-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HekA2KCgcZVTfJo9jeGo4DIiZPbI3Ax+G3g7L4bwMUn5RT8CHQWVgMAR8LbmiziY jhuQD81HeXt5C+Uu1BlCug== 0000950152-97-001573.txt : 19970305 0000950152-97-001573.hdr.sgml : 19970305 ACCESSION NUMBER: 0000950152-97-001573 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970304 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHART INDUSTRIES INC CENTRAL INDEX KEY: 0000892553 STANDARD INDUSTRIAL CLASSIFICATION: FABRICATED PLATE WORK (BOILER SHOPS) [3443] IRS NUMBER: 341712937 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11442 FILM NUMBER: 97550028 BUSINESS ADDRESS: STREET 1: 35555 CURTIS BLVD CITY: EASTLAKE STATE: OH ZIP: 44095 BUSINESS PHONE: 2169462525 10-K 1 CHART INDUSTRIES, INC. 10-K 1 ================================================================================ Securities and Exchange Commission Washington, D.C. 20549 FORM 10-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal year ended December 31, 1996 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 1-11442 CHART INDUSTRIES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Delaware 34-1712937 - ---------------------------------------- ---------------------------------------- (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 35555 Curtis Boulevard, Eastlake, Ohio 44095 - ---------------------------------------- ---------------------------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(216) 946-2525 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED -------------------------------------- -------------------------------------- Common Stock, New York Stock Exchange par value $.01 per share
Securities registered pursuant to Section 12(g) of the Act: None 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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. [ ] As of January 31, 1997, the registrant had 9,846,969 shares of Common Stock outstanding. As of that date, the aggregate market value of the voting stock of the registrant held by non-affiliates was $102,211,531 (based upon the closing price of $20.25 per share of Common Stock on the New York Stock Exchange on January 31, 1997). For purposes of this calculation, the registrant deems the 4,799,486 shares of Common Stock held by all of its Directors and executive officers to be the shares of Common Stock held by affiliates. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's definitive Proxy Statement to be used in connection with its Annual Meeting of Stockholders to be held on May 1, 1997 are incorporated by reference into Part III of this Form 10-K. Except as otherwise stated, the information contained in this Form 10-K is as of December 31, 1996. ================================================================================ 2 PART I ITEM 1. BUSINESS; ITEM 2. PROPERTIES; AND ITEM 3. LEGAL PROCEEDINGS. THE COMPANY Chart Industries, Inc. (the "Company" or "Chart") was organized in June 1992 as a Delaware corporation to serve as a holding company for the operating units described herein. As used herein, the terms "Company" or "Chart" mean Chart Industries, Inc., its subsidiaries and its predecessors, unless the context otherwise indicates. The Company's executive offices are located at 35555 Curtis Boulevard, Eastlake, Ohio 44095, and its telephone number is (216) 946-2525. In December 1992, the Company completed a reorganization (the "Reorganization") whereby each of ALTEC International, Inc., Process Systems International, Inc. ("PSI"), Process Engineering Inc. ("Process Engineering"), NPS Products, Inc. and Greenville Tube Corporation ("Greenville Tube") became wholly owned subsidiaries of the Company. In connection with the Reorganization, in December 1992 the Company conducted an initial public offering of 4,220,500 shares of its Common Stock. In 1993, NPS Products, Inc. was merged into PSI and now operates as the NPS Products Division of PSI ("NPS"). In addition, ALTEC International, Inc. was reorganized into ALTEC International Limited Partnership ("ALTEC"). Chart controls ALTEC's operations through its wholly owned subsidiary, Chart Management Company, Inc., an Ohio corporation. In 1994, Process Engineering was merged into PSI and now operates as the Process Engineering Division of PSI ("PEI"). In addition, PSI purchased certain assets and assumed certain liabilities of CVI Incorporated, (a wholly owned subsidiary of Pitt-DesMoines). These assets and liabilities have been organized into a business now operating as the CVI Division of PSI ("CVI"). In 1995, the Company began operation of Chart Coastal Fabrication, a division of PSI, in New Iberia, Louisiana. BUSINESS GENERAL The Company designs, engineers and manufactures standard and custom-built industrial process equipment, primarily for low temperature applications. The Company has developed a particular expertise in cryogenic systems and equipment which operate at low temperatures sometimes approaching absolute zero (0 degreesKelvin/-273 degrees Centigrade/-459 degrees Fahrenheit). The Company's products range from components and subsystems to complete systems which are used by customers primarily to process, liquefy, store and transport gases. These products are used in a variety of commercial and scientific applications, including air separation, hydrocarbon processing, storage and transportation of liquefied gases and cryogenics research. The Company also manufactures and markets other products for other critical applications, including structural pipe supports used in nuclear and fossil fuel power plants, specialty stainless steel tubing and high-vacuum systems for satellite testing and scientific use. OPERATING UNITS Chart conducts operations through six operating units. The following table sets forth certain information about each of these operating units.
OPERATING UNIT AND LOCATION PRINCIPAL PRODUCTS PRIMARY MARKETS - ------------------------------ ------------------------------ ------------------------------ ALTEC Brazed aluminum plate-fin heat -Air separation equipment LaCrosse, Wisconsin exchangers for low temperature -Hydrocarbon process equipment applications; Bi-Braze(R) -Cryogenic and high vacuum transition joints systems
1 3
OPERATING UNIT AND LOCATION PRINCIPAL PRODUCTS PRIMARY MARKETS - ------------------------------ ------------------------------ ------------------------------ PSI Cryogenic systems, including -Air separation equipment Westborough, Massachusetts helium and nitrogen -Hydrocarbon processing liquefiers, cryogenic equipment refrigeration systems and -Cryogenic and high vacuum multi-component gas separation systems units; thermal vacuum system; -Specialty products pipe supports, hangers and saddles for critical pipe applications Chart Coastal Fabrication Fabrication of cryogenic gas -Air separation equipment New Iberia, Louisiana processing units (cold boxes) -Hydrocarbon processing equipment CVI Cryogenic pumps and valves; -Air separation equipment Columbus, Ohio and LNG fueling systems, -Hydrocarbon processing Costa Mesa, California cryopumps, vacuum jacketed equipment piping and other miscellaneous -Cryogenic and high vacuum cryogenic-related components systems -Specialty products PEI Cryogenic and specialty -Air separation equipment Plaistow, New Hampshire storage tanks and vessels, -Hydrocarbon processing including road and rail equipment tankers -Cryogenic and high vacuum systems -Specialty products Greenville Tube Specialty stainless steel -Specialty products Greenville, Pennsylvania and tubing Clarksville, Arkansas
MARKETS AND PRODUCTS The Company's primary markets and the approximate percentages of its 1994, 1995 and 1996 sales, respectively, represented by them include air separation equipment (32%, 38% and 45%), hydrocarbon processing equipment (26%, 21% and 19%), and cryogenic and high vacuum systems (20%, 15% and 18%). The balance of the Company's sales consist principally of specialty stainless steel tubing and manufacturing services in certain niche markets. A description of the Company's primary markets, principal products and major competitors is set forth below. AIR SEPARATION EQUIPMENT. The Company designs, manufactures and sells subsystems and components which are used at various stages of the low temperature air separation process. Low temperature air separation facilities compress, cool, purify, liquefy, distill and separate air into its component atmospheric gases, principally nitrogen, oxygen and argon. These gases are used for numerous commercial and scientific purposes. For example, oxygen is used in the processing of primary metals and in steel-making, for hospital supplies, in waste-water treatment, in the production of synthetic fuels and in the processing of various chemicals, including antifreeze. Nitrogen is used in the quick-freezing of various foods, in the manufacture of semiconductors, in the production of fertilizer and in the enhanced recovery of oil and natural gas by oil field pressurization. Argon has many diverse uses, including applications in welding, annealing, electronics manufacture, titanium and zirconium production and as an insulating barrier in double-paned window glass. The market for low temperature air separation equipment is driven by demand for high-purity forms of these atmospheric gases. The low temperature separation of air into large volumes of highly pure forms of its component gases is accomplished by compressing and cooling air until it reaches the temperatures at which 2 4 the gases transform into a liquid state. The atmospheric gases require processing at extremely low temperatures to achieve liquefaction. Oxygen, argon and nitrogen liquefy at -297 degrees, -302 degrees and -320 degrees Fahrenheit, respectively. After liquefaction, the gases are separated into their pure components by distillation. Once separated, these gases are generally stored and transported in their liquid forms, because they can be more economically and safely handled in that state. Chart's major customers generally are large, international industrial gas companies that incorporate the Company's systems and components into stand-alone air separation facilities. These customers include Air Products and Chemicals, MG Industries, Praxair, Inc., BOC and Air Liquide Process & Construction, Inc. Chart competes with a number of companies in the low temperature air separation equipment market. For subsystems and components, major competitors include Linde A.G., CCI and Kobe Steel. The major competitor for fabrication of cold boxes is Ivor J. Lee, Inc., Sumitomo Precision Products, Kobe Steel, IMI Marston, Nordon Cryogenie and Linde A.G. are competing sources for brazed aluminum plate-fin heat exchangers. The major competitors for on-site storage and road and rail transportation tanks and vessels are Taylor-Wharton division of Harsco and Minnesota Valley Engineers. HYDROCARBON PROCESSING EQUIPMENT. The Company designs, manufactures and sells complete systems, subsystems and components used in hydrocarbon processing. Hydrocarbon processing facilities, including natural gas processing, hydrocarbon refining and petrochemical processing plants, process natural gas and other hydrocarbon streams (in gaseous or liquid forms) to low temperatures and high pressures for the purpose of separating and extracting selected components. These processes produce both purified forms of hydrocarbons which are commercially marketable for various industrial or residential uses and separately salable by-products for various industrial and scientific uses. For example, various natural gas processing facilities separate nitrogen from methane gas to enhance the British Thermal Unit value of the gas, separate and produce liquefied petroleum gas for use as a fuel for household and recreational purposes, separate ethane as a petrochemical feedstock, liquefy natural gas for use as a fuel for industrial purposes and, more recently, for locomotives, buses and trucks, and separate carbon dioxide and helium from natural gas sources. Hydrocarbon processing generally takes place at relatively higher pressure and temperature levels than air separation. Pressure levels in excess of 1,000 pounds per square inch are common in hydrocarbon processing, while air separation typically takes place at less than 100 pounds per square inch. These characteristics require the application of different design and engineering techniques than are required to fabricate air separation equipment. Chart's systems for this market include various gas separation technologies, such as nitrogen rejection units used for separating nitrogen from methane and hydrocarbon recovery and distillation systems for liquefied petroleum gas plants. Subsystems and components include cold boxes similar to those employed in air separation plants, low temperature tanks and vessels for on-site storage and road and rail transportation, specialty stainless steel tubing and other equipment. As an example, the Company's PSI unit has designed nitrogen rejection units for major oil and gas producers which contain cold boxes designed by PSI, fabricated at other Company locations, and containing ALTEC's heat exchangers and Bi-Braze(R) transition couplings. The Company has an agreement with Praxair granting PSI exclusive worldwide rights to build and sell nitrogen rejection units (NRUs) and related equipment utilizing Praxair's proprietary technology in this segment of the natural gas processing field. ALTEC developed, and in 1990 introduced, the Core-in-Kettle(R) heat exchanger to provide a new application for brazed aluminum plate-fin heat exchangers in the hydrocarbon processing market. These units are designed to compete with kettle-type steel and alloy shell and tube heat exchangers. The ALTEC design replaces the steel and alloy tube bundles contained in the kettle with a brazed aluminum plate-fin heat exchanger core. The Company's patented Ryan/Holmes technology for the distillative separation of carbon dioxide and other gases from hydrocarbons is applied in gas separation plants constructed in connection with enhanced oil and gas recovery operations. This technology facilitates the extraction of carbon dioxide from recovered hydrocarbons and its reinjection into the well with reduced costs of recompression. The Ryan/Holmes 3 5 technology is also used to extract other gases from recovered hydrocarbons, some of which can be sold by customers as separate end products. The Company, through CVI, is actively involved in LNG fuel systems, including LNG and LNG to CNG fueling stations as well as on-board vehicle systems. Chart's major customers in the hydrocarbon processing equipment market include oil and gas producers such as Amerada Hess, Amoco, Arco, Exxon, Koch Industries, Lyondell, Mesa Petroleum, Mobil Oil, Phillips Petroleum, Shell Oil, and Williams Field Services; large engineering contractors such as ABB Randall, Bechtel, Fluor Daniel, JGC, M.W. Kellogg, Lummus, Parsons, and Stone & Webster. Major competitors in the hydrocarbon processing equipment market include: Dow, Monsanto and Grace for separation systems designed to compete with the Company's Ryan/Holmes technology-based systems and Air Products and Chemicals for nitrogen rejection units. Sumitomo Precision Products, Kobe Steel, IMI Marston, Nordon Cryogenie, and Linde A.G. are competing sources for brazed aluminum plate-fin heat exchangers. CRYOGENIC AND HIGH VACUUM SYSTEMS. Chart designs, engineers and manufactures complete custom liquefaction and refrigeration systems for helium and hydrogen and custom thermal vacuum systems for various uses. Cryogenic liquefaction, refrigeration, and regeneration systems are used for diverse applications, ranging from small standard-packaged helium refrigeration units for university and private sector laboratories to very large, custom designed helium regeneration and refrigeration systems for national laboratories and liquefiers for industrial application. Chart has participated as a supplier in super-low temperature research projects. In addition to its work with the technology for the production of liquid helium, the Company has designed and fabricated a wide variety of custom refrigeration and liquefaction systems for research conducted by laboratories such as Brookhaven National Laboratory, Los Alamos Scientific Laboratory, Fermi National Accelerator Laboratory, and CEBAF. In addition to the research related applications, the Company's helium liquefaction and refrigeration systems are beginning to have application in emerging industrial application of superconductivity such as high gradient magnetic separation and magnetic energy storage. The Company also manufactures cold boxes, brazed aluminum plate-fin heat exchangers, on-site storage and road and rail transportation tanks and vessels and other equipment for this market. The Company's major competitors for complete systems include L'Air Liquide, Linde A.G., CCI, Air Products and Chemicals, and Kobe Steel. Chart's custom thermal vacuum systems are designed and fabricated by the PSI Westborough operating unit. Prior to its acquisition by Chart, CVI also provided services to this area but that area has been integrated into PSI Westborough. These systems are used by NASA, other government agencies, major aerospace companies, including Lockheed/Martin, Space Systems/Loral, Hughes, and other firms. The Company's products include high vacuum, low temperature space simulation chambers used for pre-flight testing of satellites, rockets and other space-related hardware. The Company also develops vacuum systems which are used in the deposition of metallic coatings on the surfaces of specialized equipment such as large telescope mirrors. The Company's major competitors in the market for thermal vacuum products and systems for aerospace and research applications include Dynavac (a unit of Tenney Vacuum) and Bemco. The Company's experience and technological advancements in the high-vacuum area resulted in its involvement in the Laser Interferometer Gravitational-Wave Observatory (LIGO). The facilities will be dedicated to the detection of cosmic gravitational waves and the harnessing of these waves for scientific research. The Company will supply all of the required LIGO vacuum equipment; including vacuum chambers, large pipe spools, valves, vacuum pumps, controllers, bakeout equipment and modular clean rooms. SPECIALTY MARKETS. Chart designs, manufactures and markets products for nuclear and fossil fuel power plants, pulp and paper producers and various specialty markets. The Company's products for this market 4 6 include PEI's storage tanks and vessels, critical pipe supports and constants manufactured by the NPS Products division of PSI and Greenville Tube's specialty stainless steel tubing. Although no new nuclear power plants and very few new fossil fuel power plants are under construction in the United States, Chart remains active in the domestic market by providing maintenance, repair and retrofit equipment to the large number of existing operating facilities. Overseas, the construction of power generation plants, particularly nuclear facilities, is more vigorous. Together, South Korea and Taiwan have multiple nuclear plants scheduled for construction over the next five years. Other countries in Southeast Asia, as well as Canada and Spain, are also actively involved in new power plant construction. Currently, the Company has a manufacturing and design agreement for critical application pipe supports and devices with Korean Heavy Industries & Construction Co., Ltd., the prime contractor for the construction of all nuclear power plants currently under construction in South Korea. The Company's major competitors for standard pipe support products are Grinnel (a subsidiary of Tyco), Power Piping Company, Basic Engineers and Rilco. Its major competitor for low-level nuclear waste treatment systems is General Electric. The Company, through its Greenville Tube operating unit, supplies specialty stainless steel tubing for a variety of markets and applications, including food processing, medical, construction and other general industrial uses. These products are sold primarily to customers in North America. The Company employs a unique manufacturing strategy to compete in the specialty tubing markets that it serves. Virtually all of its competitors follow conventional manufacturing practices, including the stocking of numerous sizes of stainless steel strips and seamless tube hollows, so as to minimize the drawing required to obtain a finished product. These competitors also obtain maximum volume by having long production runs, thereby reducing changeovers and minimizing downtime, and, in some cases, building tubes for finished goods inventory. Chart, conversely, stocks only a limited array of stainless steel strips and seamless tube hollows, and reworks the product repeatedly to produce the finished product. It manufactures finished products only against orders received. MARKETING The Company's operating units, except for Greenville Tube, currently market products and services in North America primarily through direct sales personnel and supplement these direct sales through sales representatives and distributors. Greenville Tube currently markets its tubing products exclusively through independent manufacturer's sales representatives located throughout the United States. The technical and custom design nature of the Company's products requires a professional, highly trained sales force. Substantially all of the Company's sales personnel have previous academic and industrial engineering or technical experience. The Company uses independent manufacturer's sales representatives in many foreign countries. These independent representatives supplement the Company's direct sales force in dealing with language and cultural matters. The Company's domestic and foreign independent manufacturer's sales representatives earn commissions on sales which vary by product type. BACKLOG At December 31, 1996, the Company's backlog of firm sales orders amounted to approximately $128.3 million, compared with approximately $111.0 million at December 31, 1995. The Company anticipates that $107.3 million of the 1996 backlog will be recognized as sales during 1997 and the remainder should be recognized as sales in 1998. The Company's backlog fluctuates from time to time and the amounts set forth above are not necessarily indicative of future backlog levels. CUSTOMERS Sales to United States government funded projects accounted for 11%, 5% and 3% of consolidated sales in 1996, 1995 and 1994 respectively, and approximately $800,000 of the accounts receivable balance at 5 7 December 31, 1996. Ten customers accounted for 53% of consolidated sales in 1996. Chart's sales to particular customers fluctuate from period to period. Management believes Chart's relationships with its customers are good. PATENTS AND TRADEMARKS Although the Company has a number of patents, trademarks and licenses related to its businesses, except as described below, no one of them or related group of them is considered by the Company to be of such importance that its expiration or termination would have a material adverse effect on the Company's businesses. In general, each operating unit depends upon technological capabilities, manufacturing quality control and application of know-how, rather than patents or other proprietary rights in the conduct of its business. The Company holds a group of patents for its Ryan/Holmes technology, which is used primarily in treating associated gases produced from tertiary oil recovery projects. In addition to fabricating recovery plants on a turnkey basis for customers, Chart also grants licenses under this technology to customers for use in their own construction and operation of such facilities. As of December 31, 1996, there were 12 licensees using the Ryan/Holmes process. This group of patents will expire during the period from 1999 through 2001 and the Company may not derive licensing revenues from such technology thereafter. RAW MATERIALS AND SUPPLIERS The Company manufactures most of the products it sells. Raw materials such as aluminum fin stock, brazing sheets, bars, plate and piping, stainless steel hollows, strip, heads, plate and piping, carbon steel heads and plate, 9% nickel steel heads and plate, compressors and valves are available from multiple sources of supply. The Company has experienced price increases recently in certain of its raw materials, but anticipates passing these increased costs to its customer. However, no assurance can be given as to the success with which the Company may pass along such costs to customers. The Company foresees no acute shortages of any raw materials which would have a material adverse effect on its operations. ENGINEERING AND PRODUCT DEVELOPMENT Chart's engineering and product development activities are primarily associated with assisting in the design of products or modifications to execute specific customer orders. The Company's engineering, technical and marketing employees actively assist customers in identifying their needs and determining appropriate products to meet those needs. A substantial portion of Chart's engineering activities are conducted by the PSI Westborough operating unit, which employs most of the Company's engineers and related staff personnel. A portion of Chart's engineering expenditures were charged to customers either as a separate item or as a part of product cost. EMPLOYEES As of December 31, 1996, the Company had a total of 925 employees, including 270 salaried, 286 union hourly and 369 non-union hourly employees. The salaried employees include 96 engineers and draft-persons and 174 other professional, technical and clerical personnel. The Company is a party to two collective bargaining agreements. ALTEC's agreement with the International Association of Machinists and Aerospace Workers covering 198 employees expires February 4, 1998. PEI's agreement with the International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers and Helpers covering 88 employees expires August 31, 1999. Since the acquisition of each of its operating units, the Company has not had any work stoppages or strikes. The Company believes its employee relations are good. 6 8 PROPERTIES The Company maintains its corporate headquarters in Eastlake, Ohio. Each of ALTEC, PSI, CCF, PEI, CVI and Greenville Tube also maintains its own offices. The Company currently produces its products in seven manufacturing plants which are located in LaCrosse, Wisconsin; Westborough, Massachusetts; New Iberia, Louisiana; Plaistow, New Hampshire; Columbus, Ohio; Costa Mesa, California; and Clarksville, Arkansas. Chart also leases warehouse space at several locations near its manufacturing facilities. The Company's plant and office at Westborough, Massachusetts were not originally purchased when the Company acquired the PSI operations. However, the seller, while leasing the facility to the Company, retained a five-year option to put the plant and office to the Company at $3.25 million, a price that management believes approximates fair value. During 1995 the landlord notified the Company of this intent. The Company entered into negotiations with the landlord to also acquire some adjoining land. In May 1996 it was agreed to buy the plant and office, plus an additional 23 acres, for $3.58 million. Management considers the Company's facilities to be generally suitable and adequate for their intended uses and to be sufficient for the Company's foreseeable production capacity needs in light of its current plans. The following table sets forth certain information about the Company's facilities.
LOCATION SQ. FT. OWNERSHIP USE - --------------------------- ------- ---------- ------------------------ LaCrosse, Wisconsin 134,000 Owned Manufacturing 10,000 Owned Office Westborough, Massachusetts 51,900 Owned Manufacturing 33,200 Owned Office 31,600 Leased Manufacturing/Warehouse New Iberia, Louisiana 60,000 Leased Manufacturing Columbus, Ohio 34,700 Leased Manufacturing 5,000 Leased Manufacturing Costa Mesa, California 21,900 Leased Manufacturing Plaistow, New Hampshire 152,000 Owned Manufacturing 10,400 Owned Office Clarksville, Arkansas 82,500 Owned Manufacturing 2,800 Owned Office Greenville, Pennsylvania 2,100 Leased Office Eastlake, Ohio 1,500 Leased Corporate Headquarters
GOVERNMENT CONTRACTS In 1996, approximately 11% of the Company's revenues were derived from contracts or subcontracts with, or funded by the United States government, mostly related to LIGO. These contracts and subcontracts contain standard provisions permitting the government to terminate them at its option, without cause. In the event of such termination, the Company is entitled to receive reimbursement on the basis of work completed (costs incurred plus a reasonable profit). In addition, these contracts and subcontracts are subject to renegotiation of profits. The Company has no knowledge of any pending or threatened renegotiation or termination of any material government contract or subcontract. ENVIRONMENTAL MATTERS The Company's operations involve and have involved the handling and use of substances, such as various cleaning fluids used to remove grease from metal, that are subject to federal, state and local environmental laws and regulations that impose limitations on the discharge of pollutants into the soil, air and water, and establish standards for their storage and disposal. The Company monitors and reviews its procedures and policies for compliance with environmental laws. Company management is highly conscious of these 7 9 regulations, and supports an ongoing capital investment program to maintain the Company's strict adherence to required standards. As part of its ongoing environmental compliance and monitoring programs, the Company is voluntarily developing work plans for environmental conditions involving certain of its operating facilities. Based upon the Company's study of the known conditions and its prior experience in investigating and correcting environmental conditions, the Company estimates that the potential costs of these site remediation efforts will not have a material adverse effect on the Company's financial position or liquidity. Approximately $1.4 million is recorded in accrued liabilities at December 31, 1996 for known environmental matters. These expenditures are expected to be made mostly in the next year, if the necessary regulatory agency approvals of the Company's work plans are obtained. Although the Company believes it has adequately provided for the cost of all known environmental conditions, the applicable regulatory agencies could insist upon different and more costly remediative measures than those the Company believes are adequate or required by existing law. Otherwise, the Company believes that it is currently in compliance with all known material and applicable environmental regulations. LEGAL PROCEEDINGS The Company's operating units are parties, in the ordinary course of their business, to various legal actions related to performance under contracts, product liability and other matters, several of which actions claim substantial damages. The Company believes that these legal actions, as well as the legal actions described below, will not have a material adverse effect on the Company's consolidated financial position or liquidity. In October 1993, the Company, through its then-existing subsidiary, Process Engineering, along with other defendants, was found liable for damages for a death resulting from an accident involving a soccer goal donated to a school district prior to Chart's acquisition of Process Engineering. Total damages, excluding accrued interest, awarded by the jury against the Company and two other defendants totaled $925,000. The Company has appealed this jury verdict. At this time the Company is unable to determine what its final potential allocation of the damages may be if the Company's appeal is unsuccessful. However, third quarter 1993 earnings included a charge related to this legal proceeding which the Company feels adequately provides for any possible claims that it may have for losses associated with this legal proceeding. The Company is pursuing possible indemnification by the former shareholders of Process Engineering pursuant to the purchase agreement which memorializes the sale of Process Engineering to the Company and provides for indemnification for certain pre-acquisition contingencies. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. EXECUTIVE OFFICERS OF THE REGISTRANT* The name, age as of February 27, 1997, and positions of each executive officer of the Company are as follows:
NAME AGE POSITION AND OFFICES WITH THE COMPANY ---------------------------------------- --- ------------------------------------- Arthur S. Holmes........................ 56 Chairman and Chief Executive Officer James R. Sadowski....................... 56 President and Chief Operating Officer Don A. Baines........................... 54 Chief Financial Officer and Treasurer
- --------------- * Included pursuant to Instruction 3 to Item 401(b) of Regulation S-K. Arthur S. Holmes has been Chairman and Chief Executive Officer of the Company since its formation in June 1992, and was President until December 1993. He also has been President and the principal owner of Holmes Investment Services, Inc. ("HIS"), a management consulting firm, since 1989. Mr. Holmes is 8 10 currently the Chairman and Chief Executive Officer of ALTEC, and served as President of ALTEC from 1985 through 1989. From 1978 through 1985, he served in a variety of management capacities for Koch Process Systems, Inc., the predecessor of PSI, most recently as Vice President-Manager of the Gas Processing Division. Mr. Holmes is the co-inventor of the Company's patented Ryan/Holmes technology. See "Business-Patents and Trademarks." Mr. Holmes holds a B.S. and M.S. in Chemical Engineering from The Pennsylvania State University and an M.B.A. from Northeastern University. James R. Sadowski has been President and Chief Operating Officer of the Company since December 1993. Prior to joining the Company, Mr. Sadowski served as Group Vice President of Parker Hannifin Corporation's Bertea Aerospace Group ("Bertea") from 1991 to 1993. Prior to his service at Bertea he served in various managerial capacities at Parker Hannifin Corporation and TRW, Inc. Mr. Sadowski holds a B.S. in Engineering/Science from Case Institute of Technology and a M.S. degree from the same institution in Mechanical Engineering. Don A. Baines has been Chief Financial Officer of ALTEC since 1986 and has been the Chief Financial Officer and Treasurer of the Company since its formation in June 1992. He also has served as Chief Financial Officer for HIS since 1989. From 1986 through 1989, Mr. Baines served as Vice President, Manager of Finance for ALTEC. From 1976 through 1985, Mr. Baines served in a variety of management capacities, most recently Controller, in the Process/Transport Division of the Trane Company, which included the predecessor of ALTEC. Mr. Baines is a Certified Public Accountant and holds a B.B.A. in Accounting from St. Edward's University, Austin, Texas. KEY EMPLOYEES OF THE OPERATING UNITS Michael J. Wahlen has been the President and Chief Operating Officer of ALTEC since 1989. From 1986 through 1989, Mr. Wahlen served as Vice President and Manager of Sales for ALTEC. Mr. Wahlen began his career in 1973 with the Trane Company and from 1979 to 1986 was Manager of Sales responsible for Trane's brazed aluminum heat exchanger sales in the Western Hemisphere. Mr. Wahlen holds a B.S. in Mechanical Engineering from the University of Wisconsin -- Milwaukee. W. Kent Higgins has been President of the PSI's Westborough Division since November 1994. Mr. Higgins had been Executive Vice President of PSI from April 1993 until November 1994. From 1991 through April 1993, Mr. Higgins served as the President of NPS. From 1973 through 1991, had served in a variety of management capacities at Koch Process Systems, Inc., the predecessor of PSI, most recently as Vice President and Manager of Operations responsible for the day to day manufacturing activities of that company. Mr. Higgins holds a B.S. in Marine Engineering from the Maine Maritime Academy. Charles R. Lovett has been the President of Process Engineering Division of PSI since November 1994. From February 1993 to November 1994, he was Chief Executive Officer of PSI and Process Engineering. From March 1992 to February 1993 he was the President and Chief Operating Officer of PSI. He was Executive Vice President and Chief Operating Officer of Process Engineering from 1990 to 1992. From 1988 through 1990, he served as Vice President of Operations of AMW Industries. From 1984 through 1988, Mr. Lovett served as the Vice President of Manufacturing of Koch Process Systems, Inc., the predecessor of PSI. Mr. Lovett holds a B.S. in Mechanical Engineering from the University of Dayton. Charles E. Downs has been the President and Chief Operating Officer of Greenville Tube since 1991. Mr. Downs was the Vice President and Treasurer of Greenville Tube from 1987 to 1991. He joined Greenville Tube in 1986 as Controller and Assistant Treasurer. Mr. Downs holds a B.S. in Business Administration from Geneva College. Roland E. Spence has been President of the CVI Division of PSI from January 1995. From 1960 to 1994, Mr. Spence served in a variety of management capacities at CVI Incorporated, most recently as Vice President and Manager of the Costa Mesa operations of that company. 9 11 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. Quarterly Stock Prices and Dividends
QUARTER HIGH LOW DIVIDEND - -------- ----- ---- -------- 1995 1st 5-1/8 3-3/4 .07 2nd 5-7/8 4-1/8 .07 3rd 8-7/8 5 .07 4th 8-3/4 6-1/2 .07
QUARTER HIGH LOW DIVIDEND - -------- ----- ---- -------- 1996 1st 10-1/2 6-3/4 .07 2nd 16-7/8 9-7/8 .07 3rd 18-1/2 12-1/2 .07 4th 17-7/8 15-1/8 .09
Chart Industries Common Stock is traded on the New York Stock Exchange under the symbol "CTI." Shareholders of record on January 31, 1997 numbered 725. The Company estimates that an additional 3,100 shareholders own stock held for their accounts at brokerage firms and financial institutions. 10 12 ITEM 6. SELECTED FINANCIAL DATA SELECTED FINANCIAL DATA (Dollars in thousands, except per share amounts)
YEARS ENDED DECEMBER 31 1996 1995 1994 1993 1992 - ------------------------------------------ -------- -------- ------- ------- -------- INCOME STATEMENT DATA: Sales..................................... $148,400 $112,479 $84,258 $83,734 $104,845 Gross profit.............................. 45,002 30,775 15,808 17,779 26,670 Selling, general and administrative....... 21,745 18,108 15,020 15,865 14,624 Restructuring charge...................... 2,151 Operating income (loss)................... 23,257 12,667 (1,363) 1,914 12,046 Net interest expense...................... 623 1,858 996 602 1,451 Income tax expense (benefit).............. 7,605 3,746 (896) 512 3,789 Net income (loss)......................... 15,029 7,063 (1,463) 800 6,806 EARNINGS PER COMMON SHARE: Net income (loss)......................... $ 1.48 $ .70 ($ .15) $ .08 $ .73 OTHER FINANCIAL DATA: Income from continuing operations before income taxes, depreciation and amortization............................ $ 25,342 $ 13,551 $ 339 $ 3,385 $ 12,505 Depreciation and amortization............. 2,708 2,742 2,698 2,073 1,910 Dividends................................. 3,002 2,787 2,764 2,793 11,178 Dividends per share....................... $ .30 $ .28 $ .28 $ .28 N/A (1) BALANCE SHEET DATA: Cash, cash equivalents and restricted cash.................................... $ 9,408 $ 229 $ 206 $ 704 $ 3,518 Working capital........................... 12,647 17,750 15,483 19,847 15,815 Total assets.............................. 81,196 66,506 54,881 48,003 48,954 Total debt................................ 4,830 14,573 18,080 14,810 8,068 Long-term debt, less current portion...... 4,469 12,566 16,073 13,000 6,000 Shareholders' equity...................... 28,096 18,433 14,364 18,418 21,747
- --------------- (1) Prior to the Reorganization and public stock offering in December 1992, the Company made cash distributions to its then current stockholders. 11 13 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL In 1996, Chart Industries experienced a 113 percent increase in net income over the prior year. A large portion of this increase can be attributed to a strong demand for air separation equipment, including heat exchangers, cold boxes, cryogenic tanks and assorted system components. In addition to the air separation equipment, the Company is about one third complete on the LIGO project, its largest contract thus far which totaled $39.1 million. As to order bookings, the Company has seen a tremendous increase in the demand for hydrocarbon processing equipment. New orders in this area were $54.1 million in 1996 compared to $30.5 million and $21.4 million in 1995 and 1994, respectively. Due to the longer lead time on this equipment, the Company is just beginning to see the effect on sales. Backlog in this area now totals $45.2 million with an estimated gross margin of 39.2 percent. The consolidated backlog of $128.3 million, another new high for the Company, with an estimated gross margin of 30.8 percent, should allow for a strong 1997 in which the Company will strive again to exceed its internal growth targets and continue to look for acquisition candidates to enhance that growth.
Measurement Period (Fiscal Year Covered) 3/31/92 57.8 6/30/92 55.1 9/30/92 54.9 12/31/92 47.3 3/31/93 39.1 6/30/93 35.8 9/30/93 36.1 12/31/93 41.1 3/31/94 38.9 6/30/94 44.3 9/30/94 48.5 12/31/94 53.8 3/31/95 58.2 6/30/95 57.3 9/30/95 97.7 12/31/95 111.0 3/31/96 112.9 6/30/96 124.4 9/30/96 125.7 12/31/96 128.1
12 14 OPERATING RESULTS The following table sets forth, for the periods indicated, the percentage relationship to sales of the Company each line item represents.
YEAR ENDED DECEMBER 31, ------------------------- 1996 1995 1994 ----- ----- ----- Sales............................................................. 100.0% 100.0% 100.0% Cost of products sold............................................. 69.7 72.6 81.2 Gross profit...................................................... 30.3 27.4 18.8 Selling, general and administrative expense....................... 14.7 16.1 17.8 Restructuring charge.............................................. -- -- 2.6 Operating income (loss)........................................... 15.6 11.3 (1.6) Interest expense, net............................................. .4 1.7 1.2 Income taxes (benefit)............................................ 5.1 3.3 (1.1) Net income (loss)................................................. 10.1 6.3 (1.7)
YEAR ENDED DECEMBER 31, 1996 AND 1995 MARKET SECTOR ANALYSIS
SALES GROSS PROFIT ------------------- ------------------ GROSS PERCENT PERCENT PROFIT 1996 ($000) OF TOTAL ($000) OF TOTAL MARGIN -------- -------- ------- -------- ------ Air Separation Equipment..................... $ 66,304 44.7% $21,255 47.2% 32.1% Hydrocarbon Processing Equipment............. 28,125 18.9% 9,266 20.6% 33.0% Cryogenic & High Vacuum Equipment............ 26,822 18.1% 4,437 9.9% 16.5% Specialty Products........................... 27,149 18.3% 10,044 22.3% 37.0% -------- ------ ------- ------ ---- TOTAL.............................. $148,400 100.0% $45,002 100.0% 30.3% ======== ====== ======= ====== ====
SALES GROSS PROFIT ------------------- ------------------ GROSS PERCENT PERCENT PROFIT 1995 ($000) OF TOTAL ($000) OF TOTAL MARGIN -------- -------- ------- -------- ------ Air Separation Equipment..................... $ 42,811 38.1% $10,610 34.5% 24.8% Hydrocarbon Processing Equipment............. 23,914 21.2% 7,882 25.6% 33.0% Cryogenic & High Vacuum Equipment............ 17,301 15.4% 1,353 4.4% 7.8% Specialty Products........................... 28,453 25.3% 10,930 35.5% 38.4% -------- ------ ------- ------ ---- TOTAL.............................. $112,479 100.0% $30,775 100.0% 27.4% ======== ====== ======= ====== ====
YEARS ENDED DECEMBER 31, 1996 AND 1995 Sales for 1996 were $148.4 million, an increase of $35.9 million or 31.9 percent over 1995. By far, the largest increase in sales over 1995 came in air separation equipment totalling $23.5 million, with increases of $10.1 million in cryogenic tanks, $8.5 million in brazed aluminum heat exchangers, $2.9 million in cold boxes and $2 million in assorted cryogenic components during 1996. Sales in the hydrocarbon processing equipment area increased $4.2 million, almost entirely in brazed aluminum heat exchangers, which were for the most part supplying an increase in the demand for ethylene-related equipment. The large pick-up in 1996 orders the Company has received related to the natural gas processing market will be seen in increased sales during 1997 and into 1998. Sales to the cryogenic/high vacuum market increased in 1996. Much of the sales improvement in this market is the result of vacuum equipment being supplied to the LIGO project, which totalled approximately $13 million during 1996. 13 15 Gross profit for 1996 increased $14.2 million or 46.2 percent from 1995 levels. The gross margin percentage increased from 27.4 percent in 1995 to 30.3 percent in 1996. As in sales, a large portion of the improvement in both gross profit and in margin percentage came from the air separation sector. The most dramatic improvement was the cryogenic tank area at PEI, which has fully turned around after the 1994 restructuring, and when coupled with increasing prices, has gone from a negative gross margin to a margin level comparable to the whole market area. Also seeing large volume and price improvement in 1996 was the brazed aluminum heat exchanger market. As the LIGO job progresses toward completion, it is having a positive effect in the cryogenic/high-vacuum equipment area, where the margin percentage has grown to 16.5 percent from 7.8 percent. Selling, general and administrative (SG&A) costs totaled $21.7 million for 1996, an increase of $3.6 million from 1995. However, as a percentage of sales, SG&A has decreased from 16.1 percent in 1995 to 14.7 percent in 1996. This improvement is the result of increasing volume relative to the fixed overheads. The $3.6 million increase in expense is largely driven by the variable expenses of profit sharing, management incentive compensation and selling commissions, which are all closely tied to increasing profitability and sales levels. In addition, outside consultants are working with the Company in efforts to increase throughput in various facilities, the costs for which have been included in SG&A. Net interest expense declined during 1996 with borrowings declining from $14.6 million to a net positive cash position. This was also the last year of amortization for the loan origination costs related to the $25 million Credit Agreement. The 1996 tax expense includes the positive effect of eliminating the deferred tax valuation allowance that related to certain tax loss carryforwards as well as the ongoing benefits of several different tax credits. As a result of the continued growth of the Company's Gulf Coast operations and the expansion of ALTEC, total employment has increased 6.1 percent to 925. The Company feels that this increase is moderate when compared to the greater than 30 percent revenue growth shown in each of the last two years. YEARS ENDED DECEMBER 31, 1995 AND 1994 Sales for 1995 were $112.5 million versus $84.3 million for 1994, an increase of $28.2 million, or 33.5 percent. Sales grew across all markets and received an additional boost from the acquisition of CVI in the fourth quarter of 1994. The continued strong demand for stainless steel tubing, brazed aluminum heat exchangers and cryogenic storage tanks, was partially offset by a weak market and poor contract performance in the high vacuum area. The Company has decided to focus on large thermal vacuum systems and optical coating systems and exit the small vacuum coating systems market. These changes in emphasis during 1995 should improve this area's performance in 1996 and beyond. Strong air separation market conditions, extensive productivity improvements at PEI, demand for redraw stainless steel tubing, and strong throughput at each of Chart's plants resulted in gross profit for 1995 of $30.8 million versus $15.8 million for 1994, an improvement of $15.0 million, or 95 percent. This result reflects an improved gross profit margin to 27.4 percent from 18.8 percent in 1994. The products supporting this improved margin performance were stainless steel tubing, brazed aluminum heat exchangers and cryogenic storage tanks. This improved performance more than compensated for the anticipated low-margin sales in several long-term high vacuum projects and the start-up costs of our Chart Coastal Fabrication facility in New Iberia, Louisiana. As a percentage of sales, selling, general and administrative (SG&A) expense improved to 16.1 percent versus 17.8 percent in 1994. SG&A expense for 1995 was $18.1 million, approximately $3.1 million higher than 1994. The addition of CVI increased SG&A expense by $2.3 million over last year. The remaining increases are driven by higher commissions and employee profit sharing. Net interest expense for 1995 was $1.9 million versus $1.0 million in 1994. Increased interest charges in 1995 reflect higher borrowing levels to meet increased working capital requirements of the Company's operating units and the acquisition indebtedness related to CVI. As of October 1, 1995, the differential to 14 16 LIBOR at which Chart borrows from its bank group was lowered by 25 basis points to LIBOR plus 200 basis points. The 1995 effective tax rate of 34.7 percent reflects the positive effect of certain tax credits taken in the most recently filed income tax returns and the anticipated effect of such credits on the Company's 1995 tax returns. With the improvement in backlog and operating results in 1995, the Company has added selected personnel; these additional personnel are generally concentrated in direct manufacturing labor and include a growing workforce at Chart Coastal Fabrication. As of December 31, 1995, the Company had 872 employees, a 24 percent increase compared to the December 31, 1994 figure of 702 employees. The 1994 figure does not include 99 employees related to CVI as those employees did not begin to transfer over to the Company until 1995 under the acquisition agreement. 1996 LIQUIDITY AND CAPITAL RESOURCES Cash provided by operations in 1996 was $32.9 million compared to $8.8 million in 1995 and $6.8 million in 1994. As the Company takes on large orders and progresses through completion, there are normally wide swings in working capital requirements depending on negotiated terms. The Company is currently well positioned in regards to working capital despite the large backlog and related inventory needs due to strong progress billings to Chart's customers and strong net income. Capital expenditures in 1996, 1995, and 1994 were $4.9 million, $2.1 million and $1.3 million, respectively. The 1996 capital expenditures relate to the expansion of capacity at both ALTEC and Chart Coastal Fabrication (CCF), as well as general throughput enhancing expenditures at the other locations. The 1995 expenditures included the leasehold improvements and various machinery and equipment purchases for the Company's initial operation at CCF; along with various productivity-enhancing machinery and equipment throughout all of Chart's facilities. The Company fulfilled the original terms of its acquisition agreement related to Process Systems International, Inc., when the former owner exercised its right to put the land and building to the Company. Management believes the purchase price of $3.6 million for the land, building and neighboring parcel of land approximated market. In November 1996, the Board of Directors authorized a program to repurchase 1,000,000 shares of Company Common Stock. The amount and timing of share purchases will depend on market conditions, share price, and other factors. The Company reserves the right to discontinue the repurchase program at any time. In 1996, 146,300 shares were acquired under the program. Management believes that cash generated by operations, borrowings under the Credit Agreement, which now extends through June 1998, and access to capital markets, will be sufficient to satisfy its working capital, dividend, capital expenditure, debt repayment requirements and finance continued growth through acquisition. Dividends totaling $3 million, or $.30 per share, were paid during 1996 and $2.8 million or $.28 per share were paid during each of 1995 and 1994. Any future declarations of dividends are at the sole discretion of the Company's Board of Directors. No assurance can be given as to whether dividends may be declared in the future, and if declared, the amount and timing of such dividends. 15 17 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. REPORT OF INDEPENDENT AUDITORS To the Shareholders and Board of Directors of Chart Industries, Inc. We have audited the accompanying consolidated balance sheets of Chart Industries, Inc. and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Chart Industries, Inc. and subsidiaries at December 31, 1996 and 1995, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. /s/ ERNST & YOUNG LLP Cleveland, Ohio February 3, 1997 16 18 CHART INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31 ------------------- 1996 1995 ------- ------- (DOLLARS IN THOUSANDS) ASSETS CURRENT ASSETS Cash and cash equivalents............................................. $ 4,304 $ 229 Restricted cash....................................................... 5,104 Accounts receivable, net of allowances of $329 and $202............... 25,922 26,614 Inventories, net...................................................... 21,727 20,871 Unbilled contract revenue............................................. 1,402 791 Deferred income taxes................................................. 1,365 1,809 Prepaid expenses...................................................... 863 947 ------- ------- TOTAL CURRENT ASSETS.................................................... 60,687 51,261 Property, plant and equipment, net...................................... 17,882 11,734 Other assets, net....................................................... 2,627 3,511 ------- ------- TOTAL ASSETS............................................................ $81,196 $66,506 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable...................................................... $ 8,582 $ 7,764 Customer advances..................................................... 12,698 7,408 Billings in excess of contract revenue................................ 11,444 6,027 Accrued salaries, wages and benefits.................................. 6,810 4,760 Contract and warranty reserves........................................ 4,710 2,743 Accrued expenses and other liabilities................................ 3,435 2,802 Current portion of long-term debt..................................... 361 2,007 ------- ------- TOTAL CURRENT LIABILITIES............................................... 48,040 33,511 Long-term debt.......................................................... 4,469 12,566 Deferred income taxes................................................... 591 1,996 SHAREHOLDERS' EQUITY Preferred stock, 1,000,000 shares authorized, none issued or outstanding Common stock, par value $.01 per share -- 30,000,000 shares authorized, 10,203,200 and 10,094,594 shares issued at December 31, 1996 and 1995, respectively........................... 102 101 Additional paid-in capital............................................ 18,118 17,024 Retained earnings..................................................... 14,321 2,294 Treasury stock, at cost, 362,585 and 163,158 shares at December 31, 1996 and 1995, respectively........................................ (4,445) (986) ------- ------- 28,096 18,433 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.............................. $81,196 $66,506 ======= =======
The accompanying notes are an integral part of these consolidated financial statements. 17 19 CHART INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31 --------------------------------- 1996 1995 1994 -------- -------- ------- (DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Sales...................................................... $148,400 $112,479 $84,258 Cost of products sold...................................... 103,398 81,704 68,450 -------- -------- ------- Gross profit............................................... 45,002 30,775 15,808 Selling, general and administrative expenses............... 21,745 18,108 15,020 Restructuring charge....................................... 2,151 -------- -------- ------- Operating income (loss).................................... 23,257 12,667 (1,363) Interest expense -- net.................................... (623) (1,858) (996) -------- -------- ------- Income (loss) before income taxes.......................... 22,634 10,809 (2,359) Income tax expense (benefit): Current.................................................. 8,566 4,556 (50) Deferred................................................. (961) (810) (846) -------- -------- ------- 7,605 3,746 (896) -------- -------- ------- Net income (loss).......................................... $ 15,029 $ 7,063 $(1,463) ======== ======== ======= Net income (loss) per share................................ $ 1.48 $ .70 $ (.15) ======== ======== ======= Shares used in per share calculations...................... 10,124 10,066 10,035 ======== ======== =======
The accompanying notes are an integral part of these consolidated financial statements. 18 20 CHART INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
ADDITIONAL RETAINED TOTAL SHARES COMMON PAID-IN EARNINGS TREASURY SHAREHOLDERS' OUTSTANDING STOCK CAPITAL (DEFICIT) STOCK EQUITY ----------- ------ ---------- -------- -------- ------------- (DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Balance at January 1, 1994..... 9,827 $100 $ 19,871 $ (430) $ (1,123) $18,418 Net loss..................... (1,463) (1,463) Dividends ($.28 per share)... (2,764) (2,764) Treasury stock acquisitions.............. (11) (44) (44) Stock options, net of tax benefit................... (57) (47) 47 (57) Contribution of treasury stock to employee benefit plans..................... 69 (134) 408 274 ----- ---- -------- -------- -------- ------- Balance at December 31, 1994... 9,885 100 16,916 (1,940) (712) 14,364 Net income................... 7,063 7,063 Dividends ($.28 per share)... (2,787) (2,787) Treasury stock acquisitions.............. (97) (664) (664) Stock options, net of tax benefit................... 97 1 68 (40) 150 179 Contribution of treasury stock to employee benefit plans..................... 46 40 (2) 240 278 ----- ---- -------- -------- -------- ------- Balance at December 31, 1995... 9,931 101 17,024 2,294 (986) 18,433 Net income................... 15,029 15,029 Dividends ($.30 per share)... (3,002) (3,002) Treasury stock acquisitions.............. (255) (3,732) (3,732) Stock options, net of tax benefit................... 115 1 737 28 766 Contribution of treasury stock to employee benefit plans..................... 50 357 245 602 ----- ---- -------- -------- -------- ------- Balance at December 31, 1996... 9,841 $102 $ 18,118 $ 14,321 $ (4,445) $28,096 ===== ==== ======== ======== ======== =======
The accompanying notes are an integral part of these consolidated financial statements. 19 21 CHART INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31 -------------------------------- 1996 1995 1994 -------- -------- -------- (DOLLARS IN THOUSANDS) OPERATING ACTIVITIES Net income (loss)......................................... $ 15,029 $ 7,063 $ (1,463) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization.......................... 2,708 2,742 2,698 Deferred income taxes.................................. (961) (810) (846) Contribution of treasury stock to employee benefit plans................................................ 602 278 274 Increase (decrease) in cash resulting from changes in operating assets and liabilities: Accounts receivable.................................. 692 (6,720) (4,740) Inventory and other current assets................... (1,383) (3,779) 3,342 Accounts payable and accrued liabilities............. 5,468 4,042 3,862 Billings in excess of contract revenue and customer advances.......................................... 10,707 6,022 3,628 -------- -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES................. 32,862 8,838 6,755 INVESTING ACTIVITIES Capital expenditures...................................... (4,868) (2,111) (1,333) Acquisition of the PSI building........................... (3,578) Acquisition of net assets from CVI Incorporated........... (650) Other investing activities................................ 474 75 (640) -------- -------- -------- NET CASH USED IN INVESTING ACTIVITIES..................... (7,972) (2,036) (2,623) FINANCING ACTIVITIES Borrowing under Industrial Revenue Bond................... 5,000 Principal payments on long-term debt...................... (3,243) (2,007) (15) Repayments on credit facility............................. (44,750) (40,500) (32,000) Borrowings on credit facility............................. 33,250 39,000 30,250 Purchase of treasury stock................................ (3,732) (664) (44) Stock options exercised................................... 766 179 (57) Dividends paid to shareholders............................ (3,002) (2,787) (2,764) -------- -------- -------- NET CASH USED IN FINANCING ACTIVITIES..................... (15,711) (6,779) (4,630) -------- -------- -------- Net increase (decrease) cash equivalents.................... 9,179 23 (498) Cash and cash equivalents at beginning of year.............. 229 206 704 -------- -------- -------- CASH AND CASH EQUIVALENTS AT END OF YEAR.................... $ 9,408 $ 229 $ 206 ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 20 22 CHART INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A -- NATURE OF OPERATIONS The Company is involved in the engineering and manufacturing of industrial equipment and systems for the cryogenic and process industries and various research applications. Substantially all of the Company's sales and trade accounts receivable are related to the air separation, hydrocarbon and chemical processing and power generation industries and laboratories related to space and high physics research located throughout the world. The Company requires customer advances when appropriate to reduce risk and provide working capital. Sales to U.S. government funded projects accounted for 11%, 5% and 3% of consolidated sales in 1996, 1995 and 1994, respectively and an $800,000 accounts receivable balance at December 31, 1996. Ten customers accounted for 53% of consolidated sales in 1996. NOTE B -- SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation: The consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany accounts and transactions are eliminated in consolidation. Certain items in previous financial statements have been reclassified to conform to 1996 presentation. Cash and Cash Equivalents: The Company considers all investments with an initial maturity of three months or less when purchased to be cash equivalents. The 1996 amount includes $5,104,000 of proceeds and interest income related to the issuance of the IRB in 1996 which have not yet been released from escrow for the ALTEC expansion (see Note C). Intangible Assets: Intangible assets are carried at cost less applicable amortization and amounted to $2,258,000 at December 31, 1996 and $2,860,000 at December 31, 1995. The accumulated amortization included in these amounts was $387,000 and $190,000 in 1996 and 1995, respectively. Intangibles are amortized on the straight-line method over the periods of expected benefit, but not in excess of 15 years. Such amounts are classified as other assets in the accompanying balance sheets. Total amortization was $507,000, $499,000 and $321,000 in 1996, 1995 and 1994, respectively. Inventories: Inventories are stated at the lower of cost or market with cost being determined by both the last-in, first-out ("LIFO") method (approximately 75 percent and 69 percent of total inventory at December 31, 1996 and 1995, respectively), and the first-in, first-out ("FIFO") method. The components of inventory on a first-in, first-out basis are as follows:
DECEMBER 31 ------------------- 1996 1995 ------- ------- (DOLLARS IN THOUSANDS) Raw materials and supplies................................... $11,507 $12,538 Work in process.............................................. 10,536 8,784 Finished goods............................................... 25 181 LIFO reserve................................................. (341) (632) ------- ------- $21,727 $20,871 ======= =======
Property, Plant and Equipment: Property, plant and equipment are stated on the basis of cost. Expenditures for maintenance, repairs and renewals are charged to expense as incurred, whereas major betterments are capitalized. The cost of applicable assets is depreciated over their estimated useful lives. Depreciation is computed using the straight-line method for financial reporting purposes and accelerated 21 23 methods for income tax purposes. The following table shows original costs and the estimated useful lives of the different types of assets:
CLASSIFICATION EXPECTED USEFUL LIFE 1996 1995 ----------------------------------------- ------------------------ ------- ------- Land and buildings....................... 20-35 years (buildings) $10,831 $ 6,753 Machinery and equipment.................. 3-12 years 14,724 13,287 Furniture and fixtures................... 3-5 years 2,256 2,050 Construction in process.................. 2,793 171 ------- ------- 30,604 22,261 Less accumulated depreciation............ 12,722 10,527 ------- ------- Total Property, Plant and Equipment...... $17,882 $11,734 ======= =======
The property, plant and equipment at PEI was evaluated for impairment during 1994 and a writedown of $320,000 was included in a restructuring charge taken in the second quarter of 1994. Property, plant and equipment along with the intangible assets are periodically evaluated for impairment. The Company assesses impairment for each of their operating units by measuring future cash flows against the carrying value of these long-lived assets. If the future undiscounted cash flows are less than the carrying amount, an impairment reserve is recorded. Revenue Recognition: The Company uses the percentage of completion method of accounting for significant contracts. Earned revenue is based on the percentage that incurred costs to date bear to total estimated costs after giving effect to the most recent estimates of total cost. Earned revenue on jobs in process totalled $52.6 million. Timing of amounts billed on contracts varies greatly from contract to contract causing high variation in working capital needs. Amounts billed on percentage completion jobs in process total $62.6 million. 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. Earned revenue reflects the original contract price adjusted for agreed upon claim and change order revenue, if any. Losses expected to be incurred on jobs in process, after consideration of estimated minimum recoveries from claims and change orders, are charged to income as soon as such losses are known. Otherwise, revenue is recognized when the products are completed or shipped. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates especially in regards to the percentage of completion method of revenue recognition. Deferred Income Taxes: The Company and its subsidiaries file a consolidated federal income tax return. Deferred income taxes are provided for temporary differences between financial reporting and the consolidated tax return in accordance with the liability method. Net Income (Loss) Per Share: The weighted average number of common shares and common share equivalents (stock options) outstanding in each year is used to compute net income (loss) per share. Employee Stock Options: The Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related Interpretations in accounting for its employee stock options. Under APB 25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. NOTE C -- LONG-TERM DEBT The Company currently maintains a consolidated credit and revolving loan facility ("Facility") which provides for loans of up to $25 million, of which $10 million may be available for the issuance of letters of credit. The Company had no borrowings at December 31, 1996 and $11.5 million outstanding at December 31, 22 24 1995. The Facility extends to June 30, 1998. The Facility provides the bank with a secured interest in substantially all of the property, plant and equipment of the Company. Under the terms of the Facility, loans (including draws under any proposed letters of credit) will bear interest, at the Company's option, at a rate equal to the bank's base rate (8.25 percent at December 31, 1996) or LIBOR plus 1.25 percent per annum. Based on the Company's financial position, the Company and its banks have agreed to adjust the LIBOR differential on a set schedule. The Company is also required to pay a commitment fee of .375% per annum on the unused portion of the Facility, payable quarterly in arrears. The Facility contains certain covenants and conditions which impose limitations on the Company and its operating units, including meeting certain financial tests and the maintenance of certain financial ratios on a consolidated basis such as: minimum current ratio, minimum net worth, maximum leverage, minimum interest coverage ratio and minimum fixed charge ratio. As of December 31, 1996, the Company was in compliance with all covenants and conditions. The Company has outstanding letters of credit totaling $2,635,000 all backed up by the Facility. As part of the expansion of the ALTEC facility, the Company issued Industrial Development Revenue Bonds (IRB) totaling $5 million during 1996 ($4.8 million outstanding at December 31, 1996). The bonds are collateralized by the equipment related to the expansion. These notes pay interest at 6.3 percent and have maturities in the next five years as follows: 1997 -- $361,000; 1998 -- $405,000; 1999 -- $431,000; 2000 -- $459,000 and 2001 -- $489,000. The Company is required to spend these monies on the current expansion and has commitments with vendors covering this work. All funds should be released from escrow by the end of 1997. The Company was able to repay during 1996 all remaining maturities of the notes issued as part of the acquisition of CVI without any early retirement costs. Interest paid was $688,000 in 1996, $1,799,000 in 1995, and $800,000 in 1994. NOTE D -- RESTRUCTURING CHARGE During 1994, the Company elected to substantially restructure PEI's operations. A restructuring charge was recorded during the second quarter of 1994 for the costs of employee severance (approximately $1.3 million), lease-buyouts, excess inventory and machinery disposals (approximately $1.2 million) and the eventual sale of the land and buildings and other expenses associated with the anticipated plant closure. In October 1994, the Company announced its intention to maintain the operations of PEI at its current Plaistow, New Hampshire location. The decision to continue operations followed the termination of a proposed joint venture and identification of substantial restructuring opportunities and cost reductions at the Plaistow facility. In addition, PEI reached an agreement with its union work force which is expected to permit meaningful operating concessions. The original restructuring charge was reduced by $1.1 million reflecting reductions in employee severance, lease buyouts and costs related to the eventual sale of the land and buildings. The remaining $2.15 million restructuring charge includes severance and other employee-related costs due to the restructuring, write-off of inventory and equipment related to products no longer manufactured, certain costs of the terminated joint venture negotiations and the impairment in value of the land and building. NOTE E -- INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. At December 31, 1996, the Company had net operating loss carryforwards for income tax purposes of $947,000 that expire in years 2003 through 2006. These carryforwards resulted from the Company's 1991 acquisition of Process Engineering and are subject to Separate Return Limitation Year (SRLY) and Section 382 limitations 23 25 imposed by the Internal Revenue Service Code of 1986, as amended, and the regulations thereunder. Significant components of the Company's deferred tax liabilities and assets are as follows:
DECEMBER 31 ----------------- 1996 1995 ------ ------ (DOLLARS IN THOUSANDS) Deferred tax liabilities: Property, plant and equipment....................... $1,506 $1,524 Inventory........................................... 1,243 959 Other -- net........................................ 159 461 ------ ------ TOTAL DEFERRED TAX LIABILITIES.............. 2,908 2,944 Deferred tax assets: Accruals and reserves............................... 3,332 2,154 Net operating loss carryforwards.................... 322 683 Other -- net........................................ 28 290 ------ ------ TOTAL DEFERRED TAX ASSETS................... 3,682 3,127 Valuation allowance for deferred tax assets........... 0 (370) ------ ------ Net deferred tax assets............................... 3,682 2,757 ------ ------ NET DEFERRED TAX (ASSETS)/LIABILITIES....... $ (774) $ 187 ====== ======
Significant components of the provision for income taxes attributable to continuing operations are as follows:
YEARS ENDED DECEMBER 31 ---------------------------- 1996 1995 1994 ------ ------ ------ (DOLLARS IN THOUSANDS) Current: Federal............................................. $7,936 $4,015 $ (185) State............................................... 630 541 135 ------ ------ ------ 8,566 4,556 (50) Deferred: Federal............................................. (850) (644) (846) State............................................... (111) (166) ------ ------ ------ (961) (810) (846) ------ ------ ------ $7,605 $3,746 $ (896) ====== ====== ======
The reconciliation of income tax attributable to continuing operations computed at the U.S. federal statutory tax rates to income tax expense is:
YEARS ENDED DECEMBER 31 ----------------------------------------------------------- 1996 1995 1994 ----------------- ----------------- ----------------- AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT ------ ------- ------ ------- ------ ------- (DOLLARS IN THOUSANDS) Tax at U.S. statutory rates.............. $7,922 35.0% $3,684 34.0% $(802) (34.0%) State income taxes, net of federal tax benefit................................ 337 1.5 248 2.3 89 3.8 Reversal of valuation allowance.......... (370) (1.6) Federal tax benefit of Foreign Sales Corp................................... (213) (.9) (122) (1.1) (96) (4.1) Other -- net............................. (71) (.4) (64) (.5) (87) (3.7) ------ ---- ------ ---- ----- ----- $7,605 33.6% $3,746 34.7% $(896) (38.0%) ====== ==== ====== ==== ===== =====
The Company paid approximately $8 million and $3.1 million in income taxes in 1996 and 1995, respectively. 24 26 NOTE F -- EMPLOYEE BENEFIT PLANS The Company has two defined benefit pension plans which cover approximately 41% of their workforce. The plan benefits are based on either an average of the employee's compensation for certain periods during their employment or fixed amounts per year of service as negotiated with the employees' collective bargaining unit. The Company's funding policy is to contribute at least the minimum funding amounts required by law. Plan assets consist primarily of U.S. Treasury notes and corporate stocks and bonds. The actuarially computed combined pension cost included the following components for the years ended December 31:
1996 1995 1994 ----- ----- ----- (DOLLARS IN THOUSANDS) ----------------------- Service cost of current period...................................... $ 281 $ 204 $ 198 Interest cost on projected benefit obligation....................... 302 264 230 Actual return on plan assets........................................ (290) (530) 39 Net amortization and deferrals...................................... 18 296 (279) ----- ----- ----- TOTAL PENSION COST........................................ $ 311 $ 234 $ 188 ===== ===== =====
The following table sets forth the funded status and amounts recognized in the balance sheets as of December 31:
ASSETS EXCEED ACCUMULATED ACCUMULATED BENEFITS BENEFITS EXCEED ASSETS ----------------- ----------------- 1996 1995 1996 1995 ------ ------ ------ ------ (DOLLARS IN THOUSANDS) Actuarial present value of benefit obligation Vested benefit obligation............................ $2,047 $1,992 $1,299 $1,131 ====== ====== ====== ====== Accumulated benefit obligation....................... 2,140 2,067 $1,544 $1,372 ====== ====== ====== ====== Projected benefit obligation........................... 3,115 2,932 $1,544 $1,372 Plan assets at fair value.............................. 3,129 2,896 1,272 987 ------ ------ ------ ------ Plan assets in excess of (under) projected benefit obligation........................................... 14 (36) (272) (385) Unrecognized prior service cost........................ 173 184 Unrecognized net actuarial loss/(gain)................. 766 727 (45) (36) ------ ------ ------ ------ Prepaid Assets (Liabilities)................. 780 691 (144) (165) ====== ====== ====== ======
The assumptions used in determining pension cost and funded status information are as follows:
1996 1995 ---- ---- Discount rate....................................................... 7% 7% Rate of increase in compensation.................................... 4-5% 4-5% Expected long-term rate of return on assets......................... 8% 8%
The Company has defined contribution savings plans that cover most of its employees. Company contributions to the plans are based on employee contributions and the level of Company match and discretionary contributions. Expenses under the plans totaled $1,127,000, $907,000, and $871,000 for the years 1996, 1995 and 1994, respectively. NOTE G -- STOCK OPTION PLANS In July 1992, the Company adopted a Key Employee Stock Option Plan which provides for the granting of options to purchase shares of Common Stock to certain key employees of the Company. In May 1996, shareholders approved an increase in the amount of shares authorized for the Plan to 615,000 shares of Common Stock. Nonqualified stock options are exercisable for up to 10 years at an option price determined by the Compensation Committee of the Board of Directors. 25 27 Certain information for 1996, 1995 and 1994 relative to the Key Employee Stock Option Plan is summarized below:
1996 1995 1994 --------------------- --------------------- --------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE NUMBER EXERCISE NUMBER EXERCISE NUMBER EXERCISE OF SHARES PRICE OF SHARES PRICE OF SHARES PRICE --------- -------- --------- -------- --------- -------- Outstanding at beginning of year.... 302,331 $ 2.64 333,802 $ 2.64 346,395 $ 2.44 Granted............................. 120,000 14.09 67,500 6.00 10,000 4.13 Exercised........................... (97,831) 1.60 (96,971) .26 (22,593) .18 Expired or canceled................. -- (2,000) 5.50 -- ------- ------ ------- ------ ------- ------ Outstanding at end of year.......... 324,500 $ 8.58 302,331 $ 2.64 333,802 $ 2.64 ======= ====== ======= ====== ======= ====== Exercisable at end of year.......... 85,500 139,331 203,802 ======= ======= ======= Weighted-average fair value of options granted during the year... $ 5.54 $ 2.36 N/A ====== ====== ====== Participants at end of year......... 35 32 32 ======= ======= ======= Available for future grant at end of year....................... 23,105 43,105 58,605 ======= ======= =======
Exercise prices for options outstanding as of December 31, 1996 ranged from $.18 to $15.875. The weighted-average remaining contractual life of those options is 8.2 years. Certain information for ranges of exercise prices is summarized below:
OUTSTANDING EXERCISABLE ------------------------------------ --------------------- WEIGHTED AVERAGE WEIGHTED ----------------------- AVERAGE EXERCISE NUMBER EXERCISE CONTRACTUAL NUMBER EXERCISE PRICE OF SHARES PRICE LIFE OF SHARES PRICE - -------------------------------------------- --------- -------- ----------- --------- -------- Less than $10............................... 209,500 $ 5.41 7.4 85,500 $ 5.00 Equal to or greater than $10................ 115,000 14.36 9.6 0 --
In May 1996, the Shareholders approved the 1996 Outside Directors Stock Option Plan which provides for the granting of options to purchase up to 75,000 shares of Common Stock. The option price for options granted under the Plan to outside Directors will be equal to the fair market value of a share of Common Stock on the date of grant and will be exercisable for a period of ten years from the date of grant exercisable in 33.3% increments on each of the first through the third anniversaries of the date of grant. 26 28 Certain information for 1996, 1995 and 1994 relative to the Outside Directors Stock Option Plans is summarized below:
1996 1995 1994 --------------------- --------------------- --------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE NUMBER EXERCISE NUMBER EXERCISE NUMBER EXERCISE OF SHARES PRICE OF SHARES PRICE OF SHARES PRICE --------- -------- --------- -------- --------- -------- Outstanding at beginning of year.... 30,000 4.29 20,000 4.00 0 Granted............................. 10,000 7.875 10,000 4.875 20,000 4.00 Exercised........................... (16,668) 4.18 Expired or canceled................. ------- ------ ------- ------ ------- ------ Outstanding at end of year.......... 23,332 5.91 30,000 4.29 20,000 4.00 ======= ====== ======= ====== ======= ====== Exercisable at end of year.......... 0 6,666 0 ======= ======= ======= Weighted-average fair value of options granted during the year... $ 2.28 $ 1.41 N/A ====== ====== ====== Participants at end of year......... 2 2 2 ======= ======= ======= Available for future grant at end of year.............................. 65,000 40,000 30,000 ======= ======= =======
Pro forma information regarding net income and earnings per share is required by FASB Statement No. 123, "Accounting for Stock-Based Compensation", which also requires that the information be determined as if the Company has accounted for its employee stock options granted subsequent to December 31, 1994, under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 1996 and 1995: risk-free interest rates of 6.7 percent; dividend yields of 2 percent; volatility factors of the expected market price of the Company's common stock of .38; and a weighted-average expected life of the option of six (6) years for key employee options and three (3) years for outside directors options. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's Key Employee and Outside Directors stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of these stock options. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's pro forma information follows (in thousands except for earnings per share information):
1996 1995 ------- ------ Pro forma net income............................................ $14,971 $7,051 Pro forma earnings per share.................................... $ 1.48 $ .70
Because FASB Statement No. 123 is applicable only to options granted subsequent to December 31, 1994, its pro forma effect will not be fully reflected until 1999. NOTE H -- LEASE COMMITMENTS The Company had $774,000, $800,000 and $417,000 of rental expenses in 1996, 1995 and 1994, respectively. At December 31, 1996, future minimum lease payments for non-cancelable operating leases for the next five years totaled $2.1 million and are payable as follows: 1997 -- $679,000; 1998 -- $542,000; 1999 -- $435,000; 2000 -- $275,000; and 2001 -- $216,000. 27 29 NOTE I -- CONTINGENCIES The Company's operating units are parties, in the ordinary course of their businesses, to various legal actions related to performance under contracts, product liability and other matters, several of which actions claim substantial damages. The Company believes these legal actions will not have a material effect on the Company's financial position or liquidity. The Company is subject to federal, state and local environmental laws and regulations concerning, among other matters, waste water effluents, air emissions and handling and disposal of hazardous materials such as cleaning fluids. As part of its ongoing environmental compliance and monitoring programs, the Company is voluntarily developing work plans for environmental conditions involving certain of its operating facilities. Based upon the Company's study of the known conditions and its prior experience in investigating and correcting environmental conditions, the Company estimates that the potential costs of these site remediation efforts will not be material to financial position or liquidity of the Company. Approximately $1.4 million for these costs is recorded in accrued liabilities at December 31, 1996 for known environmental matters. These expenditures are expected to be made mostly in the next year, if the necessary regulatory agency approvals of the Company's work plans are obtained. Though the Company believes it has adequately provided for the cost of all known environmental conditions, the applicable regulatory agencies could insist upon different and more costly remediative measures than those the Company believes are adequate or required by existing law. Otherwise, the Company believes that it is currently in compliance with all known material and applicable environmental regulations. NOTE J -- QUARTERLY DATA (UNAUDITED) Selected quarterly data for the years ended December 31, 1996 and 1995 are as follows:
YEAR ENDED DECEMBER 31, 1996 -------------------------------------------------------- FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER TOTAL ------- ------- ------- ------- -------- (DOLLARS IN THOUSANDS) Sales................................... $34,727 $30,612 $37,970 $45,091 $148,400 Gross profit............................ 10,017 9,784 11,277 13,924 45,002 Operating income........................ 5,110 5,401 5,951 6,795 23,257 Net income.............................. 3,209 3,548 3,813 4,459 15,029 Net income per share.................... .32 .35 .38 .44 1.48
YEAR ENDED DECEMBER 31, 1995 -------------------------------------------------------- FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER TOTAL ------- ------- ------- ------- -------- Sales................................... $25,521 $29,236 $26,704 $31,018 $112,479 Gross profit............................ 6,608 7,867 7,266 9,034 30,775 Operating income........................ 1,722 3,119 3,501 4,325 12,667 Net income.............................. 780 1,648 2,057 2,578 7,063 Net income per share.................... .08 .16 .20 .26 .70
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None 28 30 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information regarding Directors appearing under the caption "Election of Directors" in the registrant's definitive Proxy Statement to be used in connection with the Annual Meeting of Stockholders to be held on May 1, 1997 (the "1997 Proxy Statement") is incorporated herein by reference. Information regarding executive officers of the registrant is set forth in Part I of this Form 10-K. ITEM 11. EXECUTIVE COMPENSATION. The information required by this item is incorporated herein by reference to "Executive Compensation" in the 1997 Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required by this item is incorporated herein by reference to "Stock Ownership of Principal Holders and Management" in the 1997 Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. None. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a)(1) Report of Independent Auditors............................................ 16 Consolidated Balance Sheets at December 31, 1996 and 1995................. 17 Consolidated Statements of Operations for the Years Ended December 31, 1996, 1995 and 1994............................................................. 18 Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 1996, 1995 and 1994....................................................... 19 Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994............................................................. 20 Notes to Consolidated Financial Statements................................ 21 (a)(2) Exhibits. See the Index to Exhibits at page E-1 of this Form 10-K Annual Report. (b) Financial Statement Schedules. No financial statement schedules required. (c) Reports on Form 8-K.
The Registrant has not filed Current Reports on Form 8-K during the fourth quarter of 1996. 29 31 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. CHART INDUSTRIES, INC. By: /s/ ARTHUR S. HOLMES ------------------------------------ Arthur S. Holmes, Chairman & Chief Executive Officer Date: March 3, 1997 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED. /s/ ARTHUR S. HOLMES - ------------------------------------------------------ Arthur S. Holmes Chairman & Chief Executive Officer and a Director (Principal Executive Officer) /s/ CHARLES S. HOLMES - ------------------------------------------------------ Charles S. Holmes Vice Chairman and a Director /s/ DON A. BAINES - ------------------------------------------------------ Don A. Baines Chief Financial Officer, Treasurer and a Director (Principal Financial Officer & Principal Accounting Officer) /s/ RICHARD J. CAMPBELL - ------------------------------------------------------ Richard J. Campbell, Director /s/ LAZZARO G. MODIGLIANI - ------------------------------------------------------ Lazzaro G. Modigliani Director Date: March 3, 1997 30 32 EXHIBIT INDEX
SEQUENTIAL EXHIBIT NO. DESCRIPTION PAGE - ----------- ----------------------------------------------------------------------- ---------- 3.1 Amended and Restated Certificate of Incorporation of the Company as (A) filed with the Secretary of State of Delaware on December 3, 1992 3.2 Amended and Restated By-Laws of the Company (A) 4.1 Specimen certificate of the Company's Common Stock (B) 10.1 Form of Registration Rights Agreement by and among the Company, Arthur (B) S. Holmes, Charles S. Holmes and Leonard T. Conway 10.2 Form of Indemnity Agreement of the Company (B) 10.3 Cross-Purchase Agreement by and between Arthur S. Holmes and Charles S. (B) Holmes *10.4 Key Employees Stock Option Plan of the Company (B) 10.5 1994 Stock Option Plan for Outside Directors of the Company (C) 10.5.1 1995 Stock Option Plan for Outside Directors of the Company (D) 10.5.2 1996 Stock Option Plan for Outside Directors of the Company 10.6 License Agreement by and between PSI and Koch Industries, Inc., dated (B) August 30, 1991, relating to the Ryan/Holmes Technology 10.8 Lease by and between Koch Process Systems, Inc. and PSI, dated August (B) 1991 10.12 Employment Agreement by and between Charles E. Downs and Greenville (B) Tube dated March 4, 1991 10.13 1989-1992 Labor Agreement by and between ALTEC and District Lodge 66 of (D) the International Association of Machinists and Aerospace Workers, AFL-CIO, dated March 30, 1989, as extended by 1992-1995 Labor Agreement Extension, dated January 29, 1991 and by 1995-1998 Labor Agreement Extension dated March 16, 1995 10.14 Agreement by and between Process Engineering and The International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers & Helpers Local Lodge No. 752 of the AFL-CIO, effective July 21, 1996 10.16 Credit Agreement among the Company and National City Bank, as agent (C) 10.16.1 Amendments to Credit Agreement among the Company and National City (D) Bank, as agent 10.16.2 Sixth Amendment to Credit Agreement among the Company and National City Bank, as agent *10.18 Employment Agreement by and between James R. Sadowski and Chart (D) Management Company, Inc. dated November 30, 1995 *10.19 Form of the Chart Management Company, Inc. Incentive Compensation Plan (A) 11.1 Computation of Net Income (Loss) per Share 22.1 Subsidiaries of the Registrant 23.1 Consent of Ernst & Young LLP 27 Financial Data Schedule
- --------------- * Management contract or compensation plan or arrangement identified pursuant to Item 14(c) of this Form 10-K Annual Report. (A) Incorporated herein by reference to the appropriate exhibit to the Company's Form 10-K Annual Report for the year ended December 31, 1993. E-1 33 (B) Incorporated herein by reference to the appropriate exhibit to the Company's Registration Statement on Form S-1 declared effective on December 3, 1992 (Reg. No. 33-52754). (C) Incorporated herein by reference to the appropriate exhibit to the Company's Form 10-K Annual Report for the year ended December 31, 1994. (D) Incorporated herein by reference to the appropriate exhibit to the Company's Form 10-K Annual Report for the year ended December 31, 1995. E-2 EX-10.5.2 2 EXHIBIT 10.5.2 1 EXHIBIT 10.5.2 EXHIBIT A CHART INDUSTRIES, INC. 1996 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS Chart Industries, Inc., hereinafter referred to as the "Company", hereby adopts a stock option plan for eligible Directors of the Company (hereinafter referred to sometimes as "Optionees") pursuant to the following terms and provisions: 1. PURPOSE OF THE PLAN. The purpose of this plan, hereinafter referred to as the "Plan," is to provide additional incentive to those Directors of the Company who are not employees of the Company or any of its subsidiaries or affiliates by encouraging them to acquire a new or an additional share ownership in the Company, thus increasing their proprietary interest in the Company's business and providing them with an increased personal interest in the Company's continued success and progress. These objectives will be promoted through the grant of options to acquire Common Stock, par value $.01 per share (the "Common Stock"), of the Company pursuant to the terms of the Plan. Only those Directors who meet the qualifications stated above are eligible for and shall receive options under this Plan. 2. EFFECTIVE DATE OF THE PLAN. The Plan shall become effective on February 8, 1996, subject to the approval of the Plan by holders of a majority of the outstanding shares of voting capital stock of the Company which is present and entitled to vote thereon at a meeting or otherwise. In the case that the Company's stockholders have not approved the Plan on or before February 8, 1997, the Plan and any options granted hereunder shall be null and void. 3. SHARES SUBJECT TO THE PLAN. The shares to be issued upon the exercise of the options granted under the Plan shall be shares of Common Stock of the Company. Either treasury or authorized and unissued shares of Common Stock, or both, as the Board of Directors shall from time to time determine, may be so issued. No shares of Common Stock which are subject of any lapsed, expired or terminated options may be made available for reoffering under the Plan. If an option granted under this Plan is exercised pursuant to the terms and conditions of subsection 5(b), any shares of Common Stock which are the subject thereof shall not thereafter be available for reoffering under the Plan. Subject to the provisions of the next succeeding paragraph of this Section 3, the aggregate number of shares of Common Stock for which options may be granted under the Plan shall be Seventy-Five Thousand (75,000) shares of Common Stock. In the event that subsequent to the date of effectiveness of the Plan, the Common Stock should, as a result of a stock split, stock dividend, combination or exchange of shares, exchange for other securities, reclassification, reorganization, redesignation, merger, consolidation, recapitalization or other such change, be increased or decreased or changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corporation, then (i) there shall automatically be substituted for each share of Common Stock subject to an unexercised option (in whole or in part) granted under the Plan, each share of Common Stock available for additional grants of options under the Plan and each share of Common Stock made available for grant to each eligible Director pursuant to Section 4 hereof, the number and kind of shares of stock or other securities into which each outstanding share of Common Stock shall be changed or for which each such share of Common Stock shall be exchanged, (ii) the option price A-1 2 per share of Common Stock or unit of securities shall be increased or decreased proportionately so that the aggregate purchase price for the securities subject to the option shall remain the same as immediately prior to such event and (iii) the Board shall make such other adjustments as may be appropriate and equitable to prevent enlargement or dilution of option rights. Any such adjustment may provide for the elimination of fractional shares. 4. GRANT OF OPTIONS. (a) Automatic Grants. Subject to the terms of the Plan (including without limitation the receipt of stockholder approval contemplated by Section 2 hereof), each eligible Director as of February 8, 1996 shall be granted a non-qualified stock option for 5,000 shares of Common Stock effective as of February 8, 1996. Each eligible Director first appointed or elected to the Board of Directors after the effective date of the Plan shall be granted a non-qualified stock option to purchase 5,000 shares of Common Stock as of the date of such appointment or election. In addition, subject to the terms of the Plan, each eligible Director shall be granted a non-qualified stock option for 5,000 shares of Common Stock on the date of the Company's Annual Meeting of Stockholders, beginning in 1997. Such grants shall occur automatically without any further action by the Board of Directors. (b) Option Price. The price at which each share of Common Stock may be purchased pursuant to an option granted under the Plan shall be equal to the "fair market value" (as determined pursuant to Section 7) for each such share as of the date on which the option is granted (the "Date of Grant"), but in no event shall such price be less than the par value of such shares of Common Stock. Anything contained in this subsection (b) to the contrary notwithstanding, in the event that the number of shares of Common Stock subject to any option is adjusted pursuant to Section 3, a corresponding adjustment shall be made in the price at which the shares of Common Stock subject to such option may thereafter be purchased. (c) Duration of Options. Each option granted under the Plan shall expire and all rights to purchase shares of Common Stock pursuant thereto shall cease on the date (the "Expiration Date") which shall be the tenth anniversary of the Date of Grant of such option. (d) Vesting of Options. Each option granted under the Plan shall become fully vested and exercisable on the first anniversary of the Date of Grant. 5. OPTION PROVISIONS. (a) Limitation on Exercise and Transfer of Options. Only the Director to whom the option is granted may exercise the same except where a guardian or other legal representative has been duly appointed for such Director and except as otherwise provided in the case of such Director's death. No option granted hereunder shall be transferable otherwise than by the Last Will and Testament of the Director to whom it is granted or, if the Director dies intestate, by the applicable laws of descent and distribution. No option granted hereunder may be pledged or hypothecated, nor shall any such option be subject to execution, attachment or similar process. (b) Exercise of Option. Each option granted hereunder may be exercised in whole or in part (to the maximum extent then exercisable) from time to time during the option period, but this right of exercise shall be limited to whole shares. Options shall be exercised by the Optionee (i) giving written notice to the Treasurer of the Company at its principal business office, by certified mail, return receipt requested, of intention to exercise the same and the number of shares with respect to which the Option is being exercised (the "Notice of Exercise of Option") accompanied by full payment of the purchase price in cash or, with the consent of the Board of Directors, in whole or in part in shares of Common Stock having a fair market value on the date the option is exercised equal A-2 3 to that portion of the purchase price for which payment in cash is not made and (ii) making appropriate arrangements with the Company with respect to income tax withholding, as required, which arrangements may include, in lieu of other withholding arrangements, (a) the Company withholding from issuance to the Optionee such number of shares of Common Stock otherwise issuable upon exercise of the option as the Company and the Optionee may agree; provided that such Optionee has had on file with the Board of Directors, for at least six (6) months prior thereto, an effective standing election to satisfy said Optionee's tax withholding obligations in such a fashion, which election form by its terms shall not be revocable or amendable for at least six (6) months or (b) with the consent of the Board of Directors, the Optionee's delivery to the Company of shares of Common Stock having a fair market value on the date the option is exercised equal to that portion of the withholding obligation for which payment in cash is not made. Such Notice of Exercise of Option shall be deemed delivered upon deposit into the mails. (c) Termination of Directorship. If the Optionee ceases to be a Director of the Company, his or her option shall terminate three (3) months after the effective date of termination of his or her directorship and neither he or she nor any other person shall have any right after such date to exercise all or any part of such option. If the termination of the directorship is due to death, then the option may be exercised within three (3) months after the Optionee's death by the Optionee's estate or by the person designated in the Optionee's Last Will and Testament or to whom transferred by the applicable laws of descent and distribution (the "Personal Representative") . Notwithstanding the foregoing, in no event shall any option be exercisable after the expiration of the option period and not to any greater extent than the Optionee would have been entitled to exercise the option at the time of death. (d) Acceleration of Exercise of Options in Certain Events. Notwithstanding anything in the foregoing to the contrary, in the event of a "change in control" the eligible Director shall have the immediate right and option (notwithstanding the provisions of Section 4) to exercise the option with respect to all shares of Common Stock covered by the option, which exercise, if made, shall be irrevocable. The term "change in control" shall include, but not be limited to: (i) the first purchase of shares pursuant to a tender offer or exchange (other than a tender offer or exchange by the Company) for all or part of the Company's shares of any class of common stock or any securities convertible into such common stock; (ii) the receipt by the Company of a Schedule 13D or other advice indicating that a person is the "beneficial owner" (as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934) of twenty percent (20%) or more of the Company's shares of capital stock calculated as provided in paragraph (d) of said Rule 13d-3, other than persons who are presently "beneficial owners" of at least five percent (5%) or more of the Company's Common Stock as of the effective date of the Plan; (iii) the date of approval by stockholders of the Company of an agreement providing for any consolidation or merger of the Company in which the Company will not be the continuing or surviving corporation or pursuant to which shares of capital stock, of any class or any securities convertible into such capital stock, of the Company would be converted into cash, securities, or other property, other than a merger of the Company in which the holders of shares of all classes of the Company's capital stock immediately prior to the merger would have the same proportion of ownership of common stock of the surviving corporation immediately after the merger; (iv) the date of the approval by stockholders of the Company of any sale, lease, exchange, or other transfer (in one transaction or a series of related transaction) of all or substantially all the assets of the Company; or (v) the adoption of any plan or proposal for the liquidation (but not a partial liquidation) or dissolution of the Company. A-3 4 (e) Option Agreements. Options granted under the Plan shall be subject to the further terms and provisions of an Option Agreement, a copy of which is attached hereto as Exhibit A, the execution of which by each Optionee shall be a condition to the receipt of an option. 6. INVESTMENT REPRESENTATION; APPROVALS AND LISTING. The options to be granted hereunder shall be further conditioned upon receipt of the following investment representation from the Optionee: "I further agree that any shares of Common Stock of Chart Industries, Inc. which I may acquire by virtue of this option shall be acquired for investment purposes only and not with a view to distribution or resale; provided, however, that this restriction shall become inoperative in the event the said shares of Common Stock subject to this option shall be registered under the Securities Act of 1933, as amended, or in the event Chart Industries, Inc. is otherwise satisfied that the offer or sale of the shares of Common Stock subject to this option may be lawfully made without registration of the said shares of Common Stock under the Securities Act of 1933, as amended." The Company shall not be required to issue any certificate or certificates for shares of Common Stock upon the exercise of an option granted under the Plan prior to (i) the obtaining of any approval from any governmental agency which the Company shall, in its sole discretion, determine to be necessary or advisable, (ii) the admission of such shares of Common Stock to listing on any national securities exchange on which the Common Stock may be listed, (iii) the completion of any registration or other qualification of the shares of Common Stock under any state or federal law or ruling or regulations of any governmental body which the Company shall, in its sole discretion, determine to be necessary or advisable or the determination by the Company, in its sole discretion, that any registration or other qualification of the shares of Common Stock is not necessary or advisable and (iv) the obtaining of an investment representation from the Optionee in the form stated above or in such other form as the Company, in its sole discretion, shall determine to be adequate. 7. GENERAL PROVISIONS. For all purposes of this Plan the fair market value of a share of Common Stock shall be determined as follows: so long as the Common Stock of the Company is listed upon an established stock exchange or exchanges such fair market value shall be determined to be the highest closing price of a share of such Common Stock on such stock exchange or exchanges on the date the option is granted (or the date the shares of Common Stock are tendered as payment, in the case of determining fair market value for that purpose) or if no sale of such Common Stock shall have been made on any stock exchange on that day, then on the closest preceding day on which there was a sale of such Common Stock; and during any period of time as such Common Stock is not listed upon an established stock exchange the fair market value per share shall be the mean between dealer "Bid" and "Ask" prices of such Common Stock in the over- the-counter market on the day the option is granted (or the day the shares of Common Stock are tendered as payment, in the case of determining fair market value for that purpose), as reported by the National Association of Securities Dealers, Inc. The liability of the Company under the Plan and any distribution of Common Stock made hereunder is limited to the obligations set forth herein with respect to such distribution and no term or provision of the Plan shall be construed to impose any liability on the Company in favor of any person with respect to any loss, cost or expense which the person may incur in connection with or A-4 5 arising out of any transaction in connection with the Plan, including, but not limited to, any liability to any federal, state, or local authority and/or any securities regulatory authority. Nothing in the Plan or in any option agreement shall confer upon any Optionee any right to continue as a Director of the Company, or to be entitled to any remuneration or benefits not set forth in the Plan or such option. Nothing contained in the Plan or in any option agreement shall be construed as entitling any Optionee to any rights of a stockholder as a result of the grant of an option until such time as shares of Common Stock are actually issued to such Optionee pursuant to the exercise of an option. The Plan may be assumed by the successors and assigns of the Company. The Plan shall not be amended more than once every six (6) months, other than to comport with changes in the Internal Revenue Code, the Employee Retirement Income Security Act, or the rules thereunder. The cash proceeds received by the Company from the issuance of Common Stock pursuant to the Plan will be used for general corporate purposes or in such other manner as the Board of Directors deems appropriate. The expense of administering the Plan shall be borne by the Company. The captions and section numbers appearing in the Plan are inserted only as a matter of convenience. They do not define, limit, construe or describe the scope or intent of the provisions of the Plan. 8. TERMINATION OF THE PLAN. The Plan shall terminate ten (10) years from the date of its adoption by the Board of Directors of the Company and thereafter no options shall be granted hereunder. All options outstanding at the time of termination of the Plan shall continue in full force and effect in accordance with and subject to their terms and the terms and conditions of the Plan. 9. TAXES. Appropriate provisions shall be made for all taxes required to be withheld and/or paid in connection with the options or the exercise thereof, and the transfer of shares of Common Stock pursuant thereto, under the applicable laws or other regulations of any governmental authority, whether federal, state, or local and whether domestic or foreign. 10. GOVERNING LAW. The Plan shall be governed by and construed in accordance with the laws of the State of Delaware and any applicable federal law. 11. VENUE. The venue of any claim brought hereunder by an eligible Director shall be Cleveland, Ohio. 12. CHANGES IN GOVERNING RULES AND REGULATIONS. All references herein to the Internal Revenue Code, or sections thereof, or to rules and regulations of the Department of Treasury or of the Securities and Exchange Commission, shall mean and include the Code sections thereof and such rules and regulations as are now in effect or as they may be subsequently amended, modified, substituted or superseded. 13. REPLACEMENT OF 1995 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS. Upon approval of the Plan by the holders of voting capital stock as set forth in Section 2, no further grants of options under the 1995 Stock Option Plan for Outside Directors shall be made. A-5 EX-10.14 3 EXHIBIT 10.14 1 AGREEMENT [AFL-CIO LOGO] Between PROCESS ENGINEERING Plaistow, New Hampshire Division of Process Systems International and the International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers & Helpers Local Lodge No. 752 of the AFL-CIO Plaistow, New Hampshire Effective date: July 21,1996 through August 27,1999 2
ARTICLE.INDEX PAGE I. Union Recognition .................................. 1 II. Function of Management ............................. 1 III. Relationship ....................................... 2 IV. Definitions ........................................ 2 V. Non-Discrimination ................................. 2 VI. New - Temporary Employees .......................... 3 VII. Union Security ..................................... 4 VIII. Payroll Deduction of Union Dues .................... 5 IX. Work Schedules ..................................... 6 X. Job Opening ........................................ 7 XI. Shift Operations ................................... 8 XII. Wages .............................................. 8 XIII. Overtime ........................................... 11 XIV. Holidays ........................................... 13 XV. Vacation ........................................... 14 XVI. Hospitalization, Medical and Dental ................ 17 XVII. Pension ............................................ 19 XVIII. Safety and Sanitation - First Aid .................. 19 XIX. Seniority, Lay- Off ................................ 22 XX. Attendance ......................................... 24 XXI. Disciplinary Action................................. 26 XXII. Grievance Procedure ................................ 27 XXIII. Arbitration ........................................ 28 XXIV. Union Reprentatives................................. 29 XXV. Sub-Contracting..................................... 30 XXVI. Maintenance of Work Operations ..................... 31 XXVII. Information to Union ............................... 31 XXVIII. 401(k) Savings and Investment Program .............. 32 XXIX. Profit Sharing..................................... 33 XXX. Severance Pay ..................................... 34 XXXI. Contract Limitations .............................. 35 Appendix A. Training Program .............................. 37 Schedule A. Wage Rates .................................... 40
3 ARTICLE I UNION RECOGNITION SECTION 1. The Employer recognizes the Union as the sole collective bargaining agency for all employees coming within the category of the appropriate unit with such respect to wages, hours and working conditions. Such appropriate unit is as follows: All production and maintenance Employees including Working Leadmen, Truck Drivers, but excluding Draftsmen, Technical Engineers, Foremen, Assistant Foremen, Supervisory Employees having the right to hire and fire, and Office and Clerical Employees. SECTION 2. The Employer agrees to employ only Employees in the classifications set forth in Schedule "A" in the performance of the work included within the scope of this agreement. SECTION 3. No Foremen or Assistant Foremen shall work with the tools except for the purpose of instructing or correcting Employees. The following Supervisors are exempt from this requirement: Test Supervisor to operate Mass Spectrometer only; Maintenance Supervisor and Assistant Supervisor for breakdown, repair and installation of new equipment. ARTICLE II FUNCTION OF MANAGEMENT SECTION 1. The Union agrees that the function of Management rests solely with the Company, and further agrees that it will not interfere with the Company's free exercise of this right except where the Company specifically is limited in the Articles or Sections of this Contract. SECTION 2. Foremen, Assistant Foremen, Supervisors, Leadmen and Group Leaders in all departments shall be selected by the Employer. 1 4 ARTICLE III RELATIONSHIP SECTION 1. The parties of the Agreement recognize that stability in wages and working conditions and competency of workmen are essential to the best interest of the industry and public, and agree to strive to eliminate all factors which tend toward unstabilizing these conditions. The parties further agree to cooperate fully in carrying out the intent of this Section. SECTION 2. It is hereby agreed that a Committee consisting of two (2) representatives of the Company, the Plant Manager and two (2) representatives of the International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers and Helpers of America, AFL-CIO, Local 752, and Employees of the Company to be known as the Labor Management Production Committee, shall be established and meet to discuss and devise ways and means to effectuate maximum production which is mutually desired. A meeting shall be called by the Plant Manager at least once a quarter and he shall preside as Chairman. ARTICLE IV DEFINITIONS SECTION 1. As used in the Agreement, the term "Employee" means an Employee who is included in the appropriate unit as above defined and the term Employees" means two (2) or more such employees. ARTICLE V NON-DISCRIMINATION Section 1. The Company or the Union shall not discriminate against employees because of color, race, sex, religious 2 5 affiliation, nationality, age, handicap or status as a disabled veteran or Vietnam era veteran, as prescribed by applicable state or federal law. Pronouns in the male gender appearing in this Agreement are intended to include the female gender. ARTICLE VI NEW AND TEMPORARY EMPLOYEES SECTION 1. The Company agrees that all new Employees shall be given a copy of this Agreement. SECTION 2. All new employees shall complete their first ninety (90) days of work as Probationary Employees and shall be subject to discharge within that period at the discretion of the Employer without recourse to the grievance procedure of the Agreement. SECTION 3. New Employees are not eligible for a paid holiday until completing thirty (30) days of work. SECTION 4. New Employees may be retained on the first shift for a period of thirty (30) days of work. Thereafter they shall be subject to the seniority rules. No Employee shall be transferred to another shift to accommodate any new hire. SECTION 5. New Employees become covered for benefits on the first of the month following completion of forty-five (45) days of work. SECTION 6. Temporary employees shall be defined as employees who are hired to fill short term production work not to exceed 65 working days. This process is not meant to replace the regular hiring process. Temporary employees may become full time employees if a need exists beyond 65 working days. 3 6 Temporary employees will be hired under the following conditions: 1. Where a need exists within a classification, temporary employees may be hired to fill the need provided no employees within the classification are on layoff, and there are no qualified employees within the other classifications working or on lay-off. 2. The probationary period for temporary employees will be 65 working days. 3. Temporary employees will not be subject to Union dues in the first 30 days and shall not participate in the following specific contractual benefits, namely: Holiday pay, vacation pay, pension benefits, insurance benefits, sickness and accident coverages (except statutory Worker's Compensation) and hospitalization coverage. 4. All qualified employees will be given the opportunity to work overtime before temporary employees are asked to work overtime. 5. Temporary employees may be assigned to first shift for up to 30 days for orientation. Thereafter, they will be assigned to another shift as production needs dictate. No full time employee will be displaced from their regular shift by a temporary employee. ARTICLE VII UNION SECURITY SECTION 1. As a condition of employment, all present Employees must become and remain members of the Union thirty (30) days after the signing of this Agreement, and all future Employees hired by the Company. 4 7 ARTICLE VIII PAYROLL DEDUCTIONS OF UNION DUES SECTION 1. The Company shall, upon the written order signed by any Employee directing the Company to do so, deduct from the second pay of such Employees for each month, the amount of dues payable by such Employee to the Union for the succeeding months. This written order, being signed voluntarily, shall be irrevocable unless such rights be waived by the Union concerned, for a term of this Agreement, and is in compliance with the applicable laws. The amount of the Union's dues will be set forth under the Seal of The Union and presented to the Company immediately subsequent to the signing of this agreement. The Company shall, on or before the first day of each succeeding month, remit the amount thereof to the proper officers of the Union. The Union shall, from time to time, furnish the Company a certificate of the president or other qualified officers of the Union to whom such amounts shall be remitted. SECTION 2. In the application of Section 1 above, when the Employer is notified by the Union in writing that an Employee is delinquent in the payment of Union dues, reinstatement fee, or has failed to make proper application or pay the initiation fee required, the Employer shall, upon notice from the local Union, terminate such Employee. SECTION 3. The Union shall hold the Company harmless from any and all liability resulting from the Company's discharge of any Employee at the request of the Union as defined in Section 2, Article VIII above. 5 8 ARTICLE IX WORK SCHEDULES SECTION 1. Employees must be at their regular work station at the start of the shift. SECTION 2. The normal work week shall consist of five (5) days: Monday through Friday inclusive for the first and second shift; and Sunday through Thursday inclusive for the third shift. it is understood that all hours and days of work shall be consecutive. SECTION 3. Shift work will be permitted in all classifications. A 10% premium over and above the hourly rate shall be allowed for second and third shifts. The shifts may consist of one day and two night shifts. The regular working hours are as follows: 1st Shift ..................................6:30 a.m. - 3:00 p.m. 2nd Shift ..................................3:00 p.m.- 11:30 p.m. 3rd Shift .................................10:30 p.m. - 7:00 a.m. Unpaid lunch periods: 1st Shift ................................12:00 noon - 12:30 p.m. 2nd Shift .................................8:00 p.m. - 8:30 p.m. 3rd Shift .................................2:30 a.m. - 3:00 a.m.
If more than 120 employees are on a shift, the employer may stagger lunch periods. Employees are not allowed to leave Company property during break periods. SECTION 4. A 10-minute coffee break will be allowed during the first half of each shift. 6 9 SECTION 5. Employees shall be permitted five (5) minutes to put away their tools and wash up at the end of each shift. ARTICLE X JOB OPENINGS SECTION 1. The Company shall post all job openings except in the General Helper's classification for a period of one (1) week. All bids shall be closed at the end of this week. The senior employee shall have preference for these jobs providing he/she has the qualifications to do the job with a minimum amount of in-house training by the Company. Job bids must be submitted in duplicate by the Employee to the Personnel Manager with the Shop Steward retaining a copy. In the event the successful job bidder cannot perform the job with a minimum amount of in-house training by the Company, (not less than three (3) weeks) he/she shall then be returned to the classification and area he/she came from. A successful job bidder shall retain his/her seniority in his/her old classification for one (1) year before his/her past seniority is applicable to his/her new classification. An employee must have one (1) year or more of service in his/her classification to exercise a job bid. If an Employee's qualifications are in dispute, the Company will then resolve this matter with the Shop Committee. This Section is not intended, and shall not be construed to deny the Company the right to hire qualified employees for job openings if, in the opinion of the Company, no qualified Employee exists within its employ. In the event the Company hires from the outside to fill a job bid where no qualified Employee was available, the Company shall show the new hire's record and qualifications to the Shop Committee for their verification prior to the new hire reporting for work. 7 10 JOB CLASSIFICATIONS SECTION 1. Although all employees have specific job classifications, any employee may be assigned to any job and will be paid at their regular rate. ARTICLE XI SHIFT OPERATIONS SECTION 1. When an Employee has his/her shift changed during the work week he/she shall receive time and one-half for the first day of the new shift. When he/she returns to his/her original shift he/she receives only straight time. There shall be no time and one-half for any shift change occurring over the weekend. Shift assignment shall be by seniority in a classification. The Company shall give forty-eight (48) hours' notice to any Employee who is being transferred to another shift. Employees may exercise shift preference every twelve (12) months if so desired. Transfer must be made within a two (2) week period. An employee must have been employed one (1) year before exercising shift preference. Employees who will be so assigned by management to a different shift because of a need for skills and efficiency of the operation will do so for no more than 120 calendar days. ARTICLE XII WAGES SECTION 1. The first term of the Agreement effective July 21, 1996 through August 31,1997, base wages will be increased 3%/hr. across the board. The second term of the Agreement effective August 31, 1997 through August 30, 1998, base wages will be increased 3%/hr. across the board. 8 11 The third term of the Agreement effective August 30, 1998 through August 27, 1999, base wages will be increased 3%/hr. across the board. SECTION 2. The Employer agrees to pay to its Employees, and the Union agrees that it will accept, the wage scale for the various classifications set forth and contained in the Schedule of Wages in Schedule "A" attached hereto. SECTION 3. There shall be no reduction in wages during the life of this agreement. SECTION 4. All Union requests for Wage Increases will be submitted by the Union and administered by the Company as to approval or disapproval within two (2) weeks after being submitted. SECTION 5. Employees properly reporting for work shall receive a minimum of four (4) hours' pay. This Section shall not apply where Employees are not put to work by reason of an Act of God or on occasions when the Company has acted promptly to proceed with the necessary repairs to factory buildings and/or equipment. The foregoing requirements shall not be applicable where the Employee voluntarily quits, is discharged, goes home sick, or is excused from work for personal reasons, in which event he/she shall be paid only for actual hours worked. SECTION 6. All work performed away from the plant requiring overnight stays will be paid at the rate of $1.00/hour above the applicable shop rate. Work performed away from the plant during day trips will be paid at the rate of $.50/hour above the applicable shop rate. Mileage, if an employee's car is used, will be paid at the rate allowed by the IRS per mile [current rate (10/96) is $0.31/mile]. SECTION 7. Management will review the wages of each Employee under the maximum of their classification for each six (6) months period in which the Employee has not had a wage increase. Should an Employee not demonstrate, during the six (6) month review period, sufficient improvement over 9 12 his/her last review to justify an increase he/she shall be reviewed again in ninety (90) days. The minimum increase, if granted, shall be fifteen cents ($0.15) per hour. Shop Stewards, when requesting a Review, must make the request two (2) weeks in advance of the requested effective date. The increase, if granted, shall be retroactive to the requested effective date. Each Employee has a right to challenge his/her review with his/her General Foreman. In order to ensure the orderly progression of new employees through the Job classification apprentice training process, the actions in Appendix A will be taken. SECTION 8. When an Employee is called to Jury Duty the Company shall make up the difference in pay at the Employee's regular rate. A day of Jury Duty is defined as any day for which the Employee is required to appear, regardless of having served, certified by a written statement from the Court. SECTION 9. An employee beyond the probationary period, who is working at the time, will be granted three (3) regular working days off with pay in the event of a death in the employee's immediate family. Immediate family is defined as the employee's wife, husband, father, mother, son, daughter, brother, sister, foster parents, father-in-law or mother-in-law. An employee may take the time off with pay later than the day of death or funeral if circumstances warrant and are a direct result of the death. An employee beyond the probationary period, who is working at the time, will be granted one (1) regular work day off with pay to attend the funeral of a grandparent or grandchild of the employee. An absence for the purpose of attending the funeral of a relative, when evidence is acceptable to Personnel, shall be excused. 10 13 SECTION 11. Employees who have given long and faithful service and have become unable to handle heavy work due to age shall be given preference in such light work as they may be able to perform at a rate of pay commensurate with the classification in which they will be employed. ARTICLE XIII OVERTIME SECTION 1. All work in excess of eight (8) hours in any one work day, forty (40) hours in any one week, or on Saturday shall be paid at the rate of time and one-half; all work performed on Sundays shall be paid at the rate of double time; on a paid holiday, time and one-half extra if worked. No Employee shall be paid both daily and weekly overtime for the same hours worked. SECTION 2. Should an Employee be required to work over ten (10) hours in any one day he/she will be allowed one-half (1/2) hour paid lunch period. SECTION 3. The Company will attempt to distribute all overtime work as equally as possible among the Employees in their respective shifts. All overtime shall be worked on a voluntary basis. Where there are no qualified Employees available to perform the work the Company will authorize other means to get the work done. Before taking action, the Company will consult with the Chief Steward or in his/her absence, an available Steward who, with the Company, will mutually attempt to make available the qualified Employee(s) necessary to perform the work. It is agreed that any Employee who has agreed to report for overtime work after having been asked, but does not report for work as agreed to, shall forfeit his/her right to overtime work for one (1) month unless he/she can offer an acceptable, reasonable excuse to the Company. Any Employee who refuses overtime work when requested shall be considered as having worked, for the purpose of overtime distribution. 11 14 SECTION 4. If there is overtime work on a job that an Employee or Employees have been working straight time on, these Employees will continue on the job and receive the overtime, including Saturday and Sunday. The Chief Steward or Business Manager shall receive a complete list of all Employees scheduled to work on Saturday, Sunday and holidays. SECTION 5. There shall be one (1) Steward for each twenty (20) employees working a Saturday, Sunday or holiday. If a Steward within the group refuses the work, any Union Official within the group may be counted towards meeting the above requirements, or the Union may designate an Acting Steward from among those Union Employees at work. In no event shall the total number of Stewards working exceed the number of Stewards in the Shop. When Employees are asked to work overtime and there are no Stewards working the Shift they are held over to, the provisions above for Saturday, Sunday and holiday work shall apply. SECTION 6. Any Employee called to work at any other time than his/her regular shift shall be paid time and one-half for work. SECTION 7. Employees shall not be required to take time off because of overtime work unless required to do so by state or federal regulations. When an Employee, due to lack of work, is temporarily assigned to another classification carrying a lower rate, his/her wage rate shall not be reduced for a period of thirty (30) days of work. At the expiration of this period the Employee shall have the option to accept the lower rate of pay or take a lay-off due to lack of work in his/her classification. Temporary assignment to lower paying jobs shall be by seniority only. SECTION 8. When overtime is requested, the Employee shall be given three (3) hours' notice except in case of emergency or where it was impossible to inform the Employee within the time limit. 12 15 ARTICLE XIV HOLIDAYS
Section 1. The following shall be recognized holidays with pay. ================================================================================ HOLIDAY 1996 1997 1998 1999 - -------------------------------------------------------------------------------- New Year's Day --- Jan. 1 Jan. 1 Jan. 1 - -------------------------------------------------------------------------------- Washington's Birthday --- Feb.17 Feb.16 Feb.22 - -------------------------------------------------------------------------------- Memorial Day --- May 30 June 1 May 31 - -------------------------------------------------------------------------------- Independence Day --- July 4 July 3 July 5 - -------------------------------------------------------------------------------- Labor Day Sept.6 Sept.1 Sept.7 --- - -------------------------------------------------------------------------------- Columbus Day Oct.11 Oct.13 Oct.12 --- - -------------------------------------------------------------------------------- Veterans' Day Nov.11 Nov.11 Nov.11 --- - -------------------------------------------------------------------------------- Thanksgiving Day Nov.28 Nov.27 Nov.26 --- - -------------------------------------------------------------------------------- Day After Thanksgiving Nov.29 Nov.28 Nov.27 --- - -------------------------------------------------------------------------------- Day Before (or after) Dec.24 Dec.24 Dec.24 --- Christmas - -------------------------------------------------------------------------------- Christmas Day Dec.25 Dec.25 Dec.25 --- - -------------------------------------------------------------------------------- Floating Holiday --- --- --- --- ================================================================================
All holidays shall be observed on the nationally recognized day of celebration (Federal Statute). Agreed upon holidays under the terms of this Contract when occurring on a Saturday shall be observed on the Friday immediately preceding; when occurring on a Sunday shall be observed on the Monday immediately following. Employees must work their last scheduled work day before and their first scheduled work day after any paid holiday to be eligible to receive pay for that holiday unless just cause is shown proving his/her absence. If an Employee is absent for one (1) week or more for any cause, he/she will not receive pay for the holiday. 13 16 The floating holiday is to be taken at a time selected by the individual employee. When scheduling a floating holiday, one week's advance notice will be given, and, where multiple requests for the same day will adversely affect production, seniority rules will apply. ARTICLE XV VACATION SECTION 1. Subject to the following conditions, every Employee eligible therefor under the following schedule shall, each year, receive the paid vacation in accordance with such schedule, provided the Employee's service is continuous on July 1. The vacation "year" is July 1 through June 30. (a) New employees will begin accruing .77 vacation hours per week as of their date of hire for a total of a maximum of 40 hours to be taken their first vacation year. (b) Employees who will be entering their third paid vacation period will be eligible for two (2) weeks paid vacation. (c) Employees who will have accrued seniority of six (6) years on July 1 will receive vacation in accordance with the following Table. Employees with a greater length of service or seniority will be given preference whenever possible. Employees hired prior to August 27, 1993 will achieve a maximum accrued vacation of 25 days per Table I below: (d) Vacation may be taken in 1/2 day increments with 24 hour notice except for extreme circumstances. 14 17 TABLE I SENIORITY (YEARS) NUMBER OF AS OF JULY 1 VACATION DAYS 6 11 7 12 8 13 9 14 10 15 16 16 17 17 18 18 19 19 20 20 26 21 27 22 28 23 29 24 30 25 (d) Employees hired after August 27,1993 will achieve a maximum accrued vacation of 20 days per Table II below: TABLE II SENIORITY (YEARS) NUMBER OF AS OF JULY 1 VACATION DAYS 6 11 7 12 8 13 9 14 10 15 16 16 17 17 18 18 19 19 20 20 (e) Should the need for a plant shutdown exist (one (1) or two (2) weeks) for reasons other than reduced business conditions during the month of July or August, the Company will notify the Union ninety (90) 15 18 days in advance of such a need. Employees will take additional earned vacation time consecutively unless otherwise mutually agreed to by the employee and the Company. All vacation must be taken before the beginning of the next vacation period. If an Employee is off from work for more than thirty (30) days on an excused absence for any reason other than industrial injury or regular S & A coverage, he/she shall cease to accrue vacation time until he/she returns to work and when he/she does, the vacation he/she would otherwise have been entitled to for that year shall be reduced in proportion to the number of days of excused absence in excess of thirty days. Employees who have less than two (2) weeks vacation eligibility may, at the convenience of the Company, be requested to work for the balance of the shutdown when work is available. When an Employee is asked to work his/her vacation weeks, it shall then be the Employee's and the Company's mutual decision as to when he/she will take his/her vacation. In the absence of a mutual agreement, the Employee shall not be required to work. VACATION ELIGIBILITY IN EXCESS OF 10 DAYS MAY BE TAKEN ONE DAY AT A TIME. (CAN BE USED IN LIEU OF SICK DAYS IF EMPLOYEE DESIRES). In such cases where the number of employees selecting a given day(s) as a vacation day(s) would seriously affect the continuity of production, the Company will follow seniority with respect to those that will be allowed to take that day(s) as Vacation. If an Employee dies without receiving his/her vacation or compensation in lieu thereof, the amount shall immediately be paid to his/her beneficiary or estate upon proper proof. (f) Vacation pay to any employee laid off, fired, or who has quit, shall be paid at the rate of 1/12 of his/her vacation eligibility (see Section 2) when leaving the Company for each full month worked since the 16 19 preceding July 1st, provided he/she has completed one (1) full year service. Employees who have been laid off need not have completed one (1) year service requirement to receive prorated vacation pay. Full credit shall be given for fractional months. ARTICLE XVI HOSPITALIZATION, MEDICAL AND DENTAL SECTION 1. The Company shall provide a health care program covering hospital and surgical expenses for all employees and their qualifying dependents. If an employee elects not to utilize the Company health care program, he shall not pay any monthly premiums for the same. For the calendar years 1996 and 1997, employees will pay 70% of the cost above the Chart Basic Plan. For the calendar year 1998, employees will pay 100% of the cost above the Chart Basic Plan. Those employees enrolled in the Chart Basic Plan will continue to pay 10% of the premium cost. The Company will make available to Employees a Dental Insurance Program. If an Employee elects not to utilize the Company Dental Plan, he shall not pay any monthly premiums for the same. For the calendar year 1996 and 1997, the employees on the Dental Plan will pay 70% of the cost of the dental premium. For the calendar year 1998 and 1999, the employees will pay 100% of the cost of the dental premium. The employee may decline or "opt-out" of any of Chart's medical plans (HMO included) if the employee has coverage through another group medical plan. This does not apply to the dental plan. If the employee chooses to opt-out of medical coverage, he/she will receive a payment of $1,000. The basis of payments will be determined in January, 1997. 17 20 The Company and the Union agree to discuss any type of National Health Care legislation that is enacted during the term of this contract with the goal of providing similar levels of benefits (coverage) to employees at a lower cost to both the Company and its employees. Employees who retire from the Company at age 62 years or over who accumulated a term of employment of twenty (20) years at the time of retirement shall be covered by a $4,000.00 Life Insurance Benefit. An Employee shall be deemed as retired if he/she is eligible and is participating in the Boilermakers' Pension Plan. At the time of retirement, an employee may choose to continue as a member of the Company's group Hospital/Medical Plan in accordance with the following conditions: He/she is at least 62 years old but less than 65. Such membership terminates at the end of the month in which the former employee reaches 65 and is, therefore, eligible for Medicare. A payment equivalent to 100% of the Company's established premium must be paid to Process Engineering, by the first of each month. Failure to make such monthly payment in a given month removes the former employee from the Group. The Company shall continue to cooperate in expediting settlement of accident and health insurance claims. LIFE INSURANCE. Effective August 28, 1993, increase to one times the employee's annual base wage. *. *(Base Wage = Rate/hr. X 2080 hrs.) MAJOR MEDICAL. -$1,000,000.00 SICKNESS & ACCIDENT. The Company shall provide Sickness and Accident coverage at the rate of 40% of the base wage with a minimum of $180/week and a maximum of $245/week for the life of this Agreement. 18 21 The parties will continue to apply the use of the Section 125 Plan where beneficial to the employees. The negotiated Health and Accident coverage shall apply regardless of the State in which the Employee resides. ARTICLE XVII PENSION The Company will contribute forty ($0.40) cents per hour per employee to the Boilermakers Pension Fund. Contributions shall be made for hours worked inclusive of vacation and holidays and shall not exceed forty (40) hours per week. ARTICLE XVIII SAFETY AND SANITATION - FIRST AID SECTION 1. The Company and the Union agree to work within, and to cooperate in compliance with the "Federal Occupational Safety and Health Act of 1970" as amended. SECTION 2. The Company agrees to provide and maintain such safety and sanitary needs as are necessary to protect and preserve the health and welfare of all employees. SECTION 3. The Company shall install bells, gongs or other warning devices on the overhead cranes which shall be actuated when the crane is in motion. The Company shalltest said warning devices for a period of not more than ninety (90) days nor less than thirty (30) days to determine their feasibility. If, in the opinion of the Company, such device are not feasible, they shall be removed. 19 22 SECTION 4. The Company shall install a safety cage in the Maintenance Department for the tire mounting. SECTION 5. The Company shall retain in a tool crib the welding sleevelets for those welding who wish to use them. SECTION 6. The Company shall reimburse each Employee Sixty ($60.00) Dollars for the purchase of Safety Shoes upon proof of purchase, for one pair per calendar year. To be eligible an Employee must have completed his/her forty-five (45) work day period. All weather gear shall be furnished by the Company to those Employees who are required to work outside the plant during inclement weather. SECTION 7. The Company agrees to provide Safety Glasses including prescription lenses to Employees. If lenses or frames are damaged at work they will be replaced at no cost to the Employee. Lenses will be replaced if prescription is changed by a physician. Lenses and frames will be furnished from a Company selected grouping. For selection of lenses and frame different than those provided by the Company the Employee will pay the difference. SECTION 8. All toilets and washrooms shall be kept clean and in a sanitary condition, properly heated and ventilated, and suitable quarters with heat shall be provided for employees to change clothes and eat their lunch. All stagings, walks, ladders, and safety appliances shall be constructed and installed in a safe and proper manner. In case of spray painting, the Employer shall provide proper protection against fumes caused by paint spray. SECTION 9. The Company will train a minimum of two (2) volunteers in First-Aid for each shift. The Company will pay for tuition, books required by the school, and mileage to and from classes. 20 23 SECTION 10. Prompt ambulance service and first-aid to sick or injured employees shall be provided at Company expense on all shifts. Ambulance service will be complimented by a taxi service to insure prompt delivery of injured Employee to the hospital. In the event a taxi specified by the Company is not immediately available, the First-Aid Man or another designated Employee shall take the injured Employee to the hospital and retum immediately. It is noted here that First-Aid Man is not a classification. SECTION 11. The Company shall post notices to the effect that it is the duty of Employees to immediately report to his/her Foreman, anything that in their opinion is dangerous to the safety of the Employees. Any one of those named who receive such reports shall immediately investigate, or cause to be investigated, the complaint of the Employee. Any Employee who is injured at work shall report the injury to his/her Foreman immediately and complete, at the earliest opportunity, a "Notice of Accidental Injury or Occupational Disease," provided by the Company and forward to the Personnel Department. SECTION 12. Any Employee working inside a vessel with only a manway as a means of entrance or exit shall have an Employee stationed at the manway whose sole purpose will be to insure the well-being of the Employee inside, the only exception being when the employee inside is in communication with the Employee outside via a communication medium. No Employee shall be compelled to work where injurious fumes or unsafe conditions prevail. SECTION 13. Any Employees who are injured during the hours of work and who are to receive treatment for said injury after the day of the accident shall receive all necessary medical treatment without loss of time. 21 24 SECTION 14. In case any Employee is injured at work and is compelled by the seriousness of such injury to lose time, he/she shall be paid for the full eight (8) hours shift on which he/she was injured, plus any premium that might be due from his/her shift. SECTION 15. For electric arc flashes during the working hours, the Employees shall receive treatment at the Plant by the First-Aid Man/Woman. In cases where the Employees feel no effect until their return home after working hours, it is mutually agreed that if their eyes are inflamed the following day and they are suffering, they shall be given immediate treatment by the First-Aid Man/Woman at the Plant. The First-Aid Man/Woman and the Employee's immediate Foreman shall jointly decide whether the Employee should go home. In the case of dispute, the Employee shall be sent to the hospital and returned home at his/her own expense without loss of time for that day only. ARTICLE XIX SENIORITY - LAY-OFF SECTION 1. Seniority within job classification shall be the determining factor for lay-offs. Seniority, relative skill, and ability within job classifications will be the determining factors for recalls. SECTION 2. For the purpose of this Article the length of service of any Employee of the Company shall be computed from the date on which he/she first began to work in the shop, except that the length of service record of any Employee in the Company shall be broken, and no prior period of his/her employment shall be counted if: (a) Such Employee quits his/her employment. (b) The Employee is discharged. (c) The Employee is laid oft for period exceeding eighteen (18) months. (d) The Employee is laid off and re-called for work and fails to report for work within five (5) work days after receipt of such notification by Registered Mail, Return Receipt Requested. 22 25 Loss of time due to sickness or lay-off, not to exceed eighteen (18) months, shall not be construed as to interfere with the Employee's seniority. Employees suffering accident or injury while engaged in their employment in the shop and being unable to work because of said accident or injury shall maintain and accumulate their seniority. An active employee whose S & A benefits have expired will continue to be eligible for health insurance for a period not exceeding twelve (12) months from the start of their S & A benefit. Those employees on Workers Compensation leave will continue to be covered by health insurance at Company expense until such time as they reach maximum medical improvement as determined by their attending physician or a physician performing a medical exam at the request of the Company or its insurer. Should an employee not return to work after maximum medical improvement has been determined, Company provided health care insurance will be discontinued and the employee may apply for benefits under COBRA, as this constitutes a qualifying event. Employees on lay-off shall accumulate seniority during any period of lay-off but shall not be eligible for fringe benefits accorded to Employees currently active on the Company's roll. Employees to be laid off shall be given a three (3) day notice except in cases of emergency. The day that the Notice of Lay-off is issued shall be considered the first day of notice of lay-off. SECTION 3. Employees accepting Managerial positions shall have their shop seniority frozen on the date they accept such position. 23 26 ARTICLE XX ATTENDANCE SECTION 1. The Company shall grant a leave of absence, not to exceed thirty (30) days, to any Employee who has serious and compelling personal reasons to require such leave, provided the reasons are verified and are acceptable to the Company. The Company's approval shall not be unreasonably withheld. SECTION 2a. To maintain efficient production schedules, the parties of the Agreement will insist on regular and punctual attendance of all Union Employees. SECTION 2b. Excessive Absenteeism. Each two (2) days of absence in a single month of a given calendar year shall be considered an offense and shall subject the offending Employee to the disciplinary action below, on a progressive basis. Illness absences on consecutive days shall be considered a single day's absence. Being absent from work due to Union business, hospitalization, jury duty, military duty, industrial accident, funerals covered in the Bereavement Clause, leave of absence (personal, medical or sickness and accident) or illness absences of two (2) or more consecutive days verifiable to the Personnel Department on the first day of return to work, shall not be considered as chargeable absences. In each month, lost time due to leaving the plant early shall be additive and for each twelve (12) hours of such lost time the Employee shall be charged with one (1) day's absence for that month. EXCESSIVE TARDINESS: For each tardiness occurrence in excess of five (5) in one (1) month of a given calendar year, the offending Employee shall be subject to the below disciplinary action(s) on a progressive basis: 24 27 Violations in absenteeism and tardiness as provided for hereinabove shall subject the offending Employee to discipline as follows: Step 1: Verbal warning in the presence of the Shop Steward. Step 2: Written warning with a copy to the Steward. Step 3: One (1) week's suspension without pay. Step 4: Discharge. The above-mentioned criteria on absences and shall not limit the Company's right to administer disciplinary action where an Employee is absent prolonged or frequent periods of time, yet not in violation of such criteria. Before the Company exercises this right, a joint meeting of the Shop Committee, the Employee involved and the Company shall be convened to lay out the Employee's record and ways and means to correct. No disciplinary action shall be taken at this meeting. A continued pattern by the Employee in the future of absenteeism shall subject him/her to disciplinary action. An absence during which an Employee is admitted as an "inpatient" to a hospital, or under a doctor's care for a condition which he/she was previously hospitalized, shall not be counted in the disciplinary process. The above-mentioned provisions on absenteeism and tardiness shall become applicable on the effective date of this agreement and all records shall be continuous thereafter. SECTION 2c. This section in its entirety will in no way prevent the Company from disciplining an Employee for other breaches of conduct. It should be noted that any time an Employee has an unscheduled absence he/she is required to call the Company and notify the Personnel Department (603-382-6551, Ext. 2212) within one (1) hour of the scheduled start of the shift. 25 28 ARTICLE XXI DISCIPLINARY ACTION SECTION 1. Disciplinary action, suspensions and discharges will be taken only for just cause. All suspensions and discharges shall be reviewed with the Shop Committee as to just cause, before being awarded. Employee shall be notified within one scheduled work week of the occurrence of any violations. This in no way, however, abridges the Company's right to send an Employee home for the remainder of his/her shift pending a hearing with the Shop Committee the following work day. All Employees may be present at their hearing with the Shop Committee. SECTION 2. It is further agreed that any Employee found guilty, after a fair hearing conducted by the Employer and the Shop Committee, of instigating, fomenting or actively supporting or giving leadership to any action which will create dissension or impair the morale of other Employees, thus curtailing production, or which violate, disturb or attempt to disturb the relations or terms 0 this Agreement, shall be dismissed from the service of the Employer. 26 29 ARTICLE XXII GRIEVANCE PROCEDURE SECTION 1. A Grievance is any difference of opinion or dispute between the Employer and an Employee or Union Representative regarding the interpretation or operation of any provision of this Agreement and shall be dealt with as follows: SECTION 1. The Steward, with the Employee(s), shall present the grievance in writing on forms supplied by the Union to the immediate Foreman/Department Head in the Department of the grieving Employee(s) within three (3) work days of its occurrence of/or first knowledge; otherwise, it shall be deemed waived. SECTION 2. If the grievance is not settled in Step 1 within three (3) work days, then it shall be submitted to the General Foreman. The General Foreman and Chief Steward shall meet to attempt to resolve the grievance. The aggrieved may be present if he/she so desires. If not satisfactorily resolved within three (3) work days, it shall be referred to Step 3. SECTION 3. If not settled within three (3) work days, the grievance shall be referred to the bargaining agent of the Company and the International Representative of the Union for their consideration in conference with the Shop Committee and Chief Steward. This conference shall be held as expeditiously as possible but in no event later than ten (10) work days. NOTE: The Grievance procedure is a four step procedure. 1. Supervisor or Coach 2. Designee of President 3. Bargaining Agent of the Company and International Representative 4. Arbitration 27 30 All grievance shall be deemed settled unless, within ten (10) work days of the conference between the above parties, either party requests in writing that the dispute be referred to arbitration. ARTICLE XXIII ARBITRATION SECTION 1. Grievance involving the interpretation or application of the provisions of this Agreement, if not resolved by the parties through the foregoing steps, may be submitted to Arbitration for final and binding determination. The Arbitrator shall have no power to add to, subtract from, change or modify any of the provisions of this Agreement, but his authority shall be limited solely to the interpretation or application of the provisions of this Agreement. The decision of the Arbitrator shall be final and binding on all parties. SECTION 2. After proper notice of desire to Arbitrate, either party may request the American Arbitration Association to submit a list of names from which an Arbitrator shall be selected. If the parties fail to select an Arbitrator within ten (10) days after receipt of list, either party may request the American Arbitration Association to appoint an Arbitrator. The Company and the Union shall share equally the fee and expenses of the Arbitrator. SECTION 3. In the event a discharged or suspended Employee is reinstated through an arbitration award, the reinstated Employee shall receive back pay as determined by the Arbitrator. In no case, however, will back pay be awarded for the period of time where the Union requests a postponement in the arbitration hearing date. Back pay shall be paid within one (1) work week of return to work or within one (1) work week of receipt of the Arbitrator's ruling as appropriate. 28 31 ARTICLE XXIV UNION REPRESENTATIVES SECTION 1. It is agreed that Stewards will be Employees of the Employer and that the Union will notify the Employer in writing of the Officers and Stewards authorized to act on behalf of the Union. SECTION 2. The Business Manager and two (2) members of the Negotiating Committee shall make up the Shop Committee. SECTION 3. The loss of time by authorized Union Officials during the regular work day in Contract negotiations thirty (30) days prior to the expiration of the contract and time spent on the three (3) steps of the Grievance Procedure shall be paid for by the Employer at the day rate of their job. The Business Manager and Chief Steward shall work on the first shift only. SECTION 4. The Company shall allow the Business Manager, President, Chief Steward and Stewards to meet once a week to evaluate grievances and related grievance matters. The meeting shall be held each Thursday starting at 12:30 p.m. and ending when the related grievance matters are resolved or 2:00 p.m. whichever is earlier. When an Employee attending the meeting is holding up production by his/her absence from work, he/she may be called out of the meeting by the Plant Manager. For the time lost in the above meetings the Company shall compensate all Employees involved at their regular rate of pay. SECTION 5. Any member of the Union selected as an Officer or Delegate shall, upon request, be granted a leave of absence without pay but without loss of cumulative seniority while on Union business. SECTION 6. Bulletin boards will be provided by the Company for use by the Union. All notices to be posted thereon shall be limited to official Union business and shall be cleared through the Business Manager and posted by him. This provision in no way limits the Company from removing any 29 32 notice it deems inappropriate after notifying the Business Manager of its intent. SECTION 7. It is further understood and agreed that Local Union 752 shall designate the local representatives who is duly authorized and will be consulted in all matters pertaining to the application of this Agreement. It being specifically understood that the International Union will only be liable for the acts of said agent when such acts have been approved in writing by the International President's office. SECTION 8. Under no circumstances shall the Shop Committee or any employee make arrangements with L Foremen or Management that will change or conflict in any way with any Section or terms of this Agreement. SECTION 9. Nothing contained herein shall be construed as limiting or abridging the right of the International Union to assign an International Representative to work with or assist any local Union Agent or Employee in the negotiation or grievance procedure or application of terms and conditions of this Agreement. SECTION 10. The International Officers and Business Representatives of the Union represented shall have access to the Employees of the Shop by applying for permission through the office, provided they do not interfere or cause workmen to neglect their work. ARTICLE XXV SUBCONTRACTING SECTION 1. The Company shall not sub-contract work out normally performed by the bargaining unit when men and machines are available to do the work. 30 33 ARTICLE XXVI MAINTAINANCE OF WORK OPERATIONS SECTION 1. During the life of this Agreement neither Local 752 nor the International Union will authorize or ratify a strike, work slow-down, or work stoppage except because of violation of this Agreement by the Employer, and then only after strict compliance with Article XI of the Subordinate Lodge Constitution. SECTION 2. Any Employee entering into an unauthorized and unratified work stoppage will be discharged and not subject to the Grievance Procedure provided for herein. SECTION 3. The Employer agrees that there will be no lockout for any cause during the life of this Agreement except for violation of this Agreement by Local 752 or the International Union. Discharge of any Employee for infraction of Company rules shall not be considered as a lockout for such Employee. SECTION 4. It is further agreed that the Employer will not claim damage against Local Union 752 of the International Union because of any strike which was not ratified in accordance with the provisions of Section 1 of this Article. ARTICLE XXVII INFORMATION TO THE UNION SECTION 1. A card bearing the name, number, classification and rate of all new Employees shall be given the Chief Steward within one (1) week of date of hire. SECTION 2. Death notices received by the Company shall be forwarded immediately to the Chief Steward or Business Manager. If the deceased is a member of the Employee's immediate family, a Union Representative shall attend the funeral and receive straight-time pay. SECTION 3. During the term of this Agreement the Employer shall immediately advise the Union of all changes of status of Employees in the bargaining unit including, but not limited to, promotions, demotions, re-classifications, transfer, leave of absence and retirement. 31 34 SECTION 4. On request of the Union, the Employer will, as soon as possible, supply all data relating to wage rates, pension data and group insurance data and other data essential to policing this Agreement once in each year of the Contract. SECTION 5. Three (3) months prior to the termination of the Agreement or the reopening provision, the Employer will provide the Union with the following data: 1. Name, individual wage rate, date of employment, seniority standing for each employee in the bargaining unit, including a seniority list for purposes of re-call of laid off employees. 2. Job classification, including the number of Employees in each classification. 3. The average straight-time hourly earnings of the bargaining unit for the preceding year, including shift premiums or other pay premiums except overtime premiums. 4. The average hourly cost for each fringe benefit item and other Employer-paid benefits; i.e., unemployment compensation, etc. ARTICLE XXVIII 401(k) SAVINGS AND INVESTMENT PROGRAM A 401(k) Savings and Investment Program will be established effective January 1, 1994. A match to the 401(k) Savings and Investment Program will be made effective September 1, 1994. The match will be made on a maximum of 6% of the base wage saved in the 401(k) Plan during a given year. The match will be 25% of the % of base payments made by hourly employees to the hourly 401 (k) Plan. The match will be in the form of Chart Industries stock. The Company must have a minimum EBIT of $500,000 before the match will occur (EBIT = Earnings Before Interest and Taxes). 32 35 ARTICLE XXIX PROFIT SHARING Profit Sharing will be implemented for the hourly personnel on the following basis effective January 1,1994 1. MINIMUM COMPANY EBIT - The activation level of PEI profit sharing is a minimum EBIT of $500,000 for the full fiscal (calendar) year. Once minimum EBIT is achieved, profit sharing will be paid on profit dollars, including the first $500,000. 2. EBIT POOL MULTIPLIERS - Once the EBIT profit level is achieved, the EBIT will be used as follows to develop the profit sharing pool:
% Profit EBIT Sharing ---- ------- 1996 (JAN - JULY) 500,000 - 1,000,000 8% 1,000,000 - 1,500,000 5% >1,500,000 3% (AUG - DEC) 0 - 2,500,000 8% >2,500,000 10% 1997 & 1998 0 - 2,500,000 8% >2,500,000 10%
3. DISTRIBUTION OF EBIT HOURLY PROFIT SHARING POOL: A. The profit sharing will be made as a % of individual annual base wages except for exclusions (1) noted below. The base wage distribution % is determined as follows: Base Wage Profit Sharing % = EBIT Pool $ ---------------- Total PEI Annual Base Wage Payroll (1) 33 36 (1) Excluded from base wage are overtime, service trip premium, sick pay. Also, officers salaries will not be included as those individuals will not share in this pool. EBIT pool shall include all PEI employees except excluded above. b. Profit sharing will be distributed annually within 45 days of the end of the fiscal year. For example, 1994 profit sharing would be paid on or before February 15, 1995. At management discretion, partial payment could be made earlier in the year. ARTICLE XXX SEVERANCE PAY Should the Company cease operations completely in Plaistow, New Hampshire, or move operations to a location more than fifty (50) miles from the present location, severance pay shall be paid at the following rate: 1 week's wages for a full five (5) years' seniority 2 week's wages for a full ten (10) years' seniority 3 week's wages for a full twenty (20) years or more to employees currently employed at the time such action is taken. In the case of a move, this allowance shall apply only to those employees who find it inconvenient to continue employment because of the move. 34 37 ARTICLE XXXI CONTRACT LIMITATIONS SECTION 1. The Employer and Union expressly agree that no prior understandings or agreements and no subsequent agreements or understanding shall modify the provisions of this Agreement unless reduced in writing, signed by the parties hereto, and made an express amendment to this Agreement. SECTION 2. The officials executing this Agreement in behalf of the Union hereby warrant and guarantee that they have the authority to act for, bind, and collectively bargain in behalf of the organization which they represent, and members of such organizations, upon approval of the International president. SECTION 3. Should any part hereof or any provisions herein contained be rendered or declared invalid by reason of: 1. Any existing or subsequently enacted legislation, or 2. Any decree of a court of competent jurisdiction, or 3. Any ruling of any governmental agency having jurisdiction. such invalidation of such part or portion of this Agreement shall not invalidate the remaining portions hereof, and they shall remain in full force and effect. SECTION 4. Contract proposals will be exctianged between the Company and the Union at a meeting no later than thirty (30) days prior to the end of the Contract. The terms and provisions of this agreement shall be come effective as of the 21st day of July, 1996, and continue in effect through August 27, 1999, and from year to year thereafter, unless sixty (60) days' written notice is given by either party prior to the expiration of any such year that changes, amendments or revisions are desired. 35 38 NOTE: The expiration for this Agreement and future agreements is the last Friday in August. AGREED TO THIS 21ST DAY OF JULY, 1996. PROCESS ENGINEERING BOILERMAKER'S INTERNATIONAL LOCAL LODGE NO.752 36 39 APPENDIX A TRAINING PROGRAM All new employees will be hired as general helpers, unless skill requirements and actual qualifications dictate otherwise. Within two (2) weeks after the probationary period, the foreman and employee will discuss the employee's job classification preference. (Example: machinist, welder, welder/fitter, radiographic technician, test technician, etc.) If a need exists, the employee were to indicate a preference for welding, such employee would be assigned as a general helper/welder with work assignments in this job classification whenever possible. All new employees in the apprentice training program will be reviewed every three (3) months as to progress of their training. Progress will be evaluated on the basis of specific job skills developed since the last review. The foreman will conduct the review as to progress and deficiencies in development of job skills using input from other trainers. Such employees will be paid increases per review if progress is satisfactory. An employee can advance in job classification skill level by on-the-job training and job-related classroom instruction (example: blueprint reading, math, etc.) There is no prescribed or minimum time for an employee to advance to a job classification skill level. if the employee does not obtain the skills to perform the job classification requirements within a two (2) year period after probation, such employee will be re-classified as a general helper. When an employee completes the training for a job classification, such employee will be paid the rate for that classification provided a need exists for work in that classification. 37 40 Specific criteria for evaluation of progress within a specific job classification will be developed. Employees will be advised of the basis for review and progression within a job classification at the start of the training cycle. The Company will lay off in accordance with the present agreement dated August 28, 1993, on the basis of job classification. It is the intent of the Company to retain the most senior employee in the job classification in preference to retaining a shorter service employee in the general helper classification. 38 41 SCHEDULE "A" NOTES: Combination Welder must weld three (3) or more metals by three (3) or more processes. Leadmen receive Fifty cents ($0.50) per hour above the highest Contract rate for the classification. Group Leaders receive Thirty cents ($0.30) per hour above the highest rate for the classification. Carbon Arcing, when performed in a confined space, shall carry a Twenty-five cents ($0.25) per hour premium while Employee is so engaged. Team Leader: Employees qualified in the craft of "Team" leadership may receive up to Fifty cents ($0.50) above their regular rate. New Hampshire Radiation Safety Officer: Employees qualified and practicing the craft of RSO will receive Fifty cents ($0.50) above their regular rate. ASME Level III Radiographer: Employees qualified and practicing the craft of Level III Radiography will be paid Fifty cents ($0.50) above their regular rate. PREMIUM MACHINES: Vertical Boring Mill - Twenty-Five Cents ($0.25) per hour. These premiums are to be added after night differential or overtime has been figured. 39 42
SCHEDULE "A" UNION WAGES ================================================================================ JULY 21, AUGUST31, AUGUST 30, 1996 1997 1998 MIN. MAX. MIN. MAX. MIN. MAX. - -------------------------------------------------------------------------------- ALL AROUND FILL-IN MACHINIST 12.33 14.41 12.70 14.84 13.08 15.29 - -------------------------------------------------------------------------------- MACHINE OPERATOR MS 11.12 12.93 11.46 13.31 11.80 13.71 - -------------------------------------------------------------------------------- ALL AROUND MACHINIST 11.69 13.91 12.04 14.32 12.40 14.75 - -------------------------------------------------------------------------------- FITTER/MECHANIC 11.69 13.91 12.04 14.32 12.40 14.75 - -------------------------------------------------------------------------------- COMBINATION WELDER 11.69 13.91 12.04 14.32 12.40 14.75 - -------------------------------------------------------------------------------- WELDER 11.35 13.61 11.69 14.01 12.04 14.43 - -------------------------------------------------------------------------------- GENERAL HELPER 6.92 12.37 7.13 12.74 7.34 13.12 - -------------------------------------------------------------------------------- MACHINE OPERATIOR-OTHER 11.69 13.91 12.04 14.32 12.40 14.75 - -------------------------------------------------------------------------------- MACHINE OPERATOR-BR&S 11.35 13.61 11.69 14.01 12.04 14.43 - -------------------------------------------------------------------------------- PAINTER 11.35 13.61 11.69 14.01 12.04 14.43 - -------------------------------------------------------------------------------- PIPEFITTER/WELDER 11.69 13.91 12.04 14.32 12.40 14.75 - -------------------------------------------------------------------------------- SANDBLASTER 11.35 13.61 11.69 14.01 12.04 14.43 - -------------------------------------------------------------------------------- WELDER/FITTER 11.93 14.13 12.29 14.56 12.65 14.99 - -------------------------------------------------------------------------------- CHIEF STOREKEEPER 11.29 13.61 11.63 14.01 11.98 14.43 - -------------------------------------------------------------------------------- STOREKEEPER 11.12 12.93 11.46 13.31 11.80 13.71 - -------------------------------------------------------------------------------- MAINTENANCE MECHANIC 11.69 13.91 12.04 14.32 12.40 14.75 - -------------------------------------------------------------------------------- MAINTENANCE ELECTRICIAN 11.69 13.91 12.04 14.32 12.40 14.75 - -------------------------------------------------------------------------------- INSPECTOR 11.29 13.91 11.63 14.32 11.98 14.75 - -------------------------------------------------------------------------------- RADIOGRAPHIC TECHNICIAN 11.29 13.91 11.63 14.32 11.98 14.75 - -------------------------------------------------------------------------------- TEST TECHNICIAN 11.29 13.91 11.63 14.32 11.98 14.75 - -------------------------------------------------------------------------------- TRUCK DRIVER 11.29 13.61 11.63 14.01 11.98 14.43 - --------------------------------------------------------------------------------
40 EX-10.16.2 4 EXHIBIT 10.16.2 1 EXHIBIT 10-16.2 SIXTH AMENDMENT This Sixth Amendment (this "Amendment") is executed at Cleveland, Ohio as of July 30, 1996 by and among CHART INDUSTRIES, INC., a Delaware corporation (referred to hereinafier as the "Parent"), ALTEC INTERNATIONAL LIMITED PARTNERSHIP ("ALTEC"), ALTEC, INC. ("AI"), CHART MANAGEMENT COMPANY, INC. ("Chart Management"), CHART INDUSTRIES FOREIGN SALES CORPORATION ("Chart Foreign"), GREENVILLE TUBE CORPORATION ("Greenville"), and PROCESS SYSTEMS INTERNATIONAL, INC. ("PSI") (the Parent, ALTEC, AI, Chart Management, Chart Foreign, Greenville and PSI being referred to collectively as the "Borrowing Group") and NATIONAL CITY BANK ("NCB") and NBD BANK ("NBD") (NCB and NBD being referred to collectively as the "Banks" and singly as a "Bank") and NATIONAL CITY BANK, as agent for the Banks (the "Agent"). WHEREAS, the Borrowing Group, Banks and Agent entered into a credit agreement dated as of December 2, 1994, as amended by First Amendment dated as of April 18, 1995 and Second Amendment dated as of July 7, 1995, a Third Amendment dated as of October 1, 1995, a Fourth Amendment dated as of December 18, 1995 and a Fifih Amendment dated as of December 31, 1995 (as amended, the "Credit Agreement"; all terms used in the Credit Agreement being used herein with the same meaning) wherein Banks agreed to make Revolving Loans to the Borrowing Group on a revolving basis and to participate in letters of credit issued by Agent during the Revolving Period, under certain terms and conditions, aggregating not more than the principal amount of twenty-five million dollars ($25,000,000); and WHEREAS, the Borrowing Group, Banks and Agent want to make certain changes in the Credit Agreement; NOW, THEREFORE, the Borrowing Group, Banks and Agent agree as follows: 1. The table contained in the definition of "Libor Margin" in Section 1.01 of the Credit Agreement is hereby amended in its entirety to read as follows: 2 Fixed Charge Libor Margin Leverage Ratio Coverage Ratio (in basis points) -------------- -------------- ----------------- Less than or equal Greater than or equal to 1.49:1 to 2.26:1 100 Greater than 1.49:1 Greater than or equal to 2.01 but less than 2.25:1 but less than 2.26:1 125 Greater than or equal Greater than or equal to 1.75:1 to 2.25:1 but less than but less than 2.01:1 137 or equal to 2.40:1 Greater than 2.40:1 Greater than or equal to 1.50:1 but less than 2.50:1 but less than 1.75:1 150 Greater than or equal Less than 1.50 to 2.50:1 175 2. The dates of August 31, 1996 and August 31, 1997 contained in Sections 2.04 and 2.17 of the Credit Agreement are amended to June 30,1998. 3. The table contained in Section 2.24 of the Credit Agreement is hereby amended in its entirety to read as follows: Fixed Charge Commission Leverage Ratio Coverage Ratio Percentage -------------- -------------- ---------- Less than or equal Greater than or equal to 1.49:1 to 2.26:1 1.00% Greater than 1.49:1 Greater than or equal but less than 2.25:1 to 2.01 but less than 2.26:1 1.00% Greater than or equal Greater than or equal to to 2.25:1 but less than 1.75:1 but less than 2.01:1 or equal to 2.40:1 1.10% Greater than 2.40:1 Greater than or equal to but less than 2.50:1 1.50:1 but less than 1.75:1 1.25% Greater than or equal Less than 1.50 to 2.50:1 1.25% 4. Section 4.03 of the Credit Agreement is amended by inserting the phrase "but in all cases, excluding all accounts, accounts receivable, and inventory", after the words "properties and assets" in the third and fourth lines thereof. In addition thereto, and without limiting such amendment to Section 4.03, any and all references, direct or indirect, to the inclusion of accounts, accounts receivable or inventory in the Collateral or as subject to any Collateral Security Document are hereby deleted in their entirety and are null and void. 5. The text of Section 7.10 of the Credit Agreement is hereby amended in its entirety to read as follows: 2 3 The Borrowing Group will have and maintain a Consolidated Tangible Net Worth in an amount not less than the required minimum amount in effect at the time in question. The required minimum amount shall be Sixteen Million Dollars ($16,000,000) EXCEPT that that amount shall be permanently increased on December 31, 1996 and on each December 31 thereafter by an amount equal to twenty-five percent (25%) of the Borrowing Group's Consolidated net income, if any, after taxes, for the fiscal year then ending. 6. The text of Section 7.11 of the Credit Agreement is hereby amended in its entirety to read as follows: The Borrowing Group will have and maintain at all times a ratio of Total Liabilities to Consolidated Tangible Net Worth of not more than 2.50 to 1.0. 7. The text of Section 7.12 of the Credit Agreement is hereby amended in its entirety to read as follows: The Borrowing Group will have and maintain at all times a Pretax Interest Coverage Ratio of not less than 3.50 to 1.0 for each Quarter (based on the cumulative results for the most-recently concluded Four-Quarter Period). 8. The text of Section 7.13 of the Credit Agreement is hereby amended in its entirety to read as follows: The Borrowing Group will have and maintain at all times a Fixed Charge Coverage Ratio of not less than 1.25 to 1.0, which will be calculated based on the cumulative results of each Quarter (based on the cumulative results for the most-recently concluded Four-Quarter Period). 9. The text of Section 7.14 of the Credit Agreement is hereby amended in its entirety to read as follows: The Borrowing Group will have and maintain at all times a ratio of Current Assets to Current Liabilities of not less than 1.15 to 1.0. 10. Clause A of Section 8.09 of the Credit Agreement is hereby amended in its entirety to read as follows: 3 4 (A) the payment of an annual cash dividend which shall not exceed Three Million Dollars ($3,000,000) in any Fiscal Year which may be declared and paid only so long as no Possible Default or Event of Default exists on the date of declaration or payment thereof; and 11. CONDITIONS PRECEDENT. It is a condition precedent to the effectiveness of this Amendment that, prior to or on the date hereof, the following items shall have been delivered to Agent (in form and substance acceptable to Banks): (A) A Certificate, dated as of the date hereof, of the secretary of each member of the Borrowing Group certifying (1) that such Borrower's articles or certificate of incorporation and code of regulations or by-laws have not been amended since the execution of the Credit Agreement (or certifying that true, correct and complete copies of any amendments are attached), (2) that copies of resolutions of the Board of Directors of Borrower are attached with respect to the approval of this Amendment and of the matters contemplated hereby and authorizing the execution, delivery and performance by such Borrower of this Amendment and each other document to be delivered pursuant hereto and (3) as to the incumbency and signatures of the officers of such Borrower signing this Amendment and each other document to be delivered pursuant hereto; (B) Such other documents as Agent may request to implement this Amendment and the transactions contemplated hereby. If Banks and Agent shall consummate the transactions contemplated hereby prior to the fulfillment of any of the conditions precedent set forth above, the consummation of such transactions shall constitute only an extension of time for the fulfillment of such conditions and not a waiver thereof. If any of the conditions precedent set forth above shall not be fulfilled by August 31, 1996, the Borrowing Group expressly agree that the same shall constitute an Event of Default pursuant to Article X of the Credit Agreement. 12. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and warrants to Bank that: (A) None of the representations and warranties made in Section 6.01 of the Credit Agreement has ceased to be true and complete in any material respect as of the date hereof; and 4 5 (B) As of the date hereof no "Possible Default" has occurred that is continuing. 13. ACKNOWLEDGMENTS CONCERNING OUTSTANDING LOANS. The Borrowing Group acknowledges and agrees that, as of the date hereof, all of their outstanding Obligations to Banks are owed without any offset, defense, claim or counterclaim of any nature whatsoever. 14. REFERENCES. On and after the effective date of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof", or words of like import referring to the Credit Agreement, and each reference in the Revolving Notes or other Loan Documents to the "Credit Agreement", "thereof', or words of like import referring to the Credit Agreement shall mean and refer to the Credit Agreement as amended hereby. The Credit Agreement, as amended by this Amendment, is and shall continue to be in full force and effect and is hereby ratified and confirmed in all respects. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of Banks or Agent under the Credit Agreement or constitute a waiver of any provision of the Credit Agreement except as specifically set forth herein. 15. COUNTERPARTS AND GOVERNING LAW. This Amendment may be executed in any number of counterparts, each counterpart to be executed by one or more of the parties but, when taken together, all counterparts shall constitute one agreement. This Amendment, and the respective rights and obligations of the parties hereto, shall be construed in accordance with and governed by Ohio law. 5 6 IN WITNESS WHEREOF, the Borrowing Group, Banks and Agent have executed this Amendment at the time and place first above mentioned. CHART INDUSTRIES, INC. PROCESS SYSTEMS INTERNATIONAL, INC. By: /s/ Don A. Baines ----------------------- By: /s/ Don A. Baines Chief Financial Officer ------------------------- Ass't Clerk ALTEC INTERNATIONAL LIMITED PARTNERSHIP NATIONAL CITY BANK By: CHART MANAGEMENT COMPANY, INC., its sole general partner By: /s/ A. J. DiMare Vice Pres ------------------------- By: /s/ Don A. Baines ------------------------ ALTEC, INC. NBD BANK By: /s/ Don A. Baines By: /s/ Jim A. Ferris ------------------------ ------------------------- Ass't Secy Vice President GREENVILLE TUBE CORPORATION NATIONAL CITY BANK, as Agent By: /s/ Don A. Baines By: /s/ A.J. DiMare Vice Pres ------------------------ ------------------------- Ass't Secy CHART MANAGEMENT COMPANY, INC. By: /s/ Don A. Baines ------------------------ Secretary & Treas. CHART INDUSTRIES FOREIGN SALES CORPORATION By: /s/ Don A. Baines ------------------------- Secy & Treas. 6 EX-11.1 5 EXHIBIT 11.1 1 EXHIBIT 11.1 COMPUTATION OF NET INCOME (LOSS) PER SHARE (Dollars in thousands, except per share amounts)
1996 1995 1994 ---------------------------------------------- Average shares outstanding 9,944,861 9,941,453 9,864,497 Options - treasury stock method 179,232 124,160 170,381 ============================================== Average shares and equivalents 10,124,093 10,065,613 10,034,878 ============================================== Net income (loss) $15,029 $7,063 ($1,463) ============================================== Net income (loss) per share $ 1.48 $.70 ($.15) ==============================================
EX-22.1 6 EXHIBIT 22.1 1 EXHIBIT 22.1 SUBSIDIARIES OF THE REGISTRANT AND STATE OF INCORPORATION ALTEC, Inc. (Non-Operating) Wisconsin Chart Management Company, Inc. Ohio* CHD, Inc. (Non-Operating) Delaware Chart Industries Foreign Sales Corporation Virgin Islands Greenville Tube Corporation Arkansas Process Systems International, Inc. Massachusetts * General partner for ALTEC International Limited Partnership, a Delaware Limited Partnership.
EX-23.1 7 EXHIBIT 23.1 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-08665) pertaining to the Chart Industries, Inc. Key Employee Stock Option Plan and Chart Industries, Inc. 1996 Stock Option Plan for Outside Directors (Form S-8 No. 333-08667) of our report dated February 3, 1997, with respect to the consolidated financial statements of Chart Industries, Inc. included in the Annual Report (Form 10-K) for the year ended December 31, 1996. /s/ ERNST & YOUNG LLP Cleveland, Ohio February 27, 1997 EX-27 8 EXHIBIT 27
5 1,000 YEAR DEC-31-1996 JAN-1-1996 DEC-31-1996 9,408 0 25,922 329 21,727 60,687 30,604 12,722 81,196 48,040 0 102 0 0 27,994 81,196 148,400 148,400 103,398 103,398 21,745 0 623 22,634 7,605 15,029 0 0 0 15,029 1.48 1.48
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