FORM 10-Q

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Quarterly period ended June 30, 2004

OR

(   ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                    

Commission File Number 1-12815

CHICAGO BRIDGE & IRON COMPANY N.V.

Polarisavenue 31
2132 JH Hoofddorp
The Netherlands
31-23-5685660
(Address and telephone number of principal executive offices)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the exchange act).

The number of shares outstanding of a single class of common stock as of July 31, 2004 — 47,838,345

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CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES
Table of Contents

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CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

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CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES

(In thousands, except share data)

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

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CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

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CHICAGO BRIDGE & IRON COMPANY N.V. AND SUBSIDIARIES

1. Significant Accounting Policies

Basis of Presentation-The accompanying unaudited consolidated financial statements for Chicago Bridge & Iron Company N.V. and Subsidiaries (“CB&I”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, our unaudited consolidated financial statements include all adjustments necessary for a fair presentation of our financial position as of June 30, 2004, and our results of operations and cash flows for each of the three-month and six-month periods ended June 30, 2004 and 2003. The consolidated balance sheet at December 31, 2003 is derived from the December 31, 2003 audited consolidated financial statements. Although management believes the disclosures in 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 accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. 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 unaudited interim consolidated financial statements should be read in conjunction with our consolidated financial statements and notes thereto included in our 2003 Annual Report on Form 10-K.

Reclassification of Prior Year Balances-Certain prior year balances have been reclassified to conform with the current year presentation.

Revenue Recognition-Revenue is recognized using the percentage-of-completion method. A significant portion of our work is performed on a fixed price or lump sum basis. The balance of our work is performed on variations of cost reimbursable and target price approaches. Contract revenue is accrued based on the percentage that actual costs-to-date bear to total estimated costs. We utilize this cost-to-cost approach as we believe this method is less subjective than relying on assessments of physical progress. We follow the guidance of the Statement of Position 81-1, “Accounting for Performance of Construction-Type and Certain Production-Type Contracts,” for accounting policy relating to our use of the percentage-of-completion method, estimating costs, revenue recognition and claim recognition. The use of estimated cost to complete each contract, while the most widely recognized method used for percentage-of-completion accounting, is a significant variable in the process of determining income earned and is a significant factor in the accounting for contracts. 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. Due to the various estimates inherent in our contract accounting, actual results could differ from those estimates.

Contract revenue reflects the original contract price adjusted for agreed upon change orders and estimated minimum recoveries of claims. We recognize claims when it is probable that the claim will result in additional contract revenue and the amount of the claim can be reliably estimated. Claims are only recorded to the extent that contract costs relating to the claim have been incurred. At June 30, 2004 and December 31, 2003, we had net outstanding claims recognized of $8,550 and $6,970, respectively. Losses expected to be incurred on contracts in progress are charged to income in the period such losses are known. Provisions for additional costs associated with contracts projected to be in a loss position at June 30, 2004 resulted in a $31,400 and $46,300 charge to income in the three and six month periods ended June 30, 2004, respectively.

Cost and estimated earnings to date in excess of progress billings on contracts in process represent the cumulative revenue recognized less the cumulative billings to the customer. Any billed revenue that has not been collected is reported as accounts receivable. Unbilled revenue is reported as contracts in progress with costs and estimated earnings exceeding related progress billings on the consolidated balance sheet. The timing of when we bill our customers is generally contingent on completion of certain phases of the work as stipulated in the contract. Progress

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billings in accounts receivable at June 30, 2004 and December 31, 2003 were currently due and included retentions totaling $37,673 and $32,533, respectively, to be collected within one year. Contract retentions collectible beyond one year are included in non-current contract retentions on our consolidated balance sheets. Cost of revenue includes direct contract costs such as material and construction labor, and indirect costs which are attributable to contract activity.

New Accounting Standards-In December 2003, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 132 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits.” The revised standard requires annual and interim disclosures in addition to those in the original standard concerning the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans. This statement is effective for fiscal years ending after December 15, 2003. See Note 5 for the interim disclosure requirements of SFAS No. 132 (revised 2003).

In May 2004, the FASB issued FASB Staff Position (“FSP”) No. FAS 106-2 (“FSP 106-2”), “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003,” which supersedes FSP 106-1. FSP 106-2 provides guidance on the accounting for the effects of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”) for employers that sponsor postretirement health care plans that provide prescription drug benefits. FSP 106-2 also requires certain disclosures regarding the effect of the federal subsidy provided by the Act. FSP 106-2 is effective for the first interim and annual period beginning after June 15, 2004. We are currently evaluating the effect that adoption of FSP 106-2 will have on our financial condition or results of operations.

Earnings Per Share Computations-Basic earnings per share (“EPS”) is calculated by dividing our net income by the weighted average number of common shares outstanding for the period, which includes stock held in trust. Diluted EPS reflects the assumed conversion of all dilutive securities, consisting of employee stock options/restricted shares/performance shares and directors deferred fee shares. Excluded from our per share calculations for the three and six month periods ended June 30, 2004 were 424 shares and 64 shares, respectively, as they were considered antidilutive.

The following schedule reconciles the income and shares utilized in the basic and diluted EPS computations:

Stock Plans-We account for stock-based compensation using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of our stock at the date of the grant over the amount an employee must pay to acquire the stock, subject to any vesting provisions. Reported net income does not include any compensation expense associated with stock options, but does include compensation expense associated with restricted stock and performance share awards.

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Had compensation expense for the Employee Stock Purchase Plan and Long-Term Incentive Plans been determined consistent with the fair value method of SFAS No. 123, “Accounting for Stock-Based Compensation” (using the Black-Scholes pricing model for stock options), our net income and net income per common share would have reflected the following pro forma amounts:

Using the Black-Scholes option-pricing model, the fair value of each option grant is estimated on the date of grant based on the following weighted-average assumptions:

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2. Comprehensive Income

Comprehensive income for the three and six months ended June 30, 2004 and 2003 is as follows:

Accumulated other comprehensive loss reported on our balance sheet at June 30, 2004 includes the following, net of tax: $11,922 of cumulative translation adjustment, $211 of unrealized loss on debt securities, ($447) of unrealized fair value of cash flow hedges and $765 of minimum pension liability adjustments.

3. Goodwill and Other Intangibles

Goodwill

General-At June 30, 2004 and December 31, 2003, our goodwill balances were $232,166 and $219,033, respectively, attributable to the excess of the purchase price over the fair value of net assets acquired relative to acquisitions within our North America and EAME segments.

The increase in goodwill primarily relates to direct acquisition costs and final asset and liability valuations associated with our 2003 acquisitions of Petrofac and John Brown, a contingent earnout obligation associated with our 2000 acquisition of Howe-Baker International L.L.C. (“Howe-Baker”), the impact of foreign currency translation and a reduction in accordance with SFAS No. 109, “Accounting for Income Taxes,” where tax goodwill exceeded book goodwill.

The change in goodwill by segment for the six months ended June 30, 2004 is as follows:

Impairment Testing-SFAS No. 142 “Goodwill and Other Intangible Assets” prescribes a two-phase process for impairment testing of goodwill, which is performed annually, absent any indicators of impairment. The first phase screens for impairment, while the second phase (if necessary) measures the impairment. We have elected to perform our annual analysis during the fourth quarter of each year based upon goodwill balances as of the end of the third calendar quarter. Although no indicators of impairment have been identified during 2004, there can be no assurance that future goodwill impairment tests will not result in a charge to earnings.

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Other Intangible Assets

In accordance with SFAS No. 142, the following table provides information concerning our other intangible assets for the periods ended June 30, 2004 and December 31, 2003:

The changes in other intangibles relate to additional amortization expense.

4. Financial Instruments

Forward Contracts-At June 30, 2004 our forward contracts to hedge intercompany loans and certain operating exposures are summarized as follows:

(1)

Represents notional U.S. dollar equivalent at inception of contract.

(2)

Contracts generally mature within seven days of quarter-end.

(3)

Contracts mature within one year of quarter-end and were designated as “cash flow hedges” under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” At June 30, 2004, the fair value of these contracts, recorded in other current assets on our consolidated balance sheets, was $687 (see Note 2). Any hedge ineffectiveness was not significant.

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5. Retirement Benefits

We previously disclosed in our financial statements for the year ended December 31, 2003, that in 2004 we expected to contribute $4,929 and $3,006 to our defined benefit and other postretirement plans, respectively. The following table provides contribution information for our defined benefit and postretirement plans as of June 30, 2004:

The following table provides combined information for our defined benefit and other postretirement plans:

Components of Net Periodic Benefit Cost

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6. Segment Information

We manage our operations by four geographic segments: North America; Europe, Africa, Middle East; Asia Pacific; and Central and South America. Each geographic segment offers similar services.

The Chief Executive Officer evaluates the performance of these four segments based on revenue and income from operations. Each segment’s performance reflects the allocation of corporate costs, which were based primarily on revenue. Intersegment revenue was not material.

7. Commitments and Contingencies

Antitrust Proceedings-On October 25, 2001, the U.S. Federal Trade Commission (the “FTC” or the “Commission”) announced its decision to file an administrative complaint (the “Complaint”) challenging our February 2001 acquisition of certain assets of the Engineered Construction Division of PDM that we acquired together with certain assets of the Water Division of PDM (The Engineered Construction and Water Divisions of PDM are hereafter sometimes referred to as the “PDM Divisions”). The FTC’s Complaint alleged that the acquisition violated Section 7 of the Clayton Antitrust Act and Section 5 of the Federal Trade Commission Act by threatening to substantially lessen competition in four specific markets in which both we and PDM had competed in the United States: liquefied natural gas storage tanks and associated facilities constructed in the United States; liquefied nitrogen, liquefied oxygen and liquefied argon storage tanks constructed in the United States; liquefied petroleum gas storage tanks constructed in the United States; and field erected thermal vacuum chambers (used for the testing of satellites) constructed in the United States. The FTC’s Complaint asserted that the consequence of the acquisition will be increased prices in these four markets.

A trial before an FTC Administrative Law Judge was concluded on January 16, 2003. On June 12, 2003, the FTC Administrative Law Judge issued his ruling. The ruling found that our acquisition of PDM assets threatens to substantially lessen competition in the four markets identified above in which both CB&I and PDM participated. As a result of this finding by the FTC Administrative Law Judge, we have been ordered to divest within 180 days of a final order all physical assets, intellectual property and any uncompleted construction contracts of the PDM Divisions that we acquired from PDM to a purchaser approved by the FTC that is able to utilize those assets as a viable competitor.

We believe the FTC Administrative Law Judge’s ruling is inconsistent with the law and facts presented at trial. We have appealed the ruling to the full Federal Trade Commission. In addition, the FTC Staff has appealed the sufficiency of the remedies contained in the ruling to the full Federal Trade Commission. Pending issuance of a

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final order by the Commission, we are subject to an interim order designed to preserve the status quo of the PDM assets, including a requirement that we notify the FTC 60 days before taking any action to dispose of any PDM assets at our Provo, Utah fabrication facility. On November 12, 2003, oral arguments were held before the Commission, which will issue its decision in due course. Until the FTC order becomes final, we expect the impact on our earnings will be minimal. However, the remedies contained in the order, if implemented, could have an adverse effect on us, including an expense relating to a potential write-down of the net book value of the divested assets. If additional remedies sought by the FTC staff are also implemented by the Full Commission, there may be additional adverse financial effects on us.

In addition, we were served with a subpoena for documents on July 23, 2003, by the Philadelphia office of the U.S. Department of Justice, Antitrust Division. The subpoena seeks documents that are in part related to matters that were the subject of testimony in the FTC administrative law trial, as well as documents relating to our Water Division. We are cooperating fully with the investigation. We cannot assure you that proceedings will not result from this investigation.

Environmental Matters-Our operations are subject to extensive and changing U.S. federal, state and local laws and regulations and laws outside the U.S. establishing health and environmental quality standards, including those governing discharges and pollutants into the air and water and the management and disposal of hazardous substances and wastes. This exposes us to potential liability for personal injury or property damage caused by any release, spill, exposure or other accident involving such substances or wastes.

In connection with the historical operation of our facilities, 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 to whom we have sold facilities for certain environmental liabilities arising from acts occurring before the dates those facilities were transferred. We are not aware of any manifestation by a potential claimant of its awareness of a possible claim or assessment with respect to any such facility.

We believe that we are currently in compliance, in all material respects, with all environmental laws and regulations. We do not anticipate that we will incur material capital expenditures for environmental controls or for investigation or remediation of environmental conditions during the remainder of 2004 or 2005.

Contingent Earnout Obligations-In connection with our acquisition of Howe-Baker in 2000, we assumed two earnout arrangements contingent upon the performance of the underlying acquired entities. One of the arrangements which has and will continue to require us to make cash payments to the previous owners expires in July 2004 (of which $9.6 million is included in accrued liabilities and expected to be paid in the third quarter of 2004), while the other arrangement was settled during 2003.

Consistent with the provisions of SFAS No. 141, “Business Combinations,” any additional purchase consideration with respect to the remaining contingent obligation is allocated to goodwill when recognized.

Other-We are a defendant in a number of lawsuits arising in the normal course of business, including among others, 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, and we have in place appropriate insurance coverage for the type of work that we have performed. During 2004, we were named as a defendant in additional asbestos-related lawsuits. To date, we have been able to dismiss or settle all such claims without a material impact on our operating results or financial position and do not currently believe that the asserted claims will have a material adverse effect on our future results of operations or financial position. As a matter of standard policy, we continually review our litigation accrual and as further information is known on pending cases, increases or decreases, as appropriate, may be recorded in accordance with SFAS No. 5, “Accounting for Contingencies.”

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Item 2 — Management’s Discussion and Analysis of Financial Condition
and Results of Operations

The following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is provided to assist readers in understanding our financial performance during the periods presented and significant trends, which may impact our future performance. This discussion should be read in conjunction with our Consolidated Financial Statements and the related notes thereto included elsewhere in this quarterly report.

We are a global specialty engineering, procurement and construction company serving customers in several primary end markets, including hydrocarbon refining, natural gas, water and the energy sector in general. We have been helping our customers store and process the earth’s natural resources for more than 100 years by supplying a comprehensive range of engineered steel structures and systems. We offer a complete package of design, engineering, fabrication, procurement, construction and maintenance services. Our projects include hydrocarbon processing plants, liquefied natural gas (“LNG”) terminals and peak shaving plants, offshore structures, pipelines, bulk liquid terminals, water storage and treatment facilities, and other steel structures and their associated systems. We have been continuously engaged in the engineering and construction industry since our founding in 1889.

Results of Operations

New Business Taken/Backlog-During the three months ended June 30, 2004, new business taken, representing the value of new project commitments received during a given period, was $398.3 million, compared with $538.6 million in 2003. These commitments are included in backlog until work is performed and revenue is recognized or until cancellation. New business during the quarter included an LNG terminal expansion project and hydrogen plant projects in North America. New business taken for the first half of 2004 was $746.0 million, compared with $863.3 million for the same period last year. We anticipate new business for the full year 2004 to be $1.8 billion to $1.9 billion.

Backlog at June 30, 2004 decreased 11% to $1.5 billion compared with $1.6 billion at June 30, 2003.

Revenue-Revenue during the three months ended June 30, 2004 grew 7% to $415.4 million from $389.3 million in the second quarter of 2003. Our revenue fluctuates based on the changing project mix and is dependent on the amount and timing of new awards and on other matters such as project schedules. During the quarter, revenue increased 2% in the North America segment and 44% in the Europe, Africa, Middle East (“EAME”) segment, which included revenue from CBI John Brown, acquired May 30, 2003. Revenue declined 17% in the Asia Pacific (“AP”) segment and 16% in the Central and South America (“CSA”) segment, primarily due to the timing of project execution in the field.

Gross Profit-Gross profit for the quarter decreased 40% to $29.6 million, or 7.1% of revenue, compared with 12.7% of revenue for the comparable period in 2003. The decrease was primarily attributable to the recognition of potentially unrecoverable costs on two projects, one in our EAME segment’s Saudi Arabia region that is nearing completion and the other in our North America segment that has been completed.

Saudi Arabian Project

The Saudi project was forecasted to close in a loss position of $1.4 million as of the end of 2003. In the first quarter of 2004 we recognized unanticipated costs for work performed on the project for which we are contractually obligated without the benefit of immediate owner approval. The increased costs were provided for in the period, resulting in a total charge of $6.9 million in the first quarter.

Events in the Saudi Arabia region of our EAME segment during the second quarter resulted in an unanticipated level of uncertainty and instability in the region. As a result of disruptions, real or perceived, caused by terrorist activity beginning in May 2004, we incurred additional costs and encountered unexpected difficulties and delays on the Saudi project due to increased physical security requirements and the inefficiencies, delays and disruption caused by the need to replace employees choosing to depart the Kingdom. In the second quarter we increased our

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estimate of all costs expected to be incurred to complete the project. As the project is still forecasted to result in a loss, additional provision for such loss was made, resulting in a $16.4 million charge in the second quarter.

Other than the Saudi project, we have active smaller projects in the Saudi Arabia region of our EAME segment where terrorist activity might significantly increase our costs or cause a delay in the completion of a project. We have taken steps to reduce risks from terrorist activity, including moving certain employees and support services out of Saudi Arabia and continuing to implement appropriate security measures at our jobsites and facilities. While no assurances can be given, we do not believe that we have any material risks at the present time attributable to terrorist activity in Saudi Arabia.

North American Project

On the North America segment project, a major general contractor for us (Jones LG LLC) filed for bankruptcy in late September 2003, and we undertook to takeover and complete the project on an expedited basis to ensure that our significant client’s requirements were met. During the fourth quarter of 2003, work that had been performed by the contractor’s subcontractors was suspended at a critical stage pending authorization from the bankruptcy court to proceed. Also during the fourth quarter of 2003, the general contractor gave us an estimate of the amount of the work completed and remaining to be completed. Late in the fourth quarter, we began to mobilize and believed we could perform within the budget. During the first quarter of 2004, costs increased from the impact of our taking over the work and included the continuation of mobilization; hiring and deployment of craft labor; selection of subcontractors and planning and organization of the takeover of the work and performance of work that had not been satisfactorily completed by the general contractor or its subcontractors. An $8.0 million charge to earnings was recognized in the first quarter for the increase in forecasted total costs and the resulting reduced forecasted gross margin on the project.

During the second quarter of 2004, our forecast of total project costs increased as a result of a series of unexpected events that required us to perform unplanned work and incur unforecasted costs including the rework of components of the most critical equipment on the project; decreases in labor productivity and longer than anticipated equipment utilization. Additionally, commissioning and preparation for startup of the facility began before construction was complete and much of the work had to be completed on an expedited basis in order to support an aggressive commissioning and start up program, necessitating additional costs. Due to these previously unforeseen costs, the project was now forecasted to result in a negative gross margin. As a result, a provision for such loss was made, resulting in a $15.0 million charge to earnings in the second quarter.

As of June 30, 2004, we have not recognized revenue for unapproved change orders or claims associated with these projects.

For the first half of 2004, gross profit decreased 14% to $76.3 million compared with $89.0 million in the first six months of 2003 primarily as a result of the Saudi Arabian and North American projects as discussed above.

Selling and Administrative Expenses-Selling and administrative expense for the three months ended June 30, 2004 was $23.6 million, or 5.7% of revenue, compared with $23.9 million, or 6.1% of revenue, for the comparable period in 2003.

Income from Operations-Income from operations in the second quarter of 2004 decreased 78% to $5.5 million, compared with $25.2 million in the comparable 2003 period, primarily due to the impact of the loss provisions for the North America and EAME segment projects as previously discussed.

Liquidity and Capital Resources

At June 30, 2004, cash and cash equivalents totaled $116.9 million.

Operating-During the first six months of 2004, our operations generated $7.0 million of cash flows, due to the impact of profitability being offset by growth in working capital. The level of working capital varies from period to period and is affected by the mix, stage of completion and commercial terms of contracts.

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Investing-In the first six months of 2004, we incurred $7.6 million for capital expenditures. For 2004, capital expenditures are anticipated to be in the $20.0 to $25.0 million range. Our utilization of cash also included $1.9 million of deferred purchase consideration and direct acquisition costs related to our 2003 acquisitions.

In connection with our acquisition of Howe-Baker International, L.L.C. (“Howe-Baker”), in 2000 we assumed two earnout arrangements contingent upon the performance of the underlying acquired entities. One of the arrangements, which has and will continue to require us to make cash payments to the previous owners expires in July 2004 (of which $9.6 million is included in accrued liabilities and expected to be paid in the third quarter of 2004), while the other arrangement was settled in 2003.

We continue to evaluate and selectively pursue opportunities for expansion of our business through acquisition of complementary businesses. These acquisitions, if they arise, may involve the use of cash or, depending upon the size and terms of the acquisition, may require debt or equity financing.

Financing-Net cash flows provided by financing activities were $5.9 million, primarily attributable to the issuance of common stock resulting from the exercise of stock options. Cash dividends of $3.8 million were paid during the first six months of 2004.

Our primary source of liquidity is cash flow generated from operations. Capacity under revolving credit agreements is also available, if necessary, to fund operating or investing activities. We have a three-year $233.3 million revolving credit facility and a five-year $116.7 million letter of credit facility, which terminate in August 2006 and August 2008, respectively. Both facilities are committed and unsecured. As of June 30, 2004, no direct borrowings existed under the revolving credit facility, but we had issued $121.7 million of letters of credit under the three-year facility and $15.3 million under the five-year facility. As of June 30, 2004, we had $213.0 million of available capacity under these facilities. The facilities contain certain restrictive covenants including minimum levels of net worth, fixed charge and leverage ratios, among other restrictions. The facilities also place restrictions on us with regard to subsidiary indebtedness, sales of assets, liens, investments, type of business conducted, and mergers and acquisitions, among other restrictions. We were in compliance with all covenants at June 30, 2004.

We also have various short-term, uncommitted revolving credit facilities across several geographic regions of approximately $275.4 million. These facilities are generally used to provide letters of credit or bank guarantees to customers in the ordinary course of business to support advance payments, as performance guarantees or in lieu of retention on our contracts. At June 30, 2004, we had available capacity of $123.5 million under these uncommitted facilities. In addition to providing letters of credit or bank guarantees, we also provide surety bonds in the ordinary course of business to support our contract performance.

As of June 30, 2004, the following commitments were in place to support our ordinary course obligations:

Note: Includes $22,308 of letters of credit issued in support of our insurance program.

We believe funds generated by operations, amounts available under existing credit facilities and external sources of liquidity, such as the issuance of debt and equity instruments, will be sufficient to finance capital expenditures, the settlement of earnout obligations, the settlement of commitments and contingencies (as fully described in Note 7 to our Consolidated Financial Statements) and working capital needs for the foreseeable future. However, there can be no assurance that such funding will be available, as our ability to generate cash flows from operations and our ability to access funding under the revolving credit facilities may be impacted by a variety of business, economic,

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legislative, financial and other factors which may be outside of our control. Additionally, while we currently have significant, uncommitted bonding facilities, primarily to support various commercial provisions in our engineering and construction contracts, a termination or reduction of these bonding facilities could result in the utilization of letters of credit in lieu of performance bonds, thereby reducing our available capacity under the revolving credit facilities. There can be no assurance that such facilities will be available at reasonable terms to service our ordinary course obligations.

Off-Balance Sheet Arrangements

We use operating leases for facilities and equipment when they make economic sense. In 2001, we entered into a sale (for approximately $14.0 million) and leaseback transaction of our Plainfield, Illinois administrative office with a lease term of 20 years. The leaseback structure’s future payments are accounted for as an operating lease. Rentals under this and all other lease commitments are reflected in rental expense.

We have no other off-balance sheet arrangements.

New Accounting Standards

In December 2003, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 132 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits.” The revised standard requires annual and interim disclosures in addition to those in the original standard concerning the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans. This statement is effective for fiscal years ending after December 15, 2003. See Note 5 to our Consolidated Financial Statements for the interim disclosure requirements of SFAS No. 132 (revised 2003).

In May 2004, the FASB issued FASB Staff Position (“FSP”) No. FAS 106-2 (“FSP 106-2”), “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003,” which supersedes FSP 106-1. FSP 106-2 provides guidance on the accounting for the effects of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”) for employers that sponsor postretirement health care plans that provide prescription drug benefits. FSP 106-2 also requires certain disclosures regarding the effect of the federal subsidy provided by the Act. FSP 106-2 is effective for the first interim and annual period beginning after June 15, 2004. We are currently evaluating the effect that adoption of FSP 106-2 will have on our financial condition or results of operations.

Critical Accounting Policies

In general, there have been no significant changes in our critical accounting policies since December 31, 2003. For a detailed discussion of these policies, please see Item 7 of our annual report on Form 10-K for the year ended December 31, 2003. The following provides further clarification to our revenue recognition policy:

Revenue Recognition-Revenue is recognized using the percentage-of-completion method. A significant portion of our work is performed on a fixed price or lump sum basis. The balance of our work is performed on variations of cost reimbursable and target price approaches. Contract revenue is accrued based on the percentage that actual costs-to-date bear to total estimated costs. We utilize this cost-to-cost approach as we believe this method is less subjective than relying on assessments of physical progress. We follow the guidance of the Statement of Position 81-1, “Accounting for Performance of Construction-Type and Certain Production-Type Contracts,” for accounting policy relating to our use of the percentage-of-completion method, estimating costs, revenue recognition and claim recognition. The use of estimated cost to complete each contract, while the most widely recognized method used for percentage-of-completion accounting, is a significant variable in the process of determining income earned and is a significant factor in the accounting for contracts. 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. Due to the various estimates inherent in our contract accounting, actual results could differ from those estimates.

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Contract revenue reflects the original contract price adjusted for agreed upon change orders and estimated minimum recoveries of claims. We recognize claims when it is probable that the claim will result in additional contract revenue and the amount of the claim can be reliably estimated. Claims are only recorded to the extent that contract costs relating to the claim have been incurred. At June 30, 2004 and December 31, 2003, we had net outstanding claims recognized of $8.6 million and $7.0 million, respectively. Losses expected to be incurred on contracts in progress are charged to income in the period such losses are known.

Forward-Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements. You should read carefully any statements containing the words “expect,” “believe,” “anticipate,” “project,” “estimate,” “predict,” “intend,” “should,” “could,” “may,” “might,” or similar expressions or the negative of any of these terms.

Forward-looking statements involve known and unknown risks and uncertainties. In addition to the material risks listed under “Risk Factors,” as set forth in our Form 10-K dated March 12, 2004, that may cause our actual results, performance or achievements to be materially different from those expressed or implied by any forward-looking statements, the following factors could also cause our results to differ from such statements:

•		our ability to realize cost savings from our expected execution performance of contracts;
•		the uncertain timing and the funding of new contract awards, and project cancellations and operating risks;
•		cost overruns on fixed price contracts;
•		risks associated with percentage of completion accounting;
•		changes in the costs or availability of or delivery schedule for components and materials;
•		increased competition;
•		fluctuating revenues resulting from a number of factors, including the cyclic nature of the individual markets in which our customers operate;
•		lower than expected activity in the hydrocarbon industry, demand from which is the largest component of our revenue;
•		the expected growth in our primary end markets does not occur;
•		risks inherent in our acquisition strategy and our ability to obtain financing for proposed acquisitions;
•		our ability to integrate and successfully operate acquired businesses and the risks associated with those businesses;
•		adverse outcomes of pending claims or litigation or the possibility of new claims or litigation;
•		the ultimate outcome or effect of the pending FTC proceeding on our business, financial condition and results of operations.
•		lack of necessary liquidity to finance expenditures prior to the receipt of payment for the performance of contracts and to provide bid and performance bonds and letters of credit securing our obligations under our bids and contracts;
•		proposed revisions to U.S. tax laws that seek to increase income taxes payable by certain international companies;

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•		political and economic conditions including, but not limited to, war, conflict or civil or economic unrest in countries in which we operate; and
•		a downturn in the economy in general.

Although we believe the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future performance or results. We are not obligated to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should consider these risks when reading any forward-looking statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk from changes in foreign currency exchange rates, which may adversely affect our results of operations and financial condition. One exposure to fluctuating exchange rates relates to the effects of translating the financial statements of our non-U.S. subsidiaries, which are denominated in currencies other than the U.S. dollar, into the U.S. dollar. The foreign currency translation adjustments are recognized in shareholders’ equity in accumulated other comprehensive income (loss) as cumulative translation adjustment, net of tax. We generally do not hedge our exposure to potential foreign currency translation adjustments.

Another form of foreign currency exposure relates to our non-U.S. subsidiaries’ normal contracting activities. We generally try to limit our exposure to foreign currency fluctuations in most of our engineering and construction contracts through provisions that require client payments in U.S. dollars or other currencies corresponding to the currency in which costs are incurred. As a result, we generally do not need to hedge foreign currency cash flows for contract work performed. However, where construction contracts do not contain foreign currency provisions, we use forward exchange contracts to hedge foreign currency transaction exposure. The gains and losses on these contracts offset changes in the value of the related exposures. As of June 30, 2004, the notional amount of cash flow hedge contracts outstanding was $39.2 million, and the fair value of these contracts was an asset of approximately $0.7 million. The terms of these contracts generally do not exceed one year.

In circumstances where intercompany loans and/or borrowings are in place with non-U.S. subsidiaries, we will also use forward contracts. If the timing or amount of foreign-denominated cash flows varies, we incur foreign exchange gains or losses, which are included in the consolidated statements of income. We do not use financial instruments for trading or speculative purposes.

We maintain operations and have construction projects in Venezuela, which continued to experience negative political and economic conditions during the first six months of 2004. As a result, the Venezuelan Bolivar, which devalued more than 85% against the U.S. dollar in 2002, was subject to trading restrictions in 2003 and the first six months of 2004. As of June 30, 2004, we had $1.6 million of net assets in Venezuela that are subject to foreign currency translation adjustments. As noted above, the exposure on our construction projects is generally limited by contractual provisions. However, we will continue to face currency exposure on our net assets.

The carrying value of our cash and cash equivalents, accounts receivable, accounts payable, notes payable and forward contracts approximates their fair values because of the short-term nature of these instruments. See Note 4 to our Consolidated Financial Statements for quantification of our financial instruments.

Item 4. Controls and Procedures

Disclosure Controls and Procedures-As of the end of the period covered by this quarterly report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based upon such evaluation, the CEO and CFO have concluded that, as of the end of such period, our disclosure controls and procedures are effective to

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ensure information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time period specified in the Securities and Exchange Commission’s rules and forms.

Changes in Internal Controls-There was no significant change in our internal controls over financial reporting that occurred during our most recently completed fiscal quarter, that has materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Antitrust Proceedings-On October 25, 2001, the U.S. Federal Trade Commission (the “FTC” or the “Commission”) announced its decision to file an administrative complaint (the “Complaint”) challenging our February 2001 acquisition of certain assets of the Engineered Construction Division of PDM that we acquired together with certain assets of the Water Division of PDM (The Engineered Construction and Water Divisions of PDM are hereafter sometimes referred to as the “PDM Divisions”). The FTC’s Complaint alleged that the acquisition violated Section 7 of the Clayton Antitrust Act and Section 5 of the Federal Trade Commission Act by threatening to substantially lessen competition in four specific markets in which both we and PDM had competed in the United States: liquefied natural gas storage tanks and associated facilities constructed in the United States; liquefied nitrogen, liquefied oxygen and liquefied argon storage tanks constructed in the United States; liquefied petroleum gas storage tanks constructed in the United States; and field erected thermal vacuum chambers (used for the testing of satellites) constructed in the United States. The FTC’s Complaint asserted that the consequence of the acquisition will be increased prices in these four markets.

A trial before an FTC Administrative Law Judge was concluded on January 16, 2003. On June 12, 2003, the FTC Administrative Law Judge issued his ruling. The ruling found that our acquisition of PDM assets threatens to substantially lessen competition in the four markets identified above in which both CB&I and PDM participated. As a result of this finding by the FTC Administrative Law Judge, we have been ordered to divest within 180 days of a final order all physical assets, intellectual property and any uncompleted construction contracts of the PDM Divisions that we acquired from PDM to a purchaser approved by the FTC that is able to utilize those assets as a viable competitor.

We believe the FTC Administrative Law Judge’s ruling is inconsistent with the law and facts presented at trial. We have appealed the ruling to the full Federal Trade Commission. In addition, the FTC Staff has appealed the sufficiency of the remedies contained in the ruling to the full Federal Trade Commission. Pending issuance of a final order by the Commission, we are subject to an interim order designed to preserve the status quo of the PDM assets, including a requirement that we notify the FTC 60 days before taking any action to dispose of any PDM assets at our Provo, Utah fabrication facility. On November 12, 2003, oral arguments were held before the Commission, which will issue its decision in due course. Until the FTC order becomes final, we expect the impact on our earnings will be minimal. However, the remedies contained in the order, if implemented, could have an adverse effect on us, including an expense relating to a potential write-down of the net book value of the divested assets. If additional remedies sought by the FTC staff are also implemented by the Full Commission, there may be additional adverse financial effects on us.

In addition, we were served with a subpoena for documents on July 23, 2003, by the Philadelphia office of the U.S. Department of Justice, Antitrust Division. The subpoena seeks documents that are in part related to matters that were the subject of testimony in the FTC administrative law trial, as well as documents relating to our Water Division. We are cooperating fully with the investigation. We cannot assure you that proceedings will not result from this investigation.

Environmental Matters-Our operations are subject to extensive and changing U.S. federal, state and local laws and regulations and laws outside the U.S. establishing health and environmental quality standards, including those governing discharges and pollutants into the air and water and the management and disposal of hazardous

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substances and wastes. This exposes us to potential liability for personal injury or property damage caused by any release, spill, exposure or other accident involving such substances or wastes.

In connection with the historical operation of our facilities, 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 to whom we have sold facilities for certain environmental liabilities arising from acts occurring before the dates those facilities were transferred. We are not aware of any manifestation by a potential claimant of its awareness of a possible claim or assessment with respect to any such facility.

We believe that we are currently in compliance, in all material respects, with all environmental laws and regulations. We do not anticipate that we will incur material capital expenditures for environmental controls or for investigation or remediation of environmental conditions during the remainder of 2004 or 2005.

Other-We are a defendant in a number of lawsuits arising in the normal course of business, including among others, 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, and we have in place appropriate insurance coverage for the type of work that we have performed. During 2004, we were named as a defendant in additional asbestos-related lawsuits. To date, we have been able to dismiss or settle all such claims without a material impact on our operating results or financial position and do not currently believe that the asserted claims will have a material adverse effect on our future results of operations or financial position. As a matter of standard policy, we continually review our litigation accrual and as further information is known on pending cases, increases or decreases, as appropriate, may be recorded in accordance with SFAS No. 5, “Accounting for Contingencies.”

Item 4. Submission of Matters to a Vote of Security Holders

The annual Meeting of Shareholders of Chicago Bridge & Iron Company N.V. was held on May 13, 2004. The following matters were voted upon and adopted at the meeting:

(i)

Reappointment of Jerry H. Ballengee and L. Donald Simpson as members of the Supervisory Board to serve until the Annual General Meeting of Shareholders in 2007 and until their successors have been duly appointed.

(ii)

The authorization to prepare the annual accounts and the annual report in the English language and to adopt the Dutch Statutory Annual Accounts of the Company for the fiscal year ended December 31, 2003.

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(iii)

The discharge of members of the Management Board and the Supervisory Board from liability in respect of the exercise of their duties during the fiscal year ended December 31, 2003.

(iv)

The approval of the distribution from profits for the year ended December 31, 2003 in the amount of US $0.16 per share previously paid as interim dividends and the interim distribution in kind in the form of one share for each issued share.

(v)

The approval to extend the authority of the Management Board to repurchase up to 30% of the issued share capital of the Company until November 13, 2005.

(vi)

The approval to cancel shares to be acquired by the Company in its own share capital.

(vii)

The approval to extend the authority of the Supervisory Board to issue and/or grant rights (including options to subscribe) on shares of the Company and to limit and exclude pre-emption rights until May 13, 2009.

(viii)

The amendment of the Articles of Association to increase the number of authorized shares.

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(ix)

To appoint the Company’s independent public accountants.

Item 6. Exhibits and Reports on Form 8-K

(a)

Exhibits

(b)

Reports on Form 8-K

		We filed a current report on Form 8-K on April 29, 2004. Under Item 12 (Results of Operations and Financial Condition) we furnished a copy of our press release dated April 29, 2004 announcing financial results for the quarter ended March 31, 2004.
		We filed a current report on Form 8-K on June 4, 2004. Under Item 5 (Other Events and Regulation FD Disclosure) we filed a copy of our press release dated June 4, 2004 announcing a revision to our second quarter and full-year 2004 expectations.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: August 9, 2004

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Exhibit Index