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EX-31.2 - EXHIBIT 31.2 - CHICAGO BRIDGE & IRON CO N Va20170930ex312.htm
EX-32.2 - EXHIBIT 32.2 - CHICAGO BRIDGE & IRON CO N Va20170930ex322.htm
EX-32.1 - EXHIBIT 32.1 - CHICAGO BRIDGE & IRON CO N Va20170930ex321.htm
EX-31.1 - EXHIBIT 31.1 - CHICAGO BRIDGE & IRON CO N Va20170930ex311.htm
EX-10.7 - EXHIBIT 10.7 - CHICAGO BRIDGE & IRON CO N Va20170930ex107.htm
EX-10.6 - EXHIBIT 10.6 - CHICAGO BRIDGE & IRON CO N Va20170930ex106.htm
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
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 September 30, 2017
OR
o
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.
The Netherlands
 
Prinses Beatrixlaan 35
 
98-0420223
(State or other jurisdiction of
 
2595 AK The Hague
 
(I.R.S. Employer Identification No.)
incorporation or organization)
 
The Netherlands
 
 
 
 
31 70 373 2010
 
 
 
 
(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.    
x  Yes    o  No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    
x  Yes    o  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
x
 
Accelerated filer
 
o
 
 
 
 
 
 
Non-accelerated filer
 
o  (Do not check if a smaller reporting company)
 
Smaller reporting company
 
o
 
 
 
 
 
 
 
 
 
 
 
Emerging growth company
 
o
 
 
 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    
o  Yes    x  No
The number of shares outstanding of the registrant’s common stock as of October 19, 2017101,392,440
 



CHICAGO BRIDGE & IRON COMPANY N.V.
Table of Contents
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2


PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

CHICAGO BRIDGE & IRON COMPANY N.V.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
 
(Unaudited)
Revenue
$
1,737,764

 
$
2,137,877

 
$
4,668,690

 
$
6,200,713

Cost of revenue
1,655,002

 
1,920,894

 
4,919,206

 
5,591,393

Gross profit (loss)
82,762

 
216,983

 
(250,516
)
 
609,320

Selling and administrative expense
51,458

 
62,913

 
173,594

 
190,207

Intangibles amortization
1,891

 
1,937

 
5,771

 
6,451

Equity earnings
(9,727
)
 
(2,632
)
 
(21,210
)
 
(1,875
)
Restructuring related costs
26,882

 

 
30,882

 

Other operating (income) expense, net
(53
)
 
189

 
(415
)
 
1,112

Operating income (loss) from continuing operations
12,311

 
154,576

 
(439,138
)
 
413,425

Interest expense
(5,288
)
 
(1,586
)
 
(9,036
)
 
(4,666
)
Interest income
574

 
2,292

 
2,684

 
7,187

Income (loss) from continuing operations before taxes
7,597

 
155,282

 
(445,490
)
 
415,946

Income tax (expense) benefit
(3,112
)
 
(22,206
)
 
177,347

 
(83,280
)
Net income (loss) from continuing operations
4,485

 
133,076

 
(268,143
)
 
332,666

Net income (loss) from discontinued operations
7,061

 
35,343

 
(90,916
)
 
88,263

Net income (loss)
11,546

 
168,419

 
(359,059
)
 
420,929

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

 
$
121,760

 
$
(390,725
)
 
$
352,524

Net income (loss) attributable to CB&I per share (Basic):
 
 
 
 
 
 
 
Continuing operations
$
0.03

 
$
0.86

 
$
(2.96
)
 
$
2.57

Discontinued operations
0.07

 
0.34

 
(0.91
)
 
0.83

Total
$
0.10

 
$
1.20

 
$
(3.87
)
 
$
3.40

Net income (loss) attributable to CB&I per share (Diluted):
 
 
 
 
 
 
 
Continuing operations
$
0.03

 
$
0.86

 
$
(2.96
)
 
$
2.54

Discontinued operations
0.07

 
0.34

 
(0.91
)
 
0.83

Total
$
0.10

 
$
1.20

 
$
(3.87
)
 
$
3.37

Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
101,177

 
101,102

 
100,834

 
103,725

Diluted
101,736

 
101,863

 
100,834

 
104,555

Cash dividends on shares:
 
 
 
 
 
 
 
Amount
$

 
$
6,995

 
$
14,109

 
$
21,726

Per share
$

 
$
0.07

 
$
0.14

 
$
0.21

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

3


CHICAGO BRIDGE & IRON COMPANY N.V.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
 
(Unaudited)
Net income (loss)
$
11,546

 
$
168,419

 
$
(359,059
)
 
$
420,929

Other comprehensive income (loss) from continuing operations, net of tax:
 
 
 
 
 
 
 
Change in cumulative translation adjustment
26,496

 
2,812

 
82,392

 
1,605

Change in unrealized fair value of cash flow hedges
(187
)
 
155

 
623

 
1,198

Change in unrecognized prior service pension credits/costs
(39
)
 
(79
)
 
(64
)
 
(234
)
Change in unrecognized actuarial pension gains/losses
(4,012
)
 
423

 
(11,303
)
 
2,827

Other comprehensive income (loss) from discontinued operations, net of tax:
 
 
 
 
 
 
 
Change in cumulative translation adjustment
669

 
(553
)
 
2,367

 
(315
)
Change in unrecognized prior service pension credits/costs
2

 
(1
)
 
7

 
(2
)
Change in unrecognized actuarial pension gains/losses
(284
)
 
4

 
(1,038
)
 
16

Comprehensive income (loss)
34,191

 
171,180

 
(286,075
)
 
426,024

Net income attributable to noncontrolling interests ($0, $930, $870 and $1,815 related to discontinued operations)
(1,507
)
 
(46,659
)
 
(31,666
)
 
(68,405
)
Change in cumulative translation adjustment attributable to noncontrolling interests
(811
)
 
(750
)
 
(2,432
)
 
(1,294
)
Comprehensive income (loss) attributable to CB&I
$
31,873

 
$
123,771

 
$
(320,173
)
 
$
356,325

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

4



CHICAGO BRIDGE & IRON COMPANY N.V.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
 
September 30,
2017
 
December 31,
2016
 
(Unaudited)
 
 
Assets
 
 
 
Cash and cash equivalents ($166,287 and $328,387 related to variable interest entities ("VIEs"))
$
341,869

 
$
490,679

Accounts receivable, net ($80,634 and $53,159 related to VIEs)
599,167

 
401,872

Inventory
96,434

 
173,817

Costs and estimated earnings in excess of billings ($29,654 and $26,186 related to VIEs)
368,855

 
330,432

Current assets of discontinued operations
1,103,888

 
603,776

Other current assets ($259,245 and $426,515 related to VIEs)
410,088

 
541,176

Total current assets
2,920,301

 
2,541,752

Equity investments
66,164

 
35,541

Property and equipment, net
393,015

 
434,252

Goodwill
2,339,054

 
2,315,338

Other intangibles, net
74,365

 
80,136

Deferred income taxes
886,483

 
723,919

Non-current assets of discontinued operations

 
1,382,704

Other non-current assets ($75,313 and $5,484 related to VIEs)
397,631

 
325,778

Total assets
$
7,077,013

 
$
7,839,420

Liabilities
 
 
 
Revolving facility and other short-term borrowings
$
896,856

 
$
407,500

Current maturities of long-term debt, net
1,183,057

 
503,910

Accounts payable ($351,073 and $337,089 related to VIEs)
882,053

 
864,632

Billings in excess of costs and estimated earnings ($267,627 and $407,325 related to VIEs)
1,288,919

 
1,218,824

Current liabilities of discontinued operations
349,340

 
562,617

Other current liabilities
810,559

 
978,766

Total current liabilities
5,410,784

 
4,536,249

Long-term debt, net

 
1,287,923

Deferred income taxes
9,257

 
6,590

Non-current liabilities of discontinued operations

 
38,290

Other non-current liabilities
398,126

 
409,031

Total liabilities
5,818,167

 
6,278,083

Shareholders’ Equity
 
 
 
Common stock, Euro .01 par value; shares authorized: 250,000; shares issued: 108,857 and 108,857; shares outstanding: 101,239 and 100,113
1,288

 
1,288

Additional paid-in capital
755,820

 
782,130

Retained earnings
965,772

 
1,370,606

Treasury stock, at cost: 7,618 and 8,744 shares
(283,911
)
 
(344,870
)
Accumulated other comprehensive loss
(325,064
)
 
(395,616
)
Total CB&I shareholders’ equity
1,113,905

 
1,413,538

Noncontrolling interests ($0 and $6,874 related to discontinued operations)
144,941

 
147,799

Total shareholders’ equity
1,258,846

 
1,561,337

Total liabilities and shareholders’ equity
$
7,077,013

 
$
7,839,420

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

5


CHICAGO BRIDGE & IRON COMPANY N.V.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
Nine Months Ended September 30,
 
2017
 
2016
 
(Unaudited)
Cash Flows from Operating Activities
 
 
 
Net (loss) income
$
(359,059
)
 
$
420,929

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
 
 
 
Depreciation and amortization
65,637

 
93,285

Amortization of debt issuance costs
22,787

 
4,000

Loss on net assets sold (net of cash paid for transaction costs of $13,075)
51,742

 

Deferred income taxes
(154,192
)
 
87,161

Stock-based compensation expense
34,520

 
31,172

Other operating expense, net
745

 
1,075

Unrealized (gain) loss on foreign currency hedges
(886
)
 
1,525

Excess tax benefits from stock-based compensation

 
(48
)
Changes in operating assets and liabilities:
 
 
 
(Increase) decrease in receivables, net
(197,532
)
 
46,418

Change in contracts in progress, net
34,994

 
(252,857
)
Decrease in inventory
65,841

 
49,473

(Decrease) increase in accounts payable
(48,801
)
 
11,830

Increase in other current and non-current assets
(46,451
)
 
(15,356
)
(Decrease) increase in other current and non-current liabilities
(114,504
)
 
13,525

Increase in equity investments
(12,737
)
 
(3,974
)
Change in other, net
(30,102
)
 
6,883

Net cash (used in) provided by operating activities
(687,998
)
 
495,041

Cash Flows from Investing Activities
 
 
 
Proceeds from sale of discontinued operation, net of cash sold
645,506

 

Capital expenditures
(40,089
)
 
(37,855
)
Advances with partners of proportionately consolidated ventures, net
140,986

 
(54,158
)
Proceeds from sale of property and equipment
3,452

 
2,973

Insurance proceeds
12,000

 

Other, net
(14,817
)
 
(62,646
)
Net cash provided by (used in) investing activities
747,038

 
(151,686
)
Cash Flows from Financing Activities
 
 
 
Revolving facility and other short-term repayments, net
489,356

 
(84,000
)
Advances with equity method and proportionately consolidated ventures, net
(103,509
)
 
195,645

Repayments on long-term debt
(606,463
)
 
(112,500
)
Excess tax benefits from stock-based compensation

 
48

Purchase of treasury stock
(9,632
)
 
(206,443
)
Issuance of stock
9,717

 
12,405

Dividends paid
(14,109
)
 
(21,726
)
Distributions to noncontrolling interests
(29,921
)
 
(51,851
)
Capitalized debt issuance costs
(34,174
)
 

Net cash used in financing activities
(298,735
)
 
(268,422
)
Effect of exchange rate changes on cash and cash equivalents
76,408

 
(10,188
)
(Decrease) increase in cash and cash equivalents
(163,287
)
 
64,745

Cash and cash equivalents, beginning of period
505,156

 
550,221

Cash and cash equivalents, end of period
341,869

 
614,966

Cash and cash equivalents, end of period - discontinued operations

 
(16,412
)
Cash and cash equivalents, end of period - continuing operations
$
341,869

 
$
598,554

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

6


CHICAGO BRIDGE & IRON COMPANY N.V.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(In thousands, except per share data)

 
Nine Months Ended September 30, 2017
 
Common Stock
 
Additional
Paid-In Capital
 
Retained Earnings
 
Treasury Stock
 
Accumulated
Other
Comprehensive (Loss) Income
 
Non -
controlling Interests
 
Total
Shareholders’ Equity
 
Shares
 
Amount
 
 
 
Shares
 
Amount
 
 
 
 
 (Unaudited)
Balance at December 31, 2016
100,113

 
$
1,288

 
$
782,130

 
$
1,370,606

 
8,744

 
$
(344,870
)
 
$
(395,616
)
 
$
147,799

 
$
1,561,337

Net (loss) income

 

 

 
(390,725
)
 

 

 

 
31,666

 
(359,059
)
Disposition

 

 

 

 

 

 

 
(7,035
)
 
(7,035
)
Change in cumulative translation adjustment, net

 

 

 

 

 

 
82,327

 
2,432

 
84,759

Change in unrealized fair value of cash flow hedges, net

 

 

 

 

 

 
623

 

 
623

Change in unrecognized prior service pension credits/costs, net

 

 

 

 

 

 
(57
)
 

 
(57
)
Change in unrecognized actuarial pension gains/losses, net

 

 

 

 

 

 
(12,341
)
 

 
(12,341
)
Distributions to noncontrolling interests

 

 

 

 

 

 

 
(29,921
)
 
(29,921
)
Dividends paid ($0.14 per share)

 

 

 
(14,109
)
 

 

 

 

 
(14,109
)
Stock-based compensation expense

 

 
34,520

 

 

 

 

 

 
34,520

Purchase of treasury stock
(330
)
 

 

 

 
330

 
(9,632
)
 

 

 
(9,632
)
Issuance of stock
1,456

 

 
(60,830
)
 

 
(1,456
)
 
70,591

 

 

 
9,761

Balance at September 30, 2017
101,239

 
$
1,288

 
$
755,820

 
$
965,772

 
7,618

 
$
(283,911
)
 
$
(325,064
)
 
$
144,941

 
$
1,258,846

 
Nine Months Ended September 30, 2016
 
Common Stock
 
Additional
Paid-In Capital
 
Retained Earnings
 
Treasury Stock
 
Accumulated
Other
Comprehensive (Loss) Income
 
Non -
controlling Interests
 
Total
Shareholders’ Equity
 
Shares
 
Amount
 
 
 
Shares
 
Amount
 
 
 
 
 (Unaudited)
Balance at December 31, 2015
104,427

 
$
1,288

 
$
800,641

 
$
1,712,508

 
4,430

 
$
(206,407
)
 
$
(294,040
)
 
$
149,600

 
$
2,163,590

Net income

 

 

 
352,524

 

 

 

 
68,405

 
420,929

Change in cumulative translation adjustment, net

 

 

 

 

 

 
(4
)
 
1,294

 
1,290

Change in unrealized fair value of cash flow hedges, net

 

 

 

 

 

 
1,198

 

 
1,198

Change in unrecognized prior service pension credits/costs, net

 

 

 

 

 

 
(236
)
 

 
(236
)
Change in unrecognized actuarial pension gains/losses, net

 

 

 

 

 

 
2,843

 

 
2,843

Distributions to noncontrolling interests

 

 

 

 

 

 

 
(51,851
)
 
(51,851
)
Dividends paid ($0.21 per share)

 

 

 
(21,726
)
 

 

 

 

 
(21,726
)
Stock-based compensation expense

 

 
31,172

 

 

 

 

 

 
31,172

Purchase of treasury stock
(5,768
)
 

 

 

 
5,768

 
(206,443
)
 

 

 
(206,443
)
Issuance of stock
1,277

 

 
(53,297
)
 

 
(1,277
)
 
59,387

 

 

 
6,090

Balance at September 30, 2016
99,936

 
$
1,288

 
$
778,516

 
$
2,043,306

 
8,921

 
$
(353,463
)
 
$
(290,239
)
 
$
167,448

 
$
2,346,856


The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.


7


CHICAGO BRIDGE & IRON COMPANY N.V.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 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, engineering, procurement, fabrication, modularization, construction and commissioning services to customers in the energy infrastructure market throughout the world. Our business is aligned into two operating groups, which represent our reportable segments: Engineering & Construction and Fabrication Services. See Note 2 and Note 4 for discussions of our discontinued operations and Note 16 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”) have been 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 reflect 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 nine months ended September 30, 2017 and 2016, our financial position as of September 30, 2017 and our cash flows for the nine months ended September 30, 2017 and 2016. The December 31, 2016 Condensed Consolidated Balance Sheet (the “Balance Sheet(s)”) 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” (primarily comprised of our former Capital Services reportable segment). Our Capital Services Operations provided 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. We completed the sale of the 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 through the Closing Date and any post-closing adjustments have been classified as a discontinued operation within the Condensed Consolidated Statements of Operations (the “Statement(s) of Operations”) for the three and nine months ended September 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 September 30, 2017 Balance Sheet reflects the impact of the sale. Cash flows of the Capital Services Operations through the Closing Date are not reported separately within our Condensed Consolidated Statements of Cash flows.
In July 2017, we initiated a plan to market and sell our “Technology Operations” (primarily comprised of our former Technology reportable segment and our “Engineered Products Operations”, representing a portion of our Fabrication Services reportable segment), the proceeds of which would be used to significantly reduce our outstanding debt. Our Technology Operations provide proprietary process technology licenses and associated engineering services, catalysts and engineered products, primarily for the petrochemical and refining industries, and offers process planning and project development services and a comprehensive program of aftermarket support. We considered the Technology Operations to be a discontinued operation in the third quarter 2017, as the anticipated divestiture represents a strategic shift and will have a material effect on our operations and financial results. Operating results of the Technology Operations have been classified as a discontinued operation within the Statements of Operations for the three and nine months ended September 30, 2017 and 2016. Further, the assets and liabilities of the Technology Operations have been classified as assets and liabilities of discontinued operations within our September 30, 2017 and December 31, 2016 Balance Sheets, with all balances reported as current on our September 30, 2017 Balance Sheet. Cash flows of the Technology 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.

8

Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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”).
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 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, which could result in material changes to our Financial Statements and related disclosures. See Note 15 for discussion of projects with significant changes in estimated margins during the three and nine months ended September 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 estimates 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 15 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 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

9

Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.
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 are reported on the Balance Sheets as costs and estimated earnings in excess of billings. Projects with cumulative billings in excess of costs and estimated earnings recognized to date are reported on the Balance Sheets as billings in excess of costs and estimated earnings. The net balances on our Balance Sheets are collectively referred to as Contracts in Progress, net, and the components of these balances at September 30, 2017 and December 31, 2016 were as follows:
 
 
September 30, 2017
 
December 31, 2016
 
 
Asset
 
Liability
 
Asset
 
Liability
Costs and estimated earnings on contracts in progress
 
$
5,751,709

 
$
27,611,616

 
$
7,852,740

 
$
22,544,241

Billings on contracts in progress
 
(5,382,854
)
 
(28,900,535
)
 
(7,522,308
)
 
(23,763,065
)
Contracts in progress, net
 
$
368,855

 
$
(1,288,919
)
 
$
330,432

 
$
(1,218,824
)
Any uncollected billed amounts, including contract retentions, are reported as accounts receivable. At September 30, 2017 and December 31, 2016, accounts receivable included contract retentions of approximately $74,200 and $72,100, respectively. Contract retentions due beyond one year were approximately $42,100 and $37,500 at September 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 not material at September 30, 2017 and December 31, 2016.
Revenue for our pipe and steel fabrication 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 September 30, 2017 and December 31, 2016, our allowances for doubtful accounts were not material.
Other Operating (Income) Expense, NetOther operating (income) expense, net generally represents (gains) losses associated with the sale or disposition of property and equipment. Approximately $4,000 of costs previously recorded within other operating expense during the three and six months ended June 30, 2017 were reclassified to restructuring related costs for the nine months ended September 30, 2017, as described below.
Restructuring Related Costs—Restructuring related costs were approximately $26,900 and $30,900, for the three and nine months ended September 30, 2017, respectively, and included: 1) approximately $13,200 and $17,200, respectively, of accrued future operating lease expense for vacated facility capacity where we remain contractually obligated to a lessor, 2) approximately $2,400 of employee severance related costs for both periods, 3) approximately $10,400 of professional fees for both periods, and 4) approximately $900 of other miscellaneous restructuring related costs for both periods, as further described in Note 8. Restructuring costs for the nine months ended September 30, 2017 includes approximately $4,000 of costs that were previously recorded within other operating expense during the three and six months ended June 30, 2017.
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 on 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

10

Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.
During the three months ended September 30, 2017, we recorded an impairment charge of approximately $35,000 for a fabrication facility within our Fabrication Services operating group that was damaged during Hurricane Harvey. This charge was offset by insurance recoveries recorded to the extent of the charge, although we anticipate that insurance proceeds will ultimately exceed the amount of our impairment charge. Both the impairment charge and insurance recoveries were recorded within other operating (income) expense, net. Approximately $12,000 of insurance proceeds had been received as of September 30, 2017 and we anticipate that our recorded receivable amounts will be received during the fourth quarter 2017.
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 on 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 nine months ended September 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 10 for additional discussion of our financial instruments.

11

Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Income TaxesDeferred 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 on 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 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 ArrangementsIn 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.
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 determine that we are not 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 1) proportionate consolidation for both the Balance Sheet and Statement of Operations, when we meet the applicable accounting criteria to do so, or 2) 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

12

Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 on a prospective basis, 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 our Statements of Operations. 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.
In the first quarter 2017, 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 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 September 30,
 
Nine Months Ended September 30,
 
 
2017
 
2016
 
2017
 
2016
Net income (loss) from continuing operations attributable to CB&I (net of $1,507, $45,729, $30,796 and $66,590 of noncontrolling interests)
 
$
2,978

 
$
87,347

 
$
(298,939
)
 
$
266,076

Net income (loss) from discontinued operations attributable to CB&I (net of $0, $930, $870 and $1,815 of noncontrolling interests)
 
7,061

 
34,413

 
(91,786
)
 
86,448

Net income (loss) attributable to CB&I
 
$
10,039

 
$
121,760

 
$
(390,725
)
 
$
352,524

 
 
 
 
 
 
 
 
 
Weighted average shares outstanding—basic
 
101,177

 
101,102

 
100,834

 
103,725

Effect of restricted shares/performance based shares/stock options (1)
 
541

 
746

 

 
816

Effect of directors’ deferred-fee shares (1)
 
18

 
15

 

 
14

Weighted average shares outstanding—diluted
 
101,736

 
101,863

 
100,834

 
104,555

Net income (loss) attributable to CB&I per share (Basic):
 
 
 
 
 
 
 
 
Continuing operations
 
$
0.03

 
$
0.86

 
$
(2.96
)
 
$
2.57

Discontinued operations
 
0.07

 
0.34

 
(0.91
)
 
0.83

Total
 
$
0.10

 
$
1.20

 
$
(3.87
)
 
$
3.40

Net income (loss) attributable to CB&I per share (Diluted):
 
 
 
 
 
 
 
 
Continuing operations
 
$
0.03

 
$
0.86

 
$
(2.96
)
 
$
2.54

Discontinued operations
 
0.07

 
0.34

 
(0.91
)
 
0.83

Total
 
$
0.10

 
$
1.20

 
$
(3.87
)
 
$
3.37

(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 nine months ended September 30, 2017 due to the net loss for the period. Antidilutive shares excluded from diluted EPS were not material for the three months ended September 30, 2017 and the three and nine months ended September 30, 2016.

13

Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

4. DISCONTINUED OPERATIONS
Capital Services Operations
Transaction Summary— As discussed in Note 2, on June 30, 2017, we completed the sale of our Capital Services Operations as provided for by the CS Agreement entered into on February 27, 2017. Under the CS Agreement, including it’s amendment prior to the Closing Date, the purchase price was $700,000, 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. 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. Based on actual working capital of the Capital Services Operations on the Closing Date, we accrued an estimate of the final post-closing working capital adjustment during the second quarter 2017, which is included within other current liabilities on our September 30, 2017 Balance Sheet. We continue to 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 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). During the three months ended September 30, 2017, we recognized an income tax benefit of approximately $5,200, primarily resulting from updates to our estimates of the tax effect of the disposition. The transaction did 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 included the impact of a $655,000 impairment charge recorded in the fourth quarter 2016 in connection with our annual impairment assessment.

14

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 nine months ended September 30, 2017 and 2016, were as follows:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2017
 
2016
 
2017
 
2016
Revenue
 
$

 
$
530,912

 
$
1,114,655

 
$
1,655,583

Cost of revenue
 

 
490,758

 
1,047,614

 
1,546,823

Gross profit
 

 
40,154

 
67,041

 
108,760

Selling and administrative expense
 

 
14,312

 
29,541

 
39,499

Intangibles amortization
 

 
4,030

 
2,550

 
12,260

Loss on net assets sold
 

 

 
64,817

 

Other operating (income) expense
 

 
(1,201
)
 
504

 
(1,505
)
Operating income (loss) from discontinued operations
 

 
23,013

 
(30,371
)
 
58,506

Interest expense (1)
 

 
(5,989
)
 
(13,440
)
 
(17,699
)
Interest income
 

 
302

 
16

 
916

Income (loss) from discontinued operations before taxes
 

 
17,326

 
(43,795
)
 
41,723

Income tax benefit (expense)
 
5,166

 
(6,236
)
 
(62,392
)
 
(15,915
)
Net income (loss) from discontinued operations
 
5,166

 
11,090

 
(106,187
)
 
25,808

Net income from discontinued operations attributable to noncontrolling interests
 

 
(930
)
 
(870
)
 
(1,815
)
Net income (loss) from discontinued operations attributable to CB&I
 
$
5,166

 
$
10,160

 
$
(107,057
)
 
$
23,993

(1) 
Interest expense, including amortization of capitalized debt issuance costs, was allocated to the Capital Services Operations due to a requirement to use the proceeds from 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 9. The allocation of interest expense was based on the anticipated debt amounts to be repaid.
(2) 
As noted above, the sale of the Capital Services Operations resulted in a taxable gain (due primarily to the non-deductibility of goodwill) resulting in tax expense of approximately $61,000 during the three months ended June 30, 2017. During the three months ended September 30, 2017, we recognized an income tax benefit of approximately $5,200, primarily resulting from updates to our estimates of the tax effect of the disposition.
Cash Flows—Cash flows for our Capital Services Operations for the nine months ended September 30, 2017 and 2016 were as follows:
 
 
Nine Months Ended September 30,
 
 
2017
 
2016
Operating cash flows
 
$
(36,469
)
 
$
52,560

Investing cash flows
 
$
(1,459
)
 
$
(3,972
)

15

Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Technology Operations
Summary— As discussed in Note 2, in July 2017, we initiated a plan to market and sell our Technology Operations. At September 30, 2017, the fair value of the Technology Operations substantially exceeded the carrying value of its net assets.
Assets and Liabilities—The carrying values of the major classes of assets and liabilities of the discontinued Technology Operations included within our Balance Sheets on September 30, 2017 and December 31, 2016 were as follows:
 
 
September 30,
2017
 
December 31,
2016
Assets
 
 
 
 
Accounts receivable, net
 
$
96,851

 
$
86,641

Costs and estimated earnings in excess of billings
 
59,628

 
80,317

Inventory
 
29,531

 
16,285

Other assets
 
97,041

 
5,801

Equity investments
 
122,427

 

Property and equipment, net
 
70,048

 

Goodwill (1)
 
497,024

 

Other intangibles, net
 
131,338

 

Current assets of discontinued operations
 
1,103,888

 
189,044

 
 
 
 
 
Equity investments
 

 
129,715

Property and equipment, net
 

 
71,692

Goodwill (1)
 

 
498,465

Other intangibles, net
 

 
139,273

Other assets
 

 
81,415

Non-current assets of discontinued operations
 

 
920,560

 
 
 
 
 
Total assets of discontinued operations
 
$
1,103,888

 
$
1,109,604

 
 
 
 
 
Liabilities
 
 
 
 
Accounts payable
 
$
103,988

 
$
99,916

Billings in excess of costs and estimated earnings
 
162,308

 
176,525

Other liabilities
 
83,044

 
38,707

Current liabilities of discontinued operations
 
349,340

 
315,148

 
 
 
 
 
Other liabilities
 

 
32,902

Non-current liabilities of discontinued operations
 

 
32,902

 
 
 
 
 
Total liabilities of discontinued operations
 
$
349,340

 
$
348,050

 
 
 
 
 
Accumulated other comprehensive loss
 
$
(14,283
)
 
$
(13,252
)
(1) 
Goodwill allocated to the discontinued Technology Operations is comprised of all the goodwill of our former Technology reporting unit (approximately $297,000), and an allocation of goodwill from our Fabrication Services reporting unit (approximately $200,000), as discussed in Note 6.

16

Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Results of Operations—The results of our Technology Operations, which have been reflected within discontinued operations in our Statement of Operations for the three and nine months ended September 30, 2017 and 2016, were as follows:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2017
 
2016
 
2017
 
2016
Revenue
 
$
170,143

 
$
183,321

 
$
454,840

 
$
491,858

Cost of revenue
 
103,345

 
113,890

 
281,870

 
301,239

Gross profit
 
66,798

 
69,431

 
172,970

 
190,619

Selling and administrative expense
 
8,991

 
10,589

 
27,079

 
33,436

Intangibles amortization
 
1,520

 
4,518

 
10,503

 
13,545

Equity earnings
 
(4,879
)
 
(1,609
)
 
(9,662
)
 
(8,030
)
Other operating expense
 
8

 

 
38

 
4

Operating income from discontinued operations
 
61,158

 
55,933

 
145,012

 
151,664

Interest expense (1)
 
(55,512
)
 
(18,858
)
 
(110,579
)
 
(56,039
)
Interest income
 

 
14

 

 
53

Income from discontinued operations before taxes
 
5,646

 
37,089

 
34,433

 
95,678

Income tax expense
 
(3,751
)
 
(12,836
)
 
(19,162
)
 
(33,223
)
Net income from discontinued operations
 
1,895

 
24,253

 
15,271

 
62,455

Net income from discontinued operations attributable to noncontrolling interests
 

 

 

 

Net income from discontinued operations attributable to CB&I
 
$
1,895

 
$
24,253

 
$
15,271

 
$
62,455

(1) 
Interest expense, including amortization of capitalized debt issuance costs, was allocated to the Technology Operations due to a requirement to use the proceeds from the transaction to repay our debt. The allocation of interest expense was based on the anticipated debt amounts to be repaid. Allocated interest expense increased for both the three and nine months ended September 30, 2017 compared to the respective 2016 periods due to higher revolving credit facility borrowings, higher interest rates and increased amortization expense. The increase in amortization expense resulted from the accelerated amortization of capitalized debt issuance costs resulting from the requirement to use the proceeds from the transaction to repay our debt.
Cash Flows—Cash flows for our Technology Operations for the nine months ended September 30, 2017 and 2016 were as follows:
 
 
Nine Months Ended September 30,
 
 
2017
 
2016
Operating cash flows
 
$
29,820

 
$
15,967

Investing cash flows
 
$
(3,856
)
 
$
(48,006
)
Partnering Arrangements—Our Technology Operations has a venture with Chevron (CB&I—50% / Chevron—50%) (“Chevron-Lummus Global” or “CLG”) which provides proprietary process technology licenses and associated engineering services and catalyst, primarily for the refining industry. The venture is accounted for using the equity method.
5. INVENTORY
The components of inventory at September 30, 2017 and December 31, 2016 were as follows:
 
 
September 30,
2017
 
December 31,
2016
Raw materials
 
$
60,194

 
$
58,261

Work in process
 
8,854

 
48,011

Finished goods
 
27,386

 
67,545

Total
 
$
96,434

 
$
173,817


17

Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

6. GOODWILL AND OTHER INTANGIBLES
Goodwill—At September 30, 2017 and December 31, 2016, our goodwill balances were $2,339,054 and $2,315,338, 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 nine months ended September 30, 2017 is as follows:
 
 
Total
Balance at December 31, 2016
 
$
2,315,338

Foreign currency translation and other
 
23,803

Amortization of tax goodwill in excess of book goodwill
 
(87
)
Balance at September 30, 2017 (1)
 
$
2,339,054

(1) 
At September 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 on balances as of October 1. At December 31, 2016, and prior to the recognition of our Capital Services Operations and Technology Operations as discontinued operations (discussed below), we had the following five reporting units within our four operating groups:
Engineering & Construction—Our Engineering & Construction operating group represented a reporting unit, and continued to represent a reporting unit at September 30, 2017.
Fabrication Services—Our Fabrication Services operating group represented a reporting unit. This reporting unit included our Engineered Products Operations, which were included within our Technology Operations and classified as a discontinued operation during the third quarter 2017 (discussed below). Fabrication Services, excluding our discontinued Engineered Products Operations, continued to represent a reporting unit at September 30, 2017.
Technology—Our Technology operating group represented a reporting unit. This reporting unit was included within our Technology Operations and classified as a discontinued operation during the third quarter 2017 (discussed below).
Capital Services—Our Capital Services operating group included two reporting units: Facilities & Plant Services and Federal Services. These reporting units were included within our Capital Services Operations and classified as a discontinued operation during the first quarter 2017 and sold on June 30, 2017 (discussed in Note 1 and Note 4).
Annual Impairment Assessment—During the fourth quarter 2016, we performed a quantitative assessment of goodwill for the aforementioned reporting units. Based on these quantitative assessments, the fair value of the Engineering & Construction, Fabrication Services and Technology reporting units each substantially exceeded their respective net book values, and accordingly, no impairment charge was necessary as a result of our impairment assessments. However, the net book values of the Facilities & Plant Services and Federal Services reporting units exceeded their respective fair values and an impairment charge was recorded. Accordingly, the fair value of these reporting units approximated their respective net book values subsequent to the goodwill impairments.
Interim Impairment Assessment—During the second quarter 2017, we experienced a decline in our market capitalization and incurred charges on certain projects (as discussed further in Note 15) within our Engineering & Construction reporting unit that resulted in a net loss for the three and six months ended June 30, 2017. We believed 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. There were no additional indicators of impairment during the three or nine months ended September 30, 2017. 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 one or more 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

18

Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

earnings in the period of impairment. There can be no assurance that future goodwill impairment tests will not result in charges to earnings.
Discontinued Operations Assessment—During the third quarter 2017, we classified our Technology Operations as a discontinued operation (discussed in Note 1 and Note 4). Our Technology Operations are primarily comprised of our former Technology operating group and reporting unit and our Engineered Products Operations, representing a portion of our Fabrication Services operating group and reporting unit. As a result of the classification of our Technology reporting unit as part of our Technology Operations within discontinued operations, all of its goodwill (approximately $297,000) was allocated to our Technology Operations. Further, as a result of the classification of our Engineered Products Operations as part of our Technology Operations within discontinued operations, we allocated a portion of the Fabrication Services reporting unit’s goodwill (approximately $200,000) to our Technology Operations. The allocation was based on the relative fair values of the Engineered Products Operations and remaining Fabrication Services reporting unit after removal of the Engineered Products Operations.
The fair value of the Engineered Products Operations was determined on a basis consistent with the basis used for our annual impairment assessment (discussed in Note 2) and gave consideration to a market indicator of fair value for the Technology Operations. The fair value of the remaining Fabrication Services reporting unit was also determined on a basis consistent with the basis used for our annual impairment assessment. Based on the aforementioned, the fair value of the remaining Fabrication Services reporting unit continued to substantially exceed its net book value, and accordingly, no impairment charge was necessary as a result of the removal of the Engineered Products Operations.
Other Intangible Assets—The following table presents our acquired finite-lived intangible assets at September 30, 2017 and December 31, 2016, including the September 30, 2017 weighted-average useful lives for each major intangible asset class and in total:
 
 
 
 
September 30, 2017
 
December 31, 2016
 
 
Weighted Average Life
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Gross Carrying
Amount
 
Accumulated
Amortization
Backlog and customer relationships
 
18 Years
 
$
93,700

 
$
(23,958
)
 
$
93,700

 
$
(20,073
)
Process technologies
 
20 Years
 
400

 
(93
)
 
400

 
(78
)
Tradenames
 
6 Years
 
15,718

 
(11,402
)
 
15,718

 
(9,531
)
Total (1)
 
17 Years
 
$
109,818

 
$
(35,453
)
 
$
109,818

 
$
(29,682
)
(1) 
The decrease in other intangibles, net during the nine months ended September 30, 2017 related to amortization expense of approximately $5,800.
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 that 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.

19

Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table presents summarized balance sheet information for our share of our proportionately consolidated ventures at September 30, 2017 and December 31, 2016:
 
 
September 30,
2017
 
December 31,
2016
CB&I/Zachry
 
 
 
 
Current assets (1)
 
$
224,611

 
$
260,934

Non-current assets
 
1,887

 
3,204

Total assets
 
$
226,498

 
$
264,138

Current liabilities (1)
 
$
315,082

 
$
379,339

CB&I/Zachry/Chiyoda
 
 
 
 
Current assets (1)
 
$
115,875

 
$
84,279

Non-current assets
 
1,334

 
1,969

Total assets
 
$
117,209

 
$
86,248

Current liabilities (1)
 
$
92,445

 
$
73,138

CB&I/Chiyoda
 
 
 
 
Current assets (1)
 
$
99,269

 
$
337,479

Current liabilities (1)
 
$
123,884

 
$
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 September 30, 2017 and December 31, 2016, other current assets on the Balance Sheets included approximately $233,800 and $374,800, respectively, related to our proportionate share of advances from the ventures to our venture partners, and other current liabilities included approximately $254,300 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:
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. During the three months ended 2017, we made our final payment of $2,400 toward our total cash commitment for NET Power of $47,300.
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 September 30, 2017 and December 31, 2016, other current liabilities included approximately $183,700 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 September 30, 2017.
CB&I/AREVA—We have a venture with AREVA (CB&I52% / 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.

20

Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table presents summarized balance sheet information for our consolidated ventures at September 30, 2017 and December 31, 2016:
 
 
September 30,
2017
 
December 31,
2016
CB&I/Kentz
 
 
 
 
Current assets
 
$
23,740

 
$
68,867

Non-current assets
 
71,250

 

Total assets
 
$
94,990

 
$
68,867

Current liabilities
 
$
25,694

 
$
87,822

CB&I/AREVA
 
 
 
 
Current assets
 
$
44,070

 
$
16,313

Current liabilities
 
$
56,601

 
$
47,652

All Other (1)
 
 
 
 
Current assets
 
$
28,501

 
$
69,785

Non-current assets
 
16,256

 
16,382

Total assets
 
$
44,757

 
$
86,167

Current liabilities
 
$
9,714

 
$
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.
8. RESTRUCTURING RELATED COSTS
During the three and nine months ended September 30, 2017, we recognized approximately $26,900 and $30,900, respectively, of facility realignment, severance, professional services, and other miscellaneous costs, primarily resulting from our publicly announced cost reduction and strategic initiatives, as described below. The nine months ended September 30, 2017 includes approximately $4,000 of facility realignment costs that were previously recorded within other operating expense during the three and six months ended June 30, 2017.
Facility Realignment Costs—Facility realignment costs totaled approximately $13,200 and $17,200, respectively, during the three and nine months ended September 30, 2017, and were related to the recognition of future operating lease expense for vacated facility capacity where we remain contractually obligated to a lessor. At September 30, 2017, the liability was approximately $16,920, and was reflected within other current and non-current liabilities, as applicable, based upon the anticipated timing of payments. The following table summarizes the changes in the facility realignment liability during 2017:
 
 
Total
Balance at December 31, 2016
 
$
2,260

Charges (1)
 
17,223

Cash payments
 
(2,782
)
Foreign exchange and other
 
219

Balance at September 30, 2017
 
$
16,920

(1) The charges primarily relate to our Engineering & Construction operating group.

21

Chicago Bridge & Iron Company N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Severance Costs—Employee severance costs totaled approximately $2,400 for both the three and nine months ended September 30, 2017. We anticipate that we will incur additional severance related costs during the fourth quarter 2017. These costs are generally paid within the quarter they are incurred or the subsequent quarter.
Professional Fees—Professional fees totaled approximately $10,400 for both the three and nine months ended September 30, 2017, and were related to consulting, legal and advisory related services associated with our recent lending facility amendments and strategic assessments.
Other Miscellaneous—Other miscellaneous restructuring costs totaled approximately $900 for both the three and nine months ended September 30, 2017.
9. DEBT
Our outstanding debt at September 30, 2017 and December 31, 2016 was as follows:
 
 
September 30,
2017
 
December 31,
2016
Current
 
 
 
 
Revolving facilities and other short-term borrowings
 
$
896,856

 
$
407,500

 
 
 
 
 
Current maturities of long-term debt
 
1,193,537

 
506,250

Less: unamortized debt issuance costs
 
(10,480
)
 
(2,340
)
Current maturities of long-term debt, net of unamortized debt issuance costs
 
1,183,057

 
503,910

Current debt, net of unamortized debt issuance costs
 
$
2,079,913

 
$
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)
 
462,500

 
500,000

Senior Notes: $800,000 senior notes, series A-D (fixed interest ranging from 7.15% to 8.30%)
 
588,154

 
800,000

Second Senior Notes: $200,000 senior notes (fixed interest of 7.53%)
 
142,883

 
200,000

Less: unamortized debt issuance costs
 

 
(5,827
)
Less: current maturities of long-term debt
 
(1,193,537
)
 
(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 has a $100,000 total letter of credit sublimit. At September 30, 2017, we had $553,531 and $45,049 of outstanding borrowings and letters of credit, respectively, under the facility, providing $551,420 of available capacity, of which $54,951 was available for letters of credit based on our 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 has a $100,000 total letter of credit sublimit. At September 30, 2017, we had $343,325 and $73,262 of outstanding borrowings and letters of credit, respectively, under the facility, providing $383,413 of available capacity, of which $26,738 was available for letters of credit based on our total letter of credit sublimit.
Maximum outstanding borrowings under our Revolving Facility and Second Revolving Facility (together, “Committed Facilities”) during the nine months ended September 30, 2017, 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. Interest on borrowings is assessed at either prime plus 4.00% or LIBOR plus 5.00%. In addition, our fees for financial and performance letters of credit are 5.00% and 3.50%, respectively. During the nine months ended September 30, 2017, our weighted average interest rate on borrowings under the Revolving Facility and Second Revolving Facility was approximately 4.90% and 7.90%, respectively, inclusive of the applicable floating margin. The Committed Facilities have financial and restrictive covenants described further below. As a result of the August 9, 2017 amendment described below, the proceeds from the sale of our Technology Operations are required to be used to repay our debt obligations.

22

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 $1,548,445 of outstanding letters of credit as of September 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 on 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% for the period.
At September 30, 2017, we had $462,500 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, and interest is assessed at either prime plus 4.00% or LIBOR plus 5.00%. During the nine months ended September 30, 2017, our weighted average interest rate on the Second Term Loan was approximately 4.80%