<PAGE> 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 March 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.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 34-1712937
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(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
35555 Curtis Boulevard, Eastlake, Ohio 44095
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(Address of Principal Executive Offices) (ZIP Code)
Registrant's Telephone Number, Including Area Code: (216) 946-2525
Not Applicable
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(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
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At March 31, 1996, there were 9,943,568 outstanding shares of the Company's
Common Stock, $0.01 par value per share.
Page 1 of 11 sequentially numbered pages.
1
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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 6 of this Report on Form 10-Q.
2
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CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1996 1995
-------------------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 167 $ 229
Accounts receivable 24,211 26,614
Inventories 20,999 20,871
Other current assets 1,834 1,738
--------------------
Total Current Assets 47,211 49,452
Property, plant & equipment, net 11,917 11,734
Other assets, net 3,393 3,511
--------------------
TOTAL ASSETS $ 62,521 $ 64,697
====================
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 8,047 $ 7,764
Customer advances 9,942 7,408
Billings in excess of costs plus
estimated earnings 5,256 6,027
Accrued expenses and other liabilities 11,455 10,305
Current portion of long-term debt 1,673 2,007
--------------------
Total Current Liabilities 36,373 33,511
Long-term debt 5,062 12,566
Deferred income taxes 187 187
Shareholders' Equity
Preferred stock, 1,000 shares authorized, none
issued or outstanding
Common stock, par value $.01 per share -
30,000,000 shares authorized, 10,127,727 and 10,094,594 shares
issued at March 31, 1996 and December 31, 1995, respectively 101 101
Additional paid-in capital 17,204 17,024
Retained earnings 4,804 2,294
Treasury stock, at cost, 184,159 and 163,158 shares at March 31, 1996
and December 31, 1995, respectively (1,210) (986)
--------------------
20,899 18,433
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 62,521 $ 64,697
====================
</TABLE>
The balance sheet at December 31, 1995 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.
<PAGE> 4
CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
-----------------
<S> <C> <C>
Sales $34,727 $25,521
Cost of products sold 24,710 18,913
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Gross Profit 10,017 6,608
Selling, general & administrative expenses 4,907 4,886
-----------------
Operating Income 5,110 1,722
Interest expense - net 237 463
-----------------
Income Before Income Taxes 4,873 1,259
Income taxes 1,664 479
-----------------
Net Income $ 3,209 $ 780
=================
Net Income per Common Share $ 0.32 $ 0.08
=================
Shares used in per share calculations 10,085 10,054
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE> 5
CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1996 1995
---------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,209 $ 780
Adjustments to reconcile net income
to net cash provided by (used in) operating activities:
Depreciation and amortization 701 670
Contribution of treasury stock to Chart's 401K plans 107 0
Increase (decrease) in cash resulting from changes in operating
assets and liabilities:
Accounts receivable 2,403 656
Inventory and other current assets (224) (2,382)
Accounts payable and accrued liabilities 1,433 (545)
Billings in excess of costs plus estimated
earnings and customer advances 1,763 (119)
-------------------
Net Cash Provided By (Used In) Operating Activities 9,392 (940)
INVESTING ACTIVITIES
Capital expenditures (762) (334)
Other investing activities (4) 176
-------------------
Net Cash Used In Investing Activities (766) (158)
FINANCING ACTIVITIES
Repayments of long-term debt (338) (338)
Repayments on credit facility (11,750) (6,750)
Borrowings on credit facility 4,250 9,250
Treasury stock and stock option transactions (151) 69
Dividends/distributions paid to shareholders (699) (698)
-------------------
Net Cash (Used In) Provided by Financing Activities (8,688) 1,533
-------------------
Net increase (decrease) in cash and cash equivalents (62) 435
Cash and cash equivalents at beginning of period 229 206
-------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 167 $ 641
===================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE> 6
CHART INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
March 31, 1996
Note A - Basis of Preparation
The accompanying unaudited condensed consolidated financial statements 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 three-month period ended March 31, 1996
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1996. 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, 1995.
Note B - Inventories
The components of inventory consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
----------------------
<S> <C> <C>
Raw materials $ 11,410 $ 12,538
Work in process 10,102 8,784
Finished goods 119 181
LIFO reserve (632) (632)
--------------------
$ 20,999 $ 20,871
====================
</TABLE>
Note C - Revenue Recognition
Chart Industries, Inc. ("Chart" or 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.
<PAGE> 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
RESULTS OF OPERATIONS
Backlog at Chart continued to climb, reaching a record high this quarter. For
the quarter ended March 31, 1996, backlog was $112.9 million, a gain of $54.7
million, or 94 percent, over the 1995 first quarter level of $58.2 million.
Backlog rose $1.9 million, or 1.8 percent, above the $111 million level reported
at the end of the fourth quarter of 1995. New orders continued to outpace sales,
even as sales reached record levels. Strong order activity was experienced in
nearly all product markets.
Sales for the three-month period ended March 31, 1996 were $34.7 million versus
$25.5 million for the comparable 1995 period, an increase of $9.2 million, or
36.1 percent. Chart's 1996 first quarter sales performance improved $3.7
million, or 12 percent, from sales of $31 million reported in the three-month
period ended December 31, 1995. Higher prices and higher throughput of brazed
aluminum heat exchangers, cryogenic storage tanks and transport vehicles
resulted in the majority of the increased sales when compared with the same
period last year and the prior quarter. The LIGO project which began September
1995 generated $1.3 million of sales during the 1996 first quarter.
Strong market conditions resulting in better pricing and volume, as well as
Company-wide productivity improvements, especially at Process Engineering,
produced gross profit of $10 million for the three-month period ended March 31,
1996, versus $6.6 million for the comparable period in 1995, an improvement of
$3.4 million, or 51.6 percent. This result also compared favorably to gross
profit of $9 million reported in the fourth quarter of 1995. Gross profit margin
for the three-month period ended March 31, 1996 improved to 28.8 percent from
25.9 percent in Chart's 1995 first quarter. Factors supporting this improved
first quarter margin performance were higher prices for brazed aluminum heat
exchangers, cryogenic storage tanks and transport vehicles. The slight decrease
in gross margin percentage from the 1995 fourth quarter figure of 29.1% is
attributed to writedowns taken in connection with the Flxible/DART LNG bus
program, on which work has currently been halted.
Selling, general and administrative (SG&A) expense for the three-month period
ended March 31, 1996 was $4.9 million, approximately the same level as in the
first quarter of 1995, and $0.2 million higher than in the fourth quarter of
1995. As a percentage of sales, SG&A expense dropped to 14.1 percent for the
1996 first quarter versus 19.1 percent and 15.2 percent for the first and fourth
quarters of 1995, respectively. The drop in this percentage was the result of an
increase in sales volume without a corresponding increase in fixed overhead
cases.
Net interest expense for the three-month period ended March 31, 1996 was
$237,000, versus $463,000 and $405,000 in the 1995 first and fourth quarters,
respectively. Interest expense decreased because of lower debt levels resulting
from an increase in the Company's cash flow due to the improving operations.
7
<PAGE> 8
As a result of extensive state and federal tax planning and restructuring over
the last few years, the Company has been able to reduce its effective tax rate
from 38% in 1995's first quarter to 34% in the first quarter of 1996.
As a result of the foregoing, Chart reported net income for the three-month
period ended March 31, 1996 of $3.4 million, or $.34 per share, versus net
income of $780,000, or $.08 per share, in the first quarter of 1995.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations during the three month period that ended March 31,
1996 was $9.4 million, compared to cash used by operations of $900,000 in 1995's
first quarter and cash provided by operations of $6.8 million in 1995's fourth
quarter. The Company's 1996 first quarter cash flow reflected the improved
operating performance of the Company as well as improved working capital
management after the early 1995 build-up to respond to increased backlog.
Capital expenditures for the first quarter of 1996 were $762,000, compared to
$334,000 for the same period in 1995. The majority of the 1996 expenditures
related to building improvements and the continued development of the Chart
Coastal Fabrication facility.
The Company anticipates sufficient cash flow from operations and available
borrowings to fund interest payments, dividends, capital expenditures and the
repayment of scheduled maturities of debt from the acquisition of CVI. As of
March 31, 1996, the Company's borrowings on its $25 million credit facility
totaled $4.0 million, a decrease of $7.5 million since year-end. The Company was
in compliance with all covenants related to this facility at March 31, 1996.
BACKLOG
Chart's consolidated firm order backlog at March 31, 1996 was $112.9 million, an
increase of $1.9 million from December 31, 1995.
Air separation equipment bookings continued at a strong rate, with orders
totaling $17.7 million in the 1996 first quarter. The improved order level
resulted in backlog of $46.8 million at March 31, 1996, an increase of $5.2
million from December 31, 1995.
Hydrocarbon processing equipment backlog stood at $19.2 million at the end of
the 1996 first quarter, which was unchanged from the December 31, 1995 level.
New orders and sales during the quarter each totaled $7.6 million. The expected
margin on the current backlog exceeds 35%. The 1996 first quarter margins were
below 35% due to the charges taken related to the Flxible/DART LNG bus program.
Cryogenic and high-vacuum equipment backlog was $44.2 million at March 31, 1996.
New orders totaling $4.8 million reflected continued demand for Chart's standard
cryogenic products and a new telescope coater order. This area will continue to
be dominated by LIGO for the next two years.
8
<PAGE> 9
Specialty products backlog totaled $2.7 million at March 31, 1996, a reduction
of $2.7 million from the year-end 1995 figure as several rocket fuel road
transport trailers under contract for the U.S. Air Force were completed. The low
level of backlog in this area is not always indicative of future sales as the
redrawn stainless steel tube market runs on a few-week lead time basis.
9
<PAGE> 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
There have been no material changes since the filing of
Chart's 10-K covering 1995.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
27 - Financial Data Schedule
(b) Reports on Form 8-K.
The Company did not file a current report on Form 8-K
during the first quarter ended March 31, 1996.
10
<PAGE> 11
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: May 13, 1996 /s/Don A. Baines
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Don A. Baines
Chief Financial Officer and Treasurer
(Duly Authorized and Principal Financial Officer)
<TABLE> <S> <C>
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 167
<SECURITIES> 0
<RECEIVABLES> 24211
<ALLOWANCES> 0
<INVENTORY> 20999
<CURRENT-ASSETS> 47211
<PP&E> 11917
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<TOTAL-ASSETS> 62521
<CURRENT-LIABILITIES> 36373
<BONDS> 0
<COMMON> 101
0
0
<OTHER-SE> 20798
<TOTAL-LIABILITY-AND-EQUITY> 62521
<SALES> 34727
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<CGS> 24710
<TOTAL-COSTS> 24710
<OTHER-EXPENSES> 4907
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 237
<INCOME-PRETAX> 4873
<INCOME-TAX> 1664
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</TABLE>
