Exhibit
Exhibit 99.1
Chart Industries Reports 2016 Second Quarter Results
Cleveland, Ohio - July 28, 2016 - Chart Industries, Inc. (NASDAQ: GTLS), a leading diversified global manufacturer of highly engineered equipment for the industrial gas, energy and biomedical industries, today reported results for the second quarter ended June 30, 2016. Highlights include:
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• | Record short lead-time shipments in the quarter |
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• | Strong operating cash flow of $49 million |
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• | Addition of William C. Johnson as President and Chief Operating Officer |
Net income for the second quarter of 2016 was $21.2 million, or $0.68 per diluted share. Second quarter 2016 earnings would have been $0.72 per diluted share excluding $2.1 million, or $0.04 per diluted share, of restructuring and acquisition-related costs. This compares with net income of $17.2 million, or $0.56 per diluted share, for the second quarter of 2015. Second quarter 2015 earnings would have been $0.60 per diluted share excluding $1.7 million, or $0.04 per diluted share, of restructuring and acquisition-related costs, including facility shutdown costs.
Net sales for the second quarter of 2016 decreased 8.6% to $247.1 million from $270.3 million in the comparable period a year ago. Gross profit for the second quarter of 2016 was $87.0 million, or 35.2% of sales, versus $74.9 million, or 27.7% of sales, in the comparable quarter of 2015.
“We delivered better than anticipated results in our Energy & Chemicals (“E&C”) segment through solid project execution, several short lead-time replacement equipment opportunities supported by our newly created LifeCycle aftermarket service offering, and contract expiration fees related to project development, which highlight our unique capabilities and competitive strengths. The short lead-time shipments were a record in the quarter and eclipsed the prior record set in the fourth quarter of 2015," stated Sam Thomas, Chart’s Chairman and Chief Executive Officer.
Mr. Thomas added, “We are focused on our working capital initiatives and are making good headway as we delivered another consecutive quarter with strong operating cash flow, despite continued weakness in energy markets. Our geographic and product diversification highlights further advantages to support continued cash flow generation. In July 2016, Bill Johnson joined us as President and COO, bringing operational and strategic talent that will help further these initiatives.”
Orders received in the second quarter of 2016 were $270.3 million, an increase of $71.0 million over orders received during the first quarter of 2016. In addition to the typical seasonality of the business, order levels improved over the first quarter as we were awarded a number of significant projects across a variety of end markets within our Distribution & Storage ("D&S") and BioMedical segments, including a $16 million emerging energy application award and continued downstream LNG activity in D&S. Backlog at June 30, 2016 was $392.5 million, up 2.6% from the March 31, 2016 level of $382.4 million.
Selling, general and administrative ("SG&A") expenses for the second quarter of 2016 increased $3.3 million compared with the same period in 2015 to $48.9 million, or 19.8% of sales. SG&A increased due to higher variable short-term compensation expense which was accelerated compared to the prior year quarter, as well as unfavorable reserves recorded at D&S Asia during
the current quarter. Second quarter 2016 SG&A also included $1.0 million in severance costs associated with cost reduction initiatives and other restructuring-related charges.
Income tax expense was $11.0 million for the second quarter of 2016 and represented an effective tax rate of 35.9% compared with $6.9 million in the prior year quarter, or an effective tax rate of 28.7%. The effective tax rate for the current quarter is higher than 2015's second quarter rate primarily as a result of tax losses in China, for which no benefit is recorded.
Net interest expense was $4.2 million for the second quarter of 2016, which included $3.1 million of non-cash accretion expense associated with the Company’s Convertible Notes. Net cash interest was $1.1 million.
SEGMENT HIGHLIGHTS
E&C segment sales decreased 33.0% to $61.2 million for the second quarter of 2016 compared with $91.3 million for the same quarter in the prior year. The decline was due to lower sales volume seen across all product lines given continued challenging energy market conditions. E&C gross profit margins were 52.1% in the 2016 quarter compared with 30.3% in the same quarter of 2015. The improved margins were due to multiple short lead-time shipments, contract expiration fees, Lifecycle aftermarket services, favorable execution and project completions during the quarter. The impact from the short lead-time shipments and contract expiration fees contributed about $31 million to E&C’s gross profit in the quarter. These short lead-time opportunities are typically critical shut-down situations to our customers which require us to respond immediately to supply replacement equipment. Although the timing of these events is not predictable, they are recurring in nature and are an important part of our business and service to customers.
D&S segment sales increased 6.4% to $129.6 million for the second quarter of 2016 compared with $121.8 million for the same quarter in the prior year. Sales in North America and Europe increased as a result of revenue recognized on projects related to both LNG and industrial gas applications. D&S gross profit margins were 25.6% compared with 23.4% in the prior year quarter due to lower restructuring costs and improved volume in the current quarter.
BioMedical segment sales decreased 1.4% to $56.3 million for the second quarter of 2016 compared with $57.1 million for the same quarter in the prior year. The decrease is primarily due to lower revenues in North American respiratory and commercial oxygen generation, partially offset by an increase of new product revenues in life sciences and liquid oxygen revenues in Europe. BioMedical gross profit margin increased to 38.8% in the quarter compared with 32.8% for the same period in 2015 primarily due to product mix and lower warranty costs.
OUTLOOK
Based on year-to-date results, continued weak order trends in E&C and business expectations for the remainder of 2016, we are adjusting 2016 guidance with sales now expected to be in the range of $850 million to $900 million. Full year adjusted earnings per diluted share (non-GAAP) are now expected to be in the range of $0.75 to $0.95 per share, on approximately 30.9 million weighted average shares outstanding. This compares with previous sales guidance of $900 million to $1.0 billion and adjusted earnings per diluted share (non-GAAP) guidance of $0.50 to $1.00. Adjusted earnings per diluted share is a non-GAAP measure, which excludes the impact from any restructuring and acquisition-related costs.
FORWARD-LOOKING STATEMENTS
Certain statements made in this news release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning the Company's plans, objectives, future orders, revenues, earnings or performance, liquidity and cash flow, capital expenditures, business trends, and other information that is not historical in nature. Forward-looking statements may be identified by terminology such as "may," "will," "should," "could," "expects," "anticipates," "believes," "projects," "forecasts," “outlook,” “guidance,” "continue," or the negative of such terms or comparable terminology.
Forward-looking statements contained in this news release or in other statements made by the Company are made based on management's expectations and beliefs concerning future events impacting the Company and are subject to uncertainties and factors relating to the Company's operations and business environment, all of which are difficult to predict and many of which are beyond the Company's control, that could cause the Company's actual results to differ materially from those matters expressed or implied by forward-looking statements. These factors and uncertainties include, among others, the following: the cyclicality of the markets that the Company serves and the vulnerability of those markets to economic downturns; a delay, significant reduction in or loss of purchases by large customers; fluctuations in energy prices; our ability to control our costs and successfully manage our operations; a delay in the anticipated timing of LNG infrastructure build out or a delay or failure to receive orders; the potential for negative developments in the natural gas industry related to hydraulic fracturing; competition; potential future impairment of the Company’s significant goodwill and other intangibles; changes in government energy policy or the failure of expected changes in policy to materialize; the modification or cancellation of orders in our backlog; loss of key employees; challenges and uncertainties associated with efforts to acquire and integrate product lines or businesses; economic downturns and deteriorating financial conditions; our ability to manage our fixed-price contract exposure; our reliance on key suppliers and potential supplier failures or defects; fluctuations or adjustments in the Company’s effective tax rate; changes in government healthcare regulations and reimbursement policies; litigation and disputes involving the Company, including product liability, contract, warranty, intellectual property, employment and environmental claims; fluctuations in foreign currency exchange and interest rates; general economic, political, business and market risks associated with the Company's international operations and transactions; variability in operating results associated with unanticipated increases in warranty returns of Company products; technological security threats; financial distress of third parties; our ability to protect our intellectual property; the regulation of our products by the U.S. Food & Drug Administration and other governmental authorities; the pricing and availability of raw materials; the cost of compliance with environmental, health and safety laws; claims that our products or processes infringe intellectual property rights of others; additional liabilities related to taxes; deterioration of employee or labor relations; increased governmental regulation; risks associated with our indebtedness, leverage and liquidity; and volatility and fluctuations in the price of the Company’s stock.
For a discussion of these and additional factors that could cause actual results to differ from those described in the forward-looking statements, see the Company's filings with the Securities and Exchange Commission, including Item 1A (Risk Factors) in the Company’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission, which should be reviewed carefully. The Company undertakes no obligation to update or revise any forward-looking statement.
Chart is a leading diversified global manufacturer of highly engineered equipment for the industrial gas, energy, and biomedical industries. The majority of Chart's products are used throughout the liquid gas supply chain for purification, liquefaction, distribution, storage and end-use applications, a large portion of which are energy-related. Chart has domestic operations located across the United States and an international presence in Asia, Australia, Europe and South America. For more information, visit: http://www.chartindustries.com.
USE OF NON-GAAP FINANCIAL INFORMATION
To supplement the unaudited condensed consolidated financial statements presented in accordance with U.S. GAAP in this news release, certain non-GAAP financial measures as defined by SEC rules are used. The Company believes these non-GAAP measures are of interest to investors and facilitate useful period-to-period comparisons of the Company’s financial results, and this information is used by the Company in evaluating internal performance. See the last page of this news release for a reconciliation of adjusted earnings per diluted share, a non-GAAP measure included in this release.
With respect to the Company's full year earnings outlook, the Company is not able to provide a reconciliation of the adjusted earnings per diluted share because certain items may have not yet occurred or are out of the Company's control and / or cannot be reasonably predicted.
CONFERENCE CALL
As previously announced, the Company will discuss its second quarter 2016 results on a conference call on Thursday, July 28, 2016 at 10:30 a.m. ET. Participants may join the conference call by dialing (877) 312-9395 in the U.S. or (970) 315-0456 from outside the U.S. A live webcast presentation will also be accessible at 10:30 a.m. ET at http://www.chartindustries.com. Please log-in or dial-in at least five minutes prior to the start time.
A taped replay of the conference call will be archived on the Company’s website, www.chartindustries.com, approximately one hour after the call concludes. You may also listen to a taped replay of the conference call by dialing (855) 859-2056 in the U.S. or (404) 537-3406 outside the U.S. and entering Conference ID 48515431. The telephone replay will be available beginning 1:30 p.m. ET, Thursday July 28, 2016 until 11:59 p.m. ET, Thursday, August 4, 2016.
For more information, click here:
http://ir.chartindustries.com/
Contact:
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Ken Webster |
Vice President and |
Chief Financial Officer |
216-626-1216 |
ken.webster@chartindustries.com |
CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(Dollars and shares in thousands, except per share amounts)
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| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2016 | | 2015 | | 2016 | | 2015 |
Sales | $ | 247,095 |
| | $ | 270,252 |
| | $ | 440,852 |
| | $ | 515,357 |
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Cost of sales | 160,144 |
| | 195,372 |
| | 301,200 |
| | 367,954 |
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Gross profit | 86,951 |
| | 74,880 |
| | 139,652 |
| | 147,403 |
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Selling, general and administrative expenses | 48,896 |
| | 45,628 |
| | 98,432 |
| | 98,790 |
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Amortization | 3,116 |
| | 4,123 |
| | 6,244 |
| | 8,527 |
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Operating expenses | 52,012 |
| | 49,751 |
| | 104,676 |
| | 107,317 |
|
Operating income | 34,939 |
| | 25,129 |
| | 34,976 |
| | 40,086 |
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Other expenses: | | | | | | | |
Interest expense, net | 4,171 |
| | 3,999 |
| | 8,265 |
| | 7,921 |
|
Financing costs amortization | 321 |
| | 321 |
| | 642 |
| | 647 |
|
Foreign currency (gain) loss | (93 | ) | | (3,141 | ) | | 113 |
| | (77 | ) |
Other expenses, net | 4,399 |
| | 1,179 |
| | 9,020 |
| | 8,491 |
|
Income before income taxes | 30,540 |
| | 23,950 |
| | 25,956 |
| | 31,595 |
|
Income tax expense | 10,977 |
| | 6,868 |
| | 11,065 |
| | 9,238 |
|
Net income | 19,563 |
| | 17,082 |
| | 14,891 |
| | 22,357 |
|
Noncontrolling interests, net of taxes | (1,590 | ) | | (75 | ) | | (1,611 | ) | | (46 | ) |
Net income attributable to Chart Industries, Inc. | $ | 21,153 |
| | $ | 17,157 |
| | $ | 16,502 |
| | $ | 22,403 |
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Net income attributable to Chart Industries, Inc. per common share: | | | | | | | |
Basic | $ | 0.69 |
| | $ | 0.56 |
| | $ | 0.54 |
| | $ | 0.73 |
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Diluted | $ | 0.68 |
| | $ | 0.56 |
| | $ | 0.53 |
| | $ | 0.73 |
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Weighted average number of common shares outstanding: | | | | | | | |
Basic | 30,582 |
| | 30,495 |
| | 30,575 |
| | 30,481 |
|
Diluted | 30,939 |
| | 30,735 |
| | 30,904 |
| | 30,693 |
|
| | | | | | | |
Comprehensive income, net of taxes | $ | 13,471 |
| | $ | 19,777 |
| | $ | 15,315 |
| | $ | 17,207 |
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Less: Comprehensive loss attributable to noncontrolling interests, net of taxes | (1,708 | ) | | (41 | ) | | (1,705 | ) | | (41 | ) |
Comprehensive income attributable to Chart Industries, Inc., net of taxes | $ | 15,179 |
| | $ | 19,818 |
| | $ | 17,020 |
| | $ | 17,248 |
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CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
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| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | | Six Months Ended June 30, |
| 2016 | | 2015 | | 2016 | | 2015 |
Net Cash Provided By Operating Activities | $ | 48,650 |
| | $ | 7,106 |
| | $ | 86,829 |
| | $ | 7,994 |
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Investing Activities | | | | | | | |
Capital expenditures | (4,186 | ) | | (9,651 | ) | | (9,418 | ) | | (24,479 | ) |
Payments for land use rights | — |
| | (11,043 | ) | | — |
| | (11,043 | ) |
Proceeds from sale of assets | — |
| | 192 |
| | — |
| | 200 |
|
Government grants | 612 |
| | — |
| | 612 |
| | — |
|
Acquisition of businesses, net of cash acquired | (1,383 | ) | | — |
| | (1,383 | ) | | (320 | ) |
Net Cash Used In Investing Activities | (4,957 | ) | | (20,502 | ) | | (10,189 | ) | | (35,642 | ) |
Financing Activities | | | | | | | |
Borrowings on revolving credit facilities | — |
| | 12,377 |
| | 3,820 |
| | 12,377 |
|
Repayments on revolving credit facilities | (760 | ) | | (743 | ) | | (3,816 | ) | | (743 | ) |
Borrowings on term loan | 13,167 |
| | — |
| | 13,167 |
| | — |
|
Repayments on term loan | (1,508 | ) | | — |
| | (1,508 | ) | | — |
|
Proceeds from exercise of options | 5 |
| | 47 |
| | 17 |
| | 469 |
|
Excess tax benefit from share-based compensation | 30 |
| | — |
| | 54 |
| | 130 |
|
Payment of contingent consideration | — |
| | (611 | ) | | — |
| | (611 | ) |
Common stock repurchases | (42 | ) | | (15 | ) | | (643 | ) | | (823 | ) |
Other financing activities | — |
| | — |
| | — |
| | (157 | ) |
Net Cash Provided By Financing Activities | 10,892 |
| | 11,055 |
| | 11,091 |
| | 10,642 |
|
Effect of exchange rate changes on cash | (481 | ) | | 1,859 |
| | 1,719 |
| | (3,765 | ) |
Net increase (decrease) in cash and cash equivalents | 54,104 |
| | (482 | ) | | 89,450 |
| | (20,771 | ) |
Cash and cash equivalents at beginning of period | 159,054 |
| | 83,367 |
| | 123,708 |
| | 103,656 |
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Cash and Cash Equivalents at End of Period | $ | 213,158 |
| | $ | 82,885 |
| | $ | 213,158 |
| | $ | 82,885 |
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CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
|
| | | | | | | |
| June 30,
2016 | | December 31,
2015 |
| (Unaudited) | | |
ASSETS | | | |
Cash and cash equivalents | $ | 213,158 |
| | $ | 123,708 |
|
Accounts receivable, net | 150,902 |
| | 183,514 |
|
Inventories, net | 191,681 |
| | 199,302 |
|
Other current assets | 53,119 |
| | 80,706 |
|
Property, plant and equipment, net | 261,613 |
| | 266,277 |
|
Goodwill | 218,990 |
| | 218,390 |
|
Identifiable intangible assets, net | 100,339 |
| | 106,714 |
|
Other assets | 19,654 |
| | 21,529 |
|
TOTAL ASSETS | $ | 1,209,456 |
| | $ | 1,200,140 |
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| | | |
LIABILITIES AND EQUITY | | | |
Current liabilities | $ | 234,948 |
| | $ | 262,039 |
|
Long-term debt | 228,810 |
| | 213,798 |
|
Other long-term liabilities | 49,122 |
| | 48,567 |
|
Equity | 696,576 |
| | 675,736 |
|
TOTAL LIABILITIES AND EQUITY | $ | 1,209,456 |
| | $ | 1,200,140 |
|
CHART INDUSTRIES, INC. AND SUBSIDIARIES
OPERATING SEGMENTS (UNAUDITED)
(Dollars in thousands)
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| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2016 | | 2015 | | 2016 | | 2015 |
Sales | | | | | | | |
Energy & Chemicals | $ | 61,195 |
| | $ | 91,339 |
| | $ | 99,154 |
| | $ | 178,809 |
|
Distribution & Storage | 129,600 |
| | 121,813 |
| | 237,097 |
| | 226,884 |
|
BioMedical | 56,300 |
| | 57,100 |
| | 104,601 |
| | 109,664 |
|
Total | $ | 247,095 |
| | $ | 270,252 |
| | $ | 440,852 |
| | $ | 515,357 |
|
Gross Profit | | | | | | | |
Energy & Chemicals | $ | 31,873 |
| | $ | 27,680 |
| | $ | 37,344 |
| | $ | 52,543 |
|
Distribution & Storage | 33,230 |
| | 28,485 |
| | 62,645 |
| | 58,533 |
|
BioMedical | 21,848 |
| | 18,715 |
| | 39,663 |
| | 36,327 |
|
Total | $ | 86,951 |
| | $ | 74,880 |
| | $ | 139,652 |
| | $ | 147,403 |
|
Gross Profit Margin | | | | | | | |
Energy & Chemicals | 52.1 | % | | 30.3 | % | | 37.7 | % | | 29.4 | % |
Distribution & Storage | 25.6 | % | | 23.4 | % | | 26.4 | % | | 25.8 | % |
BioMedical | 38.8 | % | | 32.8 | % | | 37.9 | % | | 33.1 | % |
Total | 35.2 | % | | 27.7 | % | | 31.7 | % | | 28.6 | % |
Operating Income (Loss) | | | | | | | |
Energy & Chemicals | $ | 22,124 |
| | $ | 19,540 |
| | $ | 19,926 |
| | $ | 34,831 |
|
Distribution & Storage | 13,005 |
| | 10,845 |
| | 22,835 |
| | 21,157 |
|
BioMedical | 10,552 |
| | 6,000 |
| | 17,204 |
| | 9,236 |
|
Corporate | (10,742 | ) | | (11,256 | ) | | (24,989 | ) | | (25,138 | ) |
Total | $ | 34,939 |
| | $ | 25,129 |
| | $ | 34,976 |
| | $ | 40,086 |
|
CHART INDUSTRIES, INC. AND SUBSIDIARIES
ORDERS AND BACKLOG (UNAUDITED)
(Dollars in thousands)
|
| | | | | | | |
| Three Months Ended |
| June 30,
2016 | | March 31,
2016 |
Orders | | | |
Energy & Chemicals | $ | 53,016 |
| | $ | 8,774 |
|
Distribution & Storage | 156,030 |
| | 139,376 |
|
BioMedical | 61,221 |
| | 51,109 |
|
Total | $ | 270,267 |
| | $ | 199,259 |
|
|
| | | | | | | |
| As of |
| June 30,
2016 | | March 31,
2016 |
Backlog | | | |
Energy & Chemicals | $ | 114,562 |
| | $ | 122,648 |
|
Distribution & Storage | 252,502 |
| | 239,978 |
|
BioMedical | 25,433 |
| | 19,819 |
|
Total | $ | 392,497 |
| | $ | 382,445 |
|
CHART INDUSTRIES, INC. AND SUBSIDIARIES
RECONCILIATION OF EARNINGS PER DILUTED SHARE TO ADJUSTED EARNINGS PER DILUTED SHARE (UNAUDITED)
(Dollars in thousands, except per share amounts)
|
| | | | | | | |
| Three Months Ended June 30, |
| 2016 | | 2015 |
Earnings per diluted share | $ | 0.68 |
| | $ | 0.56 |
|
Restructuring and acquisition-related costs | 0.04 |
| | 0.04 |
|
Adjusted earnings per diluted share | $ | 0.72 |
| | $ | 0.60 |
|