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

April 30, 2009 | About:

Chart Industries Inc. (GTLS) filed Quarterly Report for the period ended 2009-03-31.

CHART INDUSTRIES is a leading independent global manufacturer of highly engineered equipment used in the production storage and end use of hydrocarbon and industrial gases. Their products are used throughout the liquid gas supply chain for purification liquefaction distribution storage and end use applications the largest portion of which are energy related. Chart Industries Inc. has a market cap of $392.7 million; its shares were traded at around $13.83 with a P/E ratio of 5.3 and P/S ratio of 0.5.

Highlight of Business Operations:

For the three months ended March 31, 2009, orders were $89.3 million and backlog has decreased to $307.5 million compared to $398.8 million at December 31, 2008. We experienced growth in our sales, gross profit and operating income for the three months ended March 31, 2009 compared to the same period in 2008, which was attributable to an improved project mix and cost performance as well as additional throughput in our E&C business segment. Sales for the three months ended March 31, 2009 were $180.2 million compared to sales of $170.3 million for the three months ended March 31, 2008, reflecting an increase of $9.9 million, or 5.8%. Our gross profit for the three months ended March 31, 2009 was $62.7 million, or 34.8% of sales, as compared to $51.9 million, or 30.5% of sales, for the same period in 2008. In addition, our operating income for the three months ended March 31, 2009 was $34.1 million compared to $26.2 million for the same period in 2008. Our gross profit margin improvement was primarily due to our E&C segment.

Sales for the three months ended March 31, 2009 were $180.2 million compared to $170.3 million for the three months ended March 31, 2008, reflecting an increase of $9.9 million, or 5.8%. E&C segment sales were $90.4 million for the three months ended March 31, 2009 compared with sales of $73.9 million for three months ended March 31, 2008, which reflected an increase of $16.5 million or 22.3%. The increase in sales resulted primarily from increased volume in air cooled heat exchangers. In addition, higher throughput for brazed aluminum heat exchangers also contributed to the improvement. D&S segment sales decreased $4.9 million, or 6.6%, to $69.4 million for the three months ended March 31, 2009 from $74.3 million for the three months ended March 31, 2008. Sales for package gas systems decreased $7.2 million due to lower volume, lower prices due to a reduction in raw material surcharges, and currency effect largely due to a weakening of the Czech koruna against the U.S. dollar. This was partially offset by increases in bulk storage system sales, which were impacted by industry consolidation in the prior year quarter. In addition, Flow Instrumentation & Engineering GmbH (“Flow”), acquired in April 2008, contributed $1.2 million to sales during the current year period, offsetting decreases in other D&S segment sales. BioMedical segment sales for the three months ended March 31, 2009 were $20.4 million compared to $22.1 million for the same period in 2008, which reflected a decrease of $1.7 million. The decrease was primarily driven by declines in biological storage system sales of $1.0 million due to lower volume in the breeding market and a decline in other product sales of $1.9 million largely due to lower volume in MRI components and U.S. government contract work. These declines were partially offset by medical respiratory product sales increases of $1.2 million due to increased volume and pricing in international markets. In April 2009, the Company made the decision to shutdown its Denver, Colorado BioMedical facility and exit the MRI component product line but will transfer the U.S. government contract work to other Chart facilities.

Gross profit for the three months ended March 31, 2009 was $62.7 million, or 34.8% of sales, versus $51.9 million, or 30.5% of sales, for the three months ended March 31, 2008 and reflected an increase of $10.8 million. E&C segment gross profit increased $13.3 million, or 9.4 percentage points, primarily due to a more favorable project mix and improved cost performance in the 2009 period. Gross profit for the D&S segment decreased $2.0 million, or 0.8 percentage points, for the three months ended March 31, 2009 compared to the same period in 2008 primarily due to lower volume and pricing which was partially offset by lower material costs. BioMedical gross profit declined $0.5 million, but the margin improved by 0.6 percentage points, for the three months ended March 31, 2009 compared to the same period in 2008, primarily due to lower sales volume in biological storage system products and other products including MRI components and U.S. government contract work. The margin improvement was due to product mix and pricing.

SG&A expenses for the three months ended March 31, 2009 were $25.9 million, or 14.4% of sales, compared to $23.1 million, or 13.5% of sales, for the three months ended March 31, 2008. SG&A expenses for the E&C segment were $8.7 million for the three months ended March 31, 2009 compared to $5.8 million for the three months ended March 31, 2008, an increase of $2.9 million. The increase was primarily due to variable sales commission costs related to the increased sales and bad debt expense as a result of the current economic environment. D&S segment SG&A expenses for the three months ended March 31, 2009 were $7.7 million compared to $7.4 million for the three months ended March 31, 2008, an increase of $0.3 million. This increase was primarily attributable to an increase in bad debt reserves and severance costs associated with our cost reduction initiatives in response to the current global economic recession. SG&A expenses for the BioMedical segment were $3.2 million for the three months ended March 31, 2009 compared to $3.1 million for the three months ended March 31, 2008, an increase of $0.1 million, which was primarily due to severance costs associated with our cost reduction initiatives. Corporate SG&A expenses for the three months ended March 31, 2009 were $6.3 million compared to $6.8 million for the three months ended March 31, 2008. This decrease of $0.5 million was primarily attributable to decreased stock-based compensation expense partially offset by severance costs associated with our cost reduction initiatives. It is anticipated that severance costs which were $0.5 million for the first quarter of 2009 will continue to increase during the second quarter of 2009 due to voluntary separation programs being implemented at certain D&S and BioMedical facilities to reduce work force levels. A charge of approximately $2.5 million is expected to be recognized in the second quarter as a result of these programs.

Cash used in investing activities for the three months ended March 31, 2009 was $0.3 million compared to $4.3 million for the three months ended March 31, 2008. Capital expenditures for the three months ended March 31, 2009 were $2.3 million compared with $3.7 million for the three months ended March 31, 2008. During the three months ended March, 31, 2009, certain short-term investments matured and the proceeds totaled $2.0 million. Also, during the three months ended March 31, 2008, $0.6 million of cash was contributed to a joint venture in Saudi Arabia for the manufacture of air cooled heat exchangers.

BioMedical orders for the three months ended March 31, 2009 were $19.4 million compared to $21.1 million for the three months ended December 31, 2008. BioMedical backlog at March 31, 2009 totaled $5.9 million compared to $7.0 million at December 31, 2008. The decrease in orders of $1.7 million was primarily due to decreased demand in the biological storage market, particularly the breeding market and reduced orders for MRI components and U.S. government contract work. This was partially offset by an increase in orders from international medical respiratory markets.

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