10-K 1 a2016123110k.htm FORM 10-K Document
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2016
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.
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)
 
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class:
 
Name of each exchange on which registered:
Common Stock; Euro .01 par value
 
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: none
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  YES  x    NO  ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES  ¨    NO  x
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.    YES  x    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). YES  x    NO  ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting 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
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    YES  ¨    NO  x
Aggregate market value of common stock held by non-affiliates, based on a New York Stock Exchange closing price of $34.63 as of June 30, 2016 was approximately $3.6 billion.
The number of shares outstanding of the registrant’s common stock as of February 16, 2017 was 100,307,516.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 2017 Proxy Statement for the annual general meeting of shareholders to be held May 3, 2017 Part III
 



CHICAGO BRIDGE & IRON COMPANY N.V.
Table of Contents
 
 
 
Page
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.

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PART I

FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K, including all documents incorporated by reference, contains forward-looking statements regarding Chicago Bridge & Iron Company N.V. (“CB&I” or “the Company”) and represents our expectations and beliefs concerning future events. These forward-looking statements are intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties. The forward-looking statements included herein or incorporated herein by reference include or may include, but are not limited to, (and you should read carefully) statements that are predictive in nature, depend upon or refer to future events or conditions, or use or contain words, terms, phrases, or expressions such as “achieve,” “forecast,” “plan,” “propose,” “strategy,” “envision,” “hope,” “will,” “continue,” “potential,” “expect,” “believe,” “anticipate,” “project,” “estimate,” “predict,” “intend,” “should,” “could,” “may,” “might,” or similar words, terms, phrases, or expressions or the negative of any of these terms. Any statements in this Form 10-K that are not based upon historical fact are forward-looking statements and represent our best judgment as to what may occur in the future.
In addition to the material risks listed under Item 1A “Risk Factors” that may cause business conditions or our actual results, performance or achievements to be materially different from those expressed or implied by any forward-looking statements, the following are some, but not all, of the factors that might cause business conditions or our actual results, performance or achievements to be materially different from those expressed or implied by any forward-looking statements, or contribute to such differences: our ability to realize cost savings from our expected performance of contracts, whether as a result of improper estimates, performance, or otherwise; uncertain timing and funding of new contract awards, as well as project cancellations; cost overruns on fixed-price or similar contracts or failure to receive timely or proper payments on cost-reimbursable contracts, whether as a result of improper estimates, performance, disputes, or otherwise; risks associated with labor productivity; risks associated with percentage of completion accounting; our ability to settle or negotiate unapproved change orders and claims; changes in the costs or availability of, or delivery schedule for, equipment, components, materials, labor or subcontractors; adverse impacts from weather affecting our performance and timeliness of completion, which could lead to increased costs and affect the quality, costs or availability of, or delivery schedule for, equipment, components, materials, labor or subcontractors; operating risks, which could lead to increased costs and affect the quality, costs or availability of, or delivery schedule for, equipment, components, materials, labor or subcontractors; increased competition; fluctuating revenue resulting from a number of factors, including a decline in energy prices and the cyclical nature of the individual markets in which our customers operate; delayed or lower than expected activity in the energy and natural resource industries, demand from which is the largest component of our revenue; lower than expected growth in our primary end markets, including but not limited to Liquefied Natural Gas (“LNG”) and energy processes; risks inherent in acquisitions and our ability to complete or obtain financing for acquisitions; our ability to integrate and successfully operate and manage acquired businesses and the risks associated with those businesses; the non-competitiveness or unavailability of, or lack of demand or loss of legal protection for, our intellectual property assets or rights; failure to keep pace with technological changes or innovation; failure of our patents or licensed technologies to perform as expected or to remain competitive, current, in demand, profitable or enforceable; adverse outcomes of pending claims or litigation or the possibility of new claims or litigation, and the potential effect of such claims or litigation on our business, financial position, results of operations and cash flow; lack of necessary liquidity to provide bid, performance, advance payment and retention bonds, guarantees, or letters of credit securing our obligations under our bids and contracts or to finance expenditures prior to the receipt of payment for the performance of contracts; proposed and actual revisions to United States (“U.S.”) and non-U.S. tax laws, and interpretation of said laws, Dutch tax treaties with foreign countries and U.S. tax treaties with non-U.S. countries (including, but not limited to The Netherlands), which would seek to increase income taxes payable; political and economic conditions including, but not limited to, war, conflict or civil or economic unrest in countries in which we operate; compliance with applicable laws and regulations in any one or more of the countries in which we operate including, but not limited to, the U.S. Foreign Corrupt Practices Act (“FCPA”) and those concerning the environment, export controls and trade sanction programs; our inability to properly manage or hedge currency or similar risks; and a downturn, disruption, or stagnation in the economy in general.
Although we believe the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future performance or results. You should not unduly rely on any forward-looking statements. Each forward-looking statement is made and applies only as of the date of the particular statement, and we are not obligated to update, withdraw, or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should consider these risks when reading any forward-looking statements. All forward-looking statements attributed or attributable to us or to persons acting on our behalf are expressly qualified in their entirety by this section entitled “Forward-Looking Statements”.



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Item 1. Business
Founded in 1889, CB&I, a Netherlands company, provides a wide range of services, including conceptual design, technology, engineering, procurement, fabrication, modularization, construction, commissioning, maintenance, program management and environmental services to customers in the energy infrastructure market throughout the world, and is a provider of diversified government services. Our stock trades on the New York Stock Exchange (“NYSE”) under the ticker symbol “CBI.” With more than a century of experience and approximately 42,100 employees worldwide, we capitalize on our global expertise and local knowledge to safely and reliably deliver projects virtually anywhere. At a given point in time, we have active projects in process in more than 70 countries.
Dispositions
On December 31, 2015 we completed the sale of our nuclear power construction business (the “Nuclear Operations”), previously included within our Engineering & Construction operating group, to Westinghouse Electric Company LLC (“WEC”) for transaction consideration of approximately $161.0 million, which is due upon WEC’s substantial completion of the acquired VC Summer and Vogtle nuclear projects. At December 31, 2015, we recorded the present value of the transaction consideration (the “Transaction Receivable”); however, during the fourth quarter 2016 we determined that recovery was no longer probable and recorded a non-cash pre-tax charge of approximately $148.1 million (approximately $96.3 million after-tax) to reserve the Transaction Receivable. During 2015, we recorded a non-cash pre-tax charge of approximately $1.5 billion (approximately $1.1 billion after-tax) related to the impairment of goodwill (approximately $453.1 million) and intangible assets (approximately $79.1 million) and a loss on the net assets sold (approximately $973.7 million) as a result of the sale.
See Note 4 and Note 12 within Item 8 for additional discussion regarding the sale of our Nuclear Operations and related dispute with WEC, respectively.
Segment Financial Information
Our management structure and internal and public segment reporting are aligned based upon the services offered by our four operating groups, which represent our reportable segments.
Engineering & Construction. Engineering & Construction provides engineering, procurement and construction (“EPC”) services for major energy infrastructure facilities. Projects for this operating group include upstream and downstream process facilities for the oil and gas industry, such as refinery process units and petrochemical facilities, as well as LNG liquefaction and regasification terminals, and fossil electric generating plants for the power generation industry. Customers include international energy companies such as AES, Chevron, ExxonMobil, Duke Energy, Westlake Chemical Corporation, Lotte Chemical Corporation and Sempra Energy; national energy companies such as Orpic (Oman) and KNPC (Kuwait); and regional energy companies in the U.S. such as Entergy and Freeport LNG.
Fabrication Services. Fabrication Services provides fabrication and erection of steel plate structures; fabrication of piping systems and process modules; manufacturing and distribution of pipe and fittings; and engineered products for the oil and gas, petrochemical, power generation, water and wastewater, mining and mineral processing industries. Projects for this operating group include above ground storage tanks, LNG and low temperature tanks, field erected pressure vessels and spheres, elevated water storage tanks and other specialty structures, process modules, fabrication of piping and structural steel, induction bending and module prefabrication and assembly. Customers include international energy companies such as Chevron, ChevronPhillips, ConocoPhillips, Dow, ExxonMobil and Shell; international mining and mineral processing companies such as Alcoa and BHP; national energy companies such as ADNOC (United Arab Emirates (“UAE”)), KNPC (Kuwait) and Saudi Aramco (Saudi Arabia); regional refining, chemical, and gas processing companies such as Flint Hills Resources (U.S.), Suncor (U.S. and Canada) and Sunoco (U.S.); and regional terminal operators such as Enterprise (U.S.) and Kinder Morgan (U.S. and Canada).
Technology. Technology provides proprietary process technology licenses and associated engineering services and catalysts, primarily for the petrochemical and refining industries, and offers process planning and project development services and a comprehensive program of aftermarket support. Technology has a 50% owned unconsolidated joint venture with Chevron (“Chevron-Lummus Global” or “CLG”) that provides proprietary process technology licenses and associated engineering services and catalyst, primarily for the refining industry. Technology also has a 33.3% owned unconsolidated joint venture (“NET Power”) with Exelon Generation Company, LLC and 8 Rivers Capital, LLC, for the purpose of commercializing a new natural gas power generation system that recovers the carbon dioxide produced during combustion. The joint venture is currently building a demonstration unit in Texas. Technology customers include international energy companies such as Chevron, Phillips 66, Reliance, Shell, TOTAL, and Valero; national energy companies such as Indian Oil (India), Pemex (Mexico), Saudi Aramco (Saudi Arabia), PetroChina (China) and Takreer (UAE); and regional energy companies such as Irving Oil (Canada) and Thai Oil (Thailand).
Capital Services. Capital Services provides comprehensive and integrated maintenance services, environmental engineering and remediation, construction services, program management, and disaster response and recovery for private-sector customers and governments. Private-sector customers include international chemical manufacturing companies such as

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Occidental Chemical; regional energy providers in the U.S. such as Entergy and Exelon; and regional refining, chemical, and gas processing companies in the U.S. such as Flint Hills Resources. Government customers include U.S. Federal departments and agencies such as the U.S. Department of Defense (“DOD”), U.S. Department of Energy (“DOE”), U.S. Environmental Protection Agency (“EPA”) and the U.S. Federal Emergency Management Agency (“FEMA”), as well as U.S. state and local governments.
Segment financial information by operating group can be found under “Results of Operations” within Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note 17 within Item 8.
Competitive Strengths
Our core competencies, which we believe are significant competitive strengths, include:
Strong Health, Safety and Environmental (“HSE”) Performance. Because of our long and outstanding safety record, we are sometimes invited to bid on projects for which other competitors do not qualify. Our HSE performance also translates directly to lower costs and reduced risk to our employees, subcontractors and customers. According to the U.S. Bureau of Labor Statistics, the national Lost Workday Case Incidence Rate for construction companies similar to CB&I was 1.0 per 100 full-time employees for 2015 (the latest reported year), while our rates for 2015 and 2016 were only 0.01 per 100 employees and 0.02 per 100 employees, respectively. CB&I was awarded the 2015 Green Cross for Safety medal by the National Safety Council for our outstanding achievement in workplace safety. CB&I was the first company in our industry to earn this honor, which is one of the most prestigious safety awards a company can receive.
Licensed Technologies. We hold approximately 3,500 patents and offer a broad, state-of-the-art portfolio of over 90 hydrocarbon refining, petrochemical and gas processing technologies. Our ability to provide licensed technologies sets us apart from our competitors and presents opportunities for increased profitability. Combining technology with EPC capabilities strengthens our presence throughout the project life cycle, allowing us to capture additional market share in higher margin growth markets.
Worldwide Record of Excellence. We have an established record as a leader in the international engineering and construction industry by providing consistently superior project performance for more than a century. The extensive roster of successful projects that we have executed around the world serves as a reference list for prospective clients, many of whom view such reference projects as a critically important element in selecting a contractor.
Global Execution Capabilities. With a network of approximately 200 sales and operations offices around the world, established supplier relationships and available workforces, we have the ability to rapidly mobilize personnel, materials and equipment to execute projects in locations ranging from highly industrialized countries to some of the world’s most remote regions. Additionally, due primarily to our long-standing presence in numerous markets around the world, we have a prominent position as a local direct hire contractor in global energy and industrial markets.
Integrated Execution Model. We are one of the few EPC contractors that has self perform construction capability in the U.S. and worldwide. In addition, we believe our world class piping fabrication facilities around the world are unique in the EPC contractor industry. These are key elements of our integrated project delivery model that provides our customers lower costs and schedule assurance due to our ability to directly perform and control the critical path activities of most projects. This provides us with a competitive advantage over other EPC contractors that operate in our space.
Modular Fabrication. We are one of the few EPC contractors and process technology providers with fabrication facilities, which allows us to offer customers the option of modular construction, when feasible. In contrast to traditional on-site “stick built” construction, modular construction enables modules to be built within a tightly monitored shop environment which allows us to, among other things, better control quality, minimize weather delays and expedite schedules. Once completed, the modules are shipped to, and assembled at, the project site.
Recognized Expertise. Our in-house engineering team includes internationally-recognized experts in a broad range of energy infrastructure fields, including processes and facilities related to oil and gas production, LNG, refining, petrochemicals, gas processing, power generation, modular design and fabrication, cryogenic storage and processing, and bulk liquid storage and systems. Several of our senior engineers are long-standing members of committees that have helped develop worldwide standards for storage structures and process vessels for the oil and gas industry, including the American Petroleum Institute and the American Society of Mechanical Engineers. In addition, and due in part to our integrated execution model, our engineers work closely with project managers to ensure that our design proposals place a premium on practical construction considerations.
Diversified Offering of Products and Services. We are well-diversified in our offerings and in the geographies we serve within the energy infrastructure market. Our diversity ranges from downstream activities such as gas processing, LNG, refining, and petrochemicals, to fossil based power plants and upstream activities such as offshore oil and gas and onshore oil sands projects. Our products and services for these end markets include feasibility studies and consulting, technology licensing,

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front end engineering design, EPC, piping and modular fabrication, storage solutions, engineered products, specialized equipment, and operations, maintenance and environmental services. The diversity of our offerings improves our competitive positioning by allowing us to provide our customers with a fully-integrated platform for turnkey delivery, while retaining the flexibility to provide stand-alone offerings. In addition to serving the energy infrastructure market, we provide diversified government services.
Strong Focus on Project Risk Management. We are experienced in managing the risks associated with identifying, screening, bidding and executing complex projects. Our position as an integrated EPC service provider allows us to execute global projects on a competitively bid and negotiated basis. We offer our customers a range of contracting options, including cost-reimbursable, fixed-price and hybrid, which has both cost-reimbursable and fixed-price characteristics.
Management Team with Extensive Engineering and Construction Industry Experience. Members of our senior management team have an average of over 30 years of experience in the energy infrastructure industry.
Growth Strategy
Although our near-term prospects may be moderated by the overall level of capital investment in energy infrastructure, we anticipate that our intermediate-term growth will primarily be derived organically from our competitive positioning in existing end markets. Through our fully integrated offerings, we have the ability to provide technology, engineering, procurement, fabrication, construction, maintenance, and associated services. Our ability to grow is underpinned by our capacity to compete for, and execute, the largest energy infrastructure projects globally while maintaining the agility to pursue stand-alone opportunities that generate a strong base of work. Our competitive positioning is further supported by our superior record of project execution coupled with selectivity in the developments we pursue and our partnering arrangements. On an opportunistic and strategic basis, we may pursue further growth through selective acquisitions of additional businesses, technologies, or assets that expand or complement our strategic alliances or current portfolio of services and meet our stringent acquisition criteria.
Competition
We operate in a competitive environment. Technology performance, price, timeliness of completion, quality, safety record, track record and reputation are principal competitive factors within our industry. There are numerous regional, national and global competitors that offer similar services to those offered by each of our operating groups.
Marketing and Customers
We contract directly with hundreds of customers in the energy, petrochemical, natural resource, power and government services industries. We rely primarily on direct contact between our technically qualified sales and engineering staff and our customers’ engineering and contracting departments. Dedicated sales employees are located in offices throughout the world.
Our significant customers are primarily in the hydrocarbon and power generation industries and include major petroleum and petrochemical companies (see the “Segment Financial Information” section above for a representative listing of our customers by operating group). We have longstanding relationships with many of our significant customers; however, we are not dependent upon any single customer on an ongoing basis and do not believe the loss of any single customer would have a material adverse effect on our business. For 2016, 2015, and 2014 revenue from our LNG mechanical erection and tank projects in the Asia Pacific region for Gorgon LNG was approximately $1.1 billion (approximately 11% of our consolidated 2016 revenue), approximately $1.6 billion (approximately 13% of our consolidated 2015 revenue), and approximately $2.0 billion (approximately 15% of our consolidated 2014 revenue), respectively. For 2016, revenue from our LNG export facility projects in the U.S. for Sempra Energy and Freeport LNG were approximately $1.6 billion (approximately 15% of our consolidated 2016 revenue) and approximately $1.1 billion (approximately 10% of our consolidated 2016 revenue), respectively.
Backlog
New awards represent the expected revenue value of new contract commitments received during a given period, as well as scope growth on existing commitments. Backlog represents the unearned value of our new awards. New awards and backlog include the entire award values for joint ventures we consolidate and our proportionate share of award values for joint ventures we proportionately consolidate. New awards and backlog also include our pro-rata share of the award values for unconsolidated joint ventures we account for under the equity method. As the net results for our equity method joint ventures are recognized as equity earnings, their revenue is not presented in our Consolidated Statement of Operations. Backlog may fluctuate with currency movements.
At December 31, 2016, we had backlog of approximately $18.5 billion (including approximately $1.7 billion related to our equity method joint ventures), compared with $22.6 billion at December 31, 2015 (including approximately $1.8 billion related to our equity method joint ventures). The decrease in backlog from 2015 is primarily due to the impact of revenue exceeding new awards by $3.8 billion (including approximately $187.4 million of revenue related to our equity method joint

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ventures) and other adjustments, primarily related to reductions in maintenance backlog for our Capital Services operating group. The geographic mix of our backlog and revenue is primarily dependent upon global energy demand and at December 31, 2016, approximately 20% of our backlog was derived from projects outside the U.S., and for 2016 approximately 30% of our revenue was derived from projects outside the U.S. In addition, as certain contracts within our Capital Services and Engineering & Construction operating groups are dependent upon funding from the U.S. government, where funds are appropriated on a year-by-year basis, while contract performance may take more than one year, approximately $1.0 billion of our backlog at December 31, 2016 was for contractual commitments that are subject to future funding decisions. Due to the timing of awards and the long-term nature of some of our projects, approximately 50% to 55% of our December 31, 2016 backlog (including backlog associated with our equity method joint ventures) is anticipated to be recognized beyond 2017. For further discussion of our backlog, see the applicable risk factor in Item 1A “Risk Factors” and the “Overview” section of Item 7.
Types of Contracts
Our contracts are awarded on a competitively bid and negotiated basis using a range of contracting options, including cost-reimbursable, fixed-price and hybrid, which has both cost-reimbursable and fixed-price characteristics. Each contract is designed to optimize the balance between risk and reward.
Raw Materials and Suppliers
The principal raw materials we use are metal plate, structural steel, pipe, fittings, catalysts, proprietary equipment and selected engineered equipment such as pressure vessels, exchangers, pumps, valves, compressors, motors and electrical and instrumentation components. Most of these materials are available from numerous suppliers worldwide, with some furnished under negotiated supply agreements. We anticipate being able to obtain these materials for the foreseeable future; however, the price, availability and schedule validities offered by our suppliers may vary significantly from year to year due to various factors, including supplier consolidations, supplier raw material shortages, costs, and surcharges, supplier capacity, customer demand, market conditions, and any duties and tariffs imposed on the materials.
We use subcontractors where it assists us in meeting customer requirements with regard to resources, schedule, cost or technical expertise. These subcontractors may range from small local entities to companies with global capabilities, some of which may be utilized on a repetitive or preferred basis. To the extent necessary, we anticipate being able to locate and contract with qualified subcontractors in all global areas where we do business.
Environmental Matters
Our operations are subject to extensive and changing U.S. federal, state and local laws and regulations, as well as the laws of other countries, that establish health and environmental quality standards. These standards, among others, relate to air and water pollutants and the management and disposal of hazardous substances and wastes. We are exposed to potential liability for personal injury or property damage caused by any release, spill, exposure or other accident involving such pollutants, substances or wastes.
In connection with the historical operation of our facilities, including those associated with acquired operations, substances which currently are or might be considered hazardous were used or disposed of at some sites that will or may require us to make expenditures for remediation. In addition, we have agreed to indemnify parties from whom we have purchased or to whom we have sold facilities for certain environmental liabilities arising from acts occurring before the dates those facilities were transferred.
We believe we are in compliance, in all material respects, with environmental laws and regulations and maintain insurance coverage to mitigate our exposure to environmental liabilities. We do not believe any environmental matters will have a material adverse effect on our future results of operations, financial position or cash flow. We do not anticipate we will incur material capital expenditures for environmental controls or for the investigation or remediation of environmental conditions during 2017 or 2018.
Patents
We have numerous active patents and patent applications throughout the world, the majority of which are associated with technologies licensed by our Technology operating group. However, no individual patent is so essential that its loss would materially affect our business.
Employees
At December 31, 2016, we employed approximately 42,100 persons worldwide, comprised of approximately 16,100 salaried employees and approximately 26,000 hourly and craft employees. Our number of employees, particularly hourly and craft, varies in relation to the location, number and size of projects we have in process at any given time. To preserve our

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project management and technological expertise as core competencies, we continuously recruit and develop qualified personnel, and maintain ongoing training programs for all our key personnel.
The percentage of our employees represented by unions at December 31, 2016 was approximately 15% to 20%. We have agreements, which generally extend up to 6 years, with various unions representing groups of employees at project sites and fabrication facilities in the U.S., Canada, Australia and various other countries. We enjoy good relations with our unions and have not experienced a significant work stoppage in any of our facilities in more than ten years.
Available Information
We make available our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”), free of charge through our Internet website at www.cbi.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the U.S. Securities and Exchange Commission (the “SEC”).
The public may read and copy any materials we file with or furnish to the SEC at the SEC’s Public Reference Room at 100 F Street N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website that contains our electronic filings at www.sec.gov.
Item 1A. Risk Factors
Any of the following risks (which are not the only risks we face) could have material adverse effects on our results of operations, financial position and cash flow:
Our Business is Dependent upon Major Construction and Service Contracts, the Unpredictable Timing of Which May Result in Significant Fluctuations in Our Cash Flow due to the Timing of Receipt of Payment Under the Contracts.
Our cash flow is dependent upon obtaining major construction and service contracts primarily for work in the energy, petrochemical, natural resource and government services markets throughout the world, especially in cyclical industries such as refining, natural gas and petrochemical. The timing of or failure to obtain contracts, delays in awards of contracts, cancellations of contracts, delays in completion of contracts, or failure to obtain timely payment from our customers, could result in significant periodic fluctuations in our cash flow. In addition, many of our contracts require us to satisfy specific progress or performance milestones in order to receive payment from the customer. As a result, we may incur significant costs for engineering, materials, components, equipment, labor or subcontractors prior to receipt of payment from a customer. Such expenditures could reduce our cash flow and necessitate borrowings under our credit facilities.
The Nature of Our Primary Contracting Terms for Our Contracts, Including Cost-Reimbursable and Fixed-Price or a Combination Thereof, Could Adversely Affect Our Operating Results.
We offer our customers a range of contracting options for our contracts, including cost-reimbursable, fixed-price and hybrid, which has both cost-reimbursable and fixed-price characteristics. Under cost-reimbursable contracts, we generally perform our services in exchange for a price that consists of reimbursement of all customer-approved costs and a profit component, which is typically a fixed rate per hour, an overall fixed fee, or a percentage of total reimbursable costs. If we are unable to obtain proper reimbursement for all costs incurred due to improper estimates, performance issues, customer disputes, or any of the additional factors noted below for fixed-price contracts, the project may be less profitable than we expect. Under fixed-price contracts, we perform our services and execute our projects at an established price and, as a result, benefit from cost savings, but may be unable to recover any cost overruns. If we do not execute a contract within our cost estimates, we may incur losses or the project may be less profitable than we expected. The revenue, cost and profit realized on such contracts can vary, sometimes substantially, from the original projections due to a variety of factors, including, but not limited to:
costs incurred in connection with modifications to a contract that may be unapproved by the customer as to scope, schedule, and/or price (“unapproved change orders”);
unanticipated costs or claims, including costs for project modifications, delays, errors or changes in specifications or designs, regulatory changes or contract termination;
unanticipated technical problems with the structures, equipment or systems we supply;
failure to properly estimate costs of engineering, materials, components, equipment, labor or subcontractors;
changes in the costs of engineering, materials, components, equipment, labor or subcontractors;
changes in labor conditions, including the availability, wage and productivity of labor;
productivity and other delays caused by weather conditions;
failure of our suppliers or subcontractors to perform;

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difficulties in obtaining required governmental permits or approvals;
changes in laws and regulations; and
changes in general economic conditions.
Our hybrid contracts can have a combination of the risk factors described above for our fixed-price and cost-reimbursable contracts.
These risks are exacerbated for projects with long durations because there is an increased risk that the circumstances upon which we based our original estimates will change in a manner that increases costs. In addition, we sometimes bear the risk of delays caused by unexpected conditions or events. To the extent there are future cost increases that we cannot recover from our customers, joint venture partners, suppliers or subcontractors, the outcome could have an adverse effect on our results of operations, financial position and cash flow.
Furthermore, revenue and profit from our contracts can be affected by contract incentives or penalties that may not be known or finalized until the later stages of the contract term. Some of these contracts provide for the customer’s review of our accounting and cost control systems to verify the completeness and accuracy of the reimbursable costs invoiced. These reviews could result in reductions in reimbursable costs previously billed to the customer.
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.
Our Billed and Unbilled Revenue May Be Exposed to Potential Risk if a Project is Terminated or Canceled, if Our Customers Encounter Financial Difficulties, or if We Encounter Disputes with Our Customers.
Our contracts often require us to satisfy or achieve certain milestones in order to receive payment for the work performed, or in the case of cost-reimbursable contracts, provide support for billings in advance of receiving payment. As a result, we may incur significant costs or perform significant amounts of work prior to receipt of payment. If our customer does not proceed with the completion of the project or defaults on its payment obligations, or if we encounter disputes with our customers with respect to the adequacy of billing support, we may face difficulties in collecting payment of amounts due to us for the costs previously incurred. In addition, many of our customers for large EPC projects are project-specific entities that do not have significant assets other than their interests in the EPC project. It may be difficult to collect amounts owed to us by these customers. If we are unable to collect amounts owed to us, this could have an adverse effect on our results of operations, financial position and cash flow.
We May Not Be Able to Fully Realize the Revenue Value Reported in Our Backlog.
New awards represent the expected revenue value of new contract commitments received during a given period, as well as scope growth on existing commitments. Commitments may be in the form of written contracts, purchase orders or indications of the amounts of time and materials we need to make available for customers’ anticipated projects. New awards may also include estimated amounts of work to be performed based on customer communication and historic experience and knowledge of our customers’ intentions. Backlog represents the unearned value of our new awards. New awards and backlog include the entire award values for joint ventures we consolidate and our proportionate share of award values for joint ventures we proportionately consolidate. New awards and backlog also include our pro-rata share of the award values for unconsolidated joint ventures we account for under the equity method. As the net results for our equity method joint ventures are recognized as equity earnings, their revenue is not presented in our Consolidated Statement of Operations. At December 31, 2016, we had backlog of approximately $18.5 billion (including approximately $1.7 billion related to our equity method joint ventures). Because the revenue value reported in backlog (including our equity method joint ventures) is the remaining value associated with work that has not yet been completed, the projected value may not be realized or, if realized, may not be profitable as a result of poor contract performance.
Due to project terminations, suspensions or changes in project scope and schedule, we cannot predict with certainty when or if our backlog will be performed. From time to time, projects are canceled that appeared to have a high certainty of going forward at the time they were recorded as new awards. In the event of a project cancellation, we typically have no contractual right to the total revenue reflected in our backlog. Some of the contracts in our backlog provide for cancellation fees or certain reimbursements in the event customers cancel projects. These cancellation fees usually provide for reimbursement of our out-of-pocket costs, costs associated with work performed prior to cancellation, and to varying degrees, a percentage of the profit we would have realized had the contract been completed. Although we may be reimbursed for certain costs, we may be unable to recover all direct costs incurred and may incur additional unrecoverable costs due to the resulting under-utilization of our assets.

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Our Failure to Meet Contractual Schedule or Performance Requirements Could Adversely Affect Our Revenue and Profitability.
In certain circumstances, we guarantee project completion by a scheduled date or certain performance levels. Failure to meet these schedule or performance requirements could result in a reduction of revenue and additional costs, and these adjustments could exceed projected profit. Project revenue or profit could also be reduced by liquidated damages withheld by customers under contractual penalty provisions, which can be substantial and can accrue on a daily basis. Schedule delays can result in costs exceeding our projections for a particular project. Performance problems for existing and future contracts could cause actual results of operations to differ materially from those previously anticipated and could cause us to suffer damage to our reputation within our industry and our customer base.
Our Government Contracts May Be Subject to Modification or Termination, Which Could Adversely Affect Our Revenue and Profitability.
We are a provider of services to U.S. government agencies and are therefore exposed to risks associated with government contracting. Government agencies typically can terminate or modify contracts at their convenience due to budget constraints or various other reasons. As a result, our backlog may be reduced or we may incur a loss if a government agency terminates or modifies a contract with us. We are also subject to audits, including audits of our internal control systems, cost reviews and investigations by government contracting oversight agencies. As a result of an audit, the oversight agency may disallow certain costs or withhold a percentage of interim payments. Cost disallowances may result in adjustments to previously reported revenue and may require us to refund a portion of previously collected amounts. In addition, failure to comply with the terms of one or more of our government contracts or government regulations and statutes could result in us being suspended or debarred from future government projects for a significant period of time, possible civil or criminal fines and penalties, the risk of public scrutiny of our performance, and potential harm to our reputation, each of which could have an adverse effect on our business. Other remedies that government agencies may seek for improper activities or performance issues include sanctions such as forfeiture of profit and suspension of payments.
In addition to the risks noted above, legislatures typically appropriate funds on a year-by-year basis, while contract performance may take more than one year. As a result, contracts with government agencies may be only partially funded or may be terminated, and we may not realize all of the potential revenue and profit from those contracts. Appropriations and the timing of payment may be influenced by, among other things, the state of the economy, competing political priorities, curtailments in the use of government contracting firms, budget constraints, the timing and amount of tax receipts and the overall level of government expenditures.
We Are Exposed to Potential Risks and Uncertainties Associated With Our Use of Partnering Arrangements and Our Subcontracting and Vendor Partner Arrangements to Execute Certain Projects.
In the ordinary course of business, we execute specific projects and conduct certain operations through joint venture, consortium and other collaborative arrangements (collectively referred to as “venture(s)”). We have various ownership interests in these ventures, with such ownership typically proportionate to our decision making and distribution rights. The ventures generally contract directly with the third party customer; however, services may be performed directly by the ventures, or may be performed by us, our partners, or a combination thereof.
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, any of which could have an adverse effect on our results of operations, financial position and cash flow.
Additionally, we rely on third party partners, equipment manufacturers and subcontractors to assist in the completion of our projects. To the extent these parties cannot execute their portion of the work and are unable to deliver their services, equipment or materials according to the contractual terms, or to the extent we cannot engage subcontractors or acquire equipment or materials, our ability to complete a project in a timely manner may be impacted. If the amount we are required to pay for these goods and services exceeds the amount we have included in the estimates for our work, we could experience project losses or a reduction in estimated profit.
In both the private and public sectors, either acting as a prime contractor, a subcontractor or as a member of a venture, we may join with other firms to form a team to compete for a single contract. Because a team can often offer stronger combined qualifications than any stand-alone company, these teaming arrangements can be very important to the success of a particular contract bid process or proposal. This can be particularly true for larger projects and in geographies in which bidding success

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can be substantially impacted by the presence and quality of a local partner. The failure to maintain such relationships in both foreign and domestic markets may impact our ability to win additional work.
Intense Competition in the Markets We Serve Could Reduce Our Market Share and Earnings.
The energy, petrochemical, natural resource, power and government services markets we serve are highly competitive markets in which a large number of regional, national and multinational companies (including, in some cases, certain of our customers) compete, and these markets require substantial resources and capital investment in equipment, technology and skilled personnel. Competition also places downward pressure on our contract prices and margins. Intense competition is expected to continue in these markets, presenting us with significant challenges in our ability to maintain strong growth rates and acceptable margins. If we are unable to meet these competitive challenges, we could lose market share to our competitors and experience an overall reduction in our results of operations, financial position and cash flow.
Our Revenue and Profitability May Be Adversely Affected by a Reduced Level of Activity in the Hydrocarbon Industry.
In recent years, demand from the worldwide hydrocarbon industry has been the largest generator of our revenue. Numerous factors influence capital expenditure decisions in the hydrocarbon industry, including, but not limited to, the following:
current and projected oil and gas prices;
exploration, extraction, production and transportation costs;
the discovery rate, size and location of new oil and gas reserves;
the sale and expiration dates of leases and concessions;
local and international political and economic conditions, including sanctions, war or conflict;
technological challenges and advances;
the ability of oil and gas companies to generate capital;
demand for hydrocarbon production; and
changing taxes, price controls, and laws and regulations.
The aforementioned factors are beyond our control and could have an adverse effect on our results of operations, financial position and cash flow.
If the U.S. Were to Revoke or Limit the DOE’s Loan Guarantee Program (“LGP”), it Could Have a Material Adverse Effect on Our Results of Operations, Financial Position and Cash Flow.
Some of our customers may rely on the DOE’s LGP, under which the DOE issues loan guarantees to eligible projects that “avoid, reduce, or sequester air pollutants or anthropogenic emissions of greenhouse gases” and “employ new or significantly improved technologies as compared to technologies in service in the U.S. at the time the guarantee is issued.” If the U.S. government were to revoke or limit the DOE’s LGP, it could make obtaining funding more difficult for many of our customers, which could inhibit their ability to take on new projects and have an adverse effect our results of operations, financial position and cash flow.
We May be Exposed to Additional Risks as We Obtain New Significant Awards and Execute Our Backlog, Including Greater Backlog Concentration in Fewer Projects, Potential Cost Overruns and Increasing Requirements for Letters of Credit, Each of Which Could Have a Material Adverse Effect on Our Future Results of Operations, Financial Position and Cash Flow.
As we obtain new significant project awards and convert the backlog into revenue, these projects may use larger sums of working capital than other projects and will be concentrated among a smaller number of customers. If any significant projects currently included in our backlog or awarded in the future were to have material cost overruns, or are significantly delayed, modified or canceled, and we are unable to replace the projects in backlog, our results of operations, financial position and cash flow could be adversely impacted.
Additionally, as we convert our significant projects from backlog into active construction, we may face significantly greater requirements for the provision of letters of credit or other forms of credit enhancements. We can provide no assurance that we will be able to access such capital and credit as needed or that we would be able to do so on economically attractive terms.

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Our Customers’ and Our Partners’ Ability to Receive the Applicable Regulatory and Environmental Approvals for Our Power Projects and the Timeliness of Those Approvals Could Adversely Affect Us.
The regulatory permitting process for our power projects requires significant investments of time and money by our customers and sometimes by us and our partners. There are no assurances that we or our customers will obtain the necessary permits for these projects. Applications for permits to operate these power projects, including air emissions permits, may be opposed by government entities, individuals or environmental groups, resulting in delays and possible non-issuance of the permits.
Volatility in the Equity and Credit Markets Could Adversely Impact Us Due to Factors Affecting the Availability of Funding for Our Customers, Availability of Our Lending Facilities and Non-Compliance with Our Financial and Restrictive Lending Covenants.
Some of our customers, suppliers and subcontractors have traditionally accessed commercial financing and capital markets, as well as government backed export credit agency support to fund their operations or projects, and the availability of funding from those sources could be adversely impacted by a volatile equity or credit markets. The availability of lending facilities and our ability to remain in compliance with our financial and restrictive lending covenants could also be impacted by circumstances or conditions beyond our control, including but not limited to, the delay or cancellation of projects, decreased profitability on our projects, changes in currency exchange or interest rates, performance of pension plan assets, or changes in actuarial assumptions. Further, we could be impacted if our customers experience a material change in their ability to pay us, or if the banks associated with our lending facilities were to cease or reduce operations, or if there is a full or partial break-up of the European Union (the “EU”) or its currency, the Euro.
Demand for Our Products and Services is Cyclical and Vulnerable to Economic Downturns and Reductions in Private Industry and Government Spending.
The hydrocarbon refining, petrochemical, and natural gas industries we serve historically have been, and will likely continue to be, cyclical in nature and vulnerable to general downturns in the domestic and international economies. Many of our customers may face budget shortfalls or may delay capital spending resulting in a decrease in the overall demand for our services. A decrease in federal, state and local tax revenue as well as other economic declines may result in lower government spending. Further, our customers may demand better pricing terms and their ability to pay timely may be affected by an ongoing weak economy. Portions of our business traditionally lag recovery in the economy; therefore, our business may not recover immediately upon any economic improvement. The aforementioned could have an adverse effect on our results of operations, financial position and cash flow.
Our New Awards and Liquidity May Be Adversely Affected by Bonding and Letter of Credit Capacity.
A portion of our new awards requires the support of bid and performance surety bonds or letters of credit, as well as advance payment and retention bonds. Our primary use of surety bonds is to support water and wastewater treatment and standard tank projects in the U.S., while letters of credit are generally used to support other projects. A restriction, reduction, or termination of our surety bond agreements could limit our ability to bid on new project opportunities, thereby limiting our new awards, or increasing our letter of credit utilization in lieu of bonds, thereby reducing availability under our credit facilities. A restriction, reduction or termination of our letter of credit facilities could also limit our ability to bid on new project opportunities or could significantly change the timing of project cash flow, resulting in increased borrowing needs.
We are Vulnerable to Significant Fluctuations in Our Liquidity That May Vary Substantially Over Time.
Our operations could require us to utilize large sums of working capital, sometimes on short notice and sometimes without assurance of recovery of the expenditures. Circumstances or events that could create large cash outflows include increased costs or losses resulting from fixed-price or hybrid contracts, inability to achieve contractual billing or payment milestones, inability to recover unapproved change orders or claims, environmental liabilities, litigation risks, unexpected costs or losses resulting from previous acquisitions, contract initiation or completion delays, political conditions, customer payment problems, foreign exchange risks and professional and product liability claims.
Non-Compliance With Covenants in Our Financing Arrangements, Without Waiver or Amendment From the Lenders or Note Holders, Could Require Cash Collateral For Outstanding Letters of Credit, Could Adversely Affect Our Ability to Borrow Funds and Could Ultimately Require Us to Repay the Debt Earlier Than Expected.
At December 31, 2016, we had total debt of $2.2 billion, including $800.0 million of term loan borrowings, $1.0 billion in senior notes, and $407.5 million of revolving facility borrowings. Our financing arrangements contain certain financial covenants, including a maximum leverage ratio, a minimum fixed charge coverage ratio and a minimum net worth level, and other covenants with which we must comply. We may not be able to satisfy these ratios or comply with the other covenants if our results of operations, financial position and cash flow deteriorate as a result of, but not limited to, an adverse impact from

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our other risk factors. These covenants may restrict our ability to obtain additional financing without incurring substantial financing costs, or at all.
We May be Required to Contribute Cash to Meet Our Underfunded Pension Obligations in Certain Multi-Employer Pension Plans.
We participate in various multi-employer pension plans in the U.S. and Canada under union and industry agreements that generally provide defined benefits to employees covered by collective bargaining agreements. Absent an applicable exemption, a contributor to a multi-employer plan is liable, upon termination or withdrawal from a plan, for its proportionate share of the plan’s underfunded vested liability. Funding requirements for benefit obligations of our pension plans are subject to certain regulatory requirements and we may be required to make cash contributions which may be material to one or more of these plans to satisfy certain underfunded benefit obligations.
Our Projects Expose Us to Potential Professional Liability, Product Liability, Warranty or Other Claims.
We engineer, procure, construct and provide services (including pipe, steel, and large structures fabrication) for large industrial facilities in which system failure can be disastrous. We may also be subject to claims resulting from the subsequent operations of facilities we have installed. Under some of our contracts, we must use customer-specified metals or processes for producing or fabricating pipe for our customers. The failure of any of these metals or processes could result in warranty claims against us for significant replacement or rework costs, which could have an adverse effect on our results of operations, financial position and cash flow.
In addition, our operations are subject to the usual hazards inherent in providing engineering and construction services, such as the risk of accidents, fires and explosions. These hazards can cause personal injury and loss of life, business interruptions, property damage, and pollution and environmental damage. We may be subject to claims as a result of these hazards.
Although we generally do not accept liability for consequential damages in our contracts, should we be determined liable, we may not be covered by insurance or, if covered, the dollar amount of these liabilities may exceed our policy limits. Any catastrophic occurrence in excess of insurance limits at project sites where our structures are installed or on projects for which services are performed could result in significant professional liability, product liability, warranty or other claims against us. Any damages not covered by our insurance, in excess of our insurance limits or, if covered by insurance subject to a high deductible, could result in a significant loss for us, which may reduce our profits and cash available for operations. These claims could also make it difficult for us to obtain adequate insurance coverage in the future at a reasonable cost.
Additionally, customers or subcontractors that have agreed to indemnify us against such losses may refuse or be unable to pay us. A partially or completely uninsured claim, if successful and of significant magnitude, could result in an adverse effect on our results of operations, financial position and cash flow.
We Could Be Adversely Affected by Violations of the FCPA, Similar Worldwide Anti-Bribery Laws, and Various International Trade and Export Laws.
The international nature of our business creates various domestic and local regulatory challenges. The FCPA and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from offering anything of value to government officials for the purpose of obtaining or retaining business, directing business to a particular person or legal entity or obtaining an unfair advantage. Our policies mandate compliance with these anti-bribery laws. We operate in many parts of the world that have experienced governmental corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. We train our employees concerning anti-bribery laws and issues, and we also inform our partners, subcontractors, and third parties who work for us or on our behalf that they must comply with anti-bribery law requirements. We also have procedures and controls in place to monitor internal and external compliance. Allegations of violations of anti-bribery laws, including the FCPA, may also result in internal, independent or governmental investigations. Additionally, our global operations include the import and export of goods and technologies across international borders, which requires a robust compliance program. We cannot assure that our internal controls and procedures will always protect us from the reckless or criminal acts committed by our employees, partners or third parties working for us or on our behalf. If we are found to be liable for anti-bribery law violations or other regulatory violations (either due to our own acts or our inadvertence, or due to the acts or inadvertence of others), we could suffer from criminal or civil penalties or other sanctions, which could have an adverse effect on our results of operations, financial position and cash flow.
We May Experience Increased Costs and Decreased Cash Flow Due to Compliance with Environmental Laws and Regulations, Liability for Contamination of the Environment or Related Personal Injuries.
General—We are subject to environmental laws and regulations, including those concerning emissions into the air; nuclear material; discharge into waterways; generation, storage, handling, treatment and disposal of waste materials; and health and safety.

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Our business often involves working around and with volatile, toxic and hazardous substances and other highly-regulated pollutants, substances or wastes, for which the improper characterization, handling or disposal could constitute violations of U.S. federal, state or local laws and regulations and laws of other countries, and result in criminal and civil liabilities. Environmental laws and regulations generally impose limitations and standards for certain pollutants or waste materials and require us to obtain permits and comply with various other requirements. Governmental authorities may seek to impose fines and penalties on us, or revoke or deny issuance or renewal of operating permits for failure to comply with applicable laws and regulations. We are also exposed to potential liability for personal injury or property damage caused by any release, spill, exposure or other accident involving such pollutants, substances or wastes. Furthermore, we provide certain environmental remediation services.
We may incur liabilities that may not be covered by insurance policies, or, if covered, the financial amount of such liabilities may exceed our policy limits or fall within applicable deductible or retention limits. A partially or completely uninsured claim, if successful and of significant magnitude, could cause us to suffer a significant loss and reduce cash available for our operations.
The environmental, health and safety laws and regulations to which we are subject are constantly changing, and it is impossible to predict the impact of such laws and regulations on us in the future. We cannot ensure that our operations will continue to comply with future laws and regulations or that these laws and regulations will not cause us to incur significant costs or adopt more costly methods of operation. Additionally, the adoption and implementation of any new regulations imposing reporting obligations on, or limiting emissions of greenhouse gases from, our customers’ equipment and operations could significantly impact demand for our services, particularly among our customers for coal and gas-fired generation facilities as well as our customers in the petrochemicals business. Any significant reduction in demand for our services as a result of the adoption of these or similar proposals could have an adverse effect on our results of operations, financial position and cash flow.
In connection with the historical operation of our facilities, including those associated with acquired operations, substances which currently are or might be considered hazardous were used or disposed of at some sites that will or may require us to make expenditures for remediation. In addition, we have agreed to indemnify parties from whom we have purchased or to whom we have sold facilities for certain environmental liabilities arising from acts occurring before the dates those facilities were transferred.
Nuclear Maintenance—We are subject to regulations from a number of entities, including the applicable U.S. regulatory bodies, such as the U.S. Nuclear Regulatory Commission, and non-U.S. regulatory bodies, such as the International Atomic Energy Agency (the “IAEA”) and the EU. Regulations include, among other things: systems for nuclear material safeguards implemented by the IAEA and the EU; global-scale agreements on nuclear safety such as the Convention on Nuclear Safety and the Joint Convention on the Safety of Spent Fuel Management and on the Safety of Radioactive Waste Management; the Euratom Treaty, which has created uniform safety standards aimed at protecting the public and workers and passed rules governing the transportation of radioactive waste; and additional general regulations for licensed nuclear facilities, including strict inspection procedures and regulations governing the maintenance, shutdown and dismantling of nuclear facilities and the disposal of nuclear wastes. Failure to maintain sufficient compliance programs for these regulations, or other problems encountered during maintenance work, could significantly increase our costs and have an adverse effect on our results of operations, financial position and cash flow.
We Are and Will Continue to Be Involved in Litigation Including Litigation Related to Hazardous Substances that Could Negatively Impact Our Earnings and Liquidity.
We have been and may from time to time be named as a defendant in legal actions claiming damages in connection with engineering and construction projects, technology licenses, other services we provide, and other matters. These are typically claims that arise in the normal course of business, including employment-related claims and contractual disputes or claims for personal injury or property damage which occur in connection with services performed relating to project or construction sites. Contractual disputes normally involve claims relating to the timely completion of projects, performance of equipment or technologies, design or other engineering services or project construction services provided by us. While we do not believe that any of our pending contractual, employment-related, personal injury or property damage claims and disputes could have an adverse effect on our results of operations, financial position and cash flow, there can be no assurance that this will be the case.
In addition, we are from time to time involved in various litigation and other matters related to hazardous substances encountered in our business. In particular, the numerous operating hazards inherent in our business increase the risk of toxic tort litigation relating to any and all consequences arising out of human exposure to hazardous substances, including without limitation, current or past claims involving asbestos-related materials, formaldehyde, Cesium 137 (radiation), mercury and other hazardous substances, or related environmental damage. As a result, we are subject to potentially material liabilities related to personal injuries or property damages that may be caused by hazardous substance releases and exposures. The outcome of such litigation is inherently uncertain and adverse developments or outcomes can result in significant monetary

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damages, penalties, other sanctions or injunctive relief against us, limitations on our property rights, or regulatory interpretations that increase our operating costs. If any of these disputes result in a substantial monetary judgment against us or an adverse legal interpretation is settled on unfavorable terms, or otherwise affects our operations, it could have an adverse effect on our results of operations, financial position and cash flow.
Uncertainty in Enforcing U.S. Judgments Against Netherlands Corporations, Directors and Others Could Create Difficulties for Our Shareholders in Enforcing Any Judgments Obtained Against Us.
We are a Netherlands company and a significant portion of our assets are located outside of the U.S. In addition, certain members of our management and supervisory boards may be residents of countries other than the U.S. As a result, effecting service of process on such persons may be difficult, and judgments of U.S. courts, including judgments against us or members of our management or supervisory boards predicated on the civil liability provisions of the federal or state securities laws of the U.S., may be difficult to enforce.
Certain Provisions of Our Articles of Association and Netherlands Law May Have Possible Anti-Takeover Effects.
Our Articles of Association and the applicable law of The Netherlands contain provisions that may be deemed to have anti-takeover effects. Among other things, these provisions provide for a staggered board of Supervisory Directors, a binding nomination process and supermajority shareholder voting requirements for certain significant transactions. Such provisions may delay, defer or prevent takeover attempts that shareholders might consider in their best interests. In addition, certain U.S. tax laws, including those relating to possible classification as a “controlled foreign corporation” (described below), may discourage third parties from accumulating significant blocks of our common shares.
We Have a Risk of Being Classified as a Controlled Foreign Corporation and Certain Shareholders Who Do Not Beneficially Own Shares May Lose the Benefit of Withholding Tax Reduction or Exemption Under Dutch Legislation.
As a company incorporated in The Netherlands, we would be classified as a controlled foreign corporation for U.S. federal income tax purposes if any U.S. person acquires 10% or more of our common shares (including ownership through the attribution rules of Section 958 of the Internal Revenue Code of 1986, as amended (the “Code”), each such person, a “U.S. 10% Shareholder”) and the sum of the percentage ownership by all U.S. 10% Shareholders exceeds 50% (by voting power or value) of our common shares. We do not believe we are currently a controlled foreign corporation; however, we may be determined to be a controlled foreign corporation in the future. In the event that such a determination is made, all U.S. 10% Shareholders would be subject to taxation under Subpart F of the Code. The ultimate consequences of this determination are fact-specific to each U.S. 10% Shareholder, but could include possible taxation of such U.S. 10% Shareholder on a pro-rata portion of our income, even in the absence of any distribution of such income.
Under the double taxation convention in effect between The Netherlands and the U.S. (the “Treaty”), dividends we pay to certain U.S. corporate shareholders owning at least 10% of our voting power are generally eligible for a reduction of the 15% Netherlands withholding tax to 5%, unless the common shares held by such residents are attributable to a business or part of a business that is, in whole or in part, carried on through a permanent establishment or a permanent representative in The Netherlands. Dividends received by exempt pension organizations and exempt organizations, as defined in the Treaty, are completely exempt from the withholding tax. A holder of common shares other than an individual will not be eligible for the benefits of the Treaty if such holder of common shares does not satisfy one or more of the tests set forth in the limitation on benefits provisions of Article 26 of the Treaty. According to an anti-dividend stripping provision, no exemption from, reduction of, or refund of, Netherlands withholding tax will be granted if the ultimate recipient of a dividend paid by us is not considered to be the beneficial owner of such dividend. The ability of a holder of common shares to take a credit against its U.S. taxable income for Netherlands withholding tax may be limited.
Political and Economic Conditions, Including War, Conflict or Economic Turmoil in Non-U.S. Countries in Which We or Our Customers Operate, Could Adversely Affect Us.
A significant number of our projects are performed or located outside the U.S., including projects in developing countries with economic conditions and political and legal systems, and associated instability risks, that are significantly different from those found in the U.S. We expect non-U.S. sales and operations to continue to contribute materially to our earnings for the foreseeable future. Non-U.S. contracts and operations expose us to risks inherent in doing business outside the U.S., including but not limited to the following:
unstable economic conditions in some countries in which we make capital investments, operate or provide services, including Europe, which has experienced recent economic turmoil;
increased costs, lower revenue and backlog and decreased liquidity resulting from a full or partial break-up of the EU or its currency, the Euro;
the lack of well-developed legal systems in some countries in which we make capital investments, operate, or provide services, which could make it difficult for us to enforce our rights;

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expropriation of property;
restrictions on the right to receive dividends from our ventures, convert currency or repatriate funds; and
political upheaval and international hostilities, including risks of loss due to civil strife, acts of war, guerrilla activities, insurrections and acts of terrorism.
We Are Exposed to Possible Losses from Foreign Currency Exchange Rates.
We are exposed to market risk associated with changes in foreign currency exchange rates. Our exposure to changes in foreign currency exchange rates arises primarily from receivables, payables, and firm and forecasted commitments associated with foreign transactions. We may incur losses from foreign currency exchange rate fluctuations if we are unable to convert foreign currency in a timely fashion. We seek to minimize the risks from these foreign currency exchange rate fluctuations primarily through a combination of contracting methodology (including escalation provisions for projects in inflationary economies) and, when deemed appropriate, the use of foreign currency exchange rate derivatives. In circumstances where we utilize derivatives, our results of operations might be negatively impacted if the underlying transactions occur at different times, or in different amounts, than originally anticipated, or if the counterparties to our contracts fail to perform. In addition, our entities with functional currencies other than our reporting currency of the U.S. Dollar are translated to the U.S. Dollar for reporting purposes. As a result, foreign currency exchange rate fluctuations could have a significant impact on our revenue and earnings. We do not hold, issue, or use financial instruments for trading or speculative purposes.
If We Are Unable to Attract, Retain and Motivate Key Personnel, Our Business Could Be Adversely Affected.
Our future success depends upon our ability to attract, retain and motivate highly-skilled personnel in various areas, including engineering, skilled laborers and craftsmen, project management, procurement, project controls, finance and senior management. If we do not succeed in retaining our current employees and attracting new high quality employees, our business could be adversely affected.
Work Stoppages, Union Negotiations and Other Labor Problems Could Adversely Affect Us.
A portion of our employees are represented by labor unions. A lengthy strike or other work stoppage at any of our facilities could have an adverse effect on us. There is inherent risk that on-going or future negotiations relating to collective bargaining agreements or union representation may not be favorable to us. From time to time, we also have experienced attempts to unionize our non-union shops. Such efforts can often disrupt or delay work and present risk of labor unrest.
Our Employees Work on Projects That are Inherently Dangerous and a Failure to Maintain a Safe Work Site Could Result in Significant Losses.
Safety is a primary focus of our business and is critical to all of our stakeholders, including our employees, customers and shareholders, and our reputation; however, we often work on large-scale and complex projects, frequently in geographically remote locations. Our project sites can place our employees and others near large equipment, dangerous processes or highly-regulated materials, and in challenging environments. If we fail to implement appropriate safety procedures or if our procedures fail, our employees or others may suffer injuries. Often, we are responsible for safety on the project sites where we work. Many of our customers require that we meet certain safety criteria to be eligible to bid on contracts, and some of our contract fees or profits are subject to satisfying safety criteria. Unsafe work conditions also have the potential of increasing employee turnover, increasing project costs and raising our operating costs. Although we maintain functional groups whose primary purpose is to implement effective health, safety and environmental procedures throughout our company, the failure to comply with such procedures, customer contracts or applicable regulations could subject us to losses and liability.
Any Previous or Prospective Acquisitions Could Be Difficult to Integrate, Disrupt Our Business, Dilute Shareholder Value and Harm Our Operating Results.
We have made acquisitions and may continue to pursue additional growth through the opportunistic and strategic acquisition of companies, assets or technologies that will enable us to broaden the types of services and technologies we provide and to expand into new markets. Our opportunity to grow through prospective acquisitions may be limited if we cannot identify suitable companies or assets or reach agreement on potential acquisitions on acceptable terms or for other reasons. Our previous or prospective acquisitions may be subject to a variety of risks, including, but not limited to, the following:
difficulties in the integration of operations and systems;
the key personnel and customers of the acquired company may terminate their relationships with the acquired company;
additional financial and accounting challenges and complexities in areas such as tax planning, treasury management, financial reporting and internal controls;

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assumption of risks and liabilities (including, for example, environmental-related costs), some of which we may not discover during our due diligence;
disruption of or insufficient management attention to our ongoing business;
inability to realize the cost savings or other financial or operational benefits we anticipated; and
potential requirement for additional equity or debt financing, which may not be available, or if available, may not have favorable terms.
Realization of one or more of these risks could have an adverse effect on our results of operations, financial position and cash flow. Moreover, to the extent an acquisition financed by non-equity consideration results in additional goodwill, it will reduce our tangible net worth, which might have an adverse effect on our credit and bonding capacity.
If We Fail to Meet Expectations of Securities Analysts or Investors due to Fluctuations in Our Revenue, Operating Results or Cash Flows, Our Stock Price Could Decline Significantly.
Our revenue, operating results and cash flows may fluctuate from quarter to quarter due to a number of factors, including the timing of or failure to obtain projects, delays in awards of projects, cancellations of projects, delays in the completion of projects, changes in estimated costs to complete projects, performance of significant amounts of work prior to receipt of payment, or the timing of approvals of change orders with, or recoveries of claims against, our customers. It is likely that in some future quarters our operating results or cash flows may fall below the expectations of securities analysts or investors. In this event, the trading price of our common stock could decline significantly.
Our Sale or Issuance of Additional Common Shares Could Dilute Each Shareholder’s Share Ownership.
Part of our business strategy is to expand into new markets and enhance our position in existing markets throughout the world through the strategic and opportunistic acquisition of complementary businesses. In order to successfully complete future acquisitions or fund our other activities, we may issue equity securities that could dilute our earnings per share and each shareholder’s share ownership.
We Cannot Provide Assurance That We Will Be Able to Continue Paying Dividends at the Current Rate.
We have declared and paid quarterly cash dividends on our common stock; however, there can be no assurance that future dividends or distributions will be declared or paid. The payment of dividends or distributions in the future will be subject to the discretion of our shareholders (in the case of annual dividends), our Management Board and our Supervisory Board. Our Management Board and Supervisory Board will periodically evaluate our ability to pay dividends in the future based upon relevant factors, which include:
potential lack of available cash to pay dividends due to general business and economic conditions, net results of acquisitions, changes in our cash requirements, capital spending plans, financing agreements, availability of surplus cash flow or financial position;
legal and contractual restrictions on the amount of dividends that we may distribute to our shareholders, including but not limited to restrictions under the Dutch Civil Code; and
potential inability to receive dividend payments from our subsidiaries at the same level that we have historically. The ability of our subsidiaries to make dividend payments to us is subject to factors similar to those listed above.
Our Goodwill and Other Finite-Lived Intangible Assets Could Become Impaired and Result in Future Charges to Earnings.
Goodwill—Our goodwill balance represents the excess of the purchase price over the fair value of net assets acquired as part of previous acquisitions. Net assets acquired include identifiable finite-lived intangible assets that were recorded at fair value based upon expected future recovery of the underlying assets.
At December 31, 2016, our goodwill balance was $3.0 billion and was distributed among our four operating groups as follows: Engineering & Construction - $1.9 billion, Fabrication Services - $665.7 million, Technology - $297.9 million and Capital Services - $229.6 million. Goodwill is not amortized to earnings, but instead is reviewed for impairment at least annually at a reporting unit level, absent any indicators of impairment or when other actions require an impairment assessment (such as a change in reporting units). We perform our annual impairment assessment during the fourth quarter of each year based upon balances as of October 1. We identify a potential impairment by comparing the fair value of the applicable reporting unit to its net book value, including goodwill. If the net book value exceeds the fair value of the reporting unit, an indication of potential impairment exists, and we measure the impairment by comparing the carrying value of the reporting unit’s goodwill to its implied fair value. To determine the fair value of our reporting units and test for impairment, we utilize an income approach (discounted cash flow method) as we believe this is the most direct approach to incorporate the specific economic attributes and risk profiles of our reporting units into our valuation model. This is consistent with the methodology used to determine the fair value of our reporting units in previous years. We generally do not utilize a market approach given the lack of relevant

17


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. The discounted cash flow methodology is based, to a large extent, on assumptions about future events, which may or may not occur as anticipated, and such deviations could have a significant impact on the calculated estimated fair values of our reporting units. These assumptions include, but are not limited to, estimates of discount rates, future growth rates, and terminal values for each reporting unit.
During 2016 we performed various quantitative assessments of goodwill in connection with the third quarter integration and operational combination of the reporting units within our Fabrication Services operating group and in connection with our annual fourth quarter impairment assessment. As a result of our fourth quarter annual impairment assessment, we recorded a non-cash pre-tax charge of approximately $655.0 million related to the partial impairment of goodwill for our Capital Services operating group. No other impairment charges were necessary as a result of the changes in our reporting units or our annual assessment. If we were to experience a significant and prolonged deterioration of our market capitalization, it may indicate a decline in the fair value of our reporting units and result in the need to perform an interim quantitative impairment assessment. If, based on future assessments our goodwill is deemed to be impaired, the impairment would result in a charge to earnings in the period of impairment with a resulting decrease in our net worth.
See “Critical Accounting Estimates” section of Item 7 for discussion regarding the amount by which the estimated fair values of each of our reporting units exceeded their respective net book values, and additional discussion regarding the determination of the estimated fair values for certain reporting units.
Other Intangible Assets—At December 31, 2016, our finite-lived intangible assets were $367.8 million. We amortize our finite-lived intangible assets on a straight-line basis with lives ranging from 4 to 20 years, absent any indicators of impairment. We review 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 the asset’s carrying amount to determine if an impairment exists. We noted no impairment during 2016; however, if our other intangible assets are determined to be impaired in the future, the impairment would result in a charge to earnings in the year of the impairment with a resulting decrease in our net worth.
We Rely on Our Information Systems to Conduct Our Business, and Failure to Protect These Systems Against Security Breaches Could Adversely Affect Our Business and Results of Operations. Additionally, if These Systems Fail or Become Unavailable for Any Significant Period of Time, Our Business Could be Harmed.
The efficient operation of our business is dependent on computer hardware and software systems. Information systems are vulnerable to security breaches, and we rely on industry-accepted security measures and technology to securely maintain confidential and proprietary information maintained on our information systems. However, these measures and technology may not adequately prevent security breaches. In addition, the unavailability of the information systems or the failure of these systems to perform as anticipated for any reason could disrupt our business and could result in decreased performance and increased costs, causing our business and results of operations to suffer. Any significant interruption or failure of our information systems or any significant breach of security could adversely affect our business and results of operations.
If We are Unable to Enforce Our Intellectual Property Rights or if Our Technology Becomes Obsolete, Our Competitive Position Could be Adversely Impacted.
We believe that we are an industry leader by owning or having access to our technologies. We protect our technology positions through patent registrations, license restrictions and a research and development program. We may not be able to successfully preserve our intellectual property rights in the future, as these rights could be invalidated, circumvented or challenged. In addition, the laws of some foreign countries in which our services may be sold do not protect intellectual property rights to the same extent as U.S. law. Because we license technologies from third parties, there is a risk that our relationships with licensors may terminate or expire or may be interrupted or harmed. If we are unable to protect and maintain our intellectual property rights, or if there are any successful intellectual property challenges or infringement proceedings against us, our ability to differentiate our service offerings could be reduced. Finally, there is nothing to prevent our competitors from independently attempting to develop or obtain access to technologies that are similar or superior to our technologies.
Item 1B. Unresolved Staff Comments
None.

18


Item 2. Properties
We own or lease properties in locations throughout the world to conduct our business. We believe these facilities are adequate to meet our current and near-term requirements. The following list summarizes our principal properties by the operating group for which they are primarily utilized: Engineering & Construction (“EC”), Fabrication Services (“FS”), Technology (“Tech”), Capital Services (“CS”), and Corporate (“Corp”):
Location
 
Type of Facility
 
Interest
 
Operating Group
Brno, Czech Republic
 
Engineering office
 
Leased
 
EC
Canton, Massachusetts
 
Operations office
 
Leased
 
EC, CS, Tech
Charlotte, North Carolina
 
Operations and sales office
 
Leased
 
EC
Gurgaon, India
 
Engineering and operations office
 
Leased
 
EC, FS, Tech
Houston, Texas
 
Engineering and operations office
 
Leased
 
EC, Tech
London, England
 
Engineering and sales office
 
Leased
 
EC
Moscow, Russia
 
Administrative, operations and sales office
 
Leased
 
EC, Tech
Perth, Australia
 
Administrative, engineering, operations and sales office
 
Leased
 
EC, FS
The Hague, The Netherlands (1)
 
Administrative, engineering, operations and sales office
 
Leased
 
EC, FS, Tech, Corp
Abu Dhabi, UAE
 
Operations office and fabrication facility
 
Owned/Leased
 
FS
Al Aujam, Saudi Arabia
 
Fabrication facility and warehouse
 
Owned
 
FS
Al-Khobar, Saudi Arabia
 
Administrative and engineering office
 
Leased
 
FS, EC
Askar, Bahrain
 
Operations office and fabrication facility
 
Owned/Leased
 
FS
Beaumont, Texas
 
Fabrication facility
 
Owned
 
FS
Clearfield, Utah
 
Fabrication facility
 
Leased
 
FS
Clive, Iowa
 
Fabrication facility
 
Owned
 
FS
Dubai, UAE
 
Administrative, engineering and operations office and warehouse
 
Leased
 
FS, Tech
El Dorado, Arkansas
 
Fabrication facility
 
Owned
 
FS
Fort Saskatchewan, Canada
 
Operations office, fabrication facility and warehouse
 
Owned
 
FS
Houston, Texas
 
Operations office, fabrication facility, warehouse and distribution facility
 
Owned/Leased
 
FS
Lake Charles, Louisiana
 
Fabrication facility
 
Owned/Leased
 
FS
Laurens, South Carolina
 
Fabrication facility
 
Owned
 
FS
New Brunswick, New Jersey
 
Fabrication and distribution facility
 
Leased
 
FS
Niagara-on-the-Lake, Canada
 
Engineering office
 
Leased
 
FS
Plainfield, Illinois
 
Engineering and operations office
 
Leased
 
FS
Sattahip, Thailand
 
Operations office and fabrication facility
 
Leased
 
FS
Sherwood Park, Canada
 
Administrative and operations office
 
Leased
 
FS
Shreveport, Louisiana
 
Fabrication and distribution facilities
 
Owned
 
FS
Tyler, Texas
 
Engineering office
 
Owned
 
FS
The Woodlands, Texas (1)
 
Administrative, operations and sales office
 
Owned
 
FS, EC, Tech, CS, Corp
Walker, Louisiana
 
Operations office, fabrication facility and warehouse
 
Owned
 
FS
Beijing, China
 
Sales and operations office
 
Leased
 
Tech
Bloomfield, New Jersey
 
Administrative, engineering and operations office
 
Leased
 
Tech, FS
Ludwigshafen, Germany
 
Research and development office
 
Leased
 
Tech
Mannheim, Germany
 
Engineering and operations office
 
Leased
 
Tech
Pasadena, Texas
 
Research and development office and manufacturing facility
 
Owned
 
Tech
Alexandria, Virginia
 
Operations office
 
Leased
 
CS
Baton Rouge, Louisiana
 
Administrative, engineering and operations offices
 
Leased
 
CS, EC, FS
Findlay, Ohio
 
Operations office and warehouse
 
Leased
 
CS
Greenwood Village, Colorado
 
Operations office
 
Leased
 
CS, Tech
Knoxville, Tennessee
 
Operations office
 
Leased
 
CS
Monroeville, Pennsylvania
 
Operations office
 
Leased
 
CS
Trenton, New Jersey
 
Operations office
 
Leased
 
CS
(1) 
In addition to being utilized by the operating groups referenced above, our office in The Hague, The Netherlands serves as our corporate headquarters and our office in The Woodlands, Texas serves as our administrative headquarters.
We also own or lease a number of smaller administrative and field construction offices, warehouses and equipment maintenance centers strategically located throughout the world.

19


Item 3. Legal Proceedings
General—We have been and may from time to time be named as a defendant in legal actions claiming damages in connection with engineering and construction projects, technology licenses, other services we provide, and other matters. These are typically claims that arise in the normal course of business, including employment-related claims and contractual disputes or claims for personal injury or property damage which occur in connection with services performed relating to project or construction sites. Contractual disputes normally involve claims relating to the timely completion of projects, performance of equipment or technologies, design or other engineering services or project construction services provided by us. We do not believe that any of our pending contractual, employment-related personal injury or property damage claims and disputes will have a material adverse effect on our results of operations, financial position or cash flow.
Project Arbitration Matter—The customer for one of our large cost-reimbursable projects has filed a request for arbitration with the International Chamber of Commerce, alleging cost overruns on the project. The customer has not provided evidence to substantiate its allegations and we believe all amounts incurred and billed on the project, including outstanding receivables of approximately $231.0 million as of December 31, 2016, are contractually due under the provisions of our contract and are recoverable. We do not believe a risk of material loss is probable related to this matter, and accordingly, no amounts have been accrued. While it is possible that a loss may be incurred, we are unable to estimate the range of potential loss, if any. Further, we have asserted counterclaims for our outstanding receivables.
Dispute Related to Sale of Nuclear Operations—As discussed further in Note 4 within Item 8, on December 31, 2015, we sold our Nuclear Operations to WEC. In connection with the transaction, a customary post-closing purchase price adjustment mechanism was negotiated between CB&I and WEC (the “Parties”) to account for any difference between target working capital and actual working capital as finally determined. On April 28, 2016, WEC delivered to us a purported closing statement estimating closing working capital to be negative $976.5 million, which was $2.2 billion less than target working capital. In contrast, we calculated closing working capital to be $1.6 billion, which is $427.8 million greater than target working capital. On July 21, 2016, we filed a complaint against WEC in the Court of Chancery in the State of Delaware (the “Court”) seeking a declaration that WEC has no remedy for the vast majority of its claims and requesting an injunction barring WEC from bringing such claims. On December 2, 2016, the Court granted WEC’s motion for judgment on the pleadings and dismissed our complaint, stating that the dispute should follow the dispute resolution process as set forth in the sales agreement. We have filed an appeal of the Court’s ruling to the Delaware Supreme Court which is now in the briefing stages. The Parties have selected an independent auditor for the dispute resolution process and we must simultaneously move forward with this process while the appeal is pursued. We do not believe a risk of material loss is probable related to this matter, and accordingly, no amounts have been accrued. While it is possible that a loss may be incurred, we are unable to estimate the range of potential loss, if any. We intend to vigorously pursue this litigation and our rights under the purchase agreement.
Asbestos Litigation—We are a defendant in lawsuits wherein plaintiffs allege exposure to asbestos due to work we may have performed at various locations. We have never been a manufacturer, distributor or supplier of asbestos products. Over the past several decades and through December 31, 2016, we have been named a defendant in lawsuits alleging exposure to asbestos involving approximately 6,000 plaintiffs and, of those claims, approximately 1,200 claims were pending and 4,800 have been closed through dismissals or settlements. Over the past several decades and through December 31, 2016, the claims alleging exposure to asbestos that have been resolved have been dismissed or settled for an average settlement amount of approximately two thousand dollars per claim. We review each case on its own merits and make accruals based upon the probability of loss and our estimates of the amount of liability and related expenses, if any. While we have seen an increase in the number of recent filings, especially in one specific venue, we do not believe the increase or any unresolved asserted claims will have a material adverse effect on our future results of operations, financial position or cash flow, and at December 31, 2016, we had approximately $9.2 million accrued for liability and related expenses. With respect to unasserted asbestos claims, we cannot identify a population of potential claimants with sufficient certainty to determine the probability of a loss and to make a reasonable estimate of liability, if any. While we continue to pursue recovery for recognized and unrecognized contingent losses through insurance, indemnification arrangements or other sources, we are unable to quantify the amount, if any, that we may expect to recover because of the variability in coverage amounts, limitations and deductibles, or the viability of carriers, with respect to our insurance policies for the years in question.
Environmental MattersOur operations are subject to extensive and changing U.S. federal, state and local laws and regulations, as well as the laws of other countries, that establish health and environmental quality standards. These standards, among others, relate to air and water pollutants and the management and disposal of hazardous substances and wastes. We are exposed to potential liability for personal injury or property damage caused by any release, spill, exposure or other accident involving such pollutants, substances or wastes.
In connection with the historical operation of our facilities, including those associated with acquired operations, substances which currently are or might be considered hazardous were used or disposed of at some sites that will or may require us to make expenditures for remediation. In addition, we have agreed to indemnify parties from whom we have

20


purchased or to whom we have sold facilities for certain environmental liabilities arising from acts occurring before the dates those facilities were transferred.
We believe we are in compliance, in all material respects, with environmental laws and regulations and maintain insurance coverage to mitigate our exposure to environmental liabilities. We do not believe any environmental matters will have a material adverse effect on our future results of operations, financial position or cash flow. We do not anticipate we will incur material capital expenditures for environmental controls or for the investigation or remediation of environmental conditions during 2017 or 2018.
Item 4. Mine Safety Disclosures
None.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Stock and Dividend Information—Our common stock is traded on the NYSE. At February 16, 2017, we had approximately 123 thousand shareholders, based upon individual participants in security position listings at that date. The following table presents our range of common stock prices on the NYSE and the cash dividends paid per share of common stock by quarter for 2016 and 2015:
 
 
Range of Common Stock Prices
 
Dividends
 
 
High
 
Low
 
Close
 
Per Share
Year Ended December 31, 2016
 
 
 
 
 
 
 
 
Fourth Quarter
 
$
36.56

 
$
26.55

 
$
31.75

 
$
0.07

Third Quarter
 
$
39.71

 
$
26.12

 
$
28.03

 
$
0.07

Second Quarter
 
$
41.33

 
$
32.16

 
$
34.63

 
$
0.07

First Quarter
 
$
39.82

 
$
31.30

 
$
36.59

 
$
0.07

Year Ended December 31, 2015
 
 
 
 
 
 
 
 
Fourth Quarter
 
$
46.39

 
$
36.75

 
$
38.99

 
$
0.07

Third Quarter
 
$
53.73

 
$
36.23

 
$
39.66

 
$
0.07

Second Quarter
 
$
59.45

 
$
44.00

 
$
50.04

 
$
0.07

First Quarter
 
$
50.12

 
$
32.16

 
$
49.26

 
$
0.07

Cash dividends are dependent upon our results of operations, financial condition, cash requirements, availability of surplus and such other factors as our Supervisory Board may deem relevant. See Item 1A for risk factors associated with our cash dividends.

21


Stock Performance Graph—The following chart compares the cumulative total shareholder return on shares of our common stock for the five-year period ended December 31, 2016, with the cumulative total shareholder return of the S&P 500 Index and Dow Jones (“DJ”) U.S. Heavy Construction Index for the same period. The comparison assumes one hundred dollars invested on December 31, 2011 and the reinvestment of all dividends. The calculated shareholder return for our common stock is not indicative of future performance.
a2016123110_chart-37809.jpg
 
 
2011
 
2012
 
2013
 
2014
 
2015
 
2016
CB&I
 
$
100

 
$
123

 
$
220

 
$
111

 
$
103

 
$
84

S&P 500
 
$
100

 
$
113

 
$
147

 
$
164

 
$
163

 
$
178

DJ U.S. Heavy Construction Index
 
$
100

 
$
121

 
$
158

 
$
117

 
$
103

 
$
126

Equity Compensation Plan Information—The following table summarizes information, at December 31, 2016, relating to our equity compensation plans pursuant to which options or other rights to acquire our common shares may be granted from time to time:
Plan Category
 
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights
 
Weighted-Average Exercise Price of Outstanding 
Options, Warrants and Rights
 
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column (a))
 
 
(a)
 
(b)
 
(c)
Equity compensation plans approved by security holders
 
662

 
$
19.03

 
8,421

Equity compensation plans not approved by security holders (1)
 
46

 
$
45.13

 
315

Total
 
708

 
$
20.73

 
8,736

(1) 
Associated with The Shaw 2008 Omnibus Incentive Plan that was approved by The Shaw Group Inc. (“Shaw”) shareholders and subsequently acquired as part of our acquisition of Shaw (the “Shaw Acquisition”), on February 13, 2013 (the “Acquisition Closing Date”).
Stock Repurchases—None in the fourth quarter of 2016.


22


Item 6. Selected Financial Data
The following table presents selected financial and operating data for the last five years. This information should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8. Financial Statements and Supplementary Data.”
 
 
Years Ended December 31,
 
 
2016 (1)

2015 (2)

2014

2013 (3)

2012
 
 
(In thousands, except per share and employee data)
Statement of Operations Data
 
 
 
 
 
 
 
 
 
 
Revenue
 
$
10,679,558

 
$
12,929,504

 
$
12,974,930

 
$
11,094,527

 
$
5,485,206

Cost of revenue
 
9,653,502

 
11,417,188

 
11,508,521

 
9,895,517

 
4,786,499

Gross profit
 
1,026,056

 
1,512,316

 
1,466,409

 
1,199,010

 
698,707

Selling and administrative expense
 
349,874

 
387,027

 
405,208

 
379,485

 
227,948

Intangibles amortization
 
42,439

 
57,625

 
66,506

 
61,111

 
22,613

Equity earnings
 
(26,826
)
 
(15,689
)
 
(25,225
)
 
(23,474
)
 
(17,931
)
Goodwill impairment
 
655,000

 
453,100

 

 

 

Loss on net assets sold and intangible assets impairment
 
148,148

 
1,052,751

 

 

 

Other operating expense (income), net (4)
 
2,339

 
2,619

 
(2,373
)
 
1,643

 
(566
)
Acquisition and integration related costs (5)
 

 

 
39,685

 
95,737

 
11,000

(Loss) income from operations
 
(144,918
)
 
(425,117
)
 
982,608

 
684,508

 
455,643

Interest expense
 
(105,349
)
 
(94,360
)
 
(83,590
)
 
(87,578
)
 
(19,606
)
Interest income
 
13,004

 
8,285

 
8,524

 
6,930

 
8,029

(Loss) income before taxes
 
(237,263
)
 
(511,192
)
 
907,542

 
603,860

 
444,066

Income tax (expense) benefit (6)(7)
 
(2,560
)
 
81,231

 
(271,417
)
 
(91,270
)
 
(127,003
)
Net (loss) income
 
(239,823
)
 
(429,961
)
 
636,125

 
512,590

 
317,063

Less: Net income attributable to noncontrolling interests
 
(73,346
)
 
(74,454
)
 
(92,518
)
 
(58,470
)
 
(15,408
)
Net (loss) income attributable to CB&I
 
$
(313,169
)
 
$
(504,415
)
 
$
543,607

 
$
454,120

 
$
301,655

Per Share Data
 
 
 
 
 
 
 
 
 
 
Net (loss) income attributable to CB&I per share — basic
 
$
(3.05
)
 
$
(4.72
)
 
$
5.03

 
$
4.29

 
$
3.12

Net (loss) income attributable to CB&I per share — diluted
 
$
(3.05
)
 
$
(4.72
)
 
$
4.98

 
$
4.23

 
$
3.07

Cash dividends per share
 
$
0.28

 
$
0.28

 
$
0.28

 
$
0.20

 
$
0.20

Balance Sheet Data
 
 
 
 
 
 
 
 
 
 
Goodwill
 
$
3,043,410

 
$
3,711,506

 
$
4,195,231

 
$
4,226,468

 
$
926,711

Total assets (8)
 
$
7,839,420

 
$
9,192,060

 
$
9,369,830

 
$
9,374,291

 
$
4,327,192

Long-term debt, net (8)
 
$
1,287,923

 
$
1,791,832

 
$
1,553,846

 
$
1,610,863

 
$
799,143

Total shareholders’ equity
 
$
1,561,337

 
$
2,163,590

 
$
2,876,303

 
$
2,507,438

 
$
1,396,310

Other Financial Data
 
 
 
 
 
 
 
 
 
 
(Loss) income from operations percentage
 
(1.4)%
 
(3.3)%
 
7.6%
 
6.2%
 
8.3%
Depreciation and amortization
 
$
122,522

 
$
161,135

 
$
181,398

 
$
180,026

 
$
66,421

Capital expenditures
 
$
52,462

 
$
78,852

 
$
117,624

 
$
90,492

 
$
72,279

Other Data
 
 
 
 
 
 
 
 
 
 
New awards (9)
 
$
7,064,157

 
$
13,138,498

 
$
16,265,273

 
$
12,252,970

 
$
7,305,970

Backlog (9)
 
$
18,455,233

 
$
22,643,939

 
$
30,363,269

 
$
27,794,212

 
$
10,928,818

Number of employees:
 
 
 
 
 
 
 
 
 
 
Salaried
 
16,100

 
18,500

 
22,900

 
21,400

 
9,400

Hourly and craft
 
26,000

 
23,500

 
31,500

 
34,500

 
17,400


23


(1) 
Results for 2016 include the impact of a reserve for the Transaction Receivable associated with the 2015 sale of our Nuclear Operations, which resulted in a non-cash pre-tax charge of approximately $148.1 million (approximately $96.3 million after-tax). Results for 2016 also include a non-cash pre-tax charge related to the partial impairment of goodwill (approximately $655.0 million) for our Capital Services operating group resulting from our fourth quarter annual impairment assessment. Our 2016 net income reflects the non-deductibility of the goodwill impairment charge for tax purposes. See “Results of Operations” within Item 7 and Note 6 within Item 8 for additional discussion.
(2) 
Results for 2015 include the impact of the sale of our Nuclear Operations which resulted in a non-cash pre-tax charge of approximately $1.5 billion (approximately $1.1 billion after-tax) related to the impairment of goodwill (approximately $453.1 million) and intangible assets (approximately $79.1 million) and a loss on net assets sold (approximately $973.7 million), as well as a reduction in our backlog (approximately $7.3 billion). See “Results of Operations” within Item 7 and Note 4 within Item 8 for further discussion and quantification of the impact of the sale.
(3) 
Results for 2013 include the impact of the Shaw Acquisition from the Acquisition Closing Date.
(4) 
Other operating expense (income), net, generally represents (gains) losses associated with the sale or disposition of property and equipment. For 2015, other operating expense (income), net, also included a gain of approximately $7.5 million related to the contribution of a technology to one of our unconsolidated joint ventures and a foreign exchange loss of approximately $11.0 million associated with the re-measurement of certain non-U.S. Dollar denominated net assets.
(5) 
For 2014 and 2013, integration related costs primarily related to facility consolidations, including the associated accrued future lease costs for vacated facilities and unutilized capacity, personnel relocation and severance related costs, and systems integration costs. For 2013 and 2012, acquisition related costs primarily related to transaction costs, professional fees, and change-in-control and severance related costs associated with the Shaw Acquisition.
(6) 
Income tax expense for 2013 included a benefit of approximately $62.8 million resulting from the reversal of a valuation allowance associated with our United Kingdom (“U.K.”) net operating loss deferred tax asset.
(7) 
Income tax expense for 2016 included a benefit of approximately $67.0 million resulting from the reversal of a deferred tax liability associated with historical earnings of a non-U.S. subsidiary for which the earnings are no longer anticipated to be subject to tax.
(8) 
Our December 31, 2015, 2014, 2013 and 2012 Balance Sheets reflect the reclassification of deferred debt issuance costs from total assets to current maturities of long-term debt and long-term debt.
(9) 
New awards represent the expected revenue value of new contract commitments received during a given period, as well as scope growth on existing commitments. Backlog represents the unearned value of our new awards. New awards and backlog include the entire award values for joint ventures we consolidate and our proportionate share of award values for joint ventures we proportionately consolidate. New awards and backlog also include our pro-rata share of the award values for unconsolidated joint ventures we account for under the equity method. As the net results for our equity method joint ventures are recognized as equity earnings, their revenue is not presented in our Consolidated Statement of Operations. Backlog may fluctuate with currency movements.


24


Item 7. 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 that may impact our future performance. This discussion should be read in conjunction with our Financial Statements and the related notes thereto.
OVERVIEW
General—We provide a wide range of services through our four operating groups, including conceptual design, technology, engineering, procurement, fabrication, modularization, construction, commissioning, maintenance, program management and environmental services to customers in the energy infrastructure market throughout the world, and are a provider of diversified government services. Our operating groups, which represent our reportable segments, include: Engineering & Construction; Fabrication Services; Technology; and Capital Services.
We continue to be broadly diversified across the global energy infrastructure market. Our geographic diversity is illustrated by approximately 30% of our 2016 revenue coming from projects outside the U.S. and approximately 20% of our December 31, 2016 backlog of $18.5 billion (including approximately $1.7 billion related to our equity method joint ventures) being comprised of projects outside the U.S. The geographic mix of our revenue will evolve consistent with changes in our backlog mix, as well as shifts in future global energy demand. Our diversity in energy infrastructure end markets ranges from downstream activities such as gas processing, LNG, refining, and petrochemicals, to fossil based power plants and upstream activities such as offshore oil and gas and onshore oil sands projects. Planned investments across the natural gas value chain, including LNG and petrochemicals, remain strong, and we anticipate additional benefits from continued investments in projects based on U.S. shale gas. Global investments in power and petrochemical facilities are expected to continue, as are investments in various types of facilities which require storage structures and pre-fabricated pipe.
Our long-term contracts are awarded on a competitively bid and negotiated basis using a range of contracting options, including cost-reimbursable, fixed-price and hybrid, which has both cost-reimbursable and fixed-price characteristics. Under cost-reimbursable contracts, we generally perform our services in exchange for a price that consists of reimbursement of all customer-approved costs and a profit component, which is typically a fixed rate per hour, an overall fixed fee or a percentage of total reimbursable costs. Under fixed-price contracts, we perform our services and execute our projects at an established price. The timing of our revenue recognition may be impacted by the contracting structure of our contracts. 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 our revenue. 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. Our shorter-term contracts and services are generally provided on a cost-reimbursable, fixed-price or unit price basis. Our December 31, 2016 backlog distribution by contracting type was approximately 70% fixed-price, hybrid, or unit based and 30% cost-reimbursable and is further described below within our operating group discussion. We anticipate that approximately 45% to 50% of our consolidated backlog (including backlog associated with our equity method joint ventures) will be recognized during 2017.
New awards represent the expected revenue value of new contract commitments received during a given period, as well as scope growth on existing commitments. Backlog represents the unearned value of our new awards. New awards and backlog include the entire award values for joint ventures we consolidate and our proportionate share of award values for joint ventures we proportionately consolidate. New awards and backlog also include our pro-rata share of the award values for unconsolidated joint ventures we account for under the equity method. As the net results for our equity method joint ventures are recognized as equity earnings, their revenue is not presented in our Consolidated Statement of Operations.
Backlog for each of our operating groups generally consists of several hundred contracts, which are being executed globally. These contracts vary in size from less than one hundred thousand dollars in contract value to several billion dollars, with varying durations that can exceed five years. The timing of new awards and differing types, sizes, and durations of our contracts, combined with their geographic diversity and stages of completion, often results in fluctuations in our quarterly operating group results as a percentage of operating group revenue. In addition, the relative contribution of each of our operating groups, and selling and administrative expense fluctuations, will impact our quarterly consolidated results as a percentage of consolidated revenue. Selling and administrative expense fluctuations are impacted by our stock-based compensation costs, which are generally higher in the first quarter of each year due to the timing of stock awards and the accelerated expensing of awards for participants that are eligible to retire. As a result of the aforementioned, quarterly variability in our revenue and operating results is not unusual in our business.
    

25


Our 2016 revenue reflects the impact of the sale of our Nuclear Operations on December 31, 2015 (see Note 4 within Item 8), which represented approximately $2.1 billion of our 2015 revenue. In addition, our 2016 revenue and operating results have been impacted by delays in the awards of certain large project prospects. Such delays in awards could also impact our near term revenue and operating results; however, we do not currently anticipate a long-term impact to our revenue as a result of the delays in awards. In addition, the anticipated sale of our Capital Services operating group (see Note 18 within Item 8), which represented approximately $2.2 billion of our 2016 revenue, would also impact our future revenue and operating results. Absent the aforementioned, we are currently not aware of any other fundamental change in our backlog or business that would give rise to future long-term operating results that would be significantly different from our recent historical norms. Further, we do not anticipate a material long-term negative impact to our liquidity as a result of the aforementioned and anticipate generating operating cash flows equivalent to our earnings.
Engineering & Construction—Our Engineering & Construction operating group provides EPC services for major energy infrastructure facilities.
Backlog for our Engineering & Construction operating group comprised approximately $9.9 billion (54%) of our consolidated December 31, 2016 backlog (including approximately $1.2 billion related to our equity method joint ventures). The backlog composition by end market was approximately 40% LNG, 30% petrochemical, 25% power, and 5% refining. Our LNG backlog was primarily concentrated in the Asia Pacific and North American regions. We anticipate significant opportunities will be derived from North America and Africa. Our petrochemical backlog was primarily concentrated in the U.S. and the Middle East region and we anticipate significant opportunities will continue to be derived from these regions. Our power backlog was primarily concentrated in the U.S. and we anticipate that our significant future opportunities will be derived from North America. The majority of our refining-related backlog was derived from the Middle East and Russia and we anticipate that our future opportunities will continue to be derived from these regions. Our December 31, 2016 backlog distribution for this operating group by contracting type was approximately 80% fixed-price and hybrid and 20% cost-reimbursable.
Fabrication Services—Our Fabrication Services operating group provides fabrication and erection of steel plate structures; fabrication of piping systems and process modules; manufacturing and distribution of pipe and fittings; and engineered products for the oil and gas, petrochemical, power generation, water and wastewater, mining and mineral processing industries.
Backlog for our Fabrication Services operating group comprised approximately $2.1 billion (11%) of our consolidated December 31, 2016 backlog. The backlog composition by end market was approximately 40% petrochemical, 30% LNG (including low temp and cryogenic), 15% power, 5% refining, 5% gas processing and 5% other end markets. Our December 31, 2016 backlog distribution for this operating group by contracting type was approximately 95% fixed-price, hybrid, or unit based, with the remainder being cost-reimbursable.
Technology—Our Technology operating group provides proprietary process technology licenses and associated engineering services and catalysts, primarily for the petrochemical and refining industries, and offers process planning and project development services and a comprehensive program of aftermarket support. Technology also has a 50% owned unconsolidated joint venture that provides proprietary process technology licenses and associated engineering services and catalyst, primarily for the refining industry, as well as a 33.3% owned unconsolidated joint venture that is commercializing a new natural gas power generation system that recovers the carbon dioxide produced during combustion.
Backlog for our Technology operating group comprised approximately $1.0 billion (6%) of our consolidated December 31, 2016 backlog (including approximately $470.0 million related to our equity method joint ventures) and was primarily comprised of fixed-price contracts.
Capital Services—Our Capital Services operating group provides comprehensive and integrated maintenance services, environmental engineering and remediation, construction services, program management, and disaster response and recovery for private-sector customers and governments.
Backlog for our Capital Services operating group comprised approximately $5.4 billion (29%) of our consolidated December 31, 2016 backlog. The backlog composition by end market was approximately 65% operations and maintenance services, 15% environmental services, 15% construction services and 5% program and project management, and was primarily concentrated in the U.S. Our December 31, 2016 backlog distribution for this operating group by contracting type was approximately 75% cost-reimbursable and 25% fixed-price and unit based.

26


RESULTS OF OPERATIONS
Our backlog, new awards, revenue and income from operations by reportable segment were as follows:
 
 
December 31,
 
 
(In thousands)
 
 
2016
 
% of
Total
 
2015
 
% of
Total
 
2014
 
% of
Total
Backlog
 
 
 
 
 
 
 
 
 
 
 
 
Engineering & Construction
 
$
9,916,948

 
54%
 
$
12,892,804

 
57%
 
$
21,284,090

 
71%
Fabrication Services
 
2,114,550

 
11%
 
3,107,500

 
14%
 
2,828,954

 
9%
Technology
 
1,025,723

 
6%
 
963,058

 
4%
 
652,750

 
2%
Capital Services
 
5,398,012

 
29%
 
5,680,577

 
25%
 
5,597,475

 
18%
Total backlog
 
$
18,455,233

 
 
 
$
22,643,939

 
 
 
$
30,363,269

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Years Ended December 31,
 
 
(In thousands)
 
 
2016
 
% of
Total
 
2015
 
% of
Total
 
2014
 
% of
Total
New Awards
 
 
 
 
 
 
 
 
 
 
 
 
Engineering & Construction
 
$
3,104,874

 
44%
 
$
6,709,864

 
51%
 
$
10,101,263

 
62%
Fabrication Services
 
1,273,971

 
18%
 
3,106,563

 
24%
 
2,422,580

 
15%
Technology
 
479,409

 
7%
 
577,540

 
4%
 
387,010

 
2%
Capital Services
 
2,205,903

 
31%
 
2,744,531

 
21%
 
3,354,420

 
21%
Total new awards
 
$
7,064,157

 
 
 
$
13,138,498

 
 
 
$
16,265,273

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2016
 
% of
Total
 
2015
 
% of
Total
 
2014
 
% of
Total
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
Engineering & Construction
 
$
6,105,488

 
57%
 
$
7,697,684

 
60%
 
$
7,623,381

 
59%
Fabrication Services
 
2,110,310

 
20%
 
2,442,690

 
19%
 
2,738,981

 
21%
Technology
 
284,424

 
3%
 
399,099

 
3%
 
385,126

 
3%
Capital Services
 
2,179,336

 
20%
 
2,390,031

 
18%
 
2,227,442

 
17%
Total revenue
 
$
10,679,558

 
 
 
$
12,929,504

 
 
 
$
12,974,930

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2016
 
% of
Revenue
 
2015
 
% of
Revenue
 
2014
 
% of
Revenue
(Loss) Income From Operations
 
 
 
 
 
 
 
 
 
 
 
 
Engineering & Construction
 
$
158,704

 
2.6%
 
$
(875,321
)
 
(11.4)%
 
$
518,671

 
6.8%
Fabrication Services
 
183,141

 
8.7%
 
225,267

 
9.2%
 
274,487

 
10.0%
Technology
 
105,293

 
37.0%
 
150,877

 
37.8%
 
147,782

 
38.4%
Capital Services
 
(592,056
)
 
(27.2)%
 
74,060

 
3.1%
 
81,353

 
3.7%
Total operating groups
 
(144,918
)
 
(1.4)%
 
(425,117
)
 
(3.3)%
 
1,022,293

 
7.9%
Integration related costs
 

 
 
 

 
 
 
(39,685
)
 
 
Total (loss) income from operations
 
$
(144,918
)
 
(1.4)%
 
$
(425,117
)
 
(3.3)%
 
$
982,608

 
7.6%
As discussed in Note 6 within Item 8, during 2016 we recorded a non-cash pre-tax charge related to the partial impairment of goodwill for our Capital Services operating group resulting from our fourth quarter annual impairment assessment. As discussed in Note 4 within Item 8, during 2016 we recorded a non-cash pre-tax charge within our Engineering & Construction operating group resulting from a reserve for the transaction consideration (the “Transaction Receivable”) associated with the 2015 sale of our Nuclear Operations. Also discussed in Note 4 within Item 8, on December 31, 2015 we completed the sale of our Nuclear Operations, which was previously included within our Engineering & Construction operating group, and during 2015 we recorded a non-cash pre-tax charge related to the impairments of goodwill and intangible assets and

27


a loss on net assets sold. For comparative purposes only, the results of the disposed Nuclear Operations for 2015, and charges for 2016 and 2015, are presented separately within the discussion and tables below.
2016 Versus 2015
Consolidated Results
New Awards/Backlog—As discussed above, new awards represent the expected revenue value of new contract commitments received during a given period, as well as scope growth on existing commitments. Backlog represents the unearned value of our new awards. New awards and backlog include the entire award values for joint ventures we consolidate and our proportionate share of award values for joint ventures we proportionately consolidate. New awards and backlog also include our pro-rata share of the award values for unconsolidated joint ventures we account for under the equity method. As the net results for our equity method joint ventures are recognized as equity earnings, their revenue is not presented in our Consolidated Statement of Operations. Our new awards may vary significantly each reporting period based on the timing of our major new contract commitments.
New awards were $7.1 billion for 2016 (including approximately $116.0 million related to our equity method joint ventures), compared with $13.1 billion for 2015 (including approximately $1.6 billion related to our equity method joint ventures). Significant new awards for 2016 (within our Engineering & Construction operating group) included:
three gas turbine power projects in the U.S. (approximately $1.1 billion combined),
federal funding allocations for our mixed oxide fuel fabrication facility project in the U.S. and scope increases for our LNG mechanical erection project in the Asia Pacific region (approximately $970.0 million combined), and
a refinery project in Russia (approximately $460.0 million).
Other significant awards for 2016 included refinery maintenance services (approximately $490.0 million combined) and power plant services (approximately $475.0 million combined) in the U.S. and Canada within our Capital Services operating group.
Significant new awards for 2015 (within our Engineering & Construction operating group) included:
petrochemical facility projects in the U.S. (approximately $1.8 billion combined),
our pro-rata share of a $2.8 billion liquids ethylene cracker project and associated units in the Middle East (approximately $1.4 billion) that we are executing through an unconsolidated equity method joint venture arrangement,
scope increases for our LNG mechanical erection project in the Asia Pacific region (approximately $720.0 million),
our proportionate share of a $2.0 billion additional LNG train for an LNG export facility in the U.S. (approximately $675.0 million) that we are executing through a proportionately consolidated joint venture arrangement, and
a gas turbine power project in the U.S. (approximately $600.0 million).
Other significant awards for 2015 included scope increases for our former large nuclear projects in the U.S. (approximately $730.0 million) within our Engineering & Construction and Fabrication Services operating groups; low-temperature tanks in the U.S. (approximately $300.0 million) within our Fabrication Services operating group; and power plant and refinery maintenance services in North America (approximately $910.0 million combined) within our Capital Services operating group. See Operating Group Results below for further discussion.    
Backlog at December 31, 2016 was approximately $18.5 billion (including approximately $1.7 billion related to our equity method joint ventures), compared with $22.6 billion at December 31, 2015 (including approximately $1.8 billion related to our equity method joint ventures), with the decrease reflecting the impact of revenue exceeding new awards by approximately $3.8 billion (including $187.4 million of revenue for our unconsolidated equity method ventures) and other adjustments, primarily related to reductions in maintenance backlog for our Capital Services operating group.
Certain contracts within our Capital Services and Engineering & Construction operating groups are dependent upon funding from the U.S. government, where funds are appropriated on a year-by-year basis, while contract performance may take more than one year. Approximately $1.0 billion of our backlog at December 31, 2016 for these operating groups was for contractual commitments that are subject to future funding decisions.

28


Revenue—Revenue was $10.7 billion for 2016, representing a decrease of $2.2 billion (17.4%) compared with 2015. Our 2016 and 2015 revenue exclude approximately $187.4 million and $95.6 million, respectively, of revenue for our unconsolidated equity method ventures. Our 2015 revenue included approximately $2.1 billion of revenue attributable to our former Nuclear Operations. The table below summarizes our 2015 revenue excluding the Nuclear Operations.
 
 
Years Ended December 31,
 
 
2016
 
% of
Total
 
2015
 
% of
Total
 
 
(In thousands)
Excluding Nuclear Operations (1)
 
$
10,679,558

 
100%
 
$
10,868,337

 
84%
Nuclear Operations (1)
 

 
—%
 
2,061,167

 
16%
Total revenue (1)
 
$
10,679,558

 
 
 
$
12,929,504

 
 
(1)
The break-out of 2015 revenue represents a non-GAAP financial disclosure, which we believe provides better comparability with our 2016 results.
Excluding the impact of our former Nuclear Operations, revenue for 2016 decreased by $188.8 million (1.7%) compared with 2015. Our 2016 revenue was impacted by the wind down of various tank projects in North America, South America and the Asia Pacific region within our Fabrication Services operating group; a reduction in construction services activity within our Capital Services operating group; and decreased activity on our large cost reimbursable LNG mechanical erection project in the Asia Pacific region and refinery project in Colombia within our Engineering & Construction operating group. These impacts were partly offset by the benefit of increased activity on our LNG export facility projects in the U.S. and various other projects in the U.S. and Asia Pacific region within our Engineering & Construction operating group. See Operating Group Results below for further discussion.
Gross Profit—Gross profit was $1.0 billion (9.6% of revenue) for 2016, compared with $1.5 billion (11.7% of revenue) for 2015. Our 2015 results included approximately $239.1 million of gross profit attributable to our former Nuclear Operations. The table below summarizes our 2015 gross profit excluding the Nuclear Operations.
 
 
Years Ended December 31,
 
 
2016
 
% of
Revenue
 
2015
 
% of
Revenue
 
 
(In thousands)
Excluding Nuclear Operations (1)
 
$
1,026,056

 
9.6%
 
$
1,273,266

 
11.7%
Nuclear Operations (1)
 

 
—%
 
239,050

 
11.6%
Total gross profit (1)
 
$
1,026,056

 
9.6%
 
$
1,512,316

 
11.7%
(1) 
The break-out of 2015 gross profit represents a non-GAAP financial disclosure, which we believe provides better comparability with our 2016 results.
Excluding the impact of our former Nuclear Operations, gross profit was approximately $1.3 billion (11.7% of revenue) for 2015. Our 2016 gross profit percentage decreased compared to the 2015 period due to the net impact of changes in forecast costs and changes in estimated recoveries on certain projects, lower revenue volume for our higher margin Technology operating group, and reduced leverage of our operating costs, partly offset by a higher margin mix. See Operating Group Results below for further discussion.
Selling and Administrative Expense—Selling and administrative expense was $349.9 million (3.3% of revenue) for 2016, compared with $387.0 million (3.0% of revenue) for 2015. The decrease in absolute dollars for 2016 was primarily attributable to lower incentive plan costs (approximately $26.0 million) and lower expense attributable to our former Nuclear Operations, partly offset by inflationary increases.
Intangibles Amortization—Intangibles amortization was $42.4 million for 2016, compared with $57.6 million for 2015. The decrease for 2016 was primarily due to lower intangible balances resulting from the impairment of certain intangible assets in the third quarter 2015 and intangible assets that became fully amortized during the first quarter 2016.
Equity Earnings—Equity earnings were $26.8 million for 2016, compared with $15.7 million for 2015 and were primarily associated with our unconsolidated joint ventures within our Technology and Engineering & Construction operating groups.

29


Loss on Net Assets Sold and Impairment of Intangible Assets and Goodwill—As discussed in Note 6 within Item 8, during 2016 we recorded a non-cash pre-tax charge of approximately $655.0 million related to the partial impairment of goodwill resulting from our fourth quarter annual impairment assessment. In addition, as discussed in Note 4 within Item 8, during 2016 we recorded a non-cash pre-tax charge of approximately $148.1 million resulting from a reserve for the Transaction Receivable associated with the 2015 sale of our Nuclear Operations. As a result of the sale of our Nuclear Operations discussed in Note 4 within Item 8, during 2015 we recorded a non-cash pre-tax charge of approximately $1.5 billion related to the impairment of goodwill ($453.1 million) and intangible assets ($79.1 million) and a loss on net assets sold ($973.7 million).
Other Operating Expense (Income), NetOther operating expense (income), net, generally represents losses (gains) associated with the sale or disposition of property and equipment. For 2015, other operating expense (income), net, also included a gain of approximately $7.5 million related to the contribution of a technology to one of our unconsolidated joint ventures and a foreign exchange loss of approximately $11.0 million associated with the re-measurement of certain non-U.S. Dollar denominated net assets.
(Loss) Income from Operations—Loss from operations was $(144.9) million (1.4% of revenue) for 2016, compared with a loss from operations of $(425.1) million (3.3% of revenue) for 2015. Our 2016 results included the aforementioned $655.0 million goodwill impairment charge and the impact of the $148.1 million Transaction Receivable reserve. Our 2015 results included approximately $215.2 million of income from operations attributable to our former Nuclear Operations and the aforementioned $1.5 billion charge resulting from the sale of our Nuclear Operations. The table below summarizes our 2016 and 2015 results excluding the Nuclear Operations and charges.
 
 
Years Ended December 31,
 
 
2016
 
% of
Revenue
 
2015
 
% of
Revenue
 
 
(In thousands)
Excluding Nuclear Operations, Charges and Impairments (1)
 
$
658,230

 
6.2%
 
$
865,584

 
8.0%
Nuclear Operations (1)
 

 
—%
 
215,150

 
10.4%
Charges related to sale of Nuclear Operations and Impairments (1)
 
(803,148
)
 
—%
 
(1,505,851
)
 
—%
Loss from operations (1)
 
$
(144,918
)
 
(1.4)%
 
$
(425,117
)
 
(3.3)%
(1) 
The break-out of 2016 and 2015 (loss) income from operations represents a non-GAAP financial disclosure, which we believe provides better comparability between our 2016 and 2015 results.
Excluding the impact of the goodwill impairment charge and Transaction Receivable reserve, income from operations was approximately $658.2 million (6.2% of revenue) for 2016. Excluding the impact of our former Nuclear Operations and charge, income from operations was approximately $865.6 million (8.0% of revenue) for 2015. The changes in our 2016 income from operations compared to 2015 were due to the reasons noted above. See Operating Group Results below for further discussion.
Interest Expense and Interest Income—Interest expense was $105.3 million for 2016, compared with $94.4 million for 2015. The increase for 2016 was the result of higher revolving credit facility borrowings and the full year impact of long-term borrowings, which occurred in the third quarter 2015. Interest income was $13.0 million for 2016, compared with $8.3 million for 2015.
Income Tax (Expense) Benefit—Income tax expense was $2.6 million ((1.1)% of pre-tax loss) for 2016, compared with an income tax benefit of $81.2 million (15.9% of pre-tax loss) for 2015. For 2016, the aforementioned impact of the $148.1 million Transaction Receivable reserve resulted in a tax benefit of $51.8 million. Our 2016 tax rate also reflects the non-deductibility of the aforementioned $655.0 million goodwill impairment. Excluding these impacts, our 2016 tax rate was 9.6% of pre-tax income and our income tax expense was $54.4 million. For 2015, the aforementioned $1.5 billion charge related to the sale of our Nuclear Operations resulted in a net tax benefit of $370.7 million. The net tax benefit on the charge reflects the non-deductibility of the goodwill impairment and the establishment of U.S. state valuation allowances. Excluding this net benefit, our 2015 tax rate was 29.1% and our income tax expense was $289.5 million.
Our 2016 tax rate benefited from the reversal of a deferred tax liability associated with historical earnings of a non-U.S. subsidiary for which the earnings are no longer anticipated to be subject to tax (approximately 12.0%), earnings represented by noncontrolling interests (approximately 4.0%) and adjustments to non-U.S. valuation allowances (approximately 3.0%). Our 2015 tax rate benefited from earnings represented by noncontrolling interests (approximately 2.0%) and previously unrecognized tax benefits and other adjustments (approximately 3.0%).

30


Our 2016 tax rate decreased relative to the 2015 period, excluding the impacts of the aforementioned items for 2016 and 2015, due to lower pre-tax income in higher tax rate jurisdictions, primarily the U.S. (approximately 5.0%). Our tax rate may continue to experience fluctuations due primarily to changes in the geographic distribution of our pre-tax income.
Net Income Attributable to Noncontrolling Interests—Noncontrolling interests are primarily associated with our consolidated joint venture projects within our Engineering & Construction operating group and certain operations in the U.S. and Middle East within our Capital Services and Fabrication Services operating groups. Net income attributable to noncontrolling interests was $73.3 million for 2016, compared with $74.5 million for 2015, and was commensurate with the level of applicable operating results for the aforementioned projects and operations. See Operating Group Results below for further discussion.
Operating Group Results
Engineering & Construction
New Awards—New awards were $3.1 billion for 2016, compared with $6.7 billion for 2015 (including approximately $1.4 billion related to our equity method joint ventures). Significant new awards for 2016 included:
three gas turbine power projects in the U.S. (approximately $1.1 billion combined),
federal funding allocations for our mixed oxide fuel fabrication facility project in the U.S. and scope increases for our LNG mechanical erection project in the Asia Pacific region (approximately $970.0 million combined), and
a refinery project in Russia (approximately $460.0 million).
Significant new awards for 2015 included:
petrochemical facility projects in the U.S. (approximately $1.8 billion combined),
our pro-rata share of a $2.8 billion liquids ethylene cracker project and associated units in the Middle East (approximately $1.4 billion) that we are executing through an unconsolidated equity method joint venture arrangement,
scope increases for our LNG mechanical erection project in the Asia Pacific region (approximately $720.0 million),
our proportionate share of a $2.0 billion additional LNG train for an LNG export facility in the U.S. (approximately $675.0 million) that we are executing through a proportionately consolidated joint venture arrangement,
a gas turbine power project in the U.S. (approximately $600.0 million),
scope increases for our former large nuclear projects in the U.S. (approximately $480.0 million),
an ethylene storage facility in the U.S. (approximately $115.0 million),
a chemicals plant project in the U.S. (approximately $100.0 million), and
engineering and procurement services for a refinery project in Russia.
Revenue—Revenue was $6.1 billion for 2016, representing a decrease of $1.6 billion (20.7%) compared with 2015. Our 2015 revenue included approximately $2.1 billion of revenue attributable to our former Nuclear Operations. The table below summarizes our 2015 revenue excluding the Nuclear Operations.    
 
 
Years Ended December 31,
 
 
2016
 
% of
Total
 
2015
 
% of
Total
 
 
(In thousands)
Excluding Nuclear Operations (1)
 
$
6,105,488

 
100%
 
$
5,636,517

 
73%
Nuclear Operations (1)
 

 
—%
 
2,061,167

 
27%
Total revenue (1)
 
$
6,105,488

 
 
 
$
7,697,684

 
 
(1) 
The break-out of 2015 revenue represents a non-GAAP financial disclosure, which we believe provides better comparability with our 2016 results.
Excluding the impact of our former Nuclear Operations, revenue for 2016 increased by $469.0 million (8.3%) compared with 2015. Our 2016 revenue benefited from increased activity on our LNG export facility projects in the U.S. (approximately $1.1 billion) and various other projects in the U.S. and Asia Pacific region, partly offset by decreased activity on our large cost

31


reimbursable LNG mechanical erection project in the Asia Pacific region and refinery project in Colombia (approximately $890.0 million combined).
Approximately $2.3 billion of the operating group’s 2016 revenue was attributable to our LNG export facility projects in the U.S., compared with approximately $1.2 billion for 2015. Approximately $1.2 billion of the operating group’s 2016 revenue was attributable to our large cost reimbursable projects, compared with approximately $2.1 billion for 2015.
Income (Loss) from Operations—Income from operations was $158.7 million (2.6% of revenue) for 2016, compared with a loss from operations of $(875.3) million (11.4% of revenue) for 2015. Our 2016 results included the impact of the aforementioned $148.1 million Transaction Receivable reserve. Our 2015 results included approximately $215.2 million of income from operations attributable to our former Nuclear Operations and the aforementioned $1.5 billion charge resulting from the sale of our Nuclear Operations. The 2015 results for our former Nuclear Operations benefited by approximately $28.0 million from the net impact of cost increases and adjustments to project price on our former large U.S. nuclear projects. The table below summarizes our 2016 and 2015 results excluding the Nuclear Operations and charges.
 
 
Years Ended December 31,
 
 
2016
 
% of
Revenue
 
2015
 
% of
Revenue
 
 
(In thousands)
Excluding Nuclear Operations, Charges and Impairment (1)
 
$
306,852

 
5.0%
 
$
415,380

 
7.4%
Nuclear Operations (1)
 

 
—%
 
215,150

 
10.4%
Charges related to sale of Nuclear Operations and Impairment (1)
 
(148,148
)
 
—%
 
(1,505,851
)
 
—%
Income (loss) from operations (1)
 
$
158,704

 
2.6%
 
$
(875,321
)
 
(11.4)%
(1) 
The break-out of 2016 and 2015 income (loss) from operations represents a non-GAAP financial disclosure, which we believe provides better comparability between our 2016 and 2015 results.
Excluding the impact of the Transaction Receivable reserve, income from operations was approximately $306.9 million (5.0% of revenue) for 2016. Excluding the impact of our former Nuclear Operations and the charge, income from operations was approximately $415.4 million (7.4% of revenue) for 2015. Our 2016 results were impacted by forecast cost increases on three projects in the U.S. (approximately $283.0 million combined), including approximately $164.0 million for a project in a loss position. Our estimate to complete the project in a loss position was impacted primarily by lower than anticipated labor productivity and extensions of schedule during the second half of 2016. At December 31, 2016, the project was approximately 65% complete and had a reserve for estimated losses of approximately $49.0 million. If future labor productivity differs from our current estimates, our schedule is further extended, or the project incurs schedule liquidated damages due to our inability to reach a favorable commercial resolution on such matters, the project may experience additional forecast cost increases. The aforementioned project charges were partly offset by the benefit of changes in estimated recoveries on a large consolidated joint venture project and increased recoveries and savings on two projects in the U.S. (approximately $124.0 million for the three projects combined). Our 2016 results also benefited from higher revenue volume, leverage of operating costs and a higher margin mix.
Fabrication Services
New Awards—New awards were $1.3 billion for 2016, compared with $3.1 billion for 2015. Significant new awards for 2016 included an LNG storage and fueling terminal in the U.S. (approximately $200.0 million); crude oil storage tanks in Canada (approximately $70.0 million); crude oil storage tanks in the Middle East (approximately $40.0 million); and various storage tank and pipe fabrication awards throughout the world.
Significant new awards for 2015 included low-temperature tanks in the U.S. (approximately $300.0 million); scope increases for our former large nuclear projects in the U.S. (approximately $250.0 million); a hydrotreater project in the U.S. (approximately $95.0 million); engineered products for a refinery in Russia (approximately $93.0 million); storage spheres in the U.S. (approximately $70.0 million); storage tanks for a clean fuels project in the Middle East (approximately $60.0 million); an oil sands project in Canada (approximately $50.0 million); pipe fabrication for a petrochemical project in the U.S. (approximately $40.0 million); work scopes for our U.S. LNG export facility projects that we are executing through our proportionately consolidated joint venture arrangements; and work scopes for our liquids ethylene cracker project in the Middle East that we are executing through an unconsolidated equity method joint venture.
Revenue—Revenue was $2.1 billion for 2016, representing a decrease of $332.4 million (13.6%) compared with 2015. Our 2016 revenue was impacted by the wind down of various storage tank projects in North America, South America and the Asia Pacific region and lower engineered products activity (approximately $435.0 million combined), partly offset by increased fabrication activity.

32


Income from Operations—Income from operations was $183.1 million (8.7% of revenue) for 2016, compared with $225.3 million (9.2% of revenue) for 2015. Our 2016 results were impacted by lower revenue volume, reduced leverage of our operating costs and forecast cost increases on various projects, primarily in North America and the Asia Pacific region (approximately $45.0 million combined), including approximately $25.0 million for a project in a loss position. Our estimate to complete the project in a loss position was impacted primarily by lower than anticipated labor productivity. At December 31, 2016, the project was approximately 75% complete and had a reserve for estimated losses of approximately $5.0 million. If future productivity differs from our current estimates the project may experience additional forecast cost increases. Our 2015 results were impacted by net forecast cost increases on various projects in the U.S. (approximately $30.0 million combined) and a foreign exchange loss (approximately $11.0 million) associated with the re-measurement of certain non-U.S. Dollar denominated net assets.
Technology
New Awards—New awards were $479.4 million for 2016 (including approximately $116.0 million related to our equity method joint ventures), compared with $577.5 million for 2015 (including approximately $226.0 million related to our equity method joint ventures). Significant new awards for 2016 included alkylation licensing in North America and China; hydrocracking licensing in China; petrochemical licensing in Europe and China; proprietary equipment sales in Asia; and catalyst awards throughout the world. Significant new awards for 2015 included refining and petrochemical catalysts in North America and Africa and hydroprocessing licensing in the Asia Pacific region (approximately $100.0 million).
Revenue—Revenue was $284.4 million for 2016, representing a decrease of $114.7 million (28.7%) compared with 2015. Our 2016 revenue was impacted by lower catalyst volume and the timing of new awards.
Income from Operations—Income from operations was $105.3 million (37.0% of revenue) for 2016, compared with $150.9 million (37.8% of revenue) for 2015. Our 2016 results were impacted by lower revenue volume and lower equity earnings (approximately $5.0 million), partly offset by a higher margin mix. Our 2015 results benefited from a gain of approximately $7.5 million associated with the contribution of a technology to one of our unconsolidated joint ventures.
Capital Services
New Awards—New awards were $2.2 billion for 2016, compared with $2.7 billion for 2015. Significant new awards for 2016 included refinery maintenance services (approximately $490.0 million combined); power plant services (approximately $475.0 million combined); industrial maintenance services (approximately $100.0 million); U.S. military base services (approximately $75.0 million); disaster recovery services for FEMA (approximately $70.0 million); and landfill services (approximately $50.0 million), all within North America; and environmental remediation work for the U.S. Navy globally (approximately $70.0 million).
Significant new awards for 2015 included power plant and refinery maintenance services in the U.S. and Canada (approximately $910.0 million combined); power plant maintenance and modification services in the U.S. (approximately $200.0 million); scope increases on a chemical expansion project in the U.S. (approximately $200.0 million); refinery maintenance services in South America (approximately $120.0 million); world-wide military installation fuel services for the U.S. Federal Government (approximately $100.0 million); power plant operations and maintenance services in the U.S. (approximately $100.0 million); long-term specialty chemical maintenance services at multiple facilities in the U.S. (approximately $100.0 million); work for the Rapid Disaster Infrastructure Response Program of the U.S. Army Corps of Engineers (approximately $60.0 million); chemical plant operations and maintenance services in the U.S. (approximately $60.0 million); coking unit services in Canada (approximately $50.0 million); and site construction for a hydrotreater in the U.S. (approximately $45.0 million).
Revenue—Revenue was $2.2 billion for 2016, representing a decrease of $210.7 million (8.8%) compared with 2015. Our 2016 revenue was impacted by lower construction services activity.
(Loss) Income from Operations—Loss from operations was $(592.1) million (27.2% of revenue) for 2016, compared with income from operations of $74.1 million (3.1% of revenue) for 2015. Our 2016 results included the aforementioned $655.0 million goodwill impairment charge. The table below summarizes our 2016 results excluding the charge.
 
 
Years Ended December 31,
 
 
2016
 
% of
Revenue
 
2015
 
% of
Revenue
 
 
(In thousands)
Excluding Impairment (1)
 
$
62,944

 
2.9%
 
$
74,060

 
3.1%
Charge related to Impairment (1)
 
(655,000
)
 
—%
 

 
—%
(Loss) income from operations (1)
 
$
(592,056
)
 
(27.2)%
 
$
74,060

 
3.1%

33


(1) 
The break-out of 2016 (loss) income from operations represents a non-GAAP financial disclosure, which we believe provides better comparability with our 2015 results.    
Excluding the impact of the goodwill impairment charge, income from operations was approximately $62.9 million (2.9% of revenue) for 2016.
2015 Versus 2014
Consolidated Results
New awards were $13.1 billion for 2015 (including approximately $1.6 billion related to our equity method joint ventures), compared with $16.3 billion for 2014. Significant new awards for 2015 (within our Engineering & Construction operating group) included:
petrochemical facility projects in the U.S. (approximately $1.8 billion combined),
our pro-rata share of a $2.8 billion liquids ethylene cracker project and associated units in the Middle East (approximately $1.4 billion) that we are executing through an unconsolidated equity method joint venture arrangement,
scope increases for our LNG mechanical erection project in the Asia Pacific region (approximately $720.0 million),
our proportionate share of a $2.0 billion additional LNG train for an LNG export facility in the U.S. (approximately $675.0 million) that we are executing through a proportionately consolidated joint venture arrangement, and
a gas turbine power project in the U.S. (approximately $600.0 million).
Other significant awards for 2015 included scope increases for our former large nuclear projects in the U.S. (approximately $730.0 million) within our Engineering & Construction and Fabrication Services operating groups; low-temperature tanks in the U.S. (approximately $300.0 million) within our Fabrication Services operating group; and power plant and refinery maintenance services in North America (approximately $910.0 million combined) within our Capital Services operating group.
Significant awards for 2014 included our proportionate share of a $6.2 billion LNG export facility in the U.S (approximately $3.1 billion) that we are executing through a proportionately consolidated joint venture arrangement; work scopes we will perform for our two U.S. LNG export facility projects (approximately $900.0 million combined) that we are executing through our proportionately consolidated joint venture arrangements; federal funding allocations for our mixed oxide fuel fabrication facility project in the U.S., and scope increases for our former large U.S. nuclear projects and cost-reimbursable refinery project in Colombia and LNG mechanical erection project in the Asia Pacific region (approximately $3.0 billion combined; and two gas turbine power projects in the U.S. (approximately $850.0 million combined), all within our Engineering & Construction operating group; and nuclear power plant services in the U.S. (approximately $800.0 million), within our Capital Services operating group. See Operating Group Results below for further discussion.    
Backlog at December 31, 2015 was approximately $22.6 billion (including approximately $1.8 billion related to our equity method joint ventures), compared with $30.4 billion at December 31, 2014, with the decrease reflecting the impact of the sale of our Nuclear Operations (approximately $7.3 billion) and other adjustments, primarily related to foreign currency fluctuations associated with the strengthening of the U.S. Dollar against the Australian Dollar, Euro, Colombian Peso and Canadian Dollar (approximately $400.0 million). As noted in the Revenue and Gross Profit sections below, foreign currency fluctuations also had an unfavorable impact on our operating results for 2015.
Certain contracts within our Capital Services and Engineering & Construction operating groups are dependent upon funding from the U.S. government, where funds are appropriated on a year-by-year basis, while contract performance may take more than one year. Approximately $1.1 billion of our backlog at December 31, 2015 for these operating groups was for contractual commitments that are subject to future funding decisions.
Revenue—Revenue was $12.9 billion for 2015, representing a decrease of $45.4 million (0.4%) compared with 2014. Our 2015 revenue was unfavorably impacted relative to 2014 by approximately $890.0 million due to foreign currency fluctuations associated with the strengthening of the U.S. Dollar against the Australian Dollar, British Pound, Canadian Dollar, Colombian Peso and Euro, primarily within our Engineering & Construction operating group. Inclusive of the aforementioned foreign exchange impacts, our results were impacted by a reduction in revenue on our cost-reimbursable LNG mechanical erection and gas processing projects in the Asia Pacific region and refinery project in Colombia within our Engineering & Construction operating group; and the wind down of various tank projects in the Asia Pacific region within our Fabrication Services operating group; partly offset by increased progress on our former large U.S. nuclear projects and increased LNG revenue in the U.S., all within our Engineering & Construction operating group; and increased plant maintenance and chemical plant services revenue within our Capital Services operating group.     

34


For 2015 and 2014, revenue from our aforementioned LNG mechanical erection project in the Asia Pacific region, combined with our LNG tank project for the same customer within our Fabrication Services operating group, totaled $1.6 billion (approximately 13% of our total 2015 revenue) and $2.0 billion (approximately 15% of our total 2014 revenue), respectively. See Operating Group Results below for further discussion.
Gross Profit—Gross profit was $1.5 billion (11.7% of revenue) for 2015, compared with $1.5 billion (11.3% of revenue) for 2014. Our 2015 results were unfavorably impacted relative to 2014 by approximately $73.0 million due to lower revenue volume resulting from foreign currency fluctuations associated with the strengthening of the U.S. Dollar, primarily within our Engineering & Construction operating group, as noted in the Revenue section above. The increase in gross profit percentage was primarily attributable to the impact of leveraging our operating costs during 2015, and 2014 being unfavorably impacted by a temporary underutilization of fabrication capacity within our Fabrication Services operating group.
Selling and Administrative Expense—Selling and administrative expense was $387.0 million (3.0% of revenue) for 2015, compared with $405.2 million (3.1% of revenue) for 2014. The decrease in absolute dollars and as a percentage of revenue for 2015 was primarily attributable to lower incentive plan costs (approximately $12.6 million) and our cost reduction initiatives.
Intangibles Amortization—Intangibles amortization was $57.6 million for 2015, compared with $66.5 million for 2014. The decrease for 2015 was primarily attributable to intangible assets that became fully amortized during the first quarter 2015, the impairment of intangible assets in the third quarter 2015 resulting from the sale of our Nuclear Operations, and the impact of foreign currency translation.
Equity Earnings—Equity earnings were $15.7 million for 2015, compared with $25.2 million for 2014 and were associated with our unconsolidated CLG joint venture and other unconsolidated equity method joint ventures.
Loss on Net Assets Sold and Impairment of Intangible Assets and Goodwill—As a result of the sale of our Nuclear Operations discussed in Note 4 within Item 8, during 2015 we recorded a non-cash pre-tax charge of approximately $1.5 billion related to the impairment of goodwill ($453.1 million) and intangible assets ($79.1 million) and a loss on net assets sold ($973.7 million).
Other Operating Expense (Income), Net—Other operating expense (income), net, generally represents losses (gains) associated with the sale or disposition of property and equipment. For 2015, other operating expense (income), net, also included a gain of approximately $7.5 million related to the contribution of a technology to one of our unconsolidated joint ventures and a foreign exchange loss of approximately $11.0 million associated with the re-measurement of certain non-U.S. Dollar denominated net assets.
Integration Related Costs—Integration related costs were $39.7 million for 2014 and primarily related to facility consolidations, including the associated accrued future lease costs for vacated facilities and unutilized capacity, personnel relocation and severance related costs, and systems integration costs.
(Loss) Income from Operations—Loss from operations was $(425.1) million (3.3% of revenue) for 2015, compared with income from operations of $982.6 million (7.6% of revenue) for 2014. The changes in absolute dollars and as a percentage of revenue were primarily attributable to the reasons noted above. The table below summarizes our results excluding the impact of the charge resulting from the sale of our Nuclear Operations for 2015 and integration related costs for 2014.
 
 
Years Ended December 31,
 
 
2015
 
% of
Revenue
 
2014
 
% of
Revenue
 
 
(In thousands)
Excluding Charge and Integration related costs (1)
 
$
1,080,734

 
8.4%
 
$
1,022,293

 
7.9%
Charge related to sale of Nuclear Operations and Impairment(1)
 
(1,505,851
)
 
(11.7)%
 

 
—%
Integration related costs (1)
 

 
—%
 
(39,685
)
 
(0.3)%
(Loss) income from operations (1)
 
$
(425,117
)
 
(3.3)%
 
$
982,608

 
7.6%
(1) 
The break-out of 2015 and 2014 income (loss) from operations represents a non-GAAP financial disclosure, which we believe provides better comparability between our 2015 and 2014 results.
Excluding the impact of the charge for 2015 and integration related costs for 2014, income from operations was $1.1 billion (8.4% of revenue) for 2015, compared with $1.0 billion (7.9% of revenue) for 2014. See Operating Group Results below for further discussion.
Interest Expense and Interest Income—Interest expense was $94.4 million for 2015, compared with $83.6 million for 2014. The increase was the result of higher average revolving credit facility borrowings and additional long-term borrowings during 2015. Interest income was $8.3 million for 2015, compared with $8.5 million for 2014.

35


Income Tax Benefit (Expense)—Income tax benefit was $81.2 million (15.9% of pre-tax loss) for 2015, compared with income tax expense of $271.4 million (29.9% of pre-tax income) for 2014. The aforementioned $1.5 billion charge resulting from the sale of our Nuclear Operations resulted in a net tax benefit of $370.7 million for 2015. The net tax benefit on the charge reflects the non-deductibility of the goodwill impairment and the establishment of U.S. state valuation allowances. Excluding this net benefit, our income tax expense for 2015 was $289.5 million (29.1% of pre-tax income excluding the charge). Our 2015 tax rate benefited from earnings represented by noncontrolling interests (approximately 2.0%) and previously unrecognized tax benefits and other adjustments (approximately 3.0%). Our 2014 tax rate also benefited from earnings represented by noncontrolling interests (approximately 2.5%). Our 2015 tax rate increased relative to 2014 due to a greater proportion of our pre-tax income being earned in higher tax rate jurisdictions, primarily the U.S. (approximately 2.0%).
Net Income Attributable to Noncontrolling Interests—Noncontrolling interests are primarily associated with our large LNG mechanical erection project in the Asia Pacific region and certain operations in the U.S. and Middle East. Also included in 2014 was our large gas processing project in the Asia Pacific region. Net income attributable to noncontrolling interests was $74.5 million for 2015, compared with $92.5 million for 2014. The change compared to 2014 was commensurate with the level of applicable operating results for the aforementioned projects and operations.
Operating Group Results
Engineering & Construction
New Awards—New awards were $6.7 billion for 2015 (including approximately $1.4 billion related to our equity method joint ventures), compared with $10.1 billion for 2014. Significant new awards for 2015 included:
petrochemical facility projects in the U.S. (approximately $1.8 billion combined),
our pro-rata share of a $2.8 billion liquids ethylene cracker project and associated units in the Middle East (approximately $1.4 billion) that we are executing through an unconsolidated equity method joint venture arrangement,
scope increases for our LNG mechanical erection project in the Asia Pacific region (approximately $720.0 million),
our proportionate share of a $2.0 billion additional LNG train for an LNG export facility in the U.S. (approximately $675.0 million) that we are executing through a proportionately consolidated joint venture arrangement,
a gas turbine power project in the U.S. (approximately $600.0 million),
scope increases for our former large nuclear projects in the U.S. (approximately $480.0 million),
an ethylene storage facility in the U.S. (approximately $115.0 million),
a chemicals plant project in the U.S. (approximately $100.0 million), and
engineering and procurement services for a refinery project in Russia.
Significant awards for 2014 included our proportionate share of a $6.2 billion LNG export facility in the U.S. (approximately $3.1 billion) that we are executing through a proportionately consolidated joint venture arrangement; work scopes for our two U.S. LNG export facility projects (approximately $900.0 million combined) that we are executing through our proportionately consolidated joint venture arrangements; federal funding allocations for our mixed oxide fuel fabrication facility project in the U.S., and scope increases for our former large U.S. nuclear projects and cost-reimbursable refinery project in Colombia and LNG mechanical erection project in the Asia Pacific region (approximately $3.0 billion combined); two gas turbine power projects in the U.S. (approximately $850.0 million combined); structural, mechanical and piping construction work for an LNG project in the Asia Pacific region (approximately $625.0 million); engineering and procurement for a clean fuels project in the Middle East (approximately $370.0 million); and a demonstration plant for our NET Power venture.
Revenue—Revenue was $7.7 billion for 2015, representing an increase of $74.3 million (1.0%) compared with 2014. Our 2015 revenue was unfavorably impacted relative to 2014 by approximately $730.0 million due to foreign currency fluctuations associated with the strengthening of the U.S. Dollar against the Australian Dollar, British Pound, Canadian Dollar, Colombian Peso and Euro. Inclusive of the aforementioned foreign exchange impacts, our 2015 results primarily benefited from increased revenue on our LNG projects in the U.S. (approximately $1.0 billion) and former large U.S. nuclear projects (approximately $250.0 million), partly offset by net decreased revenue on our large cost-reimbursable LNG mechanical erection and gas processing projects in the Asia Pacific region and refinery project in Colombia (approximately $1.0 billion combined) and various other projects in Canada and Europe.
Approximately $2.0 billion of the operating group’s 2015 revenue was attributable to our former large U.S. nuclear projects, compared with approximately $1.7 billion for 2014. Approximately $2.1 billion of the operating group’s 2015 revenue was attributable to our large cost-reimbursable projects, compared with approximately $3.1 billion for 2014. Approximately

36


$1.2 billion of the operating group’s 2015 revenue was attributable to our U.S. LNG export facility projects, compared with approximately $205.0 million for 2014.
(Loss) Income from Operations—Loss from operations was $(875.3) million (11.4% of revenue) for 2015, compared with income from operations of $518.7 million (6.8% of revenue) for 2014. As a result of the sale of our Nuclear Operations discussed in Note 4 within Item 8, our results were impacted by a non-cash charge of approximately $1.5 billion related to the impairment of goodwill ($453.1 million) and intangible assets ($79.1 million) and loss on net assets sold ($973.7 million). The table below summarizes our results excluding the impact of the charge.
 
 
Years Ended December 31,
 
 
2015
 
% of
Revenue
 
2014
 
% of
Revenue
 
 
(In thousands)
Excluding Charge (1)
 
$
630,530

 
8.2%
 
$
518,671

 
6.8%
Charge related to sale of Nuclear Operations and Impairment (1)
 
(1,505,851
)
 
(19.6)%
 

 
—%
(Loss) income from operations (1)
 
$
(875,321
)
 
(11.4)%
 
$
518,671

 
6.8%
(1) 
The break-out of 2015 income (loss) from operations represents a non-GAAP financial disclosure, which we believe provides better comparability with our 2014 results.
Excluding the impact of the charge, income from operations was $630.5 million (8.2% of revenue) for 2015. Our 2015 results were unfavorably impacted relative to 2014 by approximately $44.0 million due to lower revenue volume resulting from foreign currency fluctuations associated with the strengthening of the U.S. Dollar, as noted in the Revenue section above. Our 2015 results benefited during 2015 from a higher margin backlog mix and better overhead recoveries, and benefited by approximately $28.0 million from the net impact of cost increases on our two former U.S. nuclear projects and the percent complete benefit of increases in project price on both projects related to contractual entitlements from our customers and consortium partner and an increase in claim recoveries on our South Carolina nuclear project related to the aforementioned and previously forecasted cost increases.
During 2014, we experienced increases in forecast cost on our two former U.S. nuclear projects related primarily to extensions of schedule resulting from regulatory and design changes. Project price for the nuclear projects was increased by a comparable amount based on our contractual entitlements, which provide for our customers and consortium partner to reimburse us for such costs. The aforementioned did not result in a significant net change in estimated margins on the projects; however, the percent complete dilutive effect of the changes was a reduction to our 2014 income from operations of approximately $34.0 million. In addition, during 2014 we experienced increases in forecast cost on our South Carolina nuclear project resulting from regulatory and design changes, and increased project price by approximately $373.0 million for unapproved change orders and claims related to these and previous forecast cost increases. This resulted in a benefit to our 2014 income from operations of approximately $24.0 million. The net impact of the aforementioned changes on the nuclear projects was a reduction to our 2014 income from operations of approximately $10.0 million.
Fabrication Services
New Awards—New awards were $3.1 billion for 2015, compared with $2.4 billion for 2014. Significant new awards for 2015 included engineering and fabrication for low-temperature tanks in the U.S. (approximately $300.0 million); scope increases for our former large nuclear projects in the U.S. (approximately $250.0 million); engineering and fabrication for a hydrotreater in the U.S. (approximately $95.0 million); engineered products for a refinery in Russia (approximately $93.0 million); engineering, procurement, fabrication and erection for storage spheres in the U.S. (approximately $70.0 million); storage tanks for a clean fuels project in the Middle East (approximately $60.0 million); an oil sands project in Canada (approximately $50.0 million); pipe fabrication for a petrochemical project in the U.S. (approximately $40.0 million); work scopes for our U.S. LNG export facility projects that we are executing through our proportionately consolidated joint venture arrangements; and work scopes for our liquids ethylene cracker project that we are executing through our unconsolidated equity method joint venture.
Significant new awards for 2014 included ethylene heaters in Malaysia and Turkmenistan (approximately $270.0 million, combined); work scopes we will perform for one of the aforementioned U.S. LNG export facility projects (approximately $140.0 million) that we are executing through a proportionately consolidated joint venture; pipe fabrication for a propane dehydrogenation unit in the U.S. (approximately $100.0 million); petroleum storage tank projects in the Middle East (approximately $90.0 million) and the U.S. (approximately $49.0 million); storage spheres in the Middle East (approximately $60.0 million); engineered products for a refinery in the Middle East (approximately $50.0 million); an ammonia storage tank project in the U.S. (approximately $40.0 million); and various other storage tank and pipe fabrication awards throughout the world.

37


Revenue—Revenue was $2.4 billion for 2015, representing a decrease of $296.3 million (10.8%) compared with 2014. Our 2015 revenue was unfavorably impacted relative to 2014 by approximately $140.0 million due to foreign currency fluctuations associated with the strengthening of the U.S. Dollar against the Australian Dollar and Canadian Dollar. Inclusive of the aforementioned foreign exchange impacts, our 2015 results were impacted by lower storage tank work in the Asia Pacific region (approximately $440.0 million), partly offset by increased engineered products activity (approximately $200.0 million).
Income from Operations—Income from operations was $225.3 million (9.2% of revenue) for 2015, compared with $274.5 million (10.0% of revenue) for 2014. Our 2015 results were impacted by lower revenue volume, a lower margin mix on our pipe fabrication backlog, net cost increases on various projects in the U.S. (approximately $30.0 million combined), and a foreign exchange loss (approximately $11.0 million) associated with the re-measurement of certain non-U.S. Dollar denominated net assets during 2015. Our 2014 results were impacted by a temporary underutilization of our pipe fabrication capacity due to customer delays (approximately $28.0 million) in the first half of 2014, and cost increases on a pipe fabrication project (approximately $24.0 million) sold in 2010 that was on hold until 2014, offset by savings on a project in the Asia Pacific region and a higher margin mix on the remaining portion of our backlog.
Technology
New Awards—New awards were $577.5 million for 2015 (including $226.0 million related to our equity method joint ventures), compared with $387.0 million for 2014. Significant new awards for 2015 included refining and petrochemical catalysts in North America and Africa and hydroprocessing licensing in the Asia Pacific region (approximately $100.0 million). Significant new awards for 2014 included refining and petrochemical catalysts and petrochemical licensing throughout the world. New awards for 2014 exclude amounts related to our unconsolidated equity method CLG joint venture, which recorded significant new awards during 2014, including hydroprocessing licensing in the Middle East (approximately $100.0 million).
Revenue—Revenue was $399.1 million for 2015, representing an increase of $14.0 million (3.6%) compared with 2014. Our 2015 results benefited from higher catalyst volume.
Income from Operations—Income from operations was $150.9 million (37.8% of revenue) for 2015, compared with $147.8 million (38.4% of revenue) for 2014. The increase in absolute dollars for 2015 was primarily attributable to a gain (approximately $7.5 million) associated with the contribution of a technology to our unconsolidated CLG joint venture during 2015, partly offset by lower equity earnings (approximately $4.0 million).
Capital Services
New Awards—New awards were $2.7 billion for 2015, compared with $3.4 billion for 2014. Significant new awards for 2015 included power plant and refinery maintenance services in the U.S. and Canada (approximately $910.0 million combined); power plant maintenance and modification services in the U.S. (approximately $200.0 million); scope increases on a chemical expansion project in the U.S. (approximately $200.0 million); refinery maintenance services in South America (approximately $120.0 million); world-wide military installation fuel services for the U.S. Federal Government (approximately $100.0 million); power plant operations and maintenance services in the U.S. (approximately $100.0 million); long-term specialty chemical maintenance services at multiple facilities in the U.S. (approximately $100.0 million); work for the Rapid Disaster Infrastructure Response Program of the U.S. Army Corps of Engineers (approximately $60.0 million); chemical plant operations and maintenance work in the U.S. (approximately $60.0 million); coking unit services in Canada (approximately $50.0 million); and site construction for a hydrotreater in the U.S. (approximately $45.0 million).
Significant new awards for 2014 included power plant services in the U.S. (approximately $800.0 million); power and petrochemical facility maintenance work in the U.S. (approximately $210.0 million combined); the extension of an environmental remediation services project in the U.S. (approximately $150.0 million); power facility modification work in the U.S. (approximately $120.0 million); chemical plant services the U.S. (approximately $110.0 million); an earthworks and soil stabilization project in the U.S. (approximately $100.0 million); fossil power facility maintenance and modification work in the U.S. (approximately $100.0 million); hydrocracker services in Europe (approximately $90.0 million); refinery maintenance and industrial services in the U.S. (approximately $65.0 million); environmental monitoring services in the U.S. (approximately $60.0 million); a support services project for the U.S. EPA; oversight of decommissioning and demolition at a DOE facility; scope increases on base operations support contracts; and increased environmental remediation work at DOD facilities.
Revenue—Revenue was $2.4 billion for 2015, representing an increase of $162.6 million (7.3%) compared with 2014. Our 2015 revenue primarily benefited from increased plant maintenance and chemical plant services revenue in the U.S.
Income from Operations—Income from operations was $74.1 million (3.1% of revenue) for 2015, compared with $81.4 million (3.7% of revenue) for 2014. The decreases in absolute dollars and as a percentage of revenue were primarily due to a lower margin mix of work and reserves established during 2015 for two uncollectible receivables (approximately $7.0 million), partly offset by higher revenue volume and continuing benefits from previously implemented cost reduction initiatives.

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LIQUIDITY AND CAPITAL RESOURCES
General
Cash and Cash Equivalents—At December 31, 2016, our cash and cash equivalents were $505.2 million, and were maintained in local accounts throughout the world, substantially all of which were maintained outside The Netherlands, our country of domicile. With the exception of $334.5 million of cash and cash equivalents within our variable interest entities (“VIEs”) associated with our partnering arrangements, which is generally only available for use in our operating activities when distributed to the partners, we are not aware of any material restrictions on our cash and cash equivalents.
With respect to tax consequences associated with repatriating our foreign earnings, distributions from our EU subsidiaries to their Netherlands parent companies are not subject to taxation. Further, for our non-EU companies and their subsidiaries and our U.S. companies, to the extent taxes apply, the amount of permanently reinvested earnings becomes taxable upon repatriation of assets from the subsidiary or liquidation of the subsidiary. We have accrued taxes on undistributed earnings that we intend to repatriate and we intend to permanently reinvest the remaining undistributed earnings in their respective businesses, and accordingly, have accrued no taxes on such amounts.
Summary of Cash Flow Activity
Operating Activities—During 2016, net cash provided by operating activities was $654.5 million, primarily resulting from cash generated from earnings (excluding the aforementioned $655.0 million non-cash goodwill impairment charge and the non-cash impact of the aforementioned $148.1 million Transaction Receivable reserve), and a net change of $282.1 million in our accounts receivable, inventory, accounts payable and net contracts in progress account balances (collectively “Contract Capital”), partly offset by a net increase of $229.1 million in our other current and non-current assets. The components of our net Contract Capital balances at December 31, 2016 and 2015, and changes during 2016, were as follows:
 
 
December 31,
 
 
 
 
2016
 
2015
 
Change
 
 
(In thousands)
Total billings in excess of costs and estimated earnings (1)
 
$
(1,449,335
)
 
$
(1,934,111
)
 
$
484,776

Total costs and estimated earnings in excess of billings (1)
 
564,024

 
688,314

 
(124,290
)
Contracts in Progress, net
 
(885,311
)
 
(1,245,797
)
 
360,486

Accounts receivable, net
 
727,659

 
1,331,217

 
(603,558
)
Inventory
 
194,130

 
289,658

 
(95,528
)
Accounts payable
 
(1,105,576
)
 
(1,162,077
)
 
56,501

Contract Capital, net
 
$
(1,069,098
)
 
$
(786,999
)
 
$
(282,099
)
(1) 
Represents our cash position relative to revenue recognized on projects, with (i) billings in excess of costs and estimated earnings representing a liability reflective of future cash expenditures and non-cash earnings, and (ii) costs and estimated earnings in excess of billings representing an asset reflective of future cash receipts.
Fluctuations in our Contract Capital balance, and its components, are not unusual in our business and are impacted by the size of our projects and changing mix of cost-reimbursable versus fixed-price backlog. Our cost-reimbursable projects tend to have a greater working capital requirement (“costs and estimated earnings in excess of billings”), while our fixed-price projects are generally structured to be cash flow positive (“billings in excess of costs and estimated earnings”). Our Contract Capital is particularly impacted by the timing of new awards and related payments in advance of performing work, and the achievement of billing milestones on backlog as we complete certain phases of work. Contract Capital is also impacted at period-end by the timing of accounts receivable collections and accounts payable payments for our large projects.
The $282.1 million decrease in our Contract Capital was primarily due to a net decrease in contracts in progress and accounts receivable and a decrease in inventory, partly offset by a decrease in accounts payable. The net decrease in contracts in progress and accounts receivable was primarily due to a change in the classification of receivables (approximately $231.0 million at December 31, 2016) from accounts receivable, net, to other non-current assets, for one of our completed large cost reimbursable projects, as we do not anticipate collection within the next year. The accounts receivable balance for the project was approximately $106.0 million at December 31, 2015. The decrease in inventory is related to our fabrication projects and the timing of awards. Our net cash provided by operating activities, combined with payments in advance of performing work for our unconsolidated equity method joint ventures, which are reflected in financing activities because the joint ventures are not consolidated, totaled approximately $801.5 million during 2016.

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Although we anticipate future quarterly variability in our operating cash flows due to ongoing fluctuations in our Contract Capital balance, we expect cash flows from operating activities to approximate earnings for 2017, and we believe our anticipated future operating cash flows and capacity under our revolving and other credit facilities will be sufficient to finance our capital expenditures, settle our commitments and contingencies and address our working capital needs for the foreseeable future.
Investing Activities—During 2016, net cash used in investing activities was $169.3 million, primarily related to capital expenditures of $52.5 million, net advances of $49.8 million to our venture partners by our proportionately consolidated ventures (see Notes 7 and 8 within Item 8 for further discussion) and other investments of $71.8 million. We will continue to evaluate and selectively pursue other opportunities for additional expansion of our business through the acquisition of complementary businesses and technologies. These acquisitions may involve the use of cash or may require further debt or equity financing.
Financing Activities—During 2016, net cash used in financing activities was $482.2 million, primarily related to net revolving facility and other short-term repayments of $245.5 million, share repurchases totaling $206.6 million (5.8 million shares at an average price of $35.79 per share), including $198.2 million to purchase 5.5 million shares of our outstanding common stock and $8.4 million to repurchase 0.3 million shares associated with stock-based compensation-related withholding taxes on taxable share distributions, repayments on our long-term debt of $150.0 million, distributions to our noncontrolling interest partners of $74.3 million and dividends paid to our shareholders of $28.7 million. These cash outflows were partly offset by net advances from our equity method and proportionately consolidated ventures of $206.6 million (see Notes 7 and 8 within Item 8 for further discussion) and cash proceeds from the issuance of shares associated with our stock plans of $16.3 million.
Effect of Exchange Rate Changes on Cash and Cash Equivalents—During 2016, our cash and cash equivalents balance decreased by $48.1 million due to the impact of changes in functional currency exchange rates against the U.S. Dollar for non-U.S. Dollar cash balances, primarily for net changes in the Australian Dollar, British Pound and Euro exchange rates. The net unrealized loss on our cash and cash equivalents resulting from these exchange rate movements is reflected in the cumulative translation adjustment component of other comprehensive income (loss) (“OCI”). Our cash and cash equivalents held in non-U.S. Dollar currencies are used primarily for project-related and other operating expenditures in those currencies, and therefore, our exposure to realized exchange gains and losses is not anticipated to be material.
Credit Facilities and Debt
General—Our primary internal source of liquidity is cash flow generated from operations. Capacity under our revolving credit and other facilities discussed below is also available, if necessary, to fund operating or investing activities and provide necessary letters of credit. Letters of credit are generally issued to customers in the ordinary course of business to support advance payments and performance guarantees, in lieu of retention on our contracts, or in certain cases, are issued in support of our insurance programs.
Committed Facilities—We have a five-year, $1.35 billion, committed and unsecured revolving 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 $270.0 million financial letter of credit sublimit and has financial and restrictive covenants described further below. The Revolving Facility also includes customary restrictions regarding subsidiary indebtedness, sales of assets, liens, investments, type of business conducted, and mergers and acquisitions, and includes a limitation for dividend payments and share repurchases, among other restrictions. In addition to interest on debt borrowings, we are assessed quarterly commitment fees on the unutilized portion of the facility as well as letter of credit fees on outstanding instruments. The interest, commitment fee, and letter of credit fee percentages are based upon our quarterly leverage ratio. In the event we borrow funds under the facility, interest is assessed at either prime plus an applicable floating margin (3.75% and 1.00%, respectively at December 31, 2016), or LIBOR plus an applicable floating margin (0.77% and 2.00%, respectively at December 31, 2016). At December 31, 2016, we had $100.0 million of outstanding borrowings under the facility and $78.3 million of outstanding letters of credit under the facility (none of which were financial letters of credit), providing $1.2 billion of available capacity. During 2016, our weighted average interest rate on borrowings under the facility was approximately 2.3%, inclusive of the applicable floating margin.
We have a five-year, $800.0 million, committed and unsecured 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, has a $50.0 million financial letter of credit sublimit and has financial and restrictive covenants described further below. In addition to interest on debt borrowings, we are assessed quarterly commitment fees on the unutilized portion of the facility as well as letter of credit fees on outstanding instruments. The interest, commitment fee, and letter of credit fee percentages are based upon our quarterly leverage ratio. In the event we borrow funds under the facility, interest is assessed at

40


either prime plus an applicable floating margin (3.75% and 1.00%, respectively at December 31, 2016), or LIBOR plus an applicable floating margin (0.77% and 2.00%, respectively at December 31, 2016). At December 31, 2016, we had $157.5 million of outstanding borrowings and $7.6 million of outstanding letters of credit under the facility (including $2.8 million of financial letters of credit), providing $634.9 million of available capacity. During 2016, our weighted average interest rate on borrowings under the facility was approximately 4.3%, inclusive of the applicable floating margin.
Uncommitted Facilities—We also have various short-term, uncommitted letter of credit and borrowing facilities (the “Uncommitted Facilities”) across several geographic regions of approximately $4.6 billion, of which $563.0 million may be utilized for borrowings. At December 31, 2016, we had $150.0 million of outstanding borrowings and $1.6 billion of outstanding letters of credit under these facilities, providing $2.8 billion of available capacity, of which $413.0 million may be utilized for borrowings. During 2016, our weighted average interest rate on borrowings under the facilities was approximately 1.6%.
Term Loans—At December 31, 2016, we had $300.0 million outstanding on a four-year, $1.0 billion unsecured term loan (the “Term Loan”) with BofA as administrative agent. Interest and principal under the Term Loan is payable quarterly in arrears and bears interest at LIBOR plus an applicable floating margin (0.77% and 2.00%, respectively at December 31, 2016). However, we continue to utilize an interest rate swap to hedge against $290.4 million of the outstanding Term Loan, which resulted in a weighted average interest rate of approximately 2.3% during 2016, inclusive of the applicable floating margin. The balance of the Term Loan was paid February 13, 2017. The Term Loan has financial and restrictive covenants described further below.
At December 31, 2016, we had $500.0 million outstanding on a five-year, $500.0 million unsecured term loan (the “Second Term Loan”) with BofA as administrative agent. Interest and principal under the Second Term Loan is payable quarterly in arrears beginning in June 2017 and bears interest at LIBOR plus an applicable floating margin (rates are equivalent to the Term Loan). During 2016, our weighted average interest rate on the Second Term Loan was approximately 2.3%, inclusive of the applicable floating margin. Future annual maturities for the Second Term Loan are $56.3 million, $75.0 million, $75.0 million and $293.8 million for 2017, 2018, 2019, and 2020, respectively. The Second Term Loan has financial and restrictive covenants described further below.
Senior Notes—We have a series of senior notes totaling $800.0 million in the aggregate (the “Senior Notes”) with Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Credit Agricole, as administrative agents. The Senior Notes have financial and restrictive covenants described further below. The Senior Notes include Series A through D, which contain the following terms:
Series A—Interest due semi-annually at a fixed rate of 4.15%, with principal of $150.0 million due in December 2017
Series B—Interest due semi-annually at a fixed rate of 4.57%, with principal of $225.0 million due in December 2019
Series C—Interest due semi-annually at a fixed rate of 5.15%, with principal of $275.0 million due in December 2022
Series D—Interest due semi-annually at a fixed rate of 5.30%, with principal of $150.0 million due in December 2024
We have senior notes totaling $200.0 million (the “Second Senior Notes”) with BofA as administrative agent. Interest is due semi-annually at a fixed rate of 4.53%, with principal of $200.0 million due in July 2025. The Second Senior Notes have financial and restrictive covenants described further below.
Compliance and Other—On February 24, 2017, and effective for the period ended December 31, 2016, we amended our Revolving Facility, Second Revolving Facility, Second Term Loan, Senior Notes and Second Senior Notes. The amendments adjusted our maximum leverage ratio from 3.00 to 3.50 and our minimum net worth from $1.7 billion to $1.2 billion. Our maximum leverage ratio will decrease to 3.00 on December 31, 2017, or 45 days subsequent to the closing of the sale of our Capital Services operating group (the “Closing Date”) as described in Note 18 within Item 8, if earlier. Our required fixed charge ratio remained at 1.75. The amendments also reduce our Revolving Facility from $1.4 billion to $1.2 billion at the Closing Date. Our amended restrictive covenants continue to include a twelve-month limitation of $250.0 million for dividend payments and share repurchases if our leverage ratio exceeds 1.50 (unlimited if our leverage ratio is equal to or below 1.50); however, share repurchases and acquisitions are not allowed if our leverage ratio exceeds 3.00. The amendments to our Senior Notes and Second Senior Notes also include other provisions relating to maintaining our leverage ratio and credit profile.
At December 31, 2016, we were in compliance with all our amended financial and restrictive covenants with a leverage ratio of 3.10, a fixed charge coverage ratio of 3.61, and net worth of $1.4 billion. Future compliance with our lending facilities could be impacted by circumstances or conditions beyond our control, including, but not limited to, the delay or cancellation of projects, decreased profitability on our projects, changes in currency exchange or interest rates, performance of pension plan assets, or changes in actuarial assumptions. Further, we could be impacted if our customers experience a material change in their ability to pay us or if the banks associated with our lending facilities were to cease or reduce operations, or if there is a full or partial break-up of the EU or its currency, the Euro.

41


During 2016, maximum outstanding borrowings under our revolving credit and other facilities were approximately $1.4 billion. In addition to providing letters of credit, we also issue surety bonds in the ordinary course of business to support our contract performance. At December 31, 2016, we had $826 million of outstanding surety bonds. Capitalized interest was insignificant for 2016, 2015 and 2014.
Other
Contractual Obligations—At December 31, 2016, our contractual obligations were as follows:
 
 
Payments Due by Period
(In thousands)
 
Total
 
Less than 1
Year
 
1-3 Years
 
3-5 Years
 
After 5
Years
Senior Notes (1)
 
$
984,360

 
$
188,413

 
$
289,447

 
$
44,225

 
$
462,275

Second Senior Notes (2)
 
277,765

 
9,060

 
18,120

 
18,120

 
232,465

Term Loan (3)
 
300,941

 
300,941

 

 

 

Second Term Loan (4)
 
538,505

 
69,711

 
170,948

 
297,846

 

Operating leases (5)
 
386,229

 
77,923

 
114,860

 
76,430

 
117,016

Information technology (“IT”) obligations (6)
 
50,170

 
33,309

 
16,861

 

 

Self-insurance obligations (7)
 
16,727

 
16,727

 

 

 

Pension funding obligations (8)
 
17,013

 
17,013

 

 

 

Postretirement benefit funding obligations (8)
 
2,476

 
2,476

 

 

 

Purchase obligations (9)
 

 

 

 

 

Unrecognized tax benefits (10)
 

 

 

 

 

Total contractual obligations
 
$
2,574,186

 
$
715,573

 
$
610,236

 
$
436,621

</