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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 March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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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____
At March 31, 1997, there were 9,601,902 outstanding shares of the Company's
Common Stock, $0.01 par value per share.
Page 1 of 12 sequentially numbered pages.
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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 1997 1996
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<S> <C> <C>
Current Assets
Cash and cash equivalents $ 496 $ 4,304
Restricted cash 5,093 5,104
Accounts receivable 26,339 25,922
Inventories 20,149 21,727
Other current assets 3,733 3,630
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Total Current Assets 55,810 60,687
Property, plant & equipment, net 19,381 17,882
Other assets, net 2,530 2,627
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TOTAL ASSETS $ 77,721 $ 81,196
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LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 8,760 $ 8,582
Customer advances 14,193 12,698
Billings in excess of contract revenue 7,254 11,444
Accrued expenses and other liabilities 14,556 14,955
Short-term borrowings 1,250
Current portion of long-term debt 357 361
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Total Current Liabilities 46,370 48,040
Long-term debt 4,376 4,469
Deferred income taxes 591 591
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, 10,207,200 and 10,203,200 shares
issued at March 31, 1997 and December 31, 1996, respectively 102 102
Additional paid-in capital 18,474 18,118
Retained earnings 17,911 14,321
Treasury stock, at cost, 605,298 and 362,585 shares at
March 31, 1997 and December 31, 1996, respectively (10,103) (4,445)
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26,384 28,096
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 77,721 $ 81,196
=======================
</TABLE>
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
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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
March 31,
1997 1996
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<S> <C> <C>
Sales $ 42,440 $34,727
Cost of products sold 30,272 24,710
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Gross Profit 12,168 10,017
Selling, general & administrative expenses 5,386 4,907
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Operating Income 6,782 5,110
Interest (income) expense - net (8) 237
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Income Before Income Taxes 6,790 4,873
Income taxes 2,309 1,664
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Net Income $ 4,481 $ 3,209
======================
Net Income per Common Share $ 0.45 $ 0.32
======================
Shares used in per share calculations 9,978 10,085
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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
March 31,
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1997 1996
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<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 4,481 $ 3,209
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 679 701
Contribution of treasury stock to Chart's 401K plans 188 107
Increase (decrease) in cash resulting from changes in operating
assets and liabilities:
Accounts receivable (417) 2,403
Inventory and other current assets 1,475 (224)
Accounts payable and accrued liabilities (221) 1,433
Billings in excess of contract revenue and
customer advances (2,695) 1,763
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Net Cash Provided By Operating Activities 3,490 9,392
INVESTING ACTIVITIES
Capital expenditures (2,120) (762)
Other investing activities 39 (4)
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Net Cash Used In Investing Activities (2,081) (766)
FINANCING ACTIVITIES
Repayments of long-term debt (97) (338)
Repayments on credit facility (1,500) (11,750)
Borrowings on credit facility 2,750 4,250
Treasury stock and stock option transactions (5,490) (151)
Dividends/distributions paid to shareholders (891) (699)
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Net Cash Used In Financing Activities (5,228) (8,688)
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Net decrease in cash and cash equivalents (3,819) (62)
Cash and cash equivalents at beginning of period 9,408 229
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,589 $ 167
======================
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
5
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CHART INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
March 31, 1997
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, 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.
Note B - Inventories
The components of inventory consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
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<S> <C> <C>
Raw materials $ 10,655 $ 11,507
Work in process 9,810 10,536
Finished goods 25 25
LIFO reserve (341) (341)
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$ 20,149 $ 21,727
======================
</TABLE>
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 first quarter ended March 31, 1997 and March 31, 1996
of $.46 and $.32 per share, respectively. Fully diluted earnings per share for
these quarters should not be materially different then the currently disclosed
earnings per share.
6
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Note D - 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.
Note E - Subsequent Event
On April 30, 1997, the Company signed a definitive agreement to acquire Cryenco
Sciences, Inc. (NASD: CSCI). Under the agreement, a wholly-owned Chart
subsidiary would acquire all of the common stock of Cryenco for approximately
$21 million, or $2.75 per share, in cash, plus the assumption of Cryenco's bank
debt. The transaction is contingent upon approval by Cryenco shareholders, the
expiration of certain governmental waiting periods, and the resolution of
certain other matters. The Company expects the transaction to be completed in
the third quarter of 1997.
7
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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 ended March 31, 1997, were $42.4 million versus
$34.7 million for the comparable 1996 period, an increase of $7.7 million, or
22.2 percent. Improved pricing, a higher volume of brazed aluminum heat
exchangers and higher levels of work accomplished on the LIGO project, accounted
for the majority of the sales increase compared with the same period last year.
The LIGO project which began in September 1995 generated $4.9 million of sales
during the 1997 first quarter.
Strong market conditions, which resulted in better pricing, volume, capacity
utilization, and company-wide productivity improvements produced gross profit
for the 1997 first quarter of $12.2 million versus $10 million for the
comparable period in 1996, an improvement of $2.2 million, or 21.5 percent.
Gross profit margin for the three-month period that ended March 31, 1997, was
28.7 percent, compared to 28.8 percent in Chart's 1996 first quarter. Stronger
pricing for brazed aluminum heat exchangers was offset by lower margins in cold
boxes and softer prices in stainless steel tubing.
Selling, general and administrative (SG&A) expense for the three-month period
that ended March 31, 1997, was $5.4 million, an increase of $500,000 over the
first quarter of 1996. As a percentage of sales, SG&A expense dropped to 12.7
percent for the 1997 first quarter from 14.1 percent for the first quarter of
1996. The improvement is the result of increasing volume without increasing
fixed costs.
Net interest income for the 1997 first quarter was $8,000 versus $237,000 of net
interest expense for the prior year's first quarter. Lower debt levels, which
resulted as the company's cash flow increased with improving operations, and
income on the IRB-related escrow funds, which will be spent in the second or
third quarter this year, contributed to producing net interest income for the
1997 first quarter.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations for the 1997 first quarter, was $3.5 million
compared with $9.4 million in 1996's first quarter. The company's 1997
first-quarter cash flow reflects fewer customer advances and progress billings,
and LIGO increasing its cash draw while moving into full-scale manufacturing.
Capital expenditures for the first quarter of 1997 were $2.1 million compared
with $762,000 for the same period in 1996. The majority of the 1997 expenditures
related to machinery and equipment at ALTEC for its plant expansion.
8
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During the first quarter, the company purchased 247,700 shares of common stock
under the repurchase program that was announced on November 19, 1996.
The company forecasts sufficient cash flow from operations and available
borrowings to fund interest payments, dividends and capital expenditures. As of
March 31, 1997, the company's borrowings on its $25 million credit facility
totaled $1.25 million, a small increase from the year-end balance of zero. The
company was in compliance with all covenants related to this facility at March
31, 1997.
BACKLOG
Chart's consolidated firm order backlog at March 31, 1997, was $118.1 million, a
decrease of $10.2 million from December 31, 1996. First quarter orders totaled
$31.7 million.
Air separation equipment bookings continued at a strong rate, with orders
totaling $17.7 million in the 1997 first quarter. The order level resulted in
backlog of $42.8 million at March 31, 1997, a decrease of $900,000 from December
31, 1996.
Hydrocarbon processing equipment backlog stood at $39.4 million at the end of
the 1997 first quarter, a decrease of $5.5 million from the December 31, 1996
level. Orders in this area, which generally carry stronger gross margins,
totaled $3.1 million and should increase as the company continues to bid on many
large projects and reduces its delivery time.
Cryogenic and high-vacuum equipment backlog was $31.6 million at March 31, 1997.
Sales in this area included $4.9 million related to the LIGO project, which has
$20.5 million of backlog remaining for 1997 and 1998.
Specialty products backlog totaled $4.3 million at March 31, 1997, on orders of
$7.1 million. Low backlog in this area is not indicative of future sales as the
stainless steel tubing market, the largest part of this product area, runs on a
few-week lead time basis.
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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 did not file a current report on Form 8-K
during the first quarter ended March 31, 1997
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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.
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(Registrant)
Date: May 7, 1997 /s/ Don A. Baines
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Don A. Baines
Chief Financial Officer and Treasurer
(Duly Authorized and Principal Financial Officer)
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EXHIBIT INDEX
Exhibit Number Description of Document
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27 Financial Data Schedule
12
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 5589
<SECURITIES> 0
<RECEIVABLES> 26339
<ALLOWANCES> 0
<INVENTORY> 20149
<CURRENT-ASSETS> 55810
<PP&E> 19381
<DEPRECIATION> 0
<TOTAL-ASSETS> 77721
<CURRENT-LIABILITIES> 46370
<BONDS> 0
<COMMON> 102
0
0
<OTHER-SE> 26282
<TOTAL-LIABILITY-AND-EQUITY> 77721
<SALES> 42440
<TOTAL-REVENUES> 42440
<CGS> 30272
<TOTAL-COSTS> 30272
<OTHER-EXPENSES> 5386
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (8)
<INCOME-PRETAX> 6790
<INCOME-TAX> 2309
<INCOME-CONTINUING> 4481
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4481
<EPS-PRIMARY> .45
<EPS-DILUTED> .45
</TABLE>
