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Section 1: 8-K (8-K)

8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________________________
FORM 8-K
_____________________________________
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) April 28, 2016
____________________________________
CHART INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
_____________________________________

Delaware
001-11442
34-1712937
(State of other jurisdiction of incorporation or organization)
(Commission File Number)
(I.R.S. Employer Identification No.)

One Infinity Corporate Centre Drive, Suite 300, Garfield Heights, Ohio
 
44125
(Address of principal executive offices)
 
(ZIP Code)

Registrant’s telephone number, including area code: (440) 753-1490

NOT APPLICABLE
(Former name or former address, if changed since last report)
_____________________________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





Item 2.02    Results of Operations and Financial Condition.
On April 28, 2016, Chart Industries, Inc. (the “Company”) issued a news release announcing the Company’s financial results for the first quarter ended March 31, 2016. A copy of the news release is furnished with this Current Report on Form 8-K as Exhibit 99.1. All information in the news release is furnished and shall not be deemed “filed” with the Securities and Exchange Commission for purposes of Section 18 of the Exchange Act, or otherwise be subject to the liability of that Section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent the Company specifically incorporated it by reference.
The news release furnished with this Current Report on Form 8-K as Exhibit 99.1 includes an adjusted earnings per share amount that excludes restructuring and acquisition-related costs, net of a favorable impact from an insurance settlement recorded in the quarter. Also included for purposes of period-to-period comparison is an adjusted earnings per share amount for the first quarter of 2015 which excludes certain restructuring and acquisition-related costs, including facility shutdown costs. These adjusted earnings per share measures are not recognized under generally accepted accounting principles (“GAAP”) and are referred to as “non-GAAP financial measures” in Regulation G under the Exchange Act. The Company believes these adjusted earnings per share amounts are of interest to investors and facilitate useful period-to-period comparisons of the Company’s financial results, and this information is used by the Company in evaluating internal performance. The adjusted earnings per share amounts are reconciled to earnings per share in a table at the end of the news release.

 
Item 9.01    Financial Statements and Exhibits.
(d)    Exhibits.
Exhibit No.
Description
99.1
Chart Industries, Inc. News Release, dated April 28, 2016, announcing the Company’s first quarter 2016 results.
 
 
 
 
 
 


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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 hereunto duly authorized.

 
Chart Industries, Inc.

Date: April 28, 2016



 
By:   /s/ Kenneth J. Webster                                                  
Kenneth J. Webster
Vice President and Chief Financial Officer
 
 


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EXHIBIT INDEX
Exhibit No.
Description
99.1
Chart Industries, Inc. News Release, dated April 28, 2016, announcing the Company’s first quarter 2016 results.
 
 
 
 
 
 


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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit

Exhibit 99.1
Chart Industries Reports 2016 First Quarter Results

Cleveland, Ohio - April 28, 2016 - Chart Industries, Inc. (NASDAQ: GTLS), a leading diversified global manufacturer of highly engineered equipment for the industrial gas, energy and biomedical industries, today reported results for the first quarter ended March 31, 2016. Highlights include:

Strong operating cash flow of $38 million

Chart Thermax wins contract for Indian LNG import terminal

Cost reduction initiatives delivering results

Net loss for the first quarter of 2016 was $4.7 million, or $0.15 per diluted share. First quarter 2016 earnings would have been a loss of $0.08 per diluted share excluding $3.3 million, or $0.07 per diluted share, of restructuring and acquisition-related costs, net of a favorable impact from an insurance settlement in the quarter. This compares with net income of $5.2 million, or $0.17 per diluted share, for the first quarter of 2015. First quarter 2015 earnings would have been $0.19 per diluted share excluding $0.9 million, or $0.02 per diluted share, of restructuring and acquisition-related costs, including facility shutdown costs.

Net sales for the first quarter of 2016 decreased 20.9% to $193.8 million from $245.1 million in the comparable period a year ago. Gross profit for the first quarter of 2016 was $52.7 million, or 27.2% of sales, versus $72.5 million, or 29.6% of sales, in the comparable quarter of 2015. First quarter of 2016 cost of sales included approximately $1.4 million of the adjustments noted above.

“We are pleased with demand strength for our LNG-related products in Distribution & Storage (“D&S”), including our contract for LNG vaporizers for an import terminal in India. Our D&S business is benefiting from greater availability of LNG worldwide, some of it coming from plants that Energy & Chemicals (“E&C”) has been helping to build. Despite the loss, which was largely due to acceleration of share-based compensation expense in the quarter, we continue to demonstrate the strength of our diversified product portfolio and strong cash flow generation despite low energy prices and a weak Chinese economy," stated Sam Thomas, Chart’s Chairman, President and Chief Executive Officer.

Mr. Thomas added, “We are focused on our long-term strategic initiatives and maintaining our engineering and execution capabilities, particularly in E&C. The start-up of our new E&C LifeCycle aftermarket service business to serve the significant installed base of E&C equipment is a prime example of how we plan to capitalize on our strengths by providing a well balanced portfolio of products and services. Lean initiatives, including our plant consolidation in Tulsa, Oklahoma, will allow us to improve our manufacturing efficiencies to reduce future costs.”

Orders received in the first quarter of 2016 were $199.3 million, a decrease of $31.9 million over orders received during the fourth quarter of 2015. Order levels significantly declined in the E&C segment due to continued uncertainties in the upstream energy markets. This decline was partially offset by solid order levels within D&S, including the previously announced AB Klaipėdos nafta LNG award. Backlog at March 31, 2016 was $382.4 million, up 2.1% from the December 31, 2015 level of $374.6 million.





Selling, general and administrative ("SG&A") expenses for the first quarter of 2016 decreased $3.6 million compared with the same period in 2015 to $49.5 million, or 25.6% of sales. First quarter 2016 SG&A included $1.9 million in severance costs associated with cost reduction initiatives and other restructuring-related charges. First quarter 2015 SG&A included restructuring and acquisition-related costs, including facility shutdown costs of $0.8 million. Excluding those restructuring-related costs, SG&A decreased 9.0% in the first quarter of 2016, largely due to the impact of cost reduction initiatives. In addition, first quarter 2016 SG&A included share-based compensation expense of $5.5 million, which includes the acceleration of expense for retirement eligible participants. This represents approximately half of the expected share-based compensation expense that will be recorded for the current year. The first quarter of 2015 included $5.8 million of share-based compensation expense.

Income tax expense was $0.1 million for the first quarter of 2016 and represented an effective tax rate of negative 1.9% compared with $2.4 million in the prior year quarter, or an effective tax rate of 31.0%.  The effective tax rate for the current quarter is lower than 2015's first quarter rate as a result of a higher mix of earnings in foreign jurisdictions. This was offset by tax losses in China for which no benefit is recorded. 

Net interest expense was $4.1 million for the first quarter of 2016, which included $3.0 million of non-cash accretion expense associated with the Company’s Convertible Notes. Net cash interest was $1.1 million.

SEGMENT HIGHLIGHTS
E&C segment sales decreased 56.6% to $38.0 million for the first quarter of 2016 compared with $87.5 million for the same quarter in the prior year. The decline was due to lower sales volume seen across all product lines in natural gas, petrochemical and LNG applications. A number of large projects were also completed in 2015, resulting in lower current quarter revenues. E&C gross profit margins were 14.4% in the 2016 quarter compared with 28.4% in the same quarter of 2015. Gross profit margins were negatively impacted as a result of lower throughput and highly competitive markets.
 
D&S segment sales increased 2.3% to $107.5 million for the first quarter of 2016 compared with $105.1 million for the same quarter in the prior year. Sales in North America increased as a result of revenue recognized on projects related to both LNG and industrial gas applications. This increase was partially offset by continued weakness in Asia. D&S gross profit margins were 27.4% compared with 28.6% in the prior year quarter. Severance costs of approximately $1.8 million negatively impacted D&S gross margin, while the finalization of an insurance claim positively impacted margins by approximately $1.0 million. Excluding these one-time adjustments, D&S gross profit margin would have been 28.1%.
 
BioMedical segment sales decreased 8.1% to $48.3 million for the first quarter of 2016 compared with $52.6 million for the same quarter in the prior year. The decrease is primarily due to lower respiratory sales volumes in North America and the timing of expected orders in Europe, partially offset by an increase of new product revenues in life sciences. BioMedical gross profit margin increased to 36.9% in the quarter compared with 33.5% for the same period in 2015 primarily due to product mix and lower warranty costs.


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OUTLOOK
Based on first quarter results, current order backlog and business expectations for the remainder of 2016, we are reiterating our 2016 guidance with sales expected to be in the range of $900 million to $1.0 billion. Full year earnings per diluted share are still expected to be in the range of $0.50 to $1.00 per share, on approximately 30.9 million weighted average shares outstanding. This excludes the impact from any restructuring costs and assumes an annual effective tax rate of approximately 29%.

FORWARD-LOOKING STATEMENTS
Certain statements made in this news release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning the Company's plans, objectives, future orders, revenues, earnings or performance, liquidity and cash flow, capital expenditures, business trends, and other information that is not historical in nature. Forward-looking statements may be identified by terminology such as "may," "will," "should," "could," "expects," "anticipates," "believes," "projects," "forecasts," “outlook,” “guidance,” "continue," or the negative of such terms or comparable terminology.

Forward-looking statements contained in this news release or in other statements made by the Company are made based on management's expectations and beliefs concerning future events impacting the Company and are subject to uncertainties and factors relating to the Company's operations and business environment, all of which are difficult to predict and many of which are beyond the Company's control, that could cause the Company's actual results to differ materially from those matters expressed or implied by forward-looking statements. These factors and uncertainties include, among others, the following: the cyclicality of the markets that the Company serves and the vulnerability of those markets to economic downturns; a delay, significant reduction in or loss of purchases by large customers; fluctuations in energy prices; our ability to control our costs and successfully manage our operations; a delay in the anticipated timing of LNG infrastructure build out or a delay or failure to receive orders; the potential for negative developments in the natural gas industry related to hydraulic fracturing; competition; potential future impairment of the Company’s significant goodwill and other intangibles; changes in government energy policy or the failure of expected changes in policy to materialize; the modification or cancellation of orders in our backlog; challenges and uncertainties associated with efforts to acquire and integrate product lines or businesses; economic downturns and deteriorating financial conditions; our ability to manage our fixed-price contract exposure; our reliance on key suppliers and potential supplier failures or defects; changes in government healthcare regulations and reimbursement policies; litigation and disputes involving the Company, including product liability, contract, warranty, intellectual property, employment and environmental claims; fluctuations in foreign currency exchange and interest rates; general economic, political, business and market risks associated with the Company's international operations and transactions; loss of key employees; variability in operating results associated with unanticipated increases in warranty returns of Company products; technological security threats; financial distress of third parties; our ability to protect our intellectual property; the regulation of our products by the U.S. Food & Drug Administration and other governmental authorities; the pricing and availability of raw materials; the cost of compliance with environmental, health and safety laws; claims that our products or processes infringe intellectual property rights of others; additional liabilities related to taxes; deterioration of employee or labor relations; increased governmental regulation; fluctuations or adjustments in the Company’s

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effective tax rate; risks associated with our indebtedness, leverage and liquidity; and volatility and fluctuations in the price of the Company’s stock.

For a discussion of these and additional factors that could cause actual results to differ from those described in the forward-looking statements, see the Company's filings with the Securities and Exchange Commission, including Item 1A (Risk Factors) in the Company’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission, which should be reviewed carefully. The Company undertakes no obligation to update or revise any forward-looking statement.

Chart is a leading diversified global manufacturer of highly engineered equipment for the industrial gas, energy, and biomedical industries. The majority of Chart's products are used throughout the liquid gas supply chain for purification, liquefaction, distribution, storage and end-use applications, a large portion of which are energy-related. Chart has domestic operations located across the United States and an international presence in Asia, Australia, Europe and South America. For more information, visit: http://www.chartindustries.com.

Use of Non-GAAP Financial Information:

To supplement the unaudited condensed consolidated financial statements presented in accordance with U.S. GAAP in this news release, certain non-GAAP financial measures as defined by SEC rules are used.  The non-GAAP measures included in this news release have been reconciled to the comparable GAAP measures within an accompanying table, shown on the last page of this news release.

As previously announced, the Company will discuss its first quarter 2016 results on a conference call on Thursday, April 28, 2016 at 10:30 a.m. ET. Participants may join the conference call by dialing (877) 312-9395 in the U.S. or (970) 315-0456 from outside the U.S. A live webcast presentation will also be accessible at 10:30 a.m. ET at http://www.chartindustries.com. Please log-in or dial-in at least five minutes prior to the start time.

A taped replay of the conference call will be archived on the Company’s website, www.chartindustries.com, approximately one hour after the call concludes. You may also listen to a taped replay of the conference call by dialing (855) 859-2056 in the U.S. or (404) 537-3406 outside the U.S. and entering Conference ID 91019818. The telephone replay will be available beginning 1:30 p.m. ET, Thursday April 28, 2016 until 11:59 p.m. ET, Thursday, May 5, 2016.


For more information, click here:
http://ir.chartindustries.com/

Contact:
Ken Webster    
Vice President and
Chief Financial Officer    
216-626-1216
ken.webster@chartindustries.com    


4



CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
(UNAUDITED)
(Dollars and shares in thousands, except per share amounts)
 
Three Months Ended March 31,
 
2016
 
2015
Sales
$
193,757

 
$
245,105

Cost of sales
141,056

 
172,582

Gross profit
52,701

 
72,523

Selling, general and administrative expenses
49,536

 
53,162

Amortization
3,128

 
4,404

Operating expenses
52,664

 
57,566

Operating income
37

 
14,957

Other expenses:
 
 
 
Interest expense, net
4,094

 
3,922

Financing costs amortization
321

 
326

Foreign currency loss
206

 
3,064

Other expenses, net
4,621

 
7,312

(Loss) income before income taxes
(4,584
)
 
7,645

Income tax expense
88

 
2,370

Net (loss) income
(4,672
)
 
5,275

Noncontrolling interests, net of taxes
(21
)
 
29

Net (loss) income attributable to Chart Industries, Inc.
$
(4,651
)
 
$
5,246

Net (loss) income attributable to Chart Industries, Inc. per common share:
 
 
 
Basic
$
(0.15
)
 
$
0.17

Diluted
$
(0.15
)
 
$
0.17

Weighted average number of common shares outstanding:
 
 
 
Basic
30,568

 
30,466

Diluted
30,568

 
30,652

 
 
 
 
Comprehensive income (loss), net of taxes
$
1,844

 
$
(2,570
)
Less: Comprehensive income attributable to noncontrolling interests, net of taxes
3

 

Comprehensive income (loss) attributable to Chart Industries, Inc., net of taxes
$
1,841

 
$
(2,570
)



5



CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
 
Three Months Ended March 31,
 
2016
 
2015
Net Cash Provided By Operating Activities
$
38,179

 
$
888

Investing Activities
 
 
 
Capital expenditures
(5,232
)
 
(14,828
)
Proceeds from sale of assets

 
8

Acquisition of businesses, net of cash acquired

 
(320
)
Net Cash Used In Investing Activities
(5,232
)
 
(15,140
)
Financing Activities
 
 
 
Borrowings on revolving credit facilities
3,820

 

Repayments on revolving credit facilities
(3,056
)
 

Proceeds from exercise of options
12

 
422

Excess tax benefit from share-based compensation
24

 
130

Common stock repurchases
(601
)
 
(808
)
Other financing activities

 
(157
)
Net Cash Provided By (Used In) Financing Activities
199

 
(413
)
Effect of exchange rate changes on cash
2,200

 
(5,624
)
Net increase (decrease) in cash and cash equivalents
35,346

 
(20,289
)
Cash and cash equivalents at beginning of period
123,708

 
103,656

Cash and Cash Equivalents at End of Period
$
159,054

 
$
83,367



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CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
 
March 31,
2016
 
December 31,
2015
 
(Unaudited)
 
 
ASSETS
 
 
 
Cash and cash equivalents
$
159,054

 
$
123,708

Accounts receivable, net
140,447

 
183,514

Inventories, net
203,866

 
199,302

Other current assets
61,950

 
80,706

Property, plant and equipment, net
266,998

 
266,277

Goodwill
219,258

 
218,390

Identifiable intangible assets, net
103,988

 
106,714

Other assets
21,501

 
21,529

TOTAL ASSETS
$
1,177,062

 
$
1,200,140

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities
$
228,123

 
$
262,039

Long-term debt
217,005

 
213,798

Other long-term liabilities
50,441

 
48,567

Equity
681,493

 
675,736

TOTAL LIABILITIES AND EQUITY
$
1,177,062

 
$
1,200,140



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CHART INDUSTRIES, INC. AND SUBSIDIARIES
OPERATING SEGMENTS (UNAUDITED)
(Dollars in thousands)
 
Three Months Ended March 31,
 
2016
 
2015
Sales
 
 
 
Energy & Chemicals
$
37,959

 
$
87,470

Distribution & Storage
107,497

 
105,071

BioMedical
48,301

 
52,564

Total
$
193,757

 
$
245,105

Gross Profit
 
 
 
Energy & Chemicals
$
5,471

 
$
24,863

Distribution & Storage
29,415

 
30,048

BioMedical
17,815

 
17,612

Total
$
52,701

 
$
72,523

Gross Profit Margin
 
 
 
Energy & Chemicals
14.4
%
 
28.4
%
Distribution & Storage
27.4
%
 
28.6
%
BioMedical
36.9
%
 
33.5
%
Total
27.2
%
 
29.6
%
Operating (Loss) Income (1)
 
 
 
Energy & Chemicals
$
(2,198
)
 
$
15,291

Distribution & Storage
9,830

 
10,312

BioMedical
6,652

 
3,236

Corporate
(14,247
)
 
(13,882
)
Total
$
37

 
$
14,957

_______________
(1) 
Includes restructuring-related charges and other costs, net of $3,300 and $860 for the three months ended March 31, 2016 and 2015, respectively.


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CHART INDUSTRIES, INC. AND SUBSIDIARIES
ORDERS AND BACKLOG (UNAUDITED)
(Dollars in thousands)
 
Three Months Ended
 
March 31,
2016
 
December 31,
2015
Orders
 
 
 
Energy & Chemicals
$
8,774

 
$
45,446

Distribution & Storage
139,376

 
130,630

BioMedical
51,109

 
55,077

Total
$
199,259

 
$
231,153


 
As of
 
March 31,
2016
 
December 31,
2015
Backlog
 
 
 
Energy & Chemicals
$
122,648

 
$
151,638

Distribution & Storage
239,978

 
206,518

BioMedical
19,819

 
16,456

Total
$
382,445

 
$
374,612




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CHART INDUSTRIES, INC. AND SUBSIDIARIES
RECONCILIATION OF (LOSS) EARNINGS PER DILUTED SHARE TO ADJUSTED (LOSS) EARNINGS PER DILUTED SHARE (UNAUDITED)
(Dollars in thousands, except per share amounts)
 
Three Months Ended March 31,
 
2016
 
2015
(Loss) earnings per diluted share
$
(0.15
)
 
$
0.17

Restructuring and acquisition-related costs
0.09

 
0.01

Insurance claim
(0.02
)
 

Owatonna, MN leased facility shutdown

 
0.01

Adjusted (loss) earnings per diluted share
$
(0.08
)
 
$
0.19



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