UNITED STATES
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 September 30, 2004
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.
(Exact Name of Registrant as Specified in its Charter)
| Delaware | 34-1712937 | |
| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
5885 Landerbrook Dr., Suite 205, Cleveland, Ohio 44124
(Address of Principal Executive Offices) (ZIP Code)
Registrant’s Telephone Number, Including Area Code: (440) 753-1490
Not Applicable
(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 for 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 ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes x No ¨
At September 30, 2004, there were 5,358,075 outstanding shares of the Company’s Common Stock, par value $.01 per share.
Page 1 of 30 sequentially numbered pages.
INDEX
| Page | ||
| Part I. Financial Information | ||
| Item 1: Financial Statements |
||
| Condensed Consolidated Balance Sheets as of September 30, 2004 and December 31, 2003 |
3 | |
| 4 | ||
| 5 | ||
| Notes to Unaudited Condensed Consolidated Financial Statements |
6-17 | |
| Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations |
18-25 | |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk |
26 | |
| Item 4: Controls and Procedures |
26 | |
| Part II. Other Information | ||
| Item 1: Legal Proceedings |
27 | |
| 28 | ||
| Item 6: Exhibits and Reports on Form 8-K |
28 | |
| 29 | ||
| 30 | ||
2
CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
| September 30, 2004 |
December 31, 2003 | |||||
| (Unaudited) | ||||||
| ASSETS |
||||||
| Current Assets |
||||||
| Cash and cash equivalents |
$ | 17,692 | $ | 18,600 | ||
| Accounts receivable, net |
42,071 | 39,806 | ||||
| Inventories, net |
42,178 | 34,788 | ||||
| Other current assets |
25,610 | 29,983 | ||||
| Assets held for sale |
7,742 | 550 | ||||
| Total Current Assets |
135,293 | 123,727 | ||||
| Property, plant and equipment, net |
38,230 | 45,762 | ||||
| Reorganization value in excess of amounts allocable to identifiable assets |
75,263 | 76,540 | ||||
| Identifiable intangible assets, net |
49,174 | 51,281 | ||||
| Other assets, net |
1,292 | 2,327 | ||||
| TOTAL ASSETS |
$ | 299,252 | $ | 299,637 | ||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||
| Current Liabilities |
||||||
| Accounts payable |
$ | 24,064 | $ | 22,297 | ||
| Customer advances and billings in excess of contract revenue |
12,965 | 7,250 | ||||
| Accrued expenses and other current liabilities |
30,520 | 28,419 | ||||
| Current maturities of long-term debt |
3,360 | 3,480 | ||||
| Total Current Liabilities |
70,909 | 61,446 | ||||
| Long-term debt |
84,751 | 109,081 | ||||
| Other long-term liabilities |
36,547 | 38,303 | ||||
| Shareholders’ Equity |
||||||
| Common stock, par value $.01 per share – 9,500,000 shares authorized, 5,358,075 and 5,325,331 shares issued at September 30, 2004 and December 31, 2003, respectively |
54 | 53 | ||||
| Additional paid-in capital |
90,648 | 89,812 | ||||
| Retained earnings |
15,212 | 31 | ||||
| Accumulated other comprehensive income |
1,131 | 911 | ||||
| 107,045 | 90,807 | |||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
$ | 299,252 | $ | 299,637 | ||
The balance sheet at December 31, 2003 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Dollars and shares in thousands, except per share amounts)
| Reorganized Company |
Predecessor Company |
|||||||||||||||||
| Three Months Ended 2004 |
Nine Months Ended 2004 |
Three Months Ended 2003 |
Nine Months Ended September 30, 2003 |
|||||||||||||||
| Sales |
$ | 76,380 | $ | 219,827 | $ | 63,232 | $ | 197,017 | ||||||||||
| Cost of sales |
52,693 | 152,173 | 44,552 | 141,240 | ||||||||||||||
| Gross profit |
23,687 | 67,654 | 18,680 | 55,777 | ||||||||||||||
| Selling, general and administrative expense |
13,576 | 39,675 | 11,908 | 44,211 | ||||||||||||||
| Employee separation and plant closure costs |
618 | 2,358 | (147 | ) | 882 | |||||||||||||
| Loss on insolvent subsidiary |
13,682 | |||||||||||||||||
| Equity loss (income) in joint venture |
51 | (44 | ) | |||||||||||||||
| 14,194 | 42,084 | 11,717 | 58,775 | |||||||||||||||
| Operating income (loss) |
9,493 | 25,570 | 6,963 | (2,998 | ) | |||||||||||||
| Other income (expense): |
||||||||||||||||||
| Gain (loss) on sale of assets |
282 | (182 | ) | 3,642 | 4,753 | |||||||||||||
| Interest expense, net |
(1,139 | ) | (3,625 | ) | (788 | ) | (9,911 | ) | ||||||||||
| Financing costs amortization expense |
(64 | ) | (1,653 | ) | ||||||||||||||
| Derivative contracts valuation (expense) income |
(77 | ) | (1 | ) | 23 | (389 | ) | |||||||||||
| Foreign currency loss |
(324 | ) | (52 | ) | (242 | ) | (287 | ) | ||||||||||
| Reorganization items, net |
5,677 | 5,677 | ||||||||||||||||
| (1,258 | ) | (3,860 | ) | 8,248 | (1,810 | ) | ||||||||||||
| Income (loss) from continuing operations before income taxes and minority interest |
8,235 | 21,710 | 15,211 | (4,808 | ) | |||||||||||||
| Income tax expense |
1,296 | 6,416 | 1,519 | 3,047 | ||||||||||||||
| Income (loss) from continuing operations before minority interest |
6,939 | 15,294 | 13,692 | (7,855 | ) | |||||||||||||
| Minority interest, net of taxes |
15 | 113 | 38 | 63 | ||||||||||||||
| Income (loss) from continuing operations |
6,924 | 15,181 | 13,654 | (7,918 | ) | |||||||||||||
| Income from discontinued operation, net of tax |
833 | |||||||||||||||||
| Net income (loss) |
$ | 6,924 | $ | 15,181 | $ | 13,654 | $ | (7,085 | ) | |||||||||
| Net income (loss) from continuing operations per common share – basic |
$ | 1.29 | $ | 2.84 | $ | 0.51 | $ | (0.30 | ) | |||||||||
| Income from discontinued operation |
0.03 | |||||||||||||||||
| Net income (loss) per common share – basic |
$ | 1.29 | $ | 2.84 | $ | 0.51 | $ | (0.27 | ) | |||||||||
| Net income (loss) from continuing operations per common share – assuming dilution |
$ | 1.24 | $ | 2.78 | $ | 0.51 | $ | (0.30 | ) | |||||||||
| Income from discontinued operation |
0.03 | |||||||||||||||||
| Net income (loss) per common share – assuming dilution |
$ | 1.24 | $ | 2.78 | $ | 0.51 | $ | (0.27 | ) | |||||||||
| Shares used in per share calculations — basic |
5,357 | 5,349 | 26,627 | 26,336 | ||||||||||||||
| Shares used in per share calculations – assuming dilution |
5,565 | 5,455 | 26,627 | 26,336 | ||||||||||||||
See accompanying notes to these unaudited condensed consolidated financial statements, including Note A – Basis of Preparation, describing the Reorganized Company and Predecessor Company. The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
| Reorganized Company |
Predecessor Company |
|||||||||
| Nine Months Ended 2004 |
Nine Months Ended September 30, 2003 |
|||||||||
| OPERATING ACTIVITIES |
||||||||||
| Income (loss) from continuing operations |
$ | 15,181 | $ | (7,918 | ) | |||||
| Adjustments to reconcile income (loss) from continuing operations to net cash provided by operating activities: |
||||||||||
| Reorganization items, net |
(5,677 | ) | ||||||||
| Reorganization value in excess of amounts allocable to identifiable assets |
1,277 | |||||||||
| Loss on insolvent subsidiary |
13,682 | |||||||||
| Loss (gain) on sale of assets |
182 | (4,753 | ) | |||||||
| Depreciation and amortization |
6,553 | 7,607 | ||||||||
| Financing costs amortization |
1,653 | |||||||||
| Debt restructuring related fees expensed |
6,046 | |||||||||
| Employee stock and stock option related compensation expense |
1,799 | |||||||||
| Equity loss in Joint Venture |
51 | |||||||||