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

October 28, 2010 | About:
Daily Reckoning

10qk

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Chart Industries Inc. (GTLS) filed Quarterly Report for the period ended 2010-09-30.

Chart Industries Inc. has a market cap of $579 million; its shares were traded at around $20.39 with a P/E ratio of 22.4 and P/S ratio of 1. GTLS is in the portfolios of Chuck Royce of Royce& Associates.

Highlight of Business Operations:

For the nine months ended September 30, 2010, orders were $422.3 million and backlog increased to $212.6 million compared to $185.1 million at December 31, 2009. We experienced declines in our sales, gross profit and operating income for the nine months ended September 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 large LNG projects during 2009, lower volume in our brazed aluminum heat exchanger business and the lack of significant 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. In addition, the acquisition of the assets of Cryotech International, Inc. (Cryotech) during the third quarter of 2010 positively impacted D&S segment sales and operating income for the nine months ended September 30, 2010. Sales for the nine months ended September 30, 2010 were $396.6 million compared to sales of $467.2 million for the nine months ended September 30, 2009, reflecting a decrease of $70.6 million, or 15.1%. Acquisitions completed since the fourth quarter of 2009 added $43.7 million in sales for the nine months ended September 30, 2010. Our gross profit for the nine months ended September 30, 2010 was $114.7 million, or 28.9% of sales, as compared to $157.9 million, or 33.8% of sales, for the same period in 2009. In addition, our operating income for the nine months ended September 30, 2010 was $29.4 million compared to $79.4 million for the same period in 2009.

Sales for the three months ended September 30, 2010 were $139.2 million compared to $128.8 million for the three months ended September 30, 2009, reflecting an increase of $10.4 million, or 8.1%. E&C segment sales were $38.2 million for the three months ended September 30, 2010 compared with sales of $49.7 million for the three months ended September 30, 2009, which reflected a decrease of $11.5 million or 23.1%. The decline in sales occurred in the systems product line due to the lack of significant new orders and completion of several large projects in 2009. Brazed aluminum heat exchanger sales also declined due to reduced volume and lower pricing. The delay of new capital projects due to the lack of strength in the economic recovery continues to have an unfavorable impact on E&C volume and pricing. D&S segment sales increased $7.9 million, or 13.8%, to $65.0 million for the three months ended September 30, 2010 from $57.1 million for the three months ended September 30, 2009. The increase was primarily due to higher volume resulting from increased demand in China and package gas systems in the U.S. Bulk systems sales also increased by $2.4 million due to the acquisition of Cryotech in August 2010. In addition, D&S segment sales were negatively affected in the third 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 September 30, 2010 were $36.0 million compared to $21.9 million for the same period in 2009, which reflected an increase of $14.1 million, or 64.4%. The increase was primarily driven by the Covidien Acquisition, which added $13.3 million of medical respiratory sales. Biological storage systems sales also increased $1.6 million during the three months ended September 30, 2010. These increases were partially offset by the weakening of the euro against the U.S. dollar during the third quarter of 2010.

SG&A expenses for the three months ended September 30, 2010 were $26.2 million, or 18.8% of sales, compared to $20.8 million, or 16.1% of sales, for the three months ended September 30, 2009. SG&A expenses for the E&C segment were $5.7 million for the three months ended September 30, 2010 compared to $6.0 million for the three months ended September 30, 2009, a decrease of $0.3 million. The decrease was primarily due to lower variable compensation costs. D&S segment SG&A expenses for the three months ended September 30, 2010 were $8.0 million compared to $6.1 million for the three months ended September 30, 2009, an increase of $1.9 million. This increase was primarily attributable to higher employee related costs due to the Cryotech acquisition and improving business conditions. SG&A expenses for the BioMedical segment were $5.2 million for the three months ended September 30, 2010 and $3.0 million for the three months ended September 30, 2009. The increase of $2.2 million was primarily attributable to increased employee related and integration costs, due to acquisitions. Corporate SG&A expenses for the three months ended September 30, 2010 were $7.3 million compared to $5.7 million for the three months ended September 30, 2009. This increase of $1.6 million was attributable primarily to higher stock-based compensation expense and higher employee related costs due to acquisitions.

Sales for the nine months ended September 30, 2010 were $396.6 million compared to $467.2 million for the nine months ended September 30, 2009, reflecting a decrease of $70.6 million, or 15.1%. E&C segment sales were $95.7 million for the nine months ended September 30, 2010 compared with sales of $211.0 million for the same period in 2009, which represented a decrease of $115.3 million, or 54.6%. 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 $0.3 million, or less than 1%, to $192.1 million for the nine months ended September 30, 2010 from $192.4 million for the nine months ended September 30, 2009. Bulk storage system sales decreased $11.8 million, which was offset by an increase in package gas system sales of $11.5 million for the nine months ended September 30, 2010 compared to the same period in 2009. BioMedical segment sales increased $45.0 million, or 70.5%, to $108.8 million for the nine months ended September 30, 2010 compared to $63.8 million for the nine months ended September 30, 2009. The increase was primarily driven by the Covidien Acquisition, which added $41.3 million of medical respiratory sales during the nine months ended September 30, 2010. Biological storage systems sales also increased $6.2 million during the nine months ended September 30, 2010. These increases were partially offset by the discontinuation of magnetic resonance imaging (MRI) component sales in 2009.

SG&A expenses for the nine months ended September 30, 2010 were $75.7 million, or 19.1% of sales, versus $70.2 million, or 15.0% of sales, for the nine months ended September 30, 2009. SG&A expenses for the E&C segment were $15.8 million for the nine months ended September 30, 2010 compared to $21.6 million for the nine months ended September 30, 2009, a decrease of $5.8 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 nine months ended September 30, 2010 were $22.4 million compared to $21.4 million for the nine months ended September 30, 2009, an increase of $1.0 million. This increase was primarily attributable to higher employee and related benefit costs due to the acquisition of Cryotech and improving business conditions. SG&A expenses for the BioMedical segment were $16.3 million for the nine months ended September 30, 2010, an increase of $7.2 million compared to the nine months ended September 30, 2009. The increase was largely due to increased employee and integration costs as a result of the Covidien Acquisition and restructuring costs of $0.3 million related to the planned closure of the Plainfield, Indiana facility. Corporate SG&A expenses for the nine months ended September 30, 2010 were $21.2 million compared to $18.1 million for the nine months ended September 30, 2009. This increase of $3.1 million was primarily attributable to higher stock-based compensation costs, employee related costs and consulting fees related to acquisitions and system implementations.

Cash used in investing activities for the nine months ended September 30, 2010 was $21.3 million compared to $15.1 million for the nine months ended September 30, 2009. Capital expenditures for the nine months ended September 30, 2010 were $11.8 million compared with $9.4 million for the nine months ended September 30, 2009. During the nine months ended September 30, 2010, $4.4 million was used to acquire substantially all the assets and fund a loan to the sellers of Cryotech and $1.0 million of cash was used to acquire the Japanese liquid oxygen therapy business of Covidien. In addition, the final deferred purchase payments for the 2009 acquisition of Chengdu Golden Phoenix Liquid Nitrogen Container Company, Ltd. (Golden Phoenix) of $4.1 million were paid during the 2010 period. For the nine months ended September 30, 2009, $8.1 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 nine months ended September 30, 2009, certain short-term investRead the The complete Report

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