic benefit cost in 2017 was impacted by the settlement of our qualified Canadian pension plan in the second quarter 2017. The settlement resulted in the immediate recognition of previously unrecognized actuarial gains related to the plan that were previously included in AOCI.
|
11
.
COMMITMENTS AND CONTINGENCIES
General
—
We have been and may from time to time be named as a defendant in legal actions claiming damages in connection with engineering and construction projects, technology licenses, other services we provide, and other matters. These are typically claims that arise in the normal course of business, including employment-related claims and contractual disputes or claims for personal injury or property damages which occur in connection with services performed relating to project or construction sites. Contractual disputes normally involve claims relating to the timely completion of projects, performance of equipment or technologies, design or other engineering services or project construction services provided by us. We do not believe that any of our pending contractual, employment-related personal injury or property damage claims and disputes will have a material adverse effect on our results of operations, financial position or cash flow.
See
Note 14
for additional discussion of claims associated with our projects.
Project Arbitration Matter
—The customer for one of our large cost-reimbursable projects has filed a request for arbitration with the International Chamber of Commerce, alleging cost overruns on the project, which has been completed. The customer has not provided evidence to substantiate its allegations, and we believe all amounts incurred and billed on the project, including outstanding receivables of approximately
$236,000
as of
June 30, 2017
, are contractually due under the provisions of our contract and are recoverable, but have been classified as a non-current asset on our Balance Sheet as we do not anticipate collection within the next year. We do not believe a risk of material loss is probable related to this matter, and accordingly, no amounts have been accrued. While it is possible that a loss may be incurred, we are unable to estimate the range of potential loss, if any. Further, we have asserted counterclaims for our outstanding receivables.
Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Dispute Related to Sale of Nuclear Operations
—
On December 31, 2015, we sold our Nuclear Operations to Westinghouse Electric Company LLC (“WEC”). In connection with the transaction, a post-closing purchase price adjustment mechanism was negotiated between CB&I and WEC to account for any difference between target working capital and actual working capital as finally determined pursuant to the terms of the purchase agreement. On April 28, 2016, WEC delivered to us a purported closing statement that estimated closing working capital was negative
$976,506
, which was
$2,150,506
less than the target working capital amount. In contrast, we calculated closing working capital to be
$1,601,805
, which was
$427,805
greater than the target working capital amount.
On July 21, 2016, we filed a complaint against WEC in the Court of Chancery in the State of Delaware seeking a declaration that WEC has no remedy for the vast majority of its claims, and we requested an injunction barring WEC from bringing such claims. On December 2, 2016, the Court of Chancery granted WEC’s motion for judgment on the pleadings and dismissed our complaint, stating that the dispute should follow the dispute resolution process set forth in the purchase agreement, which includes the use of an independent auditor to resolve the working capital dispute. We appealed that ruling to the Delaware Supreme Court. Due to WEC’s bankruptcy filing on March 29, 2017, all claim resolution proceedings were automatically stayed pursuant to the Bankruptcy Code. At the parties’ request, the Bankruptcy Court lifted the automatic stay to permit the appeal and dispute resolution process to continue. Oral argument before the Delaware Supreme Court was held on May 3, 2017, and on June 27, 2017, the Delaware Supreme Court overturned the decision of the Court of Chancery and instructed the Court of Chancery to issue an order enjoining WEC from submitting certain claims to the independent auditor. The parties continue to move forward with those matters still subject to the dispute resolution process and with the selection of a new independent auditor to replace the previous auditor, who had resigned. We do not believe a risk of material loss is probable related to this matter, and, accordingly, no amounts have been accrued. While it is possible that a loss may be incurred, we are unable to estimate the range of potential loss, if any. We believe the Delaware Supreme Court ruling significantly improved our position on this matter and intend to continue pursuing our rights under the purchase agreement.
Asbestos Litigation
—We are a defendant in numerous lawsuits wherein plaintiffs allege exposure to asbestos due to work we may have performed at various locations. We have never been a manufacturer, distributor or supplier of asbestos products. Over the past several decades and through
June 30, 2017
, we have been named a defendant in lawsuits alleging exposure to asbestos involving approximately
6,100
plaintiffs and, of those claims, approximately
1,200
claims were pending and
4,900
have been closed through dismissals or settlements. Over the past several decades and through
June 30, 2017
, the claims alleging exposure to asbestos that have been resolved have been dismissed or settled for an average settlement amount of approximately
two thousand
dollars per claim. We review each case on its own merits and make accruals based on the probability of loss and our estimates of the amount of liability and related expenses, if any. Although we have seen an increase in the number of recent filings, especially in one specific venue, we do not believe the increase or any unresolved asserted claims will have a material adverse effect on our future results of operations, financial position or cash flow, and at
June 30, 2017
, we had approximately
$8,300
accrued for liability and related expenses. With respect to unasserted asbestos claims, we cannot identify a population of potential claimants with sufficient certainty to determine the probability of a loss and to make a reasonable estimate of liability, if any. While we continue to pursue recovery for recognized and unrecognized contingent losses through insurance, indemnification arrangements or other sources, we are unable to quantify the amount, if any, that we may expect to recover because of the variability in coverage amounts, limitations and deductibles or the viability of carriers, with respect to our insurance policies for the years in question.
Environmental Matters
—
Our operations are subject to extensive and changing U.S. federal, state and local laws and regulations, as well as the laws of other countries, that establish health and environmental quality standards. These standards, among others, relate to air and water pollutants and the management and disposal of hazardous substances and wastes. We are exposed to potential liability for personal injury or property damage caused by any release, spill, exposure or other accident involving such pollutants, substances or wastes.
In connection with the historical operation of our facilities, including those associated with acquired operations, substances which currently are or might be considered hazardous were used or disposed of at some sites that will or may require us to make expenditures for remediation. In addition, we have agreed to indemnify parties from whom we have purchased or to whom we have sold facilities for certain environmental liabilities arising from acts occurring before the dates those facilities were transferred.
We believe we are in compliance, in all material respects, with environmental laws and regulations and maintain insurance coverage to mitigate our exposure to environmental liabilities. We do not believe any environmental matters will have a material adverse effect on our future results of operations, financial position or cash flow. We do not anticipate we will incur material capital expenditures for environmental controls or for the investigation or remediation of environmental conditions during the remainder of
2017
or
2018
.
Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
12
.
ACCUMULATED OTHER COMPREHENSIVE INCOME
The following table presents changes in AOCI, net of tax, by component, during the
six months ended June 30, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency
Translation
Adjustment
(1)
|
|
Unrealized
Fair Value Of
Cash Flow Hedges
|
|
Defined Benefit
Pension and Other
Postretirement Plans
|
|
Total
|
Balance at December 31, 2016
|
|
$
|
(264,562
|
)
|
|
$
|
(213
|
)
|
|
$
|
(130,841
|
)
|
|
$
|
(395,616
|
)
|
OCI before reclassifications
|
|
55,973
|
|
|
942
|
|
|
(10,924
|
)
|
|
45,991
|
|
Amounts reclassified from AOCI
|
|
—
|
|
|
(132
|
)
|
|
2,859
|
|
|
2,727
|
|
Net OCI
|
|
55,973
|
|
|
810
|
|
|
(8,065
|
)
|
|
48,718
|
|
Balance at June 30, 2017
|
|
$
|
(208,589
|
)
|
|
$
|
597
|
|
|
$
|
(138,906
|
)
|
|
$
|
(346,898
|
)
|
|
|
(1)
|
During the
six months ended June 30, 2017
, the currency translation adjustment component of AOCI was
favorably
impacted by net movements in the
Australian Dollar
,
British Pound
, and
Euro
exchange rates against the U.S. Dollar.
|
The following table presents reclassification of AOCI into earnings, net of tax, for each component, during the
six months ended June 30, 2017
:
|
|
|
|
|
|
|
|
Amount Reclassified From AOCI
|
Unrealized Fair Value Of Cash Flow Hedges
(1)
|
|
|
Interest rate derivatives (interest expense)
|
|
$
|
(49
|
)
|
Foreign currency derivatives (cost of revenue)
|
|
(208
|
)
|
Total before tax
|
|
$
|
(257
|
)
|
Tax
|
|
125
|
|
Total net of tax
|
|
$
|
(132
|
)
|
Defined Benefit Pension and Other Postretirement Plans
(2)
|
|
|
Amortization of prior service credits
|
|
$
|
(306
|
)
|
Recognized net actuarial losses
|
|
4,155
|
|
Total before tax
|
|
$
|
3,849
|
|
Tax
|
|
(990
|
)
|
Total net of tax
|
|
$
|
2,859
|
|
|
|
(1)
|
See
Note 9
for further discussion of our cash flow hedges, including the total value reclassified from AOCI to earnings.
|
|
|
(2)
|
See
Note 10
for further discussion of our defined benefit and other postretirement plans, including the components of net periodic benefit cost.
|
Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
13
.
EQUITY-BASED INCENTIVE PLANS
AND OTHER EQUITY ACTIVITY
General
—Under our equity-based incentive plans (our “Incentive Plans”), we can issue shares to employees and directors in the form of restricted stock units (“RSUs”), performance based shares (including those based upon financial or stock price performance) and stock options. Changes in common stock, APIC and treasury stock during the
six months ended June 30, 2017
and
2016
primarily relate to activity associated with our Incentive Plans and share repurchases.
Share Grants
—During the
six months ended June 30, 2017
, we had the following share grants associated with our Incentive Plans:
|
|
|
|
|
|
|
|
|
|
|
Shares
(1)
|
|
Weighted Average
Grant-Date Fair
Value per Share
|
RSUs
|
|
1,155
|
|
|
$
|
32.13
|
|
Financial performance based shares
|
|
597
|
|
|
$
|
36.00
|
|
Stock performance based shares
|
|
149
|
|
|
$
|
44.21
|
|
Total shares granted
|
|
1,901
|
|
|
|
|
|
(1)
|
No
stock options were granted during the
six months ended June 30, 2017
.
|
Share Issuances
—During the
six months ended June 30, 2017
, we had the following share issuances associated with our Incentive Plans and employee stock purchase plan (“ESPP”):
|
|
|
|
|
|
|
Shares
|
Financial performance based shares (issued upon vesting)
|
|
49
|
|
RSUs (issued upon vesting)
|
|
867
|
|
Stock options (issued upon exercise)
|
|
32
|
|
ESPP shares (issued upon sale)
|
|
239
|
|
Total shares issued
|
|
1,187
|
|
Stock-Based Compensation Expense
—During the
three months ended June 30, 2017
and
2016
, we recognized
$16,194
and
$6,658
, respectively (including
$6,198
and
$718
, respectively, associated with our discontinued Capital Services Operations), of stock-based compensation expense, and during the
six months ended June 30, 2017
and
2016
, we recognized
$26,441
and
$21,158
, respectively (including
$6,874
and
$1,640
, respectively, associated with our discontinued Capital Services Operations), of stock-based compensation expense, primarily within selling and administrative expense. We recognize forfeitures as they occur, rather than estimating expected forfeitures.
Share Repurchases
—During the
six months ended June 30, 2017
, we repurchased
299
shares for
$9,080
(an average price of
$30.37
) for taxes withheld on taxable share distributions.
Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
14
.
UNAPPROVED CHANGE ORDERS, CLAIMS, INCENTIVES AND OTHER PROJECT MATTERS
Unapproved Change Orders, Claims and Incentives
—We have unapproved change orders and claims (collectively, “Claims”) and incentives included in project price for consolidated and proportionately consolidated projects within our Engineering & Construction and Fabrication Services operating groups.
At
June 30, 2017
and
December 31, 2016
, our pro-rata share of Claims included in project price totaled approximately
$520,000
and
$121,100
, respectively. Our Claims at
June 30, 2017
are primarily related to a completed project, a consolidated joint venture project that is substantially complete, and a proportionately consolidated joint venture project. The Claims are primarily associated with schedule related delays and related prolongation costs, fabrication activities and disputes regarding certain reimbursable billings. Approximately
$266,200
of the Claim amounts are subject to arbitration or dispute resolution proceedings that are in the early stages and the remainder are subject to early commercial discussions. Further, approximately
$456,000
of the Claim amounts had been recognized as revenue on a cumulative POC basis through
June 30, 2017
. Of the recognized Claim amounts at
June 30, 2017
, approximately
$154,000
had been paid by the respective customers, approximately
$39,000
has been reflected within non-current assets on our Balance Sheet as we do not anticipate collection within the next year, and the remainder has been reflected within cost and estimated earnings in excess of billings on our Balance Sheet.
At
June 30, 2017
and
December 31, 2016
, we also had incentives included in project price of approximately
$38,200
and
$43,000
, respectively, for projects within our Engineering & Construction and Fabrication Services operating groups. Approximately
$21,300
of such amounts had been recognized as revenue on a cumulative POC basis through
June 30, 2017
.
The aforementioned amounts recorded in project price and recognized as revenue reflect our best estimate of recovery amounts; however, the ultimate resolution and amounts received could differ from these estimates and could have a material adverse effect on our results of operations, financial position and cash flow. See
Note 11
for further discussion of outstanding receivables related to one of our completed large cost-reimbursable projects.
Westinghouse Bankruptcy
—At
June 30, 2017
, we had approximately
$31,000
of accounts receivable and unbilled amounts due from Westinghouse. On March 29, 2017, Westinghouse filed voluntary petitions to reorganize under Chapter 11 of the U.S. Bankruptcy Code (“Westinghouse Bankruptcy”). We currently do not believe the Westinghouse Bankruptcy will impact the realizability of the receivable amounts and therefore, no amounts have been reserved as of
June 30, 2017
.
Other
—Backlog for each of our operating groups generally consists of several hundred contracts and our results may be impacted by changes in estimated project margins. For the
three months ended June 30, 2017
, significant changes in estimated margins on
four
projects resulted in a decrease to our income from operations of approximately
$548,000
, all within our Engineering & Construction operating group. For the
six months ended June 30, 2017
, significant changes in estimated margins on the same
four
projects resulted in a decrease to our income from operations of approximately
$715,000
, and changes in estimated margins on
two
projects resulted in an increase to our income from operations of approximately
$103,000
, all within our Engineering & Construction operating group. For the three and six months ended June 30, 2016, individual projects with significant changes in estimated margins did not have a material net impact on our income from operations.
The
two
projects that resulted in an increase to our income from operations of approximately
$103,000
for the
six months ended June 30, 2017
, benefited from changes in estimated recoveries during the three months ended March 31, 2017, and included a large consolidated joint venture project and a separate cost reimbursable project.
Loss Projects
Two
of the projects that resulted in a decrease to our income from operations for the 2017 periods were in a loss position. For the
three and six months ended June 30, 2017
, changes in estimates on these projects resulted in a decrease to our income from operations of approximately
$181,000
and
$324,000
, respectively. The loss projects were impacted primarily by lower than anticipated craft labor productivity (including reductions to our forecasted productivity estimates to levels that are in line with our overall historical experience); slower than anticipated benefits from mitigation plans; and further extensions of schedule and related prolongation costs (including schedule liquidated damages) resulting from the aforementioned impacts. At
June 30, 2017
,
one
project was approximately
69%
complete, had a reserve for estimated losses of approximately
$98,000
, and is forecasted to be completed in May 2018 (representing a four month extension from our estimates as of March 31, 2017). The other loss project was approximately
86%
complete, had a reserve for estimated losses of approximately
$23,000
, and is forecasted to be completed in November 2017 (representing a two month extension from our estimates as of March 31, 2017). If future direct and subcontract labor productivity differ from our current estimates, our schedules are further extended, or the projects incur increased schedule liquidated damages due to our inability to reach favorable commercial resolution on such matters, the projects would experience further losses.
Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Proportionately Consolidated JV Projects
The
two
other projects that resulted in a decrease to our income from operations for the 2017 periods were proportionately consolidated joint venture projects. For the
three and six months ended June 30, 2017
, changes in estimates on these projects resulted in a decrease to our income from operations of approximately
$367,000
and
$391,000
, respectively.
A majority of the impacts for the
2017
period relate to
one
of the proportionately consolidated joint venture projects, which was slightly above break-even at
June 30, 2017
. The project was impacted primarily by lower than anticipated craft labor productivity (including reductions to our forecasted productivity estimates as trending results of certain disciplines provided increased evidence that previously forecasted productivity estimates were unlikely to be achieved); weather related delays; increased material, construction and fabrication costs due to quantity growth and material delivery delays; higher than anticipated estimates from subcontractors for their work scopes; and extensions of schedule and related prolongation costs resulting from the aforementioned. The revised schedule represented a several month extension from our March 31, 2017 estimates for certain LNG trains and the schedule was submitted to the owner during the
three months ended June 30, 2017
. Our current forecast for the project anticipates improvement in productivity from our overall historical experience (as we make progress on each LNG train) through modified execution plans, and actions to reduce our schedule related costs. The aforementioned impact for the
six months ended June 30, 2017
includes the benefit of an increase in project price for claims on the project during the three months ended March 31, 2017.
The remaining impacts for the
2017
period relate to the other proportionately consolidated joint venture project, which was impacted primarily by increased material, construction and fabrication costs due to quantity growth and material delivery delays, and potential extensions of schedule and related prolongation costs resulting from the aforementioned.
If future direct and subcontract labor productivity differ from our current estimates, our schedules are further extended, or the projects incur schedule liquidated damages due to our inability to reach favorable legal or commercial resolution on such matters, the projects would experience further decreases in estimated margins.
15
.
SEGMENT INFORMATION
Our management structure and internal and public segment reporting are aligned based upon the services offered by our
three
operating groups, which represent our reportable segments: Engineering & Construction; Fabrication Services; and Technology. Our chief operating decision maker evaluates the performance of the aforementioned operating groups based upon revenue and income from operations. Each operating group’s income from operations reflects corporate costs, allocated based primarily upon revenue. Intersegment revenue for our continuing operations is netted against the revenue of the segment receiving the intersegment services. For the
three months ended June 30, 2017
and
2016
, intersegment revenue totaled approximately
$152,700
and
$66,700
, respectively, and for the
six months ended June 30, 2017
and
2016
, intersegment revenue totaled approximately
$294,100
and
$107,600
, respectively. Intersegment revenue for the aforementioned periods primarily related to services provided by our Fabrication Services operating group to our Engineering & Construction operating group.
As a result of the classification of our Capital Services Operations (which was primarily comprised of our former Capital Services reportable segment) as a discontinued operation, the 2016 information for our remaining segments presented below has been recast to reflect: 1) a reallocation of certain corporate amounts previously allocated to the Capital Services segment that were not assignable to the discontinued operation, and 2) the portions of the previously reported Capital Services segment that were not included in the Capital Services Operations and the portions of other segments that were included in the Capital Services Operations. In addition, revenue for the remaining segments has been recast to reflect the intersegment revenue with our Capital Services Operations that was previously eliminated prior to the discontinued operations classification (approximately
$18,500
and
$25,200
for the
three months ended June 30, 2017
and
2016
, respectively, and approximately
$34,400
and
$57,100
for the
six months ended June 30, 2017
and
2016
, respectively).
Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table presents total revenue and income from operations by reportable segment for the
three and six months ended June 30, 2017
and
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Revenue
|
|
|
|
|
|
|
|
|
Engineering & Construction
|
|
$
|
702,150
|
|
|
$
|
1,548,994
|
|
|
$
|
1,982,903
|
|
|
$
|
3,085,355
|
|
Fabrication Services
|
|
508,518
|
|
|
547,658
|
|
|
987,090
|
|
|
1,081,364
|
|
Technology
|
|
72,809
|
|
|
64,512
|
|
|
140,836
|
|
|
129,074
|
|
Total revenue
|
|
$
|
1,283,477
|
|
|
$
|
2,161,164
|
|
|
$
|
3,110,829
|
|
|
$
|
4,295,793
|
|
|
|
|
|
|
|
|
|
|
Operating (Loss) Income From Continuing Operations
|
|
|
|
|
|
|
|
|
Engineering & Construction
|
|
$
|
(525,682
|
)
|
|
$
|
92,809
|
|
|
$
|
(520,268
|
)
|
|
$
|
200,882
|
|
Fabrication Services
|
|
57,639
|
|
|
67,385
|
|
|
109,698
|
|
|
104,495
|
|
Technology
|
|
21,460
|
|
|
23,054
|
|
|
42,975
|
|
|
49,203
|
|
Total operating (loss) income from continuing operations
|
|
$
|
(446,583
|
)
|
|
$
|
183,248
|
|
|
$
|
(367,595
|
)
|
|
$
|
354,580
|
|
The following table presents total assets by reportable segment at
June 30, 2017
and
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
December 31, 2016
|
Assets
|
|
|
|
|
Engineering & Construction
|
|
$
|
3,694,396
|
|
|
$
|
3,572,399
|
|
Fabrication Services
|
|
2,465,398
|
|
|
2,394,041
|
|
Technology
|
|
986,485
|
|
|
996,104
|
|
Total assets of continuing operations
|
|
7,146,279
|
|
|
6,962,544
|
|
Assets of discontinued operations (Note 4)
|
|
—
|
|
|
876,876
|
|
Total assets
|
|
$
|
7,146,279
|
|
|
$
|
7,839,420
|
|
16
.
SUBSEQUENT EVENT
Amendments to Debt and Credit Facility Agreements
—Effective
August 9, 2017
, and effective for the period ended June 30, 2017, we are amending our Senior Facilities, subject to final documentation. See
Note 8
for additional discussion.