-----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, RHS8PqwLDXBWywfdHwCyQ++WVi3P+4ZyrvmuCniKgvN446KndvaA2pjeiwESpLda 5SOqxwvwifERXWJVbWckmw== 0000950152-97-008076.txt : 19971117 0000950152-97-008076.hdr.sgml : 19971117 ACCESSION NUMBER: 0000950152-97-008076 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NONE 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-Q SEC ACT: SEC FILE NUMBER: 001-11442 FILM NUMBER: 97720307 BUSINESS ADDRESS: STREET 1: 35555 CURTIS BLVD CITY: EASTLAKE STATE: OH ZIP: 44095 BUSINESS PHONE: 2169462525 10-Q 1 CHART INDUSTRIES, INC.|QUARTERLY REPORT|FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 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 (I.R.S. Employer Identification No.) of Incorporation or Organization) 34799 Curtis Boulevard, Eastlake, Ohio 44095 --------------------------------------------------------------------- (Address of Principal Executive Offices) (ZIP Code) Registrant's Telephone Number, Including Area Code: (440) 946-2525 Not Applicable --------------------------------------------------------------------- (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) 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 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 ----- ----- At September 30, 1997, there were 14,445,415 outstanding shares of the Company's Common Stock, $0.01 par value per share. Page 1 of 12 sequentially numbered pages. 1 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements. The information required by Rule 10-01 of Regulation S-X is set forth on pages 3 through 7 of this Report on Form 10-Q. 2 3 CHART INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (dollars in thousands, except per share amounts)
September 30, December 31, 1997 1996 ------------------------------------ ASSETS Current Assets Cash and cash equivalents $434 $4,304 Restricted cash $1,885 5,104 Accounts receivable 32,886 25,922 Inventories 24,750 21,727 Other current assets 3,181 3,630 ---------------------------------- Total Current Assets 63,136 60,687 Property, plant & equipment, net 26,927 17,882 Other assets, net 16,243 2,627 ---------------------------------- TOTAL ASSETS $106,306 $81,196 ================================== LIABILITIES & SHAREHOLDERS' EQUITY Current Liabilities Accounts payable $8,334 $8,582 Customer advances 13,739 12,698 Billings in excess of contract revenue 3,426 11,444 Accrued expenses and other liabilities 17,194 14,955 Current portion of long-term debt 545 361 ---------------------------------- Total Current Liabilities 43,238 48,040 Long-term debt 26,372 4,469 Deferred income taxes 579 591 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, 15,338,198 and 15,304,800 shares issued at September 30, 1997 and December 31, 1996, respectively 153 102 Additional paid-in capital 19,361 18,118 Retained earnings 26,599 14,321 Treasury stock, at cost, 892,783 and 543,878 shares at September 30, 1997 and December 31, 1996, respectively (9,996) (4,445) ---------------------------------- 36,117 28,096 ---------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $106,306 $81,196 ==================================
The balance sheet at December 31, 1996 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accompanying notes are an integral part of these condensed consolidated financial statements. 3 4 CHART INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share amounts)
Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 ------------------------------- ------------------------------- Sales $51,939 $37,970 $136,137 $103,309 Cost of products sold 35,278 26,693 93,834 72,231 ------------------------------- ------------------------------- Gross Profit 16,661 11,277 42,303 31,078 Selling, general & administrative expense 7,356 5,326 19,068 14,616 ------------------------------- ------------------------------- Operating Income 9,305 5,951 23,235 16,462 Interest expense - net 358 133 376 551 ------------------------------- ------------------------------- Income Before Income Taxes 8,947 5,818 22,859 15,911 Income taxes 3,156 2,005 7,886 5,341 ------------------------------- ------------------------------- Net Income $5,791 $3,813 $14,973 $10,570 =============================== =============================== Net Income per Common Share $0.39 $0.25 $1.01 $0.70 =============================== =============================== Shares used in per share calculations 14,806 15,215 14,834 15,186
The accompanying notes are an integral part of these condensed consolidated financial statements. 4 5 CHART INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (dollars in thousands)
Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ---------------------- 1997 1996 1997 1996 ---------------------- ---------------------- OPERATING ACTIVITIES Net income $ 5,791 $ 3,813 $ 14,973 $ 10,570 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,000 717 2,364 2,139 Contribution of treasury stock to 401K plans 152 148 490 453 Deferred income taxes (12) (110) (12) (220) Increase (decrease) in cash resulting from changes in operating assets and liabilities: Accounts receivable (5,496) (6,642) (1,567) 105 Inventory and other current assets 3,313 1,366 3,208 (2,597) Accounts payable and accrued liabilities 3,262 (590) (879) 550 Billings in excess of contract revenue and customer advances (519) 746 (6,977) 8,247 ---------------------- ---------------------- Net Cash Provided By (Used In) Operating Activities 7,491 (552) 11,600 19,247 INVESTING ACTIVITIES Capital expenditures (1,422) (1,286) (5,661) (2,895) Acquisition of Cryenco (net of cash acquired) (20,128) (20,128) Purchase of land and building at PSI (3,578) Other investing activities 43 8 239 70 ---------------------- ---------------------- Net Cash Used In Investing Activities (21,507) (1,278) (25,550) (6,403) FINANCING ACTIVITIES Borrowings under Industrial Revenue Bond 5,000 5,000 Repayments of long-term debt (190) (94) (386) (3,147) Repayments on credit facility (22,250) (11,500) (30,000) (35,500) Borrowings on credit facility 35,000 13,500 45,250 28,000 Treasury stock and stock option transactions 14 (265) (5,359) (647) Dividends (877) (701) (2,644) (2,100) ---------------------- ---------------------- Net Cash Provided by (Used In) Financing Activities 11,697 5,940 6,861 (8,394) ---------------------- ---------------------- Net increase (decrease) in cash and cash equivalents (2,319) 4,110 (7,089) 4,450 Cash and cash equivalents at beginning of period 4,638 569 9,408 229 ---------------------- ---------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,319 $ 4,679 $ 2,319 $ 4,679 ====================== ======================
The accompanying notes are an integral part of these condensed consolidated financial statements. 5 6 CHART INDUSTRIES, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) September 30, 1997 Note A - Basis of Preparation The accompanying unaudited condensed consolidated financial statements of Chart Industries, Inc. ("Chart" or the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine-month period ended September 30, 1997 are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. For further information, refer to the consolidated financial statements and footnotes thereto included in the Chart Industries, Inc. and Subsidiaries' Annual Report on Form 10-K for the year ended December 31, 1996. All share and per-share amounts have been adjusted for a 3-for-2 stock split which was distributed to shareholders on June 30, 1997. Note B - Inventories The components of inventory consist of the following:
September 30, December 31, 1997 1996 --------------------------- Raw materials $ 12,063 $11,507 Work in process 12,789 10,536 Finished goods 239 25 LIFO reserve (341) (341) ---------------------- $ 24,750 $21,727 ======================
6 7 Note C - Earnings per Share In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings per Share, which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating basic earnings per share, the dilutive effect of stock options will be excluded. The impact is expected to result in basic earnings per share for the nine-months ended September 30, 1997 and 1996 of $1.03 and $.71 per share, respectively. Fully diluted earnings per share for these quarters should not be materially different then the currently disclosed earnings per share. Note D - Revenue Recognition The Company uses the percentage of completion method of accounting for significant contracts. In other cases, revenue is recognized using the completed contract method. Management performs a monthly assessment of major significant contracts to determine if contract costs will exceed contract revenues. For those projects where the estimated costs exceed estimated revenues, appropriate estimated losses are recorded. The effects of any change orders are accounted for when agreed to by Chart's customers. Note E - Acquisition of Cryenco Sciences, Inc. On July 31, 1997, the Company purchased the common stock, preferred stock and common stock warrants of Cryenco Sciences, Inc. (a manufacturer of cryogenic tanks) for $20.8 million. The pro forma unaudited results of operations for the nine months ended September 30, 1997 and September 30, 1996, assuming consummation of the acquisition as of January 1, 1996, are as follows:
Nine Months ended September 30, 1997 1996 (000's omitted, except per share) ---------------- ------------------- Sales $152,428 $127,309 Net Income 14,562 10,032 Net Income per Common Share .98 .66
Note F - Subsequent Event The Company completed a stock offering on October 8, 1997. Of the 3,220,000 shares of Common Stock sold, 1,720,000 were offered by the Company, including the full over-allotment provision, and 1,500,000 were offered by certain stockholders. The entire stock sale was priced to the public at $21.00 per share. The proceeds to the Company from the stock sale were used to repay the outstanding borrowings on the Company's $45 million credit facility. 7 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. RESULTS OF OPERATIONS Sales for the three-month period ended September 30, 1997, were $51.9 million versus $38 million for the comparable quarter last year, an increase of $14.0 million, or 36.8 percent. Increased activity in the hydrocarbon processing market led to a $9.7 million increase in sales of brazed aluminum heat exchangers, cryogenic tanks and coldbox assemblies. The remainder of the sales growth for the quarter was, in large part, the contribution of Cryenco Sciences, acquired on July 31, 1997. Sales for the nine months ended September 30, 1997 were $136.1 million versus $103.3 million for the comparable 1996 period, an increase of $32.8 million or 31.8 percent. As in the quarterly analysis, the increase in sales comes mainly from the brazed aluminum heat exchanger businesses in both industrial gases and hydrocarbon processing. Gross profit for the 1997 third quarter was $16.7 million, an improvement of $5.4 million or 47.7 percent from $11.3 million for the comparable period in 1996. The gross profit margin of 32.1 percent represents a 2.4 percentage point improvement over the same quarter in 1996, and is the second best quarterly performance in the Company's history, falling only slightly below the record 32.3 percent reported for the 1997 second quarter. Improved productivity, good product mix and favorable capacity utilization contributed to the strong gross margin performance. Gross profit for the nine months ended September 30, 1997 was $42.3 million versus $31.1 million for the comparable 1996 period, an increase of $11.2 million. Strong market conditions, particularly in the industrial gas equipment market and increasingly in the hydrocarbon processing equipment market, continued to support good pricing and higher throughput. As a percentage of sales, selling, general and administrative (SG&A) expense was 14.2 percent for the third quarter of 1997 versus 14 percent for the third quarter of 1996. SG&A expense for the three-month period ended September 30, 1997, was $7.4 million, approximately $2 million higher than in the third quarter of 1996. Compared with the third quarter of 1996, SG&A expense for the 1997 third quarter included the addition of Cryenco, increased selling costs as the Company continues to pursue new opportunities, and increased compensation-related expenses that are tied to profitability. Net interest expense for the 1997 third quarter was $358,000 versus $133,000 and $26,000, for the third quarter of 1996 and the second quarter of 1997, respectively. The increase in interest expense is the result of debt assumed in the acquisition of Cryenco. With the completion of the stock offering in early October, the Company has repaid all outstanding borrowings on its $45 million credit facility. The 1997 third-quarter effective tax rate of 35.3 percent reflects the favorable tax structure of the Company. The Company expects an on-going effective tax rate between 34 and 36 percent into 1998. 8 9 Chart reported net income for the three-month period ended September 30, 1997, of $5.8 million, or $.39 per share, versus $3.8 million, or $.25 per share, for the third quarter of 1996, and $4.7 million, or $.32 per share, for the second quarter of 1997. It is the thirteenth consecutive quarter that Chart reported improved profitability. Year-to-date net income of $15 million, or $1.01 per share, represents an increase of 41.7 percent from the $10.6 million, or $.70 per share reported for the first nine months of 1996. LIQUIDITY AND CAPITAL RESOURCES Cash provided by operations during the three-month period that ended September 30, 1997, was $7.5 million compared with $.6 million used for 1996's third quarter and $.6 million provided for 1997's second quarter. The nine month 1997 cash provided by operations is $11.6 million compared to $19.2 million in 1996. The Company's 1996 cash flow represented earnings in addition to significant cash flow from customer advances and milestone billings on many jobs in backlog, especially the LIGO project. The large cash flow in 1996 compared to 1997 was due to the large customer advances and progress payments which resulted as business conditions improved and as strategic initiatives to reduce working capital took effect. The current year reflects more normal levels of working capital needs and the positive effect of higher earnings levels. Capital expenditures for the third quarter of 1997 were $1.4 million compared with $1.3 million for the same period in 1996. The level of capital expenditures in 1997 is related to the expansion at the ALTEC facility. These expenditures have been and will continue to be funded, for the most part, from an Industrial Revenue Bond. On July 31, 1997, the Company completed the acquisition of Cryenco Sciences, Inc. Total consideration for the merger consisted of $ 20.8 million for all the outstanding common stock, preferred stock, and common stock warrants. The Company expects sufficient cash flow from operations to fund interest payments, dividends, capital expenditures, and the repayment of scheduled maturities of debt from the IRB. The Company was in compliance with all covenants related to this facility as of September 30, 1997. As of September 30, 1997, the Company's borrowings on its $45 million credit facility totaled $22 million. Proceeds from the recently-completed stock offering were used to repay these borrowings. BACKLOG Chart's consolidated firm order backlog at September 30, 1997, was $125.6 million versus $126.6 million at June 30, 1997. The Company successfully increased throughput in its operations, but the acquisition of Cryenco added $11.5 million to backlog. Industrial gas equipment bookings continued at strong levels, with orders totaling $17.5 million for the 1997 third quarter. Record sales of $23.4 million outpaced orders, but with the acquisition of Cryenco, this market ended with record backlog of $55.6 million. 9 10 Hydrocarbon processing equipment backlog stood at $50.5 million on September 30, 1997, a decrease of $2.7 million over June 30, 1997 levels. This sector continues to see high demand in the ethylene, natural gas and LNG areas of the market. Special products backlog totaled $19.6 million at September 30, 1997 and is largely made up of the backlog related to the LIGO project and several other vacuum-related projects. Item 3. Quantitative and Qualitative Disclosures About Market Risk Not applicable. 10 11 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. See the Exhibit Index on page 12 of this Form 10-Q. (b) Reports on Form 8-K. The Company filed current reports on Form 8-K dated July 31, 1997 and September 17, 1997. 11 12 SIGNATURES Pursuant to the requirements 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. ----------------------------------- (Registrant) Date: November 11, 1997 /s/Don A. Baines ------------------------- ---------------------------------------- Don A. Baines Chief Financial Officer and Treasurer 12 13 EXHIBIT INDEX Exhibit Number Description of Document -------------- ----------------------- 27 Financial Data Schedule 13 EX-27 2 EXHIBIT 27
5 1,000 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 434 0 32,886 0 24,750 63,136 26,927 0 106,306 43,238 26,372 0 0 153 35,964 106,306 136,137 136,137 93,834 93,834 19,068 0 376 22,859 7,886 14,973 0 0 0 14,973 1.01 1.01
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