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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 June 30, 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
- ---------------------------- -----------------------------------
(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 June 30, 1996, there were 9,946,383 outstanding shares of the Company's
Common Stock, $0.01 par value per share.
Page 1 of 10 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>
June 30, December 31,
1996 1995
--------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $569 $229
Accounts receivable 19,867 26,614
Inventories 24,657 20,871
Other current assets 1,915 1,738
--------------------------------------------
Total Current Assets 47,008 49,452
Property, plant & equipment, net 15,753 11,734
Other assets, net 3,195 3,511
--------------------------------------------
TOTAL ASSETS $65,956 $64,697
============================================
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $8,684 $7,764
Customer advances 11,858 7,408
Billings in excess of costs plus
estimated earnings 9,078 6,027
Accrued expenses and other liabilities 10,525 10,305
Current portion of long-term debt 16 2,007
--------------------------------------------
Total Current Liabilities 40,161 33,511
Long-term debt 2,004 12,566
Deferred income taxes 77 187
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, 10,151,721 and 10,094,594 shares
issued at June 30, 1996 and December 31, 1995, respectively 102 101
Additional paid-in capital 17,449 17,024
Retained earnings 7,785 2,294
Treasury stock, at cost, 205,338 and 163,158 shares at June 30, 1996
and December 31, 1995, respectively (1,622) (986)
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23,714 18,433
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $65,956 $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 3
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CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
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<S> <C> <C> <C> <C>
Sales $30,612 $29,236 $65,339 $54,731
Cost of products sold 20,828 21,369 45,538 40,256
-------------------------------------- --------------------------------------
Gross Profit 9,784 7,867 19,801 14,475
Selling, general & administrative expense 4,383 4,748 9,290 9,634
-------------------------------------- --------------------------------------
Operating Income 5,401 3,119 10,511 4,841
Interest expense - net 181 462 418 925
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Income Before Income Taxes 5,220 2,657 10,093 3,916
Income taxes 1,672 1,009 3,336 1,488
-------------------------------------- --------------------------------------
Net Income $3,548 $1,648 $6,757 $2,428
====================================== ======================================
Net Income per Common Share $0.35 $0.16 $0.67 $0.24
====================================== ======================================
Shares used in per share calculations 10,130 10,046 10,111 10,105
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Page 4
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CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------- -------------------------------
1996 1995 1996 1995
--------------------------------- -------------------------------
OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net income $3,548 $1,648 $6,757 $2,428
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 721 667 1,422 1,337
Contribution of treasury stock to 401K plans 198 77 305 77
Deferred income taxes (110) (455) (110) (455)
Increase (decrease) in cash resulting from changes
in operating assets and liabilities:
Accounts receivable 4,344 (123) 6,747 533
Inventory and other current assets (3,739) (2,254) (3,963) (4,636)
Accounts payable and accrued liabilities (293) 3,695 1,140 3,150
Billings in excess of costs plus estimated
earnings and customer advances 5,738 (1,324) 7,501 (1,443)
--------------------------------- -------------------------------
Net Cash Provided By Operating Activities 10,407 1,931 19,799 991
INVESTING ACTIVITIES
Capital expenditures (847) (592) (1,609) (926)
Purchase of land and building at PSI (3,578) (3,578)
Other investing activities 66 32 62 208
--------------------------------- -------------------------------
Net Cash Used In Investing Activities (4,359) (560) (5,125) (718)
FINANCING ACTIVITIES
Repayments of long-term debt (2,715) (338) (3,053) (676)
Repayments on credit facility (12,250) (10,250) (24,000) (17,000)
Borrowings on credit facility 10,250 9,750 14,500 19,000
Treasury stock and employee stock option activity (231) (83) (382) (14)
Dividends/distributions paid to shareholders (700) (696) (1,399) (1,394)
--------------------------------- -------------------------------
Net Cash Used In Financing Activities (5,646) (1,617) (14,334) (84)
--------------------------------- -------------------------------
Net increase (decrease) in cash and cash equivalents 402 (246) 340 189
Cash and cash equivalents at beginning of period 167 641 229 206
--------------------------------- -------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $569 $395 $569 $395
================================= ===============================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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CHART INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
June 30, 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 six-month period ended June 30, 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>
June 30, December 31,
1996 1995
-----------------------------
<S> <C> <C>
Raw materials $ 11,399 $12,538
Work in process 13,878 8,784
Finished goods 12 181
LIFO reserve (632) (632)
----------------------------
$ 24,657 $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.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
RESULTS OF OPERATIONS
Sales for the three-month period that ended June 30, 1996, were $30.6 million
versus $29.2 million for the comparable 1995 period, an increase of $1.4
million, or 4.7 percent. The growth in sales was primarily the result of the
continued strength of the large cryogenic tank business at PEI. Sales of brazed
aluminum heat exchangers also continued at a brisk pace in both the air
separation and hydrocarbon processing equipment markets.
Sales for the six months ended June 30, 1996 were $65.3 million versus $54.7
million for the comparable 1995 period, an increase of $10.6 million or 19.3
percent. As in the quarterly analysis, the increase in sales comes mainly from
the cryogenic tank and brazed aluminum heat exchanger businesses.
Gross profit for the three-month period that ended June 30, 1996, was $9.8
million versus $7.9 million for the comparable period in 1995, an improvement of
$1.9 million, or 24.4 percent. For the first quarter of 1996, gross profit was
$10 million. Gross profit for the six months ended June 30, 1996 were $19.8
million versus $14.5 million for the comparable 1995 period, an increase of $5.3
million. Strong market conditions, particularly in the air separation equipment
market, and increasingly in the hydrocarbon processing equipment market,
continued to support better pricing and higher throughput. A favorable sales mix
at PEI also contributed to the year-over-year improvement in profitability.
Gross profit margin for the three-month period that ended June 30, 1996,
improved to 32.0 percent from 26.9 percent for the 1995 second quarter and 28.8
percent for the 1996 first quarter. Products supporting this improved second
quarter margin performance were primarily cryogenic storage tanks, brazed
aluminum heat exchangers and cold box design and fabrication.
Selling, general and administrative (SG&A) expense for the three-month period
that ended June 30, 1996, was $4.4 million, approximately $400,000 lower than
the second quarter of 1995 and $500,000 lower than the first quarter of 1996.
The decrease in SG&A expense in the second quarter of 1996 compared with the
first quarter of 1996 was the result of the high level of first quarter expenses
as well as decreasing employee benefit costs and commissions. As a percentage of
sales, SG&A expense was 14.3 percent for the second quarter of 1996 versus 16.2
percent and 14.1 percent for the second quarter of 1995 and the first quarter of
1996, respectively.
Net interest expenses for the three-month period that ended June 30, 1996, was
$181,000 versus $462,000 and $237,000 for the second quarter of 1995 and first
quarter of 1996, respectively. Six month interest expense was $418,000 in 1996
verus $925,000 in 1995.
The company has significantly reduced its level of borrowings but expects
commitment fees and amortization of loan costs to generate $75,000 per quarter
of interest expense. Early in the third quarter of 1996, the company secured a
$5 million IRB to fund the expansion of ALTEC's brazed aluminum heat exchanger
facility in La Crosse, Wisconsin.
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As a result of the foregoing, Chart reported record net income for the
three-month period that ended June 30, 1996, of $3.5 million, or $.35 per share,
versus $1.6 million, or $.16 per share, in the second quarter of 1995 and $3.2
million, or $.32 per share, for the first quarter of 1996. The improvement in
net income from the previous quarter represents the company's eighth consecutive
quarter of improved profitability. The six month 1996 net income was $6.8
million or $.67 per share, compared to $2.4 million or $.24 per share in 1995.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations during the three-month period that ended June 30,
1996, was $10.4 million compared with cash provided by operations of $1.9
million for 1995's second quarter and $9.4 million for 1996's first quarter. The
six month 1996 cash provided by operations is $19.8 million compared to $1.0
million in 1995. The company's 1996 cash flow represents current earnings in
addition to significant cash flow from customer advances and milestone billings
on many jobs in backlog, especially the LIGO project.
Capital expenditures for the second quarter of 1996 were $847,000, excluding the
PSI property purchase, compared with $592,000 for the same period in 1995. The
company completed the purchase of the PSI building and some adjoining land for
$3.6 million as fulfillment of an agreement made at the time of the original
acquisition of PSI in 1991. Increased capital expenditures in the next 12 months
are expected as the company begins expansion at the ALTEC facility. These
expenditures will be funded for the most part from the recent IRB.
The company anticipates sufficient cash flow from operations and available
borrowings to fund interest payments, dividends and capital expenditures. As of
June 30, 1996, the company's borrowings on its $25 million credit facility
totaled $2 million, a decrease of $2 million since March 31, 1996.
BACKLOG
Chart's consolidated firm order backlog at June 30, 1996 was $124.4 million
versus $112.9 million at March 31, 1996.
Air separation equipment bookings continued at strong levels, with orders
totaling $12.1 million for the 1996 second quarter. Backlog at June 30, 1996,
was $45.8 million after supporting strong quarterly sales of $13.1 million.
Hydrocarbon processing equipment backlog reached $33.8 million at June 30, 1996,
an increase of $14.6 million over March 31, 1996 levels. New orders during the
quarter totaled $20.7 million against sales of $6.1 million. The new orders
included a nitrogen rejection unit for AMOCO and numerous brazed aluminum heat
exchangers and Core-in-Kettle units. The company has experienced strong demand
for hydrocarbon processing equipment, including the innovative Core-in-Kettle
products from the growth of the ethylene market, especially overseas.
8
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Cryogenic and high-vacuum equipment backlog was $42.2 million at the end of the
1996 second quarter, with the LIGO project reflecting $35.1 million of this
backlog. New orders totaled $2.7 million and reflect continued demand for
Chart's standard cryogenic products, including helium systems and large
cryopumps.
Specialty products backlog totaled $2.6 million at June 30, 1996, essentially
even with the first quarter of 1996.
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.
Not Applicable.
(b) Reports on Form 8-K.
The Company did not file a current report on Form 8-K
during the second quarter ended June 30, 1996.
9
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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: August 9, 1996 /s/Don A. Baines
----------------- ----------------
Don A. Baines
Chief Financial Officer and Treasurer
(Duly Authorized and Principal Financial Officer)
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