Toggle SGML Header (+)


Section 1: 8-K (8-K)

Document


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) July 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))


1



Item 2.02    Results of Operations and Financial Condition.
On July 28, 2016, Chart Industries, Inc. (the “Company”) issued a news release announcing the Company’s financial results for the second quarter ended June 30, 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. Also included for purposes of period-to-period comparison is an adjusted earnings per share amount for the second quarter of 2015 which excludes certain restructuring and acquisition-related costs, including facility shutdown costs. In addition, with respect to the Company’s full year earnings outlook, the Company uses an adjusted earnings per share amount that excludes restructuring and acquisition-related 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, except for the adjusted earnings per share amount included in the full year outlook, which the Company is not able to reconcile because certain items have not yet occurred or are out of the Company’s control and/or cannot be reasonably predicted.
 
Item 9.01    Financial Statements and Exhibits.
(d)    Exhibits.
Exhibit No.
Description
99.1
Chart Industries, Inc. News Release, dated July 28, 2016, announcing the Company’s second quarter 2016 results.
 
 
 
 
 
 


2



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: July 28, 2016



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


3



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


4
(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


Exhibit 99.1
Chart Industries Reports 2016 Second Quarter Results

Cleveland, Ohio - July 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 second quarter ended June 30, 2016. Highlights include:

Record short lead-time shipments in the quarter

Strong operating cash flow of $49 million

Addition of William C. Johnson as President and Chief Operating Officer

Net income for the second quarter of 2016 was $21.2 million, or $0.68 per diluted share. Second quarter 2016 earnings would have been $0.72 per diluted share excluding $2.1 million, or $0.04 per diluted share, of restructuring and acquisition-related costs. This compares with net income of $17.2 million, or $0.56 per diluted share, for the second quarter of 2015. Second quarter 2015 earnings would have been $0.60 per diluted share excluding $1.7 million, or $0.04 per diluted share, of restructuring and acquisition-related costs, including facility shutdown costs.

Net sales for the second quarter of 2016 decreased 8.6% to $247.1 million from $270.3 million in the comparable period a year ago. Gross profit for the second quarter of 2016 was $87.0 million, or 35.2% of sales, versus $74.9 million, or 27.7% of sales, in the comparable quarter of 2015.

“We delivered better than anticipated results in our Energy & Chemicals (“E&C”) segment through solid project execution, several short lead-time replacement equipment opportunities supported by our newly created LifeCycle aftermarket service offering, and contract expiration fees related to project development, which highlight our unique capabilities and competitive strengths. The short lead-time shipments were a record in the quarter and eclipsed the prior record set in the fourth quarter of 2015," stated Sam Thomas, Chart’s Chairman and Chief Executive Officer.

Mr. Thomas added, “We are focused on our working capital initiatives and are making good headway as we delivered another consecutive quarter with strong operating cash flow, despite continued weakness in energy markets. Our geographic and product diversification highlights further advantages to support continued cash flow generation. In July 2016, Bill Johnson joined us as President and COO, bringing operational and strategic talent that will help further these initiatives.”

Orders received in the second quarter of 2016 were $270.3 million, an increase of $71.0 million over orders received during the first quarter of 2016. In addition to the typical seasonality of the business, order levels improved over the first quarter as we were awarded a number of significant projects across a variety of end markets within our Distribution & Storage ("D&S") and BioMedical segments, including a $16 million emerging energy application award and continued downstream LNG activity in D&S. Backlog at June 30, 2016 was $392.5 million, up 2.6% from the March 31, 2016 level of $382.4 million.

Selling, general and administrative ("SG&A") expenses for the second quarter of 2016 increased $3.3 million compared with the same period in 2015 to $48.9 million, or 19.8% of sales. SG&A increased due to higher variable short-term compensation expense which was accelerated compared to the prior year quarter, as well as unfavorable reserves recorded at D&S Asia during

1



the current quarter. Second quarter 2016 SG&A also included $1.0 million in severance costs associated with cost reduction initiatives and other restructuring-related charges.

Income tax expense was $11.0 million for the second quarter of 2016 and represented an effective tax rate of 35.9% compared with $6.9 million in the prior year quarter, or an effective tax rate of 28.7%.  The effective tax rate for the current quarter is higher than 2015's second quarter rate primarily as a result of tax losses in China, for which no benefit is recorded. 

Net interest expense was $4.2 million for the second quarter of 2016, which included $3.1 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 33.0% to $61.2 million for the second quarter of 2016 compared with $91.3 million for the same quarter in the prior year. The decline was due to lower sales volume seen across all product lines given continued challenging energy market conditions. E&C gross profit margins were 52.1% in the 2016 quarter compared with 30.3% in the same quarter of 2015. The improved margins were due to multiple short lead-time shipments, contract expiration fees, Lifecycle aftermarket services, favorable execution and project completions during the quarter. The impact from the short lead-time shipments and contract expiration fees contributed about $31 million to E&C’s gross profit in the quarter. These short lead-time opportunities are typically critical shut-down situations to our customers which require us to respond immediately to supply replacement equipment. Although the timing of these events is not predictable, they are recurring in nature and are an important part of our business and service to customers.
 
D&S segment sales increased 6.4% to $129.6 million for the second quarter of 2016 compared with $121.8 million for the same quarter in the prior year. Sales in North America and Europe increased as a result of revenue recognized on projects related to both LNG and industrial gas applications. D&S gross profit margins were 25.6% compared with 23.4% in the prior year quarter due to lower restructuring costs and improved volume in the current quarter.
 
BioMedical segment sales decreased 1.4% to $56.3 million for the second quarter of 2016 compared with $57.1 million for the same quarter in the prior year. The decrease is primarily due to lower revenues in North American respiratory and commercial oxygen generation, partially offset by an increase of new product revenues in life sciences and liquid oxygen revenues in Europe. BioMedical gross profit margin increased to 38.8% in the quarter compared with 32.8% for the same period in 2015 primarily due to product mix and lower warranty costs.

OUTLOOK
Based on year-to-date results, continued weak order trends in E&C and business expectations for the remainder of 2016, we are adjusting 2016 guidance with sales now expected to be in the range of $850 million to $900 million. Full year adjusted earnings per diluted share (non-GAAP) are now expected to be in the range of $0.75 to $0.95 per share, on approximately 30.9 million weighted average shares outstanding. This compares with previous sales guidance of $900 million to $1.0 billion and adjusted earnings per diluted share (non-GAAP) guidance of $0.50 to $1.00. Adjusted earnings per diluted share is a non-GAAP measure, which excludes the impact from any restructuring and acquisition-related costs.

2




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; loss of key employees; 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; fluctuations or adjustments in the Company’s effective tax rate; 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; 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; 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.


3



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 Company believes these non-GAAP measures 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. See the last page of this news release for a reconciliation of adjusted earnings per diluted share, a non-GAAP measure included in this release.

With respect to the Company's full year earnings outlook, the Company is not able to provide a reconciliation of the adjusted earnings per diluted share because certain items may have not yet occurred or are out of the Company's control and / or cannot be reasonably predicted.

CONFERENCE CALL
As previously announced, the Company will discuss its second quarter 2016 results on a conference call on Thursday, July 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 48515431. The telephone replay will be available beginning 1:30 p.m. ET, Thursday July 28, 2016 until 11:59 p.m. ET, Thursday, August 4, 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 INCOME (LOSS)
(UNAUDITED)
(Dollars and shares in thousands, except per share amounts)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
Sales
$
247,095

 
$
270,252

 
$
440,852

 
$
515,357

Cost of sales
160,144

 
195,372

 
301,200

 
367,954

Gross profit
86,951

 
74,880

 
139,652

 
147,403

Selling, general and administrative expenses
48,896

 
45,628

 
98,432

 
98,790

Amortization
3,116

 
4,123

 
6,244

 
8,527

Operating expenses
52,012

 
49,751

 
104,676

 
107,317

Operating income
34,939

 
25,129

 
34,976

 
40,086

Other expenses:
 
 
 
 
 
 
 
Interest expense, net
4,171

 
3,999

 
8,265

 
7,921

Financing costs amortization
321

 
321

 
642

 
647

Foreign currency (gain) loss
(93
)
 
(3,141
)
 
113

 
(77
)
Other expenses, net
4,399

 
1,179

 
9,020

 
8,491

Income before income taxes
30,540

 
23,950

 
25,956

 
31,595

Income tax expense
10,977

 
6,868

 
11,065

 
9,238

Net income
19,563

 
17,082

 
14,891

 
22,357

Noncontrolling interests, net of taxes
(1,590
)
 
(75
)
 
(1,611
)
 
(46
)
Net income attributable to Chart Industries, Inc.
$
21,153

 
$
17,157

 
$
16,502

 
$
22,403

Net income attributable to Chart Industries, Inc. per common share:
 
 
 
 
 
 
 
Basic
$
0.69

 
$
0.56

 
$
0.54

 
$
0.73

Diluted
$
0.68

 
$
0.56

 
$
0.53

 
$
0.73

Weighted average number of common shares outstanding:
 
 
 
 
 
 
 
Basic
30,582

 
30,495

 
30,575

 
30,481

Diluted
30,939

 
30,735

 
30,904

 
30,693

 
 
 
 
 
 
 
 
Comprehensive income, net of taxes
$
13,471

 
$
19,777

 
$
15,315

 
$
17,207

Less: Comprehensive loss attributable to noncontrolling interests, net of taxes
(1,708
)
 
(41
)
 
(1,705
)
 
(41
)
Comprehensive income attributable to Chart Industries, Inc., net of taxes
$
15,179

 
$
19,818

 
$
17,020

 
$
17,248




5



CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
 
Three Months Ended June 30,
 
 
Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
Net Cash Provided By Operating Activities
$
48,650

 
$
7,106

 
$
86,829

 
$
7,994

Investing Activities
 
 
 
 
 
 
 
Capital expenditures
(4,186
)
 
(9,651
)
 
(9,418
)
 
(24,479
)
Payments for land use rights

 
(11,043
)
 

 
(11,043
)
Proceeds from sale of assets

 
192

 

 
200

Government grants
612

 

 
612

 

Acquisition of businesses, net of cash acquired
(1,383
)
 

 
(1,383
)
 
(320
)
Net Cash Used In Investing Activities
(4,957
)
 
(20,502
)
 
(10,189
)
 
(35,642
)
Financing Activities
 
 
 
 
 
 
 
Borrowings on revolving credit facilities

 
12,377

 
3,820

 
12,377

Repayments on revolving credit facilities
(760
)
 
(743
)
 
(3,816
)
 
(743
)
Borrowings on term loan
13,167

 

 
13,167

 

Repayments on term loan
(1,508
)
 

 
(1,508
)
 

Proceeds from exercise of options
5

 
47

 
17

 
469

Excess tax benefit from share-based compensation
30

 

 
54

 
130

Payment of contingent consideration

 
(611
)
 

 
(611
)
Common stock repurchases
(42
)
 
(15
)
 
(643
)
 
(823
)
Other financing activities

 

 

 
(157
)
Net Cash Provided By Financing Activities
10,892

 
11,055

 
11,091

 
10,642

Effect of exchange rate changes on cash
(481
)
 
1,859

 
1,719

 
(3,765
)
Net increase (decrease) in cash and cash equivalents
54,104

 
(482
)
 
89,450

 
(20,771
)
Cash and cash equivalents at beginning of period
159,054

 
83,367

 
123,708

 
103,656

Cash and Cash Equivalents at End of Period
$
213,158

 
$
82,885

 
$
213,158

 
$
82,885



6



CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
 
June 30,
2016
 
December 31,
2015
 
(Unaudited)
 
 
ASSETS
 
 
 
Cash and cash equivalents
$
213,158

 
$
123,708

Accounts receivable, net
150,902

 
183,514

Inventories, net
191,681

 
199,302

Other current assets
53,119

 
80,706

Property, plant and equipment, net
261,613

 
266,277

Goodwill
218,990

 
218,390

Identifiable intangible assets, net
100,339

 
106,714

Other assets
19,654

 
21,529

TOTAL ASSETS
$
1,209,456

 
$
1,200,140

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities
$
234,948

 
$
262,039

Long-term debt
228,810

 
213,798

Other long-term liabilities
49,122

 
48,567

Equity
696,576

 
675,736

TOTAL LIABILITIES AND EQUITY
$
1,209,456

 
$
1,200,140



7



CHART INDUSTRIES, INC. AND SUBSIDIARIES
OPERATING SEGMENTS (UNAUDITED)
(Dollars in thousands)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
Sales
 
 
 
 
 
 
 
Energy & Chemicals
$
61,195

 
$
91,339

 
$
99,154

 
$
178,809

Distribution & Storage
129,600

 
121,813

 
237,097

 
226,884

BioMedical
56,300

 
57,100

 
104,601

 
109,664

Total
$
247,095

 
$
270,252

 
$
440,852

 
$
515,357

Gross Profit
 
 
 
 
 
 
 
Energy & Chemicals
$
31,873

 
$
27,680

 
$
37,344

 
$
52,543

Distribution & Storage
33,230

 
28,485

 
62,645

 
58,533

BioMedical
21,848

 
18,715

 
39,663

 
36,327

Total
$
86,951

 
$
74,880

 
$
139,652

 
$
147,403

Gross Profit Margin
 
 
 
 
 
 
 
Energy & Chemicals
52.1
%
 
30.3
%
 
37.7
%
 
29.4
%
Distribution & Storage
25.6
%
 
23.4
%
 
26.4
%
 
25.8
%
BioMedical
38.8
%
 
32.8
%
 
37.9
%
 
33.1
%
Total
35.2
%
 
27.7
%
 
31.7
%
 
28.6
%
Operating Income (Loss)
 
 
 
 
 
 
 
Energy & Chemicals
$
22,124

 
$
19,540

 
$
19,926

 
$
34,831

Distribution & Storage
13,005

 
10,845

 
22,835

 
21,157

BioMedical
10,552

 
6,000

 
17,204

 
9,236

Corporate
(10,742
)
 
(11,256
)
 
(24,989
)
 
(25,138
)
Total
$
34,939

 
$
25,129

 
$
34,976

 
$
40,086




8



CHART INDUSTRIES, INC. AND SUBSIDIARIES
ORDERS AND BACKLOG (UNAUDITED)
(Dollars in thousands)
 
Three Months Ended
 
June 30,
2016
 
March 31,
2016
Orders
 
 
 
Energy & Chemicals
$
53,016

 
$
8,774

Distribution & Storage
156,030

 
139,376

BioMedical
61,221

 
51,109

Total
$
270,267

 
$
199,259


 
As of
 
June 30,
2016
 
March 31,
2016
Backlog
 
 
 
Energy & Chemicals
$
114,562

 
$
122,648

Distribution & Storage
252,502

 
239,978

BioMedical
25,433

 
19,819

Total
$
392,497

 
$
382,445




9



CHART INDUSTRIES, INC. AND SUBSIDIARIES
RECONCILIATION OF EARNINGS PER DILUTED SHARE TO ADJUSTED EARNINGS PER DILUTED SHARE (UNAUDITED)
(Dollars in thousands, except per share amounts)
 
Three Months Ended June 30,
 
2016
 
2015
Earnings per diluted share
$
0.68

 
$
0.56

Restructuring and acquisition-related costs
0.04

 
0.04

Adjusted earnings per diluted share
$
0.72

 
$
0.60



10
(Back To Top)