CBI - Chicago Bridge & Iron

[MaxDC]

Things seem to be playing out for CBI thanks to their long term approach. I don't think that the low oil prices will affect any of of their LNG projects in the gulf. The beauty of those US LNG projects surfaces when compared to Chevron's Wheatstone or Gorgon in Australia which are pre US energy revolution projects. All messed up with from scratch infrastructure built up, subsea wells.............

 

Alaska LNG seems to be playing in Gorgon/Wheatstone territory in capital spending but it seems to have substantial backing from Japan due to proximity/political aspects. I hope this will reach FEED soon after political issues are resolved. Gas Treatment Plant and LNG Plant would substantially add to Chiyoda/CBI backlog, probably high single / low double digit billion of dollars as I see no other epc company with japanese participation.

 

Any further information on that?

[Buffetteer]

Anybody worried that BRK lowered their position by almost 13% ?

They still own 8.76% of the company, but is this a sign of a slow and steady reduction?

[berkshire101]

Anybody worried that BRK lowered their position by almost 13% ?

They still own 8.76% of the company, but is this a sign of a slow and steady reduction?

 

They also sold their position in NOV.  Looks like they're moving out of the oil sector.  Maybe they think lower oil prices are here to stay?

[jgyetzer]

Given that cash flow and share repurchases are anticipated to increase significantly during the second half of the year, this may have quickly pushed Berkshire's position beyond 10% which could have significant tax implications - this from their most recent 10K

 

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.

[ZenaidaMacroura]

Given that cash flow and share repurchases are anticipated to increase significantly during the second half of the year, this may have quickly pushed Berkshire's position beyond 10% which could have significant tax implications - this from their most recent 10K

 

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.

Hmm the interesting part is they had to decrease the position at far below cost.  They acquired  the position over 3 quarters and sold at a price below the lowest acquisition...

 

I almost wonder if this is a flip side of PCP type buy -when the company is unresponsive to a buyout overture

[mttddd]

Given that cash flow and share repurchases are anticipated to increase significantly during the second half of the year, this may have quickly pushed Berkshire's position beyond 10% which could have significant tax implications - this from their most recent 10K

 

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.

Hmm the interesting part is they had to decrease the position at far below cost.  They acquired  the position over 3 quarters and sold at a price below the lowest acquisition...

 

I almost wonder if this is a flip side of PCP type buy -when the company is unresponsive to a buyout overture

 

This makes sense to me, for owning some BRK I dont actually keep up with their financials I wonder if in conjunction with the 10% bit this just helped free up more cash for the PCP deal

[muscleman]

Is there any news today? Looks weird to have a big drop with no news.

[mttddd]

Bigger drop than usual but looks like its just the general drop this stock takes whenever oil goes down

[KCLarkin]

Is there any news today? Looks weird to have a big drop with no news.

 

Other than Berkshire trimming and oil near 6 year lows?

[muscleman]

Is there any news today? Looks weird to have a big drop with no news.

 

Other than Berkshire trimming and oil near 6 year lows?

 

Does BRK need to be below 10% on any day? Or does it only need to be below 10% by end of the year?

[Kiltacular]

Given that cash flow and share repurchases are anticipated to increase significantly during the second half of the year, this may have quickly pushed Berkshire's position beyond 10% which could have significant tax implications - this from their most recent 10K

 

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.

 

I don't think this is the reason, unless I'm misreading this.  Correction welcome.

[MrB]

Given that cash flow and share repurchases are anticipated to increase significantly during the second half of the year, this may have quickly pushed Berkshire's position beyond 10% which could have significant tax implications - this from their most recent 10K

 

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.

 

I don't think this is the reason, unless I'm misreading this.  Correction welcome.

 

Geographic Location Most Recent % O/S

United States 71.11

England 1.59

Japan 1.08

 

etc..

 

[ZenaidaMacroura]

Given that cash flow and share repurchases are anticipated to increase significantly during the second half of the year, this may have quickly pushed Berkshire's position beyond 10% which could have significant tax implications - this from their most recent 10K

 

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.

 

I don't think this is the reason, unless I'm misreading this.  Correction welcome.

 

Geographic Location Most Recent % O/S

United States 71.11

England 1.59

Japan 1.08

 

etc..

Do they publish the geography of holder info or is that just an example?  I read the section as  "if all the 10% holders together own more than 50%."  So I don't think it applies as there aren't 4 other 10% U.S. holders in addition to Berkshire -and why is it understood that each time the float decrease its Berkshire that is the one to have to decrease its exposure?

[RadMan24]

Is it conceivable, that just perhaps, he sold the position he bought at $70 a share back a year ago for tax selling purposes? Besides, its highly unlikely CBI jumps up to $70 in the next 30 days. In fact, its likely that it will remain or stay around current levels. Why not get the tax break in? It's a small relative position anyway in the grant scheme of things.

 

http://www.bloomberg.com/news/articles/2014-08-21/berkshire-defies-short-seller-by-adding-to-chicago-bridge-stake

 

But then again, if Berkshire really didn't want to own CBI, there were plenty of chances in the 2nd quarter around $50-58 to unload at breakeven. David Einhorn, who has been picking several out of favor stocks lately (micron, consol) also owns a good chunk in CBI.

 

The business is doing well, LNG projects may slow down given the downturn in oil prices. The huge overhang is the nuclear projects, which may be resolved by year end. Other than that, 2017 and beyond is when growth should pick up again.

[DCP]

It's virtually impossible to correctly speculate about why Berkshire's CBI holding was reduced but perhaps an important point to remember is that this is not a Buffett pick. All evidence points to this being a Combs selection.

 

Were the proceeds redeployed into Charter? Is Charter even a Combs pick? So many possibilities but, again, it's impossible to know why CBI was trimmed.

[MrB]

Given that cash flow and share repurchases are anticipated to increase significantly during the second half of the year, this may have quickly pushed Berkshire's position beyond 10% which could have significant tax implications - this from their most recent 10K

 

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.

 

I don't think this is the reason, unless I'm misreading this.  Correction welcome.

 

Geographic Location Most Recent % O/S

United States 71.11

England 1.59

Japan 1.08

 

etc..

Do they publish the geography of holder info or is that just an example?  I read the section as  "if all the 10% holders together own more than 50%."  So I don't think it applies as there aren't 4 other 10% U.S. holders in addition to Berkshire -and why is it understood that each time the float decrease its Berkshire that is the one to have to decrease its exposure?

 

Reuters data, so it should be accurate

 

Berkshire Hathaway Inc.  8.76 

Greenlight Capital, Inc.  6.32 

The Vanguard Group, Inc.  5.97 

SouthernSun Asset Management, LLC  5.80 

BlackRock Institutional Trust Company, N.A. 3.07

etc. 

 

 

[undervalued]

Is anyone concern about CBI current liability being greater than current asset as of 2015-06-30? Doesn't this mean it won't be able to pay off it's current liability or it needs to borrow or issue debt?

[KCLarkin]

Are you familiar with Percentage of Completion accounting? If not, just skip CBI.

[MrB]

South Carolina commission okays cost overruns for nuclear plants

 

http://www.reuters.com/article/2015/09/02/us-energy-nuclear-south-carolina-idUSKCN0R22H020150902

[gokou3]

South Carolina commission okays cost overruns for nuclear plants

 

http://www.reuters.com/article/2015/09/02/us-energy-nuclear-south-carolina-idUSKCN0R22H020150902

 

What is the implication for CBI?  The article does say that this settlement does not resolve the liability between the parties, but realistically does it now mean that the owner is more willing to put more cash on the table?

[MrB]

South Carolina commission okays cost overruns for nuclear plants

 

http://www.reuters.com/article/2015/09/02/us-energy-nuclear-south-carolina-idUSKCN0R22H020150902

 

What is the implication for CBI?  The article does say that this settlement does not resolve the liability between the parties, but realistically does it now mean that the owner is more willing to put more cash on the table?

The short answer is I don't know.

However, I do think your assumption is fair.

[MrB]

Hallelujah!! CA01 is in.

https://www.scana.com/docs/librariesprovider15/pdfs/press-releases/07232015-sceg-sets-2-4-million-pound-module-with-world-39-s-largest-crane.pdf?sfvrsn=0

 

Hallelujah AGAIN!! CA01 is in for Vogtle too (Went in 2nd week of Aug)

 

With the two major bottlenecks out of the way there is now a realistic expectation of the higher value/cash flow generating work to proceed.

[MrB]

Latest Vogtle construction monitoring report is out

http://georgiapower.com/docs/about-energy/13th-VCM-Report-Final.pdf?hp=lnau_box2

[MrB]

Latest Vogtle construction monitoring report is out

http://georgiapower.com/docs/about-energy/13th-VCM-Report-Final.pdf?hp=lnau_box2

p.19 notes that "the Unit 4 CA03 work was transferred to Lake Charles who has shown quality improvements" This work was previously taken away from the CB&I Lake Charles facility (see 11th report) and sub contracted out to SMCI. For me it backs up management's claims that the Lake Charles facility is past its problems and on track.

[kirkomi]

So, I started looking at CBI today. Scary stuff. Before the Shaw acquisition, their balance sheet looked quite ok. Not a lot of LT debt and not much of goodwill. They acquired shaw for $3.4B ($2.9B cash and $0.5B equity). Now, here is where it gets tricky.

 

At December 31, 2013, our goodwill balance was $4.2 billion (including $3.3 billion associated

with the Shaw Acquisition). -- p38, annual report 2013

 

So, they paid $3.4B for Shaw and increased the goodwill by $3.3B ? That needs some digging. Because, it looks quite weird.

 

The company has now $4.2B goodwill, $1.5B LT debt and only $2.8B in equity (so a negative TBV of $1.4B). The debt covenants from the 2013 annual report is as follows.

 

The New Revolving Facility has

a borrowing sublimit of $675.0 million (with financial letters of credit not to exceed $270.0 million) and certain financial covenants, including a maximum

leverage ratio of 3.00, a minimum fixed charge coverage ratio of 1.75, and a minimum net worth level calculated as $1.7 billion at December 31, 2013.

 

And finally, from the 2014 annual report.

 

At December 31, 2014, we were in compliance with all of our restrictive and financial covenants associated with our debt and revolving credit and other facilities, with a leverage ratio of 1.65, a fixed charge coverage ratio of 5.32, and net worth of $2.7 billion.

 

The combination of the goodwill, LT debt and covenants are not making me comfortable with this investment.

 

The shareholder letter of 2014 is also not very helpful. The guy talks about how awesome CBI is in a very fluffy language. There is one mention of debt in the letter.

 

For 2015, we expect our cash flows from operations to provide us with the flexibility to

meet our capital allocation priorities of returning value to our shareholders, maintaining an

appropriate cash balance for our operations, continuing to service our debt as planned and

growing the company strategically.

 

This does not really fill me with confidence here. How are you guys comfortable here ? I read the full thread and it seems the FCF more than what is being reported and it is growing at 13% a year or so. But, is this all or I have made some mistake in the calculations of the balance sheet risk ?