Chicago Bridge & Iron Company N.V. (CBI)

CBI 
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Chicago Bridge & Iron N.V. (CBI)

Q3 2012 Earnings Call

October 23, 2012 5:00 pm ET

Executives

Philip K. Asherman - Chief Executive Officer, President and Supervisory Director

Daniel M. McCarthy - Executive Vice President and President of Lummus Technology

Ronald A. Ballschmiede - Chief Financial Officer and Executive Vice President

Lasse Petterson - Chief Operating Officer and Executive Vice President

Analysts

Michael S. Dudas - Sterne Agee & Leach Inc., Research Division

Andy Kaplowitz - Barclays Capital, Research Division

Robert F. Norfleet - BB&T Capital Markets, Research Division

Steven Fisher - UBS Investment Bank, Research Division

Andrew Buscaglia

John Rogers - D.A. Davidson & Co., Research Division

Chase Jacobson - William Blair & Company L.L.C., Research Division

Scott J. Levine - JP Morgan Chase & Co, Research Division

Will Gabrielski - Lazard Capital Markets LLC, Research Division

Joseph Ritchie - Goldman Sachs Group Inc., Research Division

Presentation

Operator

Before beginning today's call, the company would like to caution you regarding forward-looking statements. Any statements made or discussed today that do not constitute or are not historical facts, particularly comments regarding the company's future plans and expected performance, are forward-looking statements that are based on assumptions the company believes are reasonable, but are subject to a range of uncertainties and risks that are summarized in the company's press release and the SEC filings.

While forward-looking statements represent management's best current judgment as to what may occur in the future, the actual outcome or results may differ materially from what is expressed or implied in any such statements.

Now I would like to turn the call over to Mr. Philip Asherman, President and CEO of CB&I.

Philip K. Asherman

Good afternoon, and thank you for joining us as we report Chicago Bridge & Iron's results for the third quarter of 2012. With me today are CB&I's Chief Operating Officer, Lasse Petterson, who will report on project backlog and steel plate structures; Dan McCarthy, President of Lummus Technology; and our Chief Financial Officer, Ron Ballschmiede, who will discuss our third quarter financial performance and outlook for the year.

We had another very strong quarter, highlighted by a year-over-year the growth in earnings and revenue, solid cash position and a sustainable backlog. New awards year-to-date increased to nearly $4.5 billion, consistent with the trajectory we had anticipated in our guidance for the year. During this quarter, we announced a $237 million EPC project built a peak shaver in Eastern Australia; a contract in excess of $80 million of engineering and procurement for an offshore facility in Europe; an exciting FEED contract for Occidental Chemical's new ethane cracker, which we hope to convert to EPC in early 2013 with a very interesting project for the engineering and construction management project for BASF in Belgium for a new butadiene crack plant. In addition, our quarterly run rate of new awards for smaller underpinning work in technology, tanks and services contracts around the world was in excess of $500 million.

We remain very confident that our focus in LNG, gas processing, petrochemicals, and other engineering and construction opportunities, combined with the great return that we're seeing from our technology sector and the global market position of steel plate structures. We are well poised to enter 2013 in an extremely strong position to capitalize on the continuing development of energy infrastructure in this country and around the world. As Ron will reaffirm, our guidance for this year is unchanged.

Of course, a large part of this world view is the pending of financial close of our acquisition of the Shaw Group. Since we announced on June 30 that we have signed a definitive agreement to acquire the Shaw Group, we've had the opportunity to speak with analysts, investors, bankers, employees, customers, as well as other stakeholders in both companies. From those conversations, I've been impressed with the tremendous support and anticipation about this important consolidation of 2 of the leading companies in our industry.

As we get to know more of the Shaw employees, we’re encouraged by their talent and dedication. As we further examine their work processes and technical capabilities, we clearly see an opportunity to leverage their expertise with the success we've had with our approach to execution. With our technology, EPC and tank fabrication and erection, combined with the Shaw businesses like pipe fabrication and plant services, we can scale our business model to provide a virtually seamless offering. The owners will require a safe and comprehensive solution for their capital projects, which by some estimates, will require a resource capability not seen in this industry for decades.

Let me provide an update on this transaction timeline: what's been accomplished and what's still to come. Activities are moving along as planned. Shaw announced that it successfully completed the divestiture of its energy and chemicals business, announced the extra size of put options to sell its Westinghouse shares with a settlement expected in January 1, both conditions to close. Lastly, Shaw has reported a cash position on August 31 of $1.4 billion and EBITDA for the past 3 quarters of $242 million, which obviously gives us great confidence that Shaw is satisfying the $800 million of unrestricted cash and $200 million EBITDA requirements for closing.

We also continue to make progress on the regulatory front. All necessary filings have been made and the waiting period under the Hart-Scott-Rodino has expired. We remain confident that the proposed transaction will receive the few remaining necessary governmental approvals. The next major milestone will be the filing of the final proxy statement, which is in process now. We're working towards and continue to expect a transaction close in the first quarter of 2013.

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