Following the initiation of an internal accounting investigation this past October, global engineering and construction firm Chicago Bridge & Ironworks (NYSE: CBI ) has fired both its chief executive officer and its chief operations officer, although details on their dismissal were sketchy.
Even as it attempted to put a positive spin on things, saying that it had "a healthy backlog, solid balance sheet, and continuing growth," the company delayed filing its financial reports to the SEC back in October while at the same time acknowledging that a lengthy probe could lie ahead. Analysts and investors, the company said, should no longer rely upon the earnings guidance that it previously provided.
Despite its name, Chicago Bridge primarily builds hydrocarbon processing plants, offshore fuel platforms, gas pipelines, and fuel storage facilities. It employs some 11,000 people across five countries, and while its corporate headquarters are located in Texas, the heavy construction company is based in the Netherlands.
Fool contributor Stephen Simpson has chronicled the recent results of the company, noting that in the quarter for which it last filed financial statements, it was reporting revenues rising 32%, operating margins widening, and operating income soaring 500% over the previous year. The accounting improprieties being investigated deal, however, with accounting for claims on two projects, as well as with the assessment of costs on two projects. With the company undertaking some 700 projects every year, it estimated the cost to the company would be in the range of $0.09 to $0.11 per share, or more than 10% of the full year's estimated earnings.
The company would like us to believe that the four projects won't unduly impact the performance recorded to date, even though it doesn't want us to take its guidance for the year seriously, either.
The two executives aren't standing by idly. They fired off a press release defending their actions, noting that they cooperated with the investigation even though they never knew they were under suspicion themselves and that they plan to sue Chicago Bridge to protect their good names.
The company will be holding a conference call next week, at which time it expects to be able to update investors on its guidance for 2005, which should also mark the end of the investigation and the closing of its books for the year. Although its top executives have been toppled, Chicago Bridge doesn't appear to be in danger of falling down. Its shares fell by a third when the investigation was originally announced but had recovered much of that ground before falling 26% today. As of now, there don't seem to be signs that its ironworks have rusted through.
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