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Chart Industries Inc. Reports Operating Results (10-Q)

July 29, 2010 | About:
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10qk

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Chart Industries Inc. (GTLS) filed Quarterly Report for the period ended 2010-06-30.

Chart Industries Inc. has a market cap of $509.7 million; its shares were traded at around $17.77 with a P/E ratio of 12.1 and P/S ratio of 0.9. GTLS is in the portfolios of Jim Simons of Renaissance Technologies LLC, Chuck Royce of Royce& Associates.

Highlight of Business Operations:

For the six months ended June 30, 2010, orders were $275.5 million and backlog has increased to $199.9 million compared to $185.1 million at December 31, 2009. We experienced declines in our sales, gross profit and operating income for the six months ended June 30, 2010 compared to the same period in 2009. This was largely due to the reduction in project backlog at E&C due to the completion of several LNG projects during 2009, lower volume in our brazed aluminum heat exchanger business and the lack of new orders in our systems business. The underutilized capacity and a drawn-out return of capital projects continue to have an unfavorable impact on E&C volume and margins. This was partially offset by benefits from acquisitions in our BioMedical business including the liquid oxygen therapy business of Covidien (Covidien Acquisition) in the fourth quarter of 2009, as well as the related Japanese assets in the second quarter of 2010, and Chengdu Golden Phoenix Liquid Nitrogen Container Co. Ltd., in the second quarter of 2009. Sales for the six months ended June 30, 2010 were $257.4 million compared to sales of $338.4 million for the six months ended June 30, 2009, reflecting a decrease of $81.0 million, or 23.9%. Acquisitions added $31.5 million in sales for the six months ended June 30, 2010. Our gross profit for the six months ended June 30, 2010 was $71.9 million, or 27.9% of sales, as compared to $118.6 million, or 35.0% of sales, for the same period in 2009. In addition, our operating income for the six months ended June 30, 2010 was $16.2 million compared to $63.4 million for the same period in 2009.

Sales for the three months ended June 30, 2010 were $139.1 million compared to $156.7 million for the three months ended June 30, 2009, reflecting a decrease of $17.6 million, or 11.2%. E&C segment sales were $31.4 million for the three months ended June 30, 2010 compared with sales of $70.8 million for three months ended June 30, 2009, which reflected a decrease of $39.4 million or 55.6%. The significant decline in sales occurred in the systems product line due to the lack of substantial new orders and a number of projects being completed in 2009. Brazed aluminum heat exchanger sales also decreased significantly due to reduced volume and lower pricing. The delay of new capital projects due to uncertainty in the economic recovery continues to have an unfavorable impact on E&C volume and pricing. D&S segment sales increased $3.6 million, or 5.6%, to $68.1 million for the three months ended June 30, 2010 from $64.5 million for the three months ended June 30, 2009. The increase was primarily due to higher volume resulting from increased demand in package gas systems, particularly in China. The increases in volume in packaged gas systems were partially offset by decreased volume in bulk tanks. In addition, D&S segment sales were negatively affected in the second quarter of 2010 by the weakening of the euro and the Czech koruna against the U.S. dollar as compared to exchange rates experienced during the same period in 2009. BioMedical segment sales for the three months ended June 30, 2010 were $39.6 million compared to $21.4 million for the same period in 2009, which reflected an increase of $18.2 million, or 85.0%. The increase was primarily driven by the Covidien Acquisition, which added $15.1 million of medical respiratory sales. Biological storage systems sales also increased $4.0 million during the three months ended June 30, 2010. These increases were partially offset by the weakening of the euro against the U.S. dollar during the second quarter of 2010.

SG&A expenses for the three months ended June 30, 2010 were $25.5 million, or 18.3% of sales, compared to $23.5 million, or 15% of sales, for the three months ended June 30, 2009. SG&A expenses for the E&C segment were $5.1 million for the three months ended June 30, 2010 compared to $6.9 million for the three months ended June 30, 2009, a decrease of $1.8 million. The decrease was primarily due to lower variable compensation and sales commission costs related to reduced sales volume. D&S segment SG&A expenses for the three months ended June 30, 2010 were $7.2 million compared to $7.6 million for the three months ended June 30, 2009, a decrease of $0.4 million. This decrease was primarily attributable to lower compensation costs due to the reduction in workforce in 2009. SG&A expenses for the BioMedical segment were $6.0 million for the three months ended June 30, 2010 and $2.9 million for the three months ended June 30, 2009. The increase of $3.1 million was primarily attributable to increased compensation and integration costs, associated with the Covidien Acquisition. In addition, restructuring costs of $0.3 million related to the shutdown of the Plainfield, Indiana facility contributed to the increase. Corporate SG&A expenses for the three months ended June 30, 2010 were $7.2 million compared to $6.1 million for the three months ended June 30, 2009. This increase of $1.1 million was attributable to higher stock-based compensation expense and higher employee related costs.

Sales for the six months ended June 30, 2010 were $257.4 million compared to $338.4 million for the six months ended June 30, 2009, reflecting a decrease of $81.0 million, or 23.9%. E&C segment sales were $57.6 million for the six months ended June 30, 2010 compared with sales of $161.2 million for the same period in 2009, which represented a decrease of $103.6 million, or 64.3%. A significant decline in sales occurred in the systems product line due to the lack of substantial new orders while a number of projects were completed in 2009. Brazed aluminum heat exchanger sales also decreased significantly due to reduced volume and lower pricing. D&S segment sales decreased $8.2 million, or 6.1%, to $127.1 million for the six months ended June 30, 2010 from $135.3 million for the six months ended June 30, 2009. Bulk storage system sales decreased $12.7 million, which was partially offset by an increase in package gas system sales of $4.5 million for the six months ended June 30, 2010 compared to the same period in 2009. Bulk storage system sales decreased due to lower demand. In addition, D&S segment sales were negatively affected during the six months ended June 30, 2010 from the weakening of the euro and the Czech koruna against the U.S. dollar. BioMedical segment sales increased $30.8 million, or 73.5%, to $72.7 million for the six months ended June 30, 2010 compared to $41.9 million for the six months ended June 30, 2009. The increase was primarily driven by the Covidien Acquisition, which added $28.0 million of medical respiratory sales during the six months ended June 30, 2010. Biological storage systems sales also increased $4.8 million during the six months ended June 30, 2010. These increases were partially offset by the discontinuation of magnetic resonance imaging (MRI) sales in 2009.

SG&A expenses for the six months ended June 30, 2010 were $49.5 million, or 19.2% of sales, versus $49.4 million, or 14.6% of sales, for the six months ended June 30, 2009. SG&A expenses for the E&C segment were $10.1 million for the six months ended June 30, 2010 compared to $15.6 million for the six months ended June 30, 2009, a decrease of $5.5 million. The decrease for the E&C segment was primarily the result of lower variable incentive compensation expenses and sales commissions due to lower volume during 2010 as compared to the same period in 2009. D&S segment SG&A expenses for the six months ended June 30, 2010 were $14.4 million compared to $15.3 million for the six months ended June 30, 2009, a decrease of $0.9 million. This decrease was primarily attributable to lower employee compensation costs due to workforce reductions in 2009. SG&A expenses for the BioMedical segment were $11.1 million for the six months ended June 30, 2010, an

Cash used in investing activities for the six months ended June 30, 2010 was $13.0 million compared to $8.3 million for the six months ended June 30, 2009. Capital expenditures for the six months ended June 30, 2010 were $7.9 million compared with $5.0 million for the six months ended June 30, 2009. During the six months ended June 30, 2010, $1.0 million of cash was used to acquire the Japanese liquid oxygen therapy business of Covidien. In addition, the final purchase payments for Chengdu Golden Phoenix Liquid Nitrogen Container Company, Ltd. (Golden Phoenix) of $4.1 million were paid during the 2010 period. For the six months ended June 30, 2009, $5.2 million of cash, net of cash acquired was used for two acquisitions: the equity interests of Golden Phoenix and substantially all of the assets of Tri-Thermal, Inc. Also, for the six months ended June 30, 2009, certain short-term investments matured and the proceeds totaled $2.0 million.

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