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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
x
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the fiscal year ended December 31, 2000
OR
¨
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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
(State or other jurisdiction of
incorporation or organization)
5885 Landerbrook Dr. Suite 150, Cleveland, Ohio
(Address of principal executive offices)
|
|
34-1712937
(I.R.S. Employer
Identification No.)
44124
(Zip Code)
|
|
Registrant’s telephone number, including area code: (440) 753-1490
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
|
|
Name of each exchange
on which registered
|
| Common Stock, |
|
New York Stock Exchange |
| par value $.01 per share |
|
|
Securities registered pursuant to Section 12(g) of the Act: None
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 þ No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
As of February 15, 2001, the registrant had 24,392,099 shares of Common Stock outstanding. As of that date, the
aggregate market value of the Common Stock of the registrant held by non-affiliates was $76,028,611 (based upon the closing price of $4.65 per share of Common Stock on the New York Stock Exchange on February 15, 2001). For purposes of this
calculation, the registrant deems the 8,041,860 shares of Common Stock held by all of its Directors and executive officers to be the shares of Common Stock held by affiliates.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement to be used in connection with its Annual Meeting of
Stockholders to be held on May 3, 2001 are incorporated by reference into Part III of this Form 10-K.
Except as otherwise stated, the information contained in this Form 10-K is as of December 31, 2000.
PART I
Item 1. Business; and Item 2. Properties
THE COMPANY
Chart Industries, Inc. (the “Company” or “Chart”) was organized in June 1992 as a Delaware
corporation to serve as a holding company for the operations described herein. As used herein, the terms “Company” or “Chart” mean Chart Industries, Inc., its subsidiaries and its predecessors, unless the context otherwise
indicates. The Company’s executive offices are located at 5885 Landerbrook Drive, Suite 150, Cleveland, Ohio 44124, and its telephone number is (440) 753-1490.
The Company’s sales for the year ended December 31, 2000 reached $325.7 million, an increase of 11.2 percent over
sales of $292.9 million in 1999. The Company’s net income in 2000 was $2.2 million compared with a net loss of $36.3 million in 1999. The 1999 net loss includes the effects of a reorganization of the Company which resulted from the April 12,
1999 acquisition of MVE Holdings, Inc. (“MVE”). Excluding non-recurring items resulting from this acquisition and reorganization, the Company had net income of $4.2 million in 1999.
Management anticipates that demand for the Company’s products will increase over the next several years. The
Company has initiatives to pursue multiple new products focused on the end-user equipment markets for cryogenic (low-temperature) liquids. The use of liquid natural gas (“LNG”) as a vehicle fuel and power generating feedstock, liquid
carbon dioxide (
“CO
2
”) as a cleaning solvent and telemetry to improve distribution logistics each in their own right offer
significant market potential. In addition, the Company plans to continue to focus on its worldwide presence as global industrialization and heightened environmental standards result in higher demand for high purity industrial gases, which are
generally produced, stored and distributed in a cryogenic form. The recent mergers of several industrial gas producers have temporarily reduced the demand for new process equipment that the Company offers to industrial markets. The pressures for
increased efficiency in the industry, however, are expected to result in renewed demand for newer equipment and increased service of existing equipment. The Company is well positioned to benefit from both of these developments. In the hydrocarbon
processing market, management expects strong domestic and international growth, stemming in part from increased global natural gas production. Oil producing countries are newly committed to capturing and marketing flared methane that previously was
a waste product of the production process. This increased availability of economically priced hydrocarbons is expected to result in greater demand for equipment to liquefy, process and transport these gases.
BUSINESS
General
The Company is a leading supplier of standard and custom-built equipment primarily used for cryogenic (low-temperature)
applications. The Company has developed a particular expertise in cryogenic systems and equipment, which operate at low temperatures sometimes approaching absolute zero (0° Kelvin; -273° Centigrade; -459° Fahrenheit). The majority of the
Company’s products, including vacuum-insulated containment vessels, heat exchangers, cold boxes and other cryogenic components, are used throughout the liquid-gas supply chain for the purification, liquefaction, distribution, storage and
application of industrial gases and hydrocarbons.
Segments and Products
The Company’s operations are organized within three segments: Applied Technologies, Distribution & Storage
Equipment and Process Systems & Equipment. Further information about these segments is found at Note L to the Company’s financial statements included at Item 8 of this Annual Report on Form 10-K.
Applied Technologies Segment
The Applied Technologies segment, which accounted for 42.1 percent of the Company’s sales in 2000, consists of
various product lines built around the Company’s core competencies in cryogenics but with a focus on the end users of the liquids and gases instead of the large producers and distributors. The Company’s products in the Applied Technologies
segment include the following:
LNG Alternative Fuel Systems
This product line consists of vacuum-insulated containers for LNG storage, cryogenic pumps and liquid dispensers for
vehicle fueling systems and LNG and liquid compressed natural gas refueling systems for centrally fueled fleets of vehicles powered by LNG, such as fleets operated by metropolitan transportation authorities, refuse haulers and heavy-duty truck
fleets. Competition for LNG fueling and storage systems is based primarily on product design, customer support and service, dependability and price. Although there are alternatives to LNG fuel, the Company is not aware of any viable alternatives to
vacuum-insulated containers for LNG fueling and storage systems. The Company has formed a new subsidiary, NexGen Fueling®, Inc. (“NexGen”), to pursue this opportunity. The Company has engaged an investment banking firm to assist the
Company in obtaining outside financing to help fund the development of the NexGen business, but the Company plans to retain a majority ownership interest in NexGen.
Telemetry Products
The Company is developing a new business which focuses primarily on providing routing data to distributors of home
health care oxygen and beverage CO
2
. The Company expects that this business will expand into other areas of liquid distribution, such as
micro-bulk industrial gases, as the product gains acceptance. This routing data is expected to lower distribution costs and make liquid oxygen and liquid CO
2
more competitive than the existing modes of supply to each of these markets. The Company has formed a new
subsidiary, CoolTel®, Inc. (“CoolTel”), to pursue this opportunity. The Company has engaged an investment banking firm to assist the Company in obtaining outside financing to help fund the development of the CoolTel business, but the
Company plans to retain a majority ownership interest in CoolTel.
DryWash® CO
2
Cleaning Systems
The Company offers a patented CO
2
cleaning system to the drycleaning market which allows the drycleaner to replace the highly regulated
perchlorethylene solvent with environmentally friendly CO
2
. The system consists of a drycleaning machine, custom storage tanks, CO
2
bulk storage tanks, mixing equipment and delivery equipment. While the Company has completed most of the
development of this product, commercialization of the product is dependent on cost reduction and customer acceptance of the new process.
Magnetic Resonance Imaging (“MRI”) Cryostat Components
The basis of the MRI technique is the magnetic properties of certain nuclei of the human body which can be detected,
measured and converted into images for analysis. MRI equipment uses high-strength magnetic fields, applied radio waves and high-speed computers to obtain cross-sectional images of the body. The major components of the MRI assembly are a series of
concentric thermal shields and a supercooled magnet immersed in a liquid helium vessel (a “cryostat”) that maintains a constant, extremely low temperature ( 4° Kelvin; -452° Fahrenheit) to achieve superconductivity. The Company
manufactures large cryostats, various cryogenic interfaces, electrical feed-throughs and various other MRI components that are used to transfer power and/or cryogenic fluids from the exterior of the MRI unit to the various layers of the cryostat and
superconducting magnet.
The Company currently sells all of its MRI cryostats to General Electric Company (“GE”) and is the exclusive
supplier of GE’s cryostats. GE is the leading worldwide manufacturer of MRI equipment.
Bulk Liquid CO
2
Containers
This product line consists primarily of vacuum-insulated, bulk liquid CO
2
containers used for beverage carbonation in restaurants, convenience stores and cinemas. The Company also
manufactures and markets non-insulated bulk flavored syrup containers for side-by-side installation with its CO
2
systems. The Company’s beverage systems are sold to food franchisers, soft drink companies and
CO
2
distributors.
The Company’s primary competitors for its bulk liquid CO
2
beverage delivery systems are producers of high pressure gaseous CO
2
systems and sellers of bulk liquid CO
2
beverage systems. The Company believes that competition for bulk liquid CO
2
beverage systems is based primarily on service and price.
Medical Products
The medical oxygen product lines include a limited range of medical respiratory products, including liquid oxygen
systems, ambulatory oxygen systems and oxygen concentrators, all of which are used for the in-home supplemental oxygen treatment of patients with chronic obstructive pulmonary diseases, such as bronchitis, emphysema and asthma. The Company also
manufactures and markets patient information systems, consisting of both electronic hardware and software, which allow its customers to monitor system performance and patient compliance.
Individuals for whom supplemental oxygen is prescribed generally purchase or rent an oxygen system from a home
healthcare provider or medical equipment dealer. The provider/dealer or physician usually selects which type of oxygen system to recommend to its customers: liquid oxygen systems, oxygen concentrators or high pressure oxygen cylinders. Liquid
systems are currently believed to have more therapeutic value.
The Company believes that competition for liquid oxygen systems is based primarily upon product performance,
reliability, ease-of-service and price and focuses its marketing strategies on these considerations.
Biological Storage Systems
This product line consists of vacuum-insulated vessels used by the beef and dairy cattle breeding industry to transport
frozen semen and embryos and vacuum-insulated vessels used by hospitals, medical laboratories and research facilities to transport and store human organs, tissue samples and other temperature-sensitive biological matter.
These products are sold through laboratory product original equipment manufacturers (“OEMs”), laboratory
product distributors, industrial gas distributors and breeding service providers. Many of these distributors provide a single source for many different types of products to hospitals, medical laboratories and research facilities.
The Company’s competitors for biological storage systems include only a few companies inside and outside the United
States, including Harsco. Competition for biological storage systems is based primarily on product design, reliability and price. Alternatives to vacuum-insulated vessels include mechanical, electrically powered refrigeration for storage of
biological matter.
Thermal Vacuum Test Chambers
The Company designs and manufactures thermal vacuum systems marketed to a customer base that includes the aerospace
industry, government agencies, universities and national research facilities. The Company is a leading domestic supplier of space simulation systems and other types of test chambers used to test satellites and electronic components. The Company also
manufactures large vacuum chambers for telescope mirror aluminizing, a process in which aluminum is vaporized to coat the surface of a large telescope mirror to restore its reflectivity. Management believes that the Company, as a pioneer in the
development of this technology, has supplied the majority of these systems worldwide. The Company’s major competitors in the market for thermal vacuum products and systems for aerospace and research applications include XL/CBI, Dynavac and
Bemco.
The Company’s experience and technological advancements in the high-vacuum area resulted in its involvement,
beginning in 1995 and concluding in December 1998, in equipping the Laser Interferometer Gravitational-Wave Observatory (“LIGO”) project, a scientific research project sponsored by the National Science Foundation and jointly managed by the
Massachusetts Institute of Technology and the California Institute of Technology. The observatories are dedicated to the detection and measurement of cosmic gravitational waves and the harnessing of these waves for scientific research. The Company
supplied all of the required LIGO vacuum equipment, including vacuum chambers, large pipe spools, valves, vacuum pumps, controllers and modular clean rooms. Management believes that expertise in the field of high-vacuum technology developed by the
Company through its involvement in the LIGO project may have a number of new commercial applications.
Vacuum-Insulated Pipe
This product line specializes in the design and fabrication of custom cryogenic piping (“VIP”) for liquid
nitrogen, oxygen, argon, helium and hydrogen in pipe sizes ranging from 1
/4" to 48". The configuration of
VIP is built to order and is restricted only by shipping and installation constraints. Approximately 50 percent of VIP is supplied as fuel transfer piping to space launch facilities. Launch pad construction is at an all time high to service
increased launch demand for satellites driven by growth in telecommunications, global positioning, scientific observation and defense applications. The Company provides unique design, production and installation capabilities. The Company’s
equipment is employed on every launch facility in North America. Competition for VIP is based on technology (foam vs. vacuum insulation), price and delivery lead times.
The Company is developing new technologies for insulated piping that will expand applications for the Company’s
VIP. Python™ piping is sold as an alternative to modular foam insulated piping for thermally sensitive liquids, process fluids and beverage production. Large bore vacuum insulated piping is now being employed for LNG transmission in production
and receiving terminals.
Nitrogen Injection Systems
This product line consists of injectors used by the bottling industry to give enhanced storage characteristics to
non-carbonated beverages such as iced tea, water and juices.
Environmental Test Chambers
This product line provides the most thermally efficient test chambers, capable of providing 60° celsius-per-minute
temperature change. State-of-the-art vibration systems can also be combined with the thermal test chamber.
Cryogenic and Non-Cryogenic Components
The Company’s line of cryogenic components, including high-pressure cryogenic pumps, valves and specialty
components, are recognized in the market for their reliability, quality and performance. These products are sold to the Company’s heat exchanger and cold box customers in the industrial gas and hydrocarbon processing industries, as well as to a
diverse group of customers in those and other industries. The Company competes with a number of suppliers of cryogenic components, including Cryogenic Industries, CCI and Acme Cryogenics.
The Company also produces small diameter stainless steel tubing for sale to distributors to satisfy their
customers’ requirements for quick delivery. The Company’s manufacturing strategy is to focus on custom sizes and smaller production runs, which management believes gives the Company a competitive advantage in providing a superior quality
product while meeting customer demands for dependable, fast delivery. With its production and marketing efforts directed principally to customers relying on prompt delivery, the Company is able to compete primarily on the basis of service rather
than price. Numerous manufacturers of stainless steel tubing are able to compete with the Company in this market.
Distribution & Storage Equipment Segment (“Distribution and Storage”)
Representing 42.3 percent of the Company’s sales in 2000, the products supplied by the Distribution and Storage
segment are driven primarily by the large and growing installed base of users of cryogenic liquids as well as new applications and distribution technologies for cryogenic liquids. The Company’s products span the entire spectrum of the
industrial gas market from small customers requiring cryogenic packaged gases to large users requiring custom engineered cryogenic storage systems and include the following:
Cryogenic Bulk Storage Systems
The Company is a leading supplier of cryogenic bulk storage systems of various sizes ranging up to 100,000 gallons.
Using sophisticated vacuum insulation systems placed between inner and outer vessels, these bulk storage systems are able to store and transport liquefied industrial gases and hydrocarbon gases at temperatures nearing absolute zero. The Company has
experienced growth in its bulk storage systems sales as the demand for liquefied industrial gases and liquefied hydrocarbon gases has increased. Customers for the Company’s cryogenic storage tanks include industrial gas producers, chemical
producers, manufacturers of electrical components and businesses in the oil and natural gas industries. Prices for the Company’s cryogenic bulk storage systems range from $20,000 to $500,000. Principal customers for the Company’s cryogenic
bulk storage systems are AGA, Air Liquide, Air Products, BOC and Praxair. The Company competes chiefly with Harsco in this area.
Cryogenic Packaged Gas Systems
The Company is a leading supplier of cryogenic packaged gas systems of various sizes ranging from 50 gallons to 1,000
gallons. Cryogenic liquid cylinders are used extensively in the packaged gas industry to allow smaller quantities of liquid to be easily delivered to the customers of the industrial gas distributors on a full-for-empty basis. Principal customers for
the Company’s liquid cylinders are AGA, Air Liquide, Air Products, BOC and Praxair. The Company competes chiefly with Harsco in this area. The Company has recently developed two new technologies in the packaged gas product area: ORCA®
Micro-Bulk systems and Tri-fecta® Laser Gas assist systems. ORCA® Micro-Bulk systems bring the ease of use and distribution economics of bulk gas supply to customers formerly supplied by high pressure or cryogenic liquid cylinders. The
ORCA® Micro-Bulk system growth has exceeded Company expectations and is the substantial market leader in this growing segment. The Tri-fecta® Laser Gas assist system was developed to meet the performance requirements for new high powered
lasers being used in the metal fabrication industry. Growth of this product has also exceeded Company expectations, and the Company has no knowledge of a similar competitive product.
Distribution Equipment
The Company supplies numerous products used for transporting cryogenic liquids including railcars, intermodal containers
and small truck-mounted units used in the ORCA® Micro-Bulk delivery system. The market for specialized distribution equipment for use in the nitrogen oil field service industry, one market served by this business, is growing
substantially.
Cryogenic Services
The Company operates four locations providing installation, service and maintenance of cryogenic products including
storage tanks, liquid cylinders, cryogenic trailers, cryogenic pumps and vacuum-insulated pipe. The Company’s national service network is unique in the industry, and the Company believes this network provides a significant competitive edge. The
Company anticipates the demand for full service, national, qualified maintenance of cryogenic products and installations will increase. The Company’s cryogenic services business results primarily from its March 1999 acquisition of a group of
privately held companies, collectively known as Northcoast Cryogenics (“Northcoast”), and its December 1999 acquisition of the operational assets and personnel of Air Liquide America’s cryogenic repair center located in Houston,
Texas.
Process Systems & Equipment Segment (“Process Systems”)
The Company’s principal products within the Process Systems segment, which accounted for 15.6 percent of sales in
2000, are focused on the process equipment, primarily heat exchangers and coldboxes, used by the major industrial gas, natural gas and petrochemical companies in the production of their products.
Heat Exchangers
The Company is the leading designer and manufacturer of cryogenic heat exchangers. Using technology pioneered by the
Company, heat exchangers are incorporated into systems such as cold boxes to facilitate the progressive cooling and liquefaction of air or hydrocarbon mixtures for the subsequent recovery or purification of component gases. In the industrial gas
market, heat exchangers are used to obtain high purity atmospheric gases, such as oxygen, nitrogen and argon, which have numerous diverse industrial applications. In hydrocarbon processing industries, heat exchangers allow producers to obtain
purified hydrocarbon by-products, such as methane, ethane, propane and ethylene, which are commercially marketable for various industrial or residential uses. Heat exchangers are customized to the customer’s order and range in price from
approximately $30,000 for a relatively simple unit to as high as $10 million for a major project.
Management anticipates the return of strong demand for its heat exchangers, resulting substantially from increased
activity in the petrochemical and liquid natural gas segments of the hydrocarbon processing market. In particular, management believes that continuing efforts by petroleum producing countries to make better use of previously flared methane and to
broaden their industrial base present a promising source of demand for the Company’s heat exchangers. Demand for heat exchangers in developed countries is expected to continue as firms upgrade their facilities for greater efficiency and
regulatory compliance. Historic demand for heat exchangers has cycled to very low levels and typically recovered to new peak requirements. To ensure adequate capacity for anticipated growth in demand for heat exchangers, the Company operates two
facilities, the larger being in the United States with a smaller capacity facility in the United Kingdom.
The Company’s principal competitors for heat exchangers are Linde, Sumitomo, Kobe and Nordon. Management believes
that the Company is the only producer of large brazed aluminum heat exchangers in the United States and, with the second facility in the United Kingdom, has the leading market share in the global heat exchanger market. Major customers for the
Company’s heat exchangers in the industrial gas market include Air Liquide, Air Products, BOC, MG Industries and Praxair. In the hydrocarbon processing market, major customers include BP AMOCO, ARCO, EXXON and contractors such as ABB Lummus,
Bechtel and M.W. Kellogg.
Cold Boxes
The Company is a leading designer and fabricator of cold boxes. Cold boxes are highly engineered systems used to
significantly reduce the temperature of gas mixtures to the point where component gases liquefy and can be separated and purified for further use in multiple industrial, scientific and commercial applications. In the industrial gas market, cold
boxes are used to separate air into its major atmospheric components, including nitrogen, oxygen and argon, where the gases are used in a diverse range of applications such as the quick-freezing of food, wastewater treatment and industrial welding.
In the hydrocarbon processing market, the Company’s cold box systems are used in natural gas processing and in the petrochemical industry. The construction of a cold box generally consists of one or more heat exchangers and other equipment
packaged in a “box” consisting of metal framing and a complex system of piping and valves. Cold boxes, which are designed and fabricated to order, sell in the price range of $500,000 to $10 million, with the majority of cold boxes priced
between $1 million and $2 million.
The Company has a number of competitors for fabrication of cold boxes, including E.S. Fox and Ivor J. Lee. Principal
customers for the Company’s cold boxes include Air Liquide, ABB Lummus, BP AMOCO, Bechtel, Stone & Webster, M.W. Kellogg, and Lurgi.
Market Overview
The Company serves a wide variety of markets through its emphasis on the equipment for end-users of cryogenic liquids.
These markets include beverage bottling and dispensing, alternative transportation fuels, environmentally friendly dry cleaning, biomedical research, medical test equipment, home-healthcare and electronics testing, to name just a few. With such a
wide variety of markets, the Company has reduced the effect that fluctuations in the overall industrial gas and hydrocarbon markets have on its profitability.
Despite its cyclicality, management believes that the global expansion of the industrial gas and hydrocarbon processing
markets presents attractive opportunities for growth. To date, the sources of the Company’s international business principally have been its large domestic-based customers, who are aggressively expanding into international markets, and large
foreign-based companies with significant U.S. operations. In 2000, approximately 33 percent of the Company’s sales were destined for use at job sites outside the United States compared to 34 percent in 1999 and 30 percent in 1998. During 1999,
to position the Company to take advantage of anticipated growth opportunities in the Company’s markets abroad, management concentrated its efforts on forming the Chart Europe Division. The mission of this division is to integrate the
Company’s European manufacturing ability with its marketing arm. Sales in this division grew 35.9 percent to $36.2 million in 2000.
The industrial gas market is the largest market served by the Company. The top world producers of industrial gases have
been among the Company’s largest customers for each of the last three years. Producers of industrial gases separate atmospheric air into its component gases using cryogenic processes. The resultant liquid gases are then stored and transported
for ultimate use by a wide variety of customers in the petrochemical, electronics, glass, paper, metals, food, fertilizer, welding, enhanced oil recovery and medical industries. Industrial gas producers use heat exchangers and cold boxes to produce
liquid gases. Cryogenic tanks and components, including pumps, valves and piping, are also used to store, transport and distribute liquid gases to end users.
The hydrocarbon processing market consists of petrochemical and natural gas processors. Natural gas processing involves
the separation and purification of natural gas for the production of liquid gas end products such as methane, ethane, propane and butane, and by-products such as helium, which have numerous commercial and industrial applications. In the
petrochemical industry, cryogenic separation and purification processes are required to produce ethylene (the basic building block of plastics), propylene and numerous other primary hydrocarbons having industrial uses. Like the industrial gas
market, the hydrocarbon processing market uses all of the categories of the Company’s cryogenic products in the gas separation and purification processes and the subsequent storage and distribution of liquid gases. Major customers for the
Company’s products in the hydrocarbon processing markets are large multinational firms in the oil and gas industry, and large engineering and construction concerns.
Engineering and Product Development
The Company’s engineering and product development activities are focused on developing new and improved solutions
and equipment for the users of cryogenic liquids. The Company’s engineering, technical and marketing employees actively assist customers in specifying their needs and in determining appropriate products to meet those needs. Portions of the
Company’s engineering expenditures typically are charged to customers, either as separate items or as components of product cost.
Competition
Management believes the Company can compete effectively around the world and that it is a leading competitor in its
markets. Competition is based primarily on performance and the ability to provide the design, engineering and manufacturing capabilities required in a timely and cost-efficient manner. Contracts are usually awarded on a competitive bid basis.
Quality, technical expertise and timeliness of delivery are the principal competitive factors within the industry. Price and terms of sale are also important competitive factors. Because reliable market share data is not available, it is difficult
to estimate the Company’s exact position in its markets, although the Company believes it ranks among the leaders in each of the markets it serves.
Marketing
The Company’s principal operating units currently market products and services in North America primarily through
166 direct sales personnel, and supplement these direct sales through independent sales representatives and distributors. The technical and custom design nature of the Company’s products requires a professional, highly trained sales force.
While each salesperson is expected to develop a highly specialized knowledge of one product or group of products within a segment of the Company, each salesperson is now able to sell many products from different segments to a single
market.
The Company uses independent sales representatives to conduct its sales in certain foreign countries that the Company
serves. These independent sales representatives supplement the Company’s direct sales force in dealing with language and cultural matters. The Company’s domestic and foreign independent sales representatives earn commissions on sales,
which vary by product type.
Orders and Backlog
The Company considers orders to be those for which the Company has received a signed purchase order or other written
contract from the customer. Such orders are included in backlog until recognized as revenue or cancelled. The table below sets forth orders and backlog by segment for the periods presented.
| |
|
Years Ended December 31,
|
| |
|
2000
|
|
1999
|
|
1998
|
| |
|
(Dollars in thousands) |
| Orders |
|
|
|
|
|
|
| Applied Technologies |
|
$148,259 |
|
$112,528 |
|
$ 53,004 |
| Distribution and Storage Equipment |
|
154,756 |
|
96,722 |
|
36,727 |
| Process Systems & Equipment |
|
78,149 |
|
32,087 |
|
82,404 |
| |
|
|
|
|
|
|
| Total |
|
$381,164 |
|
$241,337 |
|
$172,135 |
| |
|
|
|
|
|
|
| Backlog |
|
|
|
|
|
|
| Applied Technologies |
|
$ 35,205 |
|
$ 25,891 |
|
$ 17,615 |
| Distribution and Storage Equipment |
|
39,227 |
|
26,372 |
|
14,820 |
| Process Systems & Equipment |
|
33,686 |
|
8,165 |
|
63,688 |
| |
|
|
|
|
|
|
| Total |
|
$108,118 |
|
$ 60,428 |
|
$ 96,123 |
| |
|
|
|
|
|
|
The Company experienced a significant increase in orders in the Process Systems segment in 2000. This increase was due
to a recovery in the natural gas processing market. In the Applied Technologies segment the increase was largely driven by the inclusion of certain MVE products for the full year, while 1999 only included orders for these products subsequent to
April 12. Additionally, MRI cryostat, LNG systems and medical oxygen products all showed significant order improvements over 1999. Like Applied Technologies, the Distribution and Storage segment benefited significantly in 2000 by the inclusion of
MVE for the full year. In addition, the packaged gas and ORCA® Micro-Bulk delivery systems demonstrated significantly improved orders due to several new long term supply agreements with large industrial gas suppliers. The Company’s Czech
Republic operations also continued to increase market share in Europe as they demonstrated improved quality.
Approximately 98 percent of the December 31, 2000 backlog is scheduled to be recognized as sales during 2001. The
Company’s backlog fluctuates from time to time, and the amounts set forth above are not necessarily indicative of future backlog levels or the rate at which backlog will be recognized as sales. The increased focus within the Company on the
Distribution and Applications segments will generally reduce backlog, as products within these segments tend to have shorter lead times.
Customers
Ten customers accounted for 42 percent of consolidated sales in 2000. The Company’s sales to particular customers
fluctuate from period to period. In 2000, approximately 33 percent of sales were destined to be used in foreign countries. To reduce credit risk for both foreign and domestic sales, the Company requires customer advances, letters of credit and other
similar guarantees of payment. For certain foreign customers the Company also purchases credit and political risk insurance. The Company believes its relationships with customers are good.
Patents and Trademarks
Although the Company has a number of patents, trademarks and licenses related to its business, no one of them or related
group of them is considered by the Company to be of such importance that its expiration or termination would have a material adverse effect on the Company’s business. In general, the Company depends upon technological capabilities,
manufacturing quality control and application of know-how, rather than patents or other proprietary rights, in the conduct of its business.
Raw Materials and Suppliers
The Company manufactures most of the products it sells. The raw materials used in manufacturing include aluminum sheets,
bars, plate and piping, stainless steel strip, heads, plate and piping, palladium oxide, carbon steel heads and plate and 9 percent nickel steel heads and plate. Most raw materials are available from multiple sources of supply.
Commodity metals used by the Company have experienced fluctuations in price. The Company has generally been able to
recover the costs of price increases through its contracts with customers. The Company foresees no acute shortages of any raw materials which would have a material adverse effect on its operations.
Employees
As of December 31, 2000, the Company had 1,735 domestic employees and 642 international employees, including 689
salaried, 372 union hourly and 1,316 non-union hourly employees. The salaried employees included 126 engineers and draft-persons and 563 other professional, technical and clerical personnel.
The Company is a party to three collective bargaining agreements through its operating subsidiaries, one of which is
being renegotiated. The agreement with the International Association of Machinists and Aerospace Workers covering 176 employees at the Company’s La Crosse, Wisconsin, heat exchanger facility expired February 3, 2001. The Company expects that
this agreement will be replaced by a new agreement expiring February 3, 2004. The agreement with the International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers and Helpers covering 71 employees at the Company’s
Plaistow, New Hampshire, facility expires August 30, 2002. The agreement with the United Steel Workers covering 125 employees at the Company’s New Prague, Minnesota, facility expires January 15, 2002. Since the acquisition of each of its
operating units, the Company has not had any work stoppages or strikes. The Company believes its employee relations are good.
Facilities
The Company occupies 22 principal locations totaling approximately 1.8 million square feet, with the majority devoted to
manufacturing, assembly and storage. Of these manufacturing facilities, approximately 1.3 million square feet are owned and 500,000 square feet are occupied under operating leases. The Company considers its manufacturing facilities sufficient to
meet its current and planned operational needs. The Company leases approximately 11,400 square feet for its executive offices in Cleveland, Ohio. The Company’s owned facilities in the United States are subject to mortgages securing the
Company’s consolidated credit and revolving loan facility.
The following table sets forth certain information about the Company’s facilities:
Location
|
|
Segment
|
|
Sq. Ft.
|
|
Ownership
|
|
Use
|
| Columbus, Ohio |
|
Applied Technologies |
|
46,200
5,000 |
|
Leased
Leased |
|
Manufacturing/Office
Warehouse |
| Costa Mesa, California |
|
Applied Technologies |
|
42,000 |
|
Leased |
|
Manufacturing/Office |
| Burnsville, Minnesota |
|
Applied Technologies |
|
91,000 |
|
Owned |
|
Manufacturing/Office |
| Canton, Georgia |
|
Applied Technologies |
|
138,000 |
|
Owned |
|
Manufacturing/Office |
| Lonsdale, Minnesota |
|
Applied Technologies |
|
13,500 |
|
Leased |
|
Manufacturing |
| Clarksville, Arkansas |
|
Applied Technologies |
|
85,300 |
|
Owned |
|
Manufacturing/Office |
| Greenville, Pennsylvania |
|
Applied Technologies |
|
2,100 |
|
Leased |
|
Office |
| Solingen, Germany |
|
Applied Technologies |
|
2,600 |
|
Leased |
|
Office/Warehouse |
| Plaistow, New Hampshire |
|
Distribution & Storage |
|
164,400 |
|
Owned |
|
Manufacturing/Office |
| Denver, Colorado |
|
Distribution & Storage |
|
124,300
103,800 |
|
Leased
Owned |
|
Manufacturing/Office
Manufacturing/Office |
| Ottawa Lake, Michigan |
|
Distribution & Storage |
|
25,200 |
|
Leased |
|
Manufacturing |
| Houston, Texas |
|
Distribution & Storage |
|
22,000 |
|
Leased |
|
Manufacturing |
| Holly Springs, Georgia |
|
Distribution & Storage |
|
6,000 |
|
Leased |
|
Manufacturing |
| New Prague, Minnesota |
|
Distribution & Storage |
|
200,000
15,000
6,000
16,000
8,000 |
|
Owned
Leased
Owned
Leased
Owned |
|
Manufacturing
Manufacturing
Manufacturing
Office
Manufacturing |
| Decin, Czech Republic |
|
Distribution & Storage |
|
194,000 |
|
Owned |
|
Manufacturing |
| Yennora, Australia |
|
Distribution & Storage |
|
80,000 |
|
Leased |
|
Manufacturing |
| Zhangiajang, China |
|
Distribution & Storage |
|
30,000 |
|
Leased |
|
Manufacturing |
| La Crosse, Wisconsin |
|
Process Systems |
|
149,000 |
|
Owned |
|
Manufacturing/Office |
| Westborough, Massachusetts |
|
Process Systems |
|
18,500 |
|
Leased |
|
Office |
| New Iberia, Louisiana* |
|
Process Systems |
|
62,400 |
|
Leased |
|
Manufacturing |
| Wolverhampton, England |
|
Process Systems |
|
138,400 |
|
Owned |
|
Manufacturing/Office |
| Cleveland, Ohio |
|
Corporate Headquarters |
|
11,400 |
|
Leased |
|
Office |
* Leased by a joint venture in which the Company has a 50 percent interest.
Environmental Matters
The Company’s operations involve and have involved the handling and use of substances, such as various cleaning
fluids used to remove grease from metal, that are subject to federal, state and local environmental laws and regulations. These regulations impose limitations on the discharge of pollutants into the soil, air and water, and establish standards for
their storage and disposal. The Company monitors and reviews its procedures and policies for compliance with environmental laws and regulations. The Company’s management is familiar with these regulations, and supports an ongoing capital
investment program to maintain the Company’s adherence to required standards.
As part of its ongoing environmental compliance and monitoring programs, the Company is voluntarily developing and
executing work plans for remediation of environmental conditions involving certain of its operating facilities. Based upon the Company’s study of the known conditions and its prior experience in investigating and correcting environmental
conditions, the Company estimates that the potential costs of these site remediation efforts will not have a material adverse effect on the Company’s financial position, liquidity, cash flows or results of operations. Expected future
expenditures relating to these remediation efforts are expected to be made over the next 10 years as ongoing operating costs of remediation programs. Although the Company believes it has adequately provided for the cost of all known environmental
conditions, the applicable regulatory agencies could insist upon different and more costly remediative measures than those the Company believes are adequate or required by existing law. Except for its continuing remediative efforts described above,
the Company believes that it is currently in substantial compliance with all known material and applicable environmental regulations.
Item 3. Legal Proceedings
The Company’s Applied Technologies business (“Applied Technologies”) has been named as a defendant in
three similar cases pending in the Court of Common Pleas, Montgomery County, Ohio, related to the same incident. On December 7, 2000, an accident occurred at the IHS at Carriage by the Lake nursing home outside Dayton, Ohio. A nitrogen tank was
connected to the nursing home’s oxygen system resulting in the death of five elderly patients and injuries to five additional patients from inhaling nitrogen. Mr. Harold Tomlin filed a complaint on December 13, 2000, individually and as
Executor of the Estate of Helen Tomlin, Deceased, in Tomlin, et al. v. IHS at Carriage by the Lake, et al., naming as defendants BOC Gases of Dayton and its parent company, The BOC Group, Inc., the nursing home and its parent company, Applied
Technologies, and a “John Doe” manufacturer and supplier. The claims against the Company in this case are for negligence, strict product liability, failure to warn, negligence per se, breach of warranty and punitive damages. The
allegations underlying the claims involve defective or deficient manufacture, construction, design, labeling, formulation and warnings with regard to a cylinder. Tomlin is seeking $5 million in compensatory damages, $5 million in punitive damages,
prejudgment and post-judgment interest and costs and fees. Gayleen Waldspurger filed a complaint on December 20, 2000, individually and as Executor of the Estate of Pauline Tays, in Waldspurger v. BOC Gases, et al., naming as defendants The
BOC Group, Inc., the nursing home and its parent company, a “John Doe” employee and Applied Technologies. The claims against the Company in this case are for negligence based on wrongful death and survivorship, strict liability, negligence
per se, product liability and breach of warranty. The underlying allegations are general as to the Company, and are similar to those in the Tomlin lawsuit. Ms. Waldspurger is seeking $2.5 million in compensatory damages for wrongful death, $1
million in compensatory damages for personal injury and survivorship claims and $5 million in punitive damages. On January 12, 2001, Ronald and Ruthanna Leslie filed a complaint in Leslie v. IHS at Carriage by the Lake, et al., claiming that
Mr. Leslie, a patient at the nursing home, inhaled nitrogen and, as a result, suffered severe and permanent personal injuries, including brain damage and the aggravation of other medical conditions from which he suffered on the day of the accident.
The defendants and the claims against the Company are identical to those asserted in the Tomlin lawsuit. The damages sought by the Leslies include $10 million in compensatory damages, $10 million in punitive damages, $2 million for loss of
consortium damages, prejudgment and post-judgment interest and costs and fees. The Company is vigorously defending all three cases and has filed its answer, denied all liability and cross-claimed for contribution from The BOC Group, Inc. and IHS in
each case. All three cases are in the discovery phase and none are set for trial at this time.
The Company is a party to other routine legal proceedings incidental to the normal course of its business. Management
believes that the final resolution of these matters will not have a material adverse affect on the Company’s operating results, cash flows or financial position.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Executive Officers of the Registrant
Certain information as of December 31, 2000, regarding each of the Company’s executive officers is set forth
below:
Name
|
|
Age
|
|
Position
|
| Arthur S. Holmes |
|
59 |
|
Chairman, Chief Executive Officer and a Director |
| James R. Sadowski |
|
59 |
|
President and Chief Operating Officer |
| Don A. Baines |
|
57 |
|
Chief Financial Officer, Treasurer and a Director |
| John T. Romain |
|
36 |
|
Controller and Chief Accounting Officer |
Arthur S. Holmes has been Chairman and Chief Executive Officer of the Company since its formation in June 1992,
and was President until December 1993. He also has been President and the principal owner of Holmes Investment Services, Inc. (“HIS”), a management consulting firm, since 1989. Mr. Holmes served as President of ALTEC International, Inc.
(“ALTEC”) from 1985 through 1989. From 1978 through 1985, he served in a variety of managerial capacities for Koch Process Systems, Inc., the predecessor of Process Systems International, Inc. (“PSI”), an operating unit of the
Company, most recently as Vice President-Manager of the Gas Processing Division. Mr. Holmes is the co-inventor of the Company’s patented Ryan/Holmes technology. Mr. Holmes holds a BS and an MS in Chemical Engineering from the Pennsylvania State
University and an MBA from Northeastern University.
James R. Sadowski has been President and Chief Operating Officer of the Company since December 1993. Prior to
joining the Company, Mr. Sadowski served as Group Vice President of Parker Hannifin Corporation’s Bertea Aerospace Group (“Bertea”) from 1991 to 1993. Prior to his service at Bertea he served in various managerial capacities at Parker
Hannifin Corporation and TRW Inc. Mr. Sadowski holds a BS in Engineering/Science from Case Institute of Technology and an MS degree from the same institution in Mechanical Engineering.
Don A. Baines has been the Chief Financial Officer and Treasurer of the Company since its formation in June 1992.
He also has served as Chief Financial Officer for HIS since 1989. From 1986 through 1992, Mr. Baines served as Chief Financial Officer for ALTEC. From 1976 through 1985, Mr. Baines served in a variety of managerial capacities, most recently
Controller, in the Process/Transport Division of the Trane Company, which included the predecessor of ALTEC. Mr. Baines is a Certified Public Accountant and holds a BBA in Accounting from St. Edward’s University, Austin, Texas.
John T. Romain has been the Chief Accounting Officer since May 1999 and has served as the Company’s
Controller since July 1993. Prior to joining the Company, Mr. Romain worked for Ernst & Young LLP in its Audit and Assurance practice. Mr. Romain is a Certified Public Accountant and holds a BA in Accounting and Computer Systems from Grove City
College, Grove City, Pennsylvania.
PART II
Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters.
Quarterly Stock Prices and Dividends
Quarter
2000
|
|
High
|
|
Low
|
|
Dividend
|
| 1st |
|
$ 4.750 |
|
$2.938 |
|
— |
| 2nd |
|
5.125 |
|
2.625 |
|
— |
| 3rd |
|
6.375 |
|
4.250 |
|
— |
| 4th |
|
6.000 |
|
4.000 |
|
— |
| |
Quarter
1999
|
|
High
|
|
Low
|
|
Dividend
|
| 1st |
|
$ 9.000 |
|
$6.375 |
|
$.050 |
| 2nd |
|
10.750 |
|
6.438 |
|
.050 |
| 3rd |
|
7.875 |
|
4.125 |
|
— |
| 4th |
|
5.250 |
|
3.375 |
|
— |
Limitations on the Payment of Dividends
Under the terms of the Company’s amended Credit Facility, the Company was prohibited from paying any cash dividends
with respect to its capital stock until January 1, 2001. The Company is permitted to pay cash dividends not exceeding $7.2 million in any fiscal year after January 1, 2001, but only if at both the time of the payment of the dividend and immediately
thereafter there is no event of default under the Credit Facility.
Related Stockholder Matters
Chart Industries Common Stock is traded on the New York Stock Exchange under the symbol “CTI.”
Shareholders of record on January 31, 2001 numbered 2,066. The Company estimates that an additional 5,000 shareholders
own stock held for their accounts at brokerage firms and financial institutions.
Item 6. Selected Financial Data
The following table sets forth selected financial data of the Company for each of the five years during the period ended
December 31, 2000. The data was derived from the annual audited consolidated financial statements of the Company for the relevant years and includes the operations of acquired businesses after their date of acquisition, including for periods after
April 12, 1999, the operations of MVE. Further information about the Company’s acquisitions is found at Note E to the Company’s consolidated financial statements included at Item 8 of this Annual Report on Form 10-K.
SELECTED FINANCIAL DATA
(Dollars in thousands, except per share amounts)
| |
|
Years Ended December 31,
|
| |
|
2000
|
|
1999
|
|
1998
|
|
1997
|
|
1996
|
| Income Statement Data: |
|
|
|
|
|
|
|
|
|
|
|
|
| Sales |
|
$325,700 |
|
|
$292,937 |
|
|
$229,423 |
|
$192,249 |
|
$148,400 |
| Gross profit |
|
96,029 |
|
|
77,381 |
|
|
77,657 |
|
61,240 |
|
45,002 |
| Selling, general and administrative expense |
|
60,803 |
|
|
51,455 |
|
|
32,189 |
|
25,901 |
|
21,457 |
| Goodwill amortization expense |
|
4,921 |
|
|
3,670 |
|
|
1,313 |
|
305 |
|
288 |
| Restructuring (income) expense |
|
(614 |
) |
|
11,982 |
|
|
— |
|
— |
|
— |
| Acquired in-process research and development |
|
— |
|
|
22,010 |
|
|
— |
|
— |
|
— |
| Operating income (loss) |
|
30,919 |
|
|
(11,736 |
) |
|
44,155 |
|
35,034 |
|
23,257 |
| Gain on sale of assets |
|
1,041 |
|
|
2,505 |
|
|
— |
|
— |
|
— |
| Net interest expense |
|
26,676 |
|
|
15,854 |
|
|
901 |
|
350 |
|
623 |
| Income tax expense |
|
3,012 |
|
|
3,215 |
|
|
15,039 |
|
12,057 |
|
7,605 |
| Minority interest, net of taxes |
|
117 |
|
|
171 |
|
|
— |
|
— |
|
— |
| Income (loss) before extraordinary charge |
|
2,155 |
|
|
(28,471 |
) |
|
28,215 |
|
22,627 |
|
15,029 |
| Extraordinary item, net of tax |
|
— |
|
|
(7,809 |
) |
|
— |
|
— |
|
— |
| Net income (loss) |
|
2,155 |
|
|
(36,280 |
) |
|
28,215 |
|
22,627 |
|
15,029 |
| Earnings per Common Share: |
|
|
|
|
|
|
|
|
|
|
|
|
| Net income (loss) |
|
$ .09 |
|
|
$ (1.53 |
) |
|
$ 1.17 |
|
$ 1.01 |
|
$ .67 |
| Net income (loss)—assuming dilution |
|
$ .09 |
|
|
$ (1.53 |
) |
|
$ 1.16 |
|
$ .99 |
|
$ .66 |
| Other Financial Data: |
|
|
|
|
|
|
|
|
|
|
|
|
Operating income before gain on sale of assets, net
interest expense, income taxes, minority interest
and depreciation and amortization |
|
$ 48,783 |
|
|
$ 5,173 |
|
|
$ 51,181 |
|
$ 38,545 |
|
$ 25,965 |
| Depreciation and amortization |
|
17,864 |
|
|
16,909 |
|
|
7,026 |
|
3,511 |
|
2,708 |
| Dividends |
|
— |
|
|
2,370 |
|
|
4,821 |
|
3,858 |
|
3,002 |
| Dividends per share |
|
$ — |
|
|
$ .10 |
|
|
$ .20 |
|
$ .17 |
|
$ .13 |
| Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash, cash equivalents and restricted cash |
|
$ 4,921 |
|
|
$ 2,314 |
|
|
$ 2,169 |
|
$ 22,095 |
|
$ 9,408 |
| Working capital |
|
45,892 |
|
|
50,087 |
|
|
25,326 |
|
39,476 |
|
14,191 |
| Total assets |
|
421,489 |
|
|
424,570 |
|
|
158,205 |
|
128,919 |
|
81,196 |
| Total debt |
|
269,870 |
|
|
278,672 |
|
|
11,325 |
|
4,468 |
|
4,830 |
| Long-term debt, less current portion |
|
244,386 |
|
|
259,336 |
|
|
10,894 |
|
4,063 |
|
4,469 |
| Shareholders’ equity |
|
54,844 |
|
|
55,512 |
|
|
93,154 |
|
76,457 |
|
28,096 |
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
General
During 2000, the Company continued its focus on developing products that are expected to continue the growth trend Chart
has demonstrated since its initial public offering in 1992. The Company is growing through organic development of new products, extension of products worldwide and acquisitions. The Company has grown from $92 million in sales in 1992 to $326 million
in sales in 2000. The Company has also moved from being concentrated in the Process Systems segment to offering a wider array of products, many of which are more focused on the end usage of cryogenic liquids than on the production of these
liquids.
The migration of the Company’s business, from products primarily employed in the production of cryogenic liquids to
a broader array of products used throughout the cryogenic liquid-gas supply chain, is demonstrated by the historical growth of the Applied Technologies and Distribution and Storage businesses. In 2000, the Company’s Applied Technologies segment
represented $137.0 million, or 42.1 percent, of its sales and $54.5 million, or 56.7 percent, of its gross profit. In 1992, the Company’s equivalent segment had sales of $15.8 million, representing 15.1 percent of the Company’s 1992 sales.
Likewise, the Distribution and Storage segment generated sales of $137.9 million, or 42.3 percent, of consolidated sales in 2000. In 1992, this segment had $22.8 million in sales, representing 21.8 percent of the Company’s sales for that year.
In 2000, the Process Systems segment represented 15.6 percent of consolidated revenue.
With respect to the Company’s overall performance in 2000, the Company experienced an 11.2 percent increase in
sales and a 105.9 percent increase in net income compared with the prior year. The increase in 2000 sales can primarily be attributed to the inclusion of MVE in the Company’s results for the full year, while the increase in 2000 net income is
primarily due to the non-recurring items included in 1999 net income resulting from the acquisition of MVE (primarily acquired in-process research and development expense and the extraordinary loss on the early extinguishment of debt) and the
subsequent reorganization of the Company.
Operating Results
The following table sets forth the percentage relationship that each line item in the Company’s statements of
operations represents to sales.
| |
|
Years Ended December 31,
|
| |
|
2000
|
|
1999
|
|
1998
|
| Sales |
|
100.0 |
% |
|
100.0 |
% |
|
100.0 |
% |
| Cost of products sold |
|
70.5 |
|
|
73.6 |
|
|
66.2 |
|
| Gross profit |
|
29.5 |
|
|
26.4 |
|
|
33.8 |
|
| Selling, general and administrative expense |
|
18.7 |
|
|
17.6 |
|
|
14.0 |
|
| Goodwill amortization expense |
|
1.5 |
|
|
1.2 |
|
|
.6 |
|
| Restructuring (income) expense |
|
(.2 |
) |
|
4.1 |
|
|
— |
|
| Acquired in-process research and development |
|
— |
|
|
7.5 |
|
|
— |
|
| Operating income (loss) |
|
9.5 |
|
|
(4.0 |
) |
|
19.2 |
|
| Gain on sale of assets |
|
.3 |
|
|
.8 |
|
|
— |
|
| Interest expense, net |
|
8.2 |
|
|
5.4 |
|
|
.4 |
|
| Income taxes |
|
.9 |
|
|
1.1 |
|
|
6.5 |
|
| Income (loss) before extraordinary item |
|
.7 |
|
|
(9.7 |
) |
|
12.3 |
|
| Extraordinary item |
|
— |
|
|
(2.7 |
) |
|
— |
|
| Net income (loss) |
|
.7 |
|
|
(12.4 |
) |
|
12.3 |
|
Segment Information
The following table sets forth sales, gross profit and gross profit margin for the Company’s three operating
segments.
| |
|
Years Ended December 31,
|
| |
|
2000
|
|
1999
|
|
1998
|
| |
|
(Dollars in thousands) |
| Sales |
|
|
|
|
|
|
|
|
|
| Applied Technologies |
|
$136,952 |
|
|
$105,323 |
|
|
$ 62,256 |
|
| Distribution and Storage Equipment |
|
137,929 |
|
|
105,529 |
|
|
42,558 |
|
| Process Systems and Equipment |
|
50,819 |
|
|
82,085 |
|
|
124,609 |
|
| |
|
|
|
|
|
|
|
|
|
| Total |
|
$325,700 |
|
|
$292,937 |
|
|
$229,423 |
|
| |
|
|
|
|
|
|
|
|
|
| Gross Profit |
|
|
|
|
|
|
|
|
|
| Applied Technologies |
|
$ 54,449 |
|
|
$ 35,521 |
|
|
$ 17,323 |
|
| Distribution and Storage Equipment |
|
29,311 |
|
|
25,313 |
|
|
13,061 |
|
| Process Systems and Equipment |
|
12,269 |
|
|
16,547 |
|
|
47,273 |
|
| |
|
|
|
|
|
|
|
|
|
| Total |
|
$ 96,029 |
|
|
$ 77,381 |
|
|
$ 77,657 |
|
| |
|
|
|
|
|
|
|
|
|
| Gross Profit Margin |
|
|
|
|
|
|
|
|
|
| Applied Technologies |
|
39.8 |
% |
|
33.7 |
% |
|
27.8 |
% |
| Distribution and Storage Equipment |
|
21.3 |
% |
|
24.0 |
% |
|
30.7 |
% |
| Process Systems and Equipment |
|
24.1 |
% |
|
20.2 |
% |
|
37.9 |
% |
| Total |
|
29.5 |
% |
|
26.4 |
% |
|
33.8 |
% |
Years Ended December 31, 2000 and 1999
Sales for 2000 were $325.7 million versus $292.9 million for 1999, an increase of $32.8 million, or 11.2 percent. The
increase in sales was the result of growth in sales for the Applied Technologies and Distribution and Storage segments of $31.6 million and $32.4 million, respectively, offset by a $31.3 million decrease in Process Systems sales.
The Applied Technologies segment increase in sales was largely driven by the inclusion of certain product lines of MVE
for the full year, while 1999 only included sales subsequent to April 12. Additionally, MRI cryostat, LNG systems and medical oxygen products all showed significant improvements over 1999.
Similar to Applied Technologies, sales of the Distribution and Storage segment benefited significantly in 2000 by the
inclusion of MVE for the full year. The packaged gas and ORCA® Micro-Bulk delivery systems demonstrated significantly improved sales due to several new long term supply agreements with the large industrial gas suppliers. The Company’s Czech
Republic operations also continued to increase market share in Europe as they demonstrated improved quality.
The Process Systems segment sales reflect the significant and extended downturn in the industrial gas market for new
production equipment. This market has been cyclical in the past as demonstrated by the Company’s poor performance in 1993 and 1994. The Company believes that it should see the beginning of an upturn in the cycle in 2001.
Gross profit for 2000 was $96.0 million versus $77.4 million for 1999. Gross profit in 1999 was reduced by $1.2 million
for acquired profit in inventory related to the MVE acquisition and $936,000 for inventory related restructuring charges, both of which were included in cost of sales. Gross profit margin for 2000 was 29.5 percent versus 26.4 percent for 1999. The
Applied Technologies segment gross margin improved as its sales growth was concentrated in the higher margin products, driven largely by providing system solutions instead of components. The Process Systems segment also saw improved margins, largely
due to the improved volumes as the result of the Trinidad LNG project as well as several other higher margin hydrocarbon processing projects. Gross profit margin in the Distribution and Storage segment declined nearly three percentage points,
primarily due to poor performance in the Cryogenic Service Division.
Selling, general and administrative (“SG&A”) expense for 2000 was $60.8 million versus $51.5 million for
1999, an increase of $9.3 million, or 18.2 percent. As a percentage of sales, SG&A expense was 18.7 percent for 2000, up from 17.6 percent for 1999. The increase as a percentage of sales largely reflects the higher marketing costs inherent in
the pursuit of sales in the Applied Technologies segment, and increasing medical and other employee benefit costs.
Goodwill amortization expense for 2000 was $4.9 million compared with $3.7 million for 1999. The increase is
attributable to incremental amortization expense resulting from the MVE and Northcoast acquisitions being included for the full year. Goodwill comprised 41.1 percent and 41.7 percent of total assets at December 31, 2000 and 1999, respectively, and
arose primarily from the Company’s acquisition of MVE in 1999.
The Company recorded a net $12.9 million charge in 1999 to restructure its operations as a result of the MVE
acquisition. The charge included a non-cash portion of $9.8 million to write-off impaired inventory, fixed assets and goodwill, and a cash portion of $3.1 million for severance and other costs related to closing a manufacturing facility. The Company
terminated 188 employees in 1999 under this restructuring plan. During 2000, the Company reversed $704,000 of the restructuring reserve due to reoccupying a leased facility previously vacated under the restructuring plan, and utilized $634,000 of
the reserve for the payment of severance benefits and lease costs for an exited facility.
The Company’s 1999 financial results were negatively impacted by a non-cash charge of $22.0 million for the
write-off of acquired in-process research and development (“IPR&D” ) related to the MVE acquisition. This total amount was determined by independent consultants who estimated the costs to develop the technology into commercially viable
products, estimated cash flows resulting from the expected revenues generated by such products, and discounted the net cash flows back to their present value using a risk-adjusted discount rate.
In 2000, the Company recorded a $1.0 million gain on the sale of certain fixed assets, primarily its Westborough,
Massachusetts building, on proceeds of $5.0 million in cash.
Net interest expense for 2000 was $26.7 million compared with $15.9 million for 1999, reflecting higher interest rates
and interest for the full year on funds borrowed to finance the MVE acquisition.
The effective income tax rate for 2000 was 57.0 percent compared with 12.8 percent for 1999. The change in the effective
income tax rate was primarily due to the non-deductible IPR&D expense incurred in 1999. The Company had net deferred tax assets of $11.9 million at December 31, 2000. Management has determined, based on the Company’s history of prior
earnings and its expectations for the future, that taxable income of the Company will more likely than not be sufficient to recognize fully these net deferred tax assets.
In 1999, the Company recorded an extraordinary charge of $12.5 million, $7.8 million net of tax, related to the early
extinguishment of MVE 12.5 percent senior secured notes which had a maturity date in 2002.
As a result of the foregoing, the Company earned net income of $2.2 million in 2000, compared with a net loss of $36.3
million in 1999. Excluding non-recurring items resulting from the MVE acquisition and related reorganization, the Company had net income of $4.2 million in 1999.
Years Ended December 31, 1999 and 1998
Sales for 1999 were $292.9 million versus $229.4 million for 1998, an increase of $63.5 million, or 27.7 percent. The
acquisitions of MVE on April 12, 1999 and of Northcoast on March 15, 1999 contributed $123.1 million in incremental sales to the year, improving the sales of both the Distribution and Storage and Applied Technologies segments. Principally offsetting
these incremental sales were declines in volume and price resulting in a $42.5 million reduction in Process Systems segment sales, and a lower volume of vacuum equipment sales resulting in a $13.7 million reduction in Applied Technologies segment
sales, compared with 1998.
Gross profit for 1999 was $77.4 million versus $77.7 million for 1998. Gross profit in 1999 was reduced by $1.2 million
for acquired profit in inventory related to the MVE acquisition and $936,000 for inventory related restructuring charges, both of which were included in cost of sales. Gross profit margin for 1999 was 26.4 percent versus 33.8 percent for 1998. The
significant decline in gross profit margin occurred primarily in the Process Systems segment, where gross profit margin declined approximately 18 percentage points. The market for Process Systems equipment was very competitive in 1999 due to
industry consolidations, fixed asset rationalizations and the overall softness in the industrial gas market. In addition, under-utilization of capacity resulted in lower margin percentages. Gross profit margin in the Distribution and Storage segment
in 1999 declined approximately 7 percentage points from 1998 levels due to lower prices on cryogenic storage tanks, while gross profit margin in the Applied Technologies segment in 1999 increased approximately 6 percentage points from 1998 levels,
primarily due to favorable pricing on new product sales acquired with MVE.
SG&A expense for 1999 was $51.5 million versus $32.2 million for 1998, an increase of $19.3 million, or 59.9
percent. Offsetting the $24.9 million additional SG&A costs incurred in 1999 by MVE and Northcoast was approximately $5.6 million in overall restructuring savings and lower sales commissions. As a percentage of sales, SG&A expense was 17.6
percent for 1999, up from 14.0 percent for 1998. The 1999 increase as a percentage of sales largely reflected the lower sales base for the Process Systems segment and the higher marketing costs inherent in the pursuit of the Applied Technologies
segment.
Goodwill amortization expense for 1999 was $3.7 million compared with $1.3 million for 1998. The 1999 increase was
attributable to incremental amortization expense resulting from the MVE and Northcoast acquisitions, where the purchase prices exceeded the fair values of the net assets acquired.
The Company recorded a net $12.9 million charge in 1999 to restructure its operations as a result of the MVE
acquisition, as discussed above.
In allocating the purchase price to the net assets acquired in the MVE acquisition, the Company assigned $22.0 million
to IPR&D projects in 1999, primarily MVE’s Drywash® technology, that had not reached technological feasibility and had no alternative future use. This amount was recognized as a non-cash expense with no tax benefit at the date of
acquisition.
The Company recorded a $2.5 million gain on the sale of its standard cryogenic systems product line on proceeds of $3.3
million in cash in the fourth quarter of 1999. This product line was sold so that the Company’s Process Systems Division could focus on its core coldbox business.
Net interest expense for 1999 was $15.9 million compared with $901,000 for 1998, reflecting interest on funds borrowed
to finance the MVE acquisition.
The effective income tax rate for 1999 was 12.8 percent compared with 34.8 percent for 1998. The change in the effective
income tax rate was due to the loss incurred in 1999 offset by non-deductible IPR&D expense and goodwill amortization.
In the second quarter of 1999, the Company borrowed funds under its Credit Facility and retired prior to maturity
certain debt assumed as part of the MVE acquisition with a fair value of $119.2 million. The debt extinguishment resulted in an extraordinary loss of $12.5 million, $7.8 million net of tax.
As a result of the foregoing, the Company incurred a net loss of $36.3 million in 1999, compared with net income of
$28.2 million in 1998. Excluding non-recurring items resulting from the MVE acquisition and related reorganization, the Company had net income of $4.2 million in 1999.
Liquidity and Capital Resources
Cash provided by operations in 2000 was $14.6 million compared with cash used in operations of $5.5 million in 1999 and
cash provided by operations of $30.9 million in 1998. In 2000, the Company increased inventory in several of its short lead time items to service increasing sales volumes and to reduce orders lost due to backorders. In addition, a large heat
exchanger order is completing ahead of schedule and ahead of scheduled billings, thereby increasing unbilled revenue for 2000. The significant decrease in operating cash flow in 1999 was due primarily to the large decrease in operating income from
the Process Systems segment and decreases in customer advances. As orders recover in the Process Systems segment and grow in the other segments, there could be large fluctuations in cash flows depending on negotiated payment terms with
customers.
Capital expenditures in 2000, 1999 and 1998 were $5.6 million, $7.0 million and $10.0 million, respectively. The
Company’s 2000 and 1999 capital expenditures relate primarily to the Distribution and Storage segment, where new equipment was necessary as a result of the Company’s reorganization plan initiated in 1999. In 1998, the Company paid $3.5
million to acquire land and buildings used by its Cryenco facility. The Company expects future capital expenditures to be similar in magnitude to the prior years.
On December 15, 1999, the Company acquired certain assets relating to a cryogenic repair business operated by Air
Liquide America Corporation (“Air Liquide”) for $1.0 million in cash and $2.6 million in rebate credits to be given to Air Liquide on future sales.
On April 12, 1999, the Company acquired the common stock of MVE for approximately $9.2 million in cash ($2.2 million net
of cash acquired) and redeemed the preferred stock of MVE for approximately $74.6 million. Finally, the Company paid approximately $156.1 million to retire MVE’s existing debt obligations and complete the tender offer and consent solicitation
for the 12.5 percent senior secured notes due 2002 issued by MVE, Inc., a subsidiary of MVE.
On March 15, 1999, the Company acquired Northcoast for approximately $2.3 million in cash ($2.2 million net of cash
acquired) and $720,000 in Chart Common Stock.
On March 27, 1998, the Company, through its wholly-owned subsidiary Chart Marston, acquired the net assets of the
industrial heat exchanger division of IMI Marston Limited, a wholly-owned subsidiary of IMI plc, for £21 million ($35.3 million). The Company borrowed £11 million ($18.5 million) to fund the acquisition.
In order to finance the acquisition of MVE, in March 1999 the Company negotiated a consolidated credit and revolving
loan facility (the “Credit Facility”), which originally provided for term loans of up to $250 million and a revolving credit line of $50 million, which may also be used for the issuance of letters of credit. The Company paid fees of
approximately $6.5 million in 1999 to establish the Credit Facility. The Credit Facility provides the agent bank with a secured interest in substantially all of the property, plant and equipment of the Company. At December 31, 2000, the Company had
borrowings of $231.6 million outstanding under the term loan portion of the Credit Facility and $28.0 million outstanding on the revolving credit portion of the Credit Facility.
The Credit Facility contains certain covenants and conditions which impose limitations on the Company and its operating
units, including meeting certain financial tests and the quarterly maintenance of certain financial ratios on a consolidated basis such as: minimum net worth, maximum leverage, minimum pre-tax interest coverage ratio and minimum fixed charge
coverage ratio. The Credit Facility was amended in August 1999 and October 2000, at a cost of $1.2 million and $736,000, respectively, to modify certain covenants through 2001 based upon the Company’s performance levels and resulted in
increased interest rates and the suspension of quarterly dividend payments. The October 2000 amendment also provided the Company with the option to enter into an incremental revolving credit facility with a revolving credit line of up to $10.0
million through 2001. As of December 31, 2000, the Company was in compliance with all covenants and conditions of the amended Credit Facility.
In November 2000, the Company entered into the Series 1 Incremental Revolving Credit Agreement providing a revolving
credit line of $7.5 million in addition to the credit line available under the Credit Facility. At December 31, 2000, there were no borrowings outstanding under this agreement.
In November 1996, the Board of Directors authorized a program to repurchase 2,250,000 shares of the Company’s
Common Stock. The amount and timing of share purchases will depend on market conditions, share price and other factors. The Company reserves the right to discontinue the repurchase program at any time. In 2000, 1999 and 1998, 37,200, 104,000 and
909,433 shares, respectively, were acquired under the program, leaving 307,467 shares available for repurchase under the program.
The Company forecasts that cash generated by operations, borrowings under its Credit Facility, which extends through
March 31, 2006, and access to capital markets will be sufficient to satisfy its working capital, capital expenditure and debt repayment requirements and to finance continued growth. The Credit Facility amendment relief on financial covenants and the
additional liquidity facility agreed to during the fourth quarter of 2000 expire at the end of 2001.
Dividends totaling $2.4 million, or $.10 per share, and $4.8 million, or $.20 per share, were paid during 1999 and 1998,
respectively. Any future declarations of dividends are at the sole discretion of the Company’s Board of Directors, subject to the conditions of the Credit Facility. No assurance can be given as to whether dividends may be declared in the
future, and if declared, the amount and timing of such dividends.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
In the normal course of business, the Company’s operations are exposed to continuing fluctuations in foreign
currency values and interest rates that can affect the cost of operating and financing. Accordingly, the Company addresses a portion of these risks through a program of risk management.
The Company’s primary interest rate risk exposure results from the Credit Facility’s various floating rate
pricing mechanisms. This interest rate exposure is managed by the use of interest rate collars on approximately 50 percent of the term debt and to a lesser extent by varying LIBOR maturities in the entire Credit Facility. The fair value of the
contracts related to the collars at December 31, 2000 is not significant. If interest rates were to increase 200 basis points (2 percent) from December 31, 2000 rates, and assuming no changes in debt from the December 31, 2000 levels, the additional
annual expense would be approximately $3.6 million on a pre-tax basis.
The Company has assets, liabilities and cash flows in foreign currencies creating foreign exchange risk, the primary
foreign currencies being the British Pound Sterling, the Czech Koruna and the Euro. Monthly measurement, evaluation and forward exchange contracts are employed as methods to reduce this risk. The Company enters into foreign exchange forward
contracts to hedge anticipated and firmly committed foreign currency transactions. The Company does not hedge foreign currency translation or foreign currency net assets or liabilities. The terms of the derivatives are one year or less. If the value
of the U.S. dollar were to strengthen 10 percent relative to the currencies in which the Company has foreign exchange forward contracts at December 31, 2000, the result would be a loss in fair value of approximately $239,000.
Forward-Looking Statements
The Company is making this statement in order to satisfy the “safe harbor” provisions contained in the Private
Securities Litigation Reform Act of 1995. This Annual Report on Form 10-K includes forward-looking statements relating to the business of the Company. In some cases, forward-looking statements may be identified by terminology such as
“may,” “will,” “should,” “expects,” “anticipates,” “projects,” “forecasts,” “continue” or the negative of such terms or comparable terminology. Forward-looking
statements contained herein 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 control of the Company, that could cause actual results of the Company to differ materially from those matters expressed or
implied by forward-looking statements. The Company believes that the following factors, among others, could affect its future performance and cause actual results of the Company to differ materially from those expressed or implied by forward-looking
statements made by or on behalf of the Company: (a) general economic, business and market conditions and foreign currency fluctuations; (b) competition; (c) decreases in spending by its industrial customers; (d) the loss of a major customer or
customers; (e) the ability of the Company to identify, consummate and integrate the operations of suitable acquisition targets; (f) the effectiveness of operational changes expected to increase efficiency and productivity; (g) the ability of the
Company to manage its fixed-price contract exposure; (h) the ability of the Company to pass on increases in raw material prices; (i) the Company’s relations with its employees; (j) the extent of product liability claims asserted against the
Company; (k) variability in the Company’s operating results; (l) the ability of the Company to attract and retain key personnel; (m) the costs of compliance with environmental matters; (n) the ability of the Company to protect its proprietary
information; (o) the ability of the Company to obtain outside financing for business development initiatives; and (p) the ability of the Company to satisfy covenants under its Credit Facility.
Item 8. Financial Statements and Supplementary Data.
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
of Chart Industries, Inc.
We have audited the accompanying consolidated balance sheets of Chart Industries, Inc. and subsidiaries as of December
31, 2000 and 1999, and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated
financial position of Chart Industries, Inc. and subsidiaries at December 31, 2000 and 1999, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with
accounting principles generally accepted in the United States.
Cleveland, Ohio
February 5, 2001
CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| |
|
December 31,
|
| |
|
2000
|
|
1999
|
| |
|
(Dollars in thousands,
except per share amounts) |
| ASSETS |
|
|
|
|
|
|
| Current Assets |
|
|
|
|
|
|
| Cash and cash equivalents |
|
$ 4,921 |
|
|
$ 2,314 |
|
| Accounts receivable, net of allowances of $2,087 and $1,857 |
|
53,917 |
|
|
60,236 |
|
| Inventories, net |
|
66,987 |
|
|
50,578 |
|
| Unbilled contract revenue |
|
13,415 |
|
|
8,582 |
|
| Deferred income taxes |
|
10,781 |
|
|
16,411 |
|
| Prepaid expenses and other current assets |
|
6,810 |
|
|
5,229 |
|
| |
|
|
|
|
|
|
| Total Current Assets |
|
156,831 |
|
|
143,350 |
|
| Property, plant and equipment, net |
|
63,382 |
|
|
74,757 |
|
| Goodwill, net of amortization of $9,586 and $4,722 |
|
173,128 |
|
|
177,228 |
|
| Other assets, net |
|
28,148 |
|
|
29,235 |
|
| |
|
|
|
|
|
|
| TOTAL ASSETS |
|
$421,489 |
|
|
$424,570 |
|
| |
|
|
|
|
|
|
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
| Current Liabilities |
|
|
|
|
|
|
| Accounts payable |
|
$ 36,265 |
|
|
$ 25,102 |
|
| Customer advances |
|
1,790 |
|
|
2,765 |
|
| Billings in excess of contract revenue |
|
2,630 |
|
|
296 |
|
| Accrued salaries, wages and benefits |
|
16,453 |
|
|
13,106 |
|
| Warranty reserves |
|
6,150 |
|
|
8,255 |
|
| Other current liabilities |
|
22,167 |
|
|
24,403 |
|
| Current portion of long-term debt |
|
25,484 |
|
|
19,336 |
|
| |
|
|
|
|
|
|
| Total Current Liabilities |
|
110,939 |
|
|
93,263 |
|
| Long-term debt |
|
244,386 |
|
|
259,336 |
|
| Other long-term liabilities |
|
11,320 |
|
|
16,459 |
|
| Shareholders’ Equity |
|
|
|
|
|
|
| Preferred stock, 1,000,000 shares authorized, none issued or outstanding |
|
|
|
|
|
|
Common stock, par value $.01 per share—30,000,000 shares authorized, 24,559,512
and 24,423,927 shares issued at December 31, 2000 and 1999, respectively |
|
245 |
|
|
244 |
|
| Additional paid-in capital |
|
42,140 |
|
|
43,219 |
|
| Retained earnings |
|
19,857 |
|
|
17,702 |
|
| Accumulated other comprehensive loss |
|
(5,724 |
) |
|
(661 |
) |
Treasury stock, at cost, 206,959 and 606,725 shares at December 31, 2000 and 1999,
respectively |
|
(1,674 |
) |
|
(4,992 |
) |
| |
|
|
|
|
|
|
| |
|
54,844 |
|
|
55,512 |
|
| |
|
|
|
|
|
|
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
$421,489 |
|
|
$424,570 |
|
| |
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
| |
|
Years ended December 31,
|
| |
|
2000
|
|
1999
|
|
1998
|
| |
|
(Dollars and shares in thousands,
except per share amounts) |
| Sales |
|
$325,700 |
|
|
$292,937 |
|
|
$229,423 |
|
| Cost of products sold: |
|
|
|
|
|
|
|
|
|
| Cost of sales |
|
229,671 |
|
|
213,458 |
|
|
151,766 |
|
| Acquired profit in inventory |
|
|
|
|
1,162 |
|
|
|
|
| Restructuring charge |
|
|
|
|
936 |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| |
|
229,671 |
|
|
215,556 |
|
|
151,766 |
|
| |
|
|
|
|
|
|
|
|
|
| Gross profit |
|
96,029 |
|
|
77,381 |
|
|
77,657 |
|
|
| |
| Selling, general and administrative expense |
|
60,803 |
|
|
51,455 |
|
|
32,189 |
|
| Goodwill amortization expense |
|
4,921 |
|
|
3,670 |
|
|
1,313 |
|
| Restructuring (income) expense |
|
(614 |
) |
|
11,982 |
|
|
|
|
| Acquired in-process research and development |
|
|
|
|
22,010 |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| |
|
65,110 |
|
|
89,117 |
|
|
33,502 |
|
| |
|
|
|
|
|
|
|
|
|
| Operating income (loss) |
|
30,919 |
|
|
(11,736 |
) |
|
44,155 |
|
|
| |
| Other income (expense): |
|
|
|
|
|
|
|
|
|
| Gain on sale of assets |
|
1,041 |
|
|
2,505 |
|
|
|
|
| Interest expense—net |
|
(26,676 |
) |
|
(15,854 |
) |
|
(901 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
|
(25,635 |
) |
|
(13,349 |
) |
|
(901 |
) |
| |
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes, minority interest and extraordinary
item |
|
5,284 |
|
|
(25,085 |
) |
|
43,254 |
|
| Income tax expense (benefit): |
|
|
|
|
|
|
|
|
|
| Current |
|
985 |
|
|
4,325 |
|
|
14,096 |
|
| Deferred |
|
2,027 |
|
|
(1,110 |
) |
|
943 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
3,012 |
|
|
3,215 |
|
|
15,039 |
|
| |
|
|
|
|
|
|
|
|
|
| Income (loss) before minority interest and extraordinary item |
|
2,272 |
|
|
(28,300 |
) |
|
28,215 |
|
| Minority interest, net of taxes |
|
(117 |
) |
|
(171 |
) |
|
|
|
| |
|
|
|
|
|
|
|
|
|
| Income (loss) before extraordinary item |
|
2,155 |
|
|
(28,471 |
) |
|
28,215 |
|
| Extraordinary loss on early extinguishment of debt, net of taxes of $4,650 |
|
|
|
|
(7,809 |
) |
|
|
|
| |
|
|
|
|
|
|
|
|
|
| Net income (loss) |
|
$ 2,155 |
|
|
$(36,280 |
) |
|
$ 28,215 |
|
| |
|
|
|
|
|
|
|
|
|
| Net income (loss) per common share: |
|
|
|
|
|
|
|
|
|
| Income (loss) before extraordinary item |
|
$ .09 |
|
|
$ (1.20 |
) |
|
$ 1.17 |
|
| Extraordinary item |
|
|
|
|
(.33 |
) |
|
|
|
| |
|
|
|
|
|
|
|
|
|
| Net income (loss) per common share |
|
$ .09 |
|
|
$ (1.53 |
) |
|
$ 1.17 |
|
| |
|
|
|
|
|
|
|
|
|
| Net income (loss) per common share—assuming dilution: |
|
|
|
|
|
|
|
|
|
| Income (loss) before extraordinary item |
|
$ .09 |
|
|
$ (1.20 |
) |
|
$ 1.16 |
|
| Extraordinary item |
|
|
|
|
(.33 |
) |
|
|
|
| |
|
|
|
|
|
|
|
|
|
| Net income (loss) per common share—assuming dilution |
|
$ .09 |
|
|
$ (1.53 |
) |
|
$ 1.16 |
|
| |
|
|
|
|
|
|
|
|
|
| Shares used in per share calculations |
|
24,110 |
|
|
23,660 |
|
|
24,084 |
|
| |
|
|
|
|
|
|
|
|
|
| Shares used in per share calculations—assuming dilution |
|
24,326 |
|
|
23,660 |
|
|
24,426 |
|
| |
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
| |
|
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Treasury
Stock
|
|
Total
Shareholders’
Equity
|
| |
|
Shares
Outstanding
|
|
Amount
|
| |
|
(Dollars and shares in thousands, except per share amounts) |
| Balance at January 1, 1998 |
|
16,188 |
|
|
$162 |
|
$43,256 |
|
|
$ 33,039 |
|
|
|
|
|
|
|
|
$ 76,457 |
|
| |
| Net income |
|
|
|
|
|
|
|
|
|
28,215 |
|
|
|
|
|
|
|
|
28,215 |
|
| Other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
$ (358 |
) |
|
|
|
|
(358 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,857 |
|
| Dividends ($.20 per share) |
|
|
|
|
|
|
|
|
|
(4,821 |
) |
|
|
|
|
|
|
|
(4,821 |
) |
| Treasury stock acquisitions |
|
(844 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$(8,278 |
) |
|
(8,278 |
) |
| Stock options, net of tax benefit |
|
65 |
|
|
|
|
77 |
|
|
|
|
|
|
|
|
706 |
|
|
783 |
|
| Three for two stock split |
|
8,071 |
|
|
81 |
|
|
|
|
(81 |
) |
|
|
|
|
|
|
|
|
|
Contribution of stock to employee
benefit plans |
|
86 |
|
|
|
|
(77 |
) |
|
|
|
|
|
|
|
1,122 |
|
|
1,045 |
|
| Other |
|
|
|
|
|
|
111 |
|
|
|
|
|
|
|
|
|
|
|
111 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at December 31, 1998 |
|
23,566 |
|
|
243 |
|
43,367 |
|
|
56,352 |
|
|
(358 |
) |
|
(6,450 |
) |
|
93,154 |
|
| |
| Net loss |
|
|
|
|
|
|
|
|
|
(36,280 |
) |
|
|
|
|
|
|
|
(36,280 |
) |
| Other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
(303 |
) |
|
|
|
|
(303 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36,583 |
) |
| Dividends ($.10 per share) |
|
|
|
|
|
|
|
|
|
(2,370 |
) |
|
|
|
|
|
|
|
(2,370 |
) |
| Treasury stock acquisitions |
|
(104 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
(728 |
) |
|
(728 |
) |
| Stock options, net of tax benefit |
|
4 |
|
|
|
|
(23 |
) |
|
|
|
|
|
|
|
31 |
|
|
8 |
|
Contribution of stock to employee
benefit plans |
|
249 |
|
|
|
|
(847 |
) |
|
|
|
|
|
|
|
2,155 |
|
|
1,308 |
|
| Other |
|
102 |
|
|
1 |
|
722 |
|
|
|
|
|
|
|
|
|
|
|
723 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at December 31, 1999 |
|
23,817 |
|
|
244 |
|
43,219 |
|
|
17,702 |
|
|
(661 |
) |
|
(4,992 |
) |
|
55,512 |
|
| |
| Net income |
|
|
|
|
|
|
|
|
|
2,155 |
|
|
|
|
|
|
|
|
2,155 |
|
| Other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
(5,063 |
) |
|
|
|
|
(5,063 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,908 |
) |
| Treasury stock acquisitions |
|
(37 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
(156 |
) |
|
(156 |
) |
| Stock options, net of tax benefit |
|
50 |
|
|
|
|
(259 |
) |
|
|
|
|
|
|
|
398 |
|
|
139 |
|
Contribution of stock to employee
benefit plans |
|
523 |
|
|
1 |
|
(794 |
) |
|
|
|
|
|
|
|
3,076 |
|
|
2,283 |
|
| Other |
|
|
|
|
|
|
(26 |
) |
|
|
|
|
|
|
|
|
|
|
(26 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at December 31, 2000 |
|
24,353 |
|
|
$245 |
|
$42,140 |
|
|
$ 19,857 |
|
|
$(5,724 |
) |
|
$(1,674 |
) |
|
$ 54,844 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| |
|
Years ended December 31,
|
| |
|
2000
|
|
1999
|
|
1998
|
| |
|
(Dollars in thousands) |
| OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
| Net income (loss) |
|
$ 2,155 |
|
|
$ (36,280 |
) |
|
$ 28,215 |
|
Adjustments to reconcile net income (loss) to net cash provided by (used
in) operating activities: |
|
|
|
|
|
|
|
|
|
| Loss on early extinguishment of debt |
|
|
|
|
12,459 |
|
|
|
|
| Acquired in-process research and development |
|
|
|
|
22,010 |
|
|
|
|
| Acquired inventory profit |
|
|
|
|
1,162 |
|
|
|
|
| Restructuring (income) expense |
|
(704 |
) |
|
9,790 |
|
|
|
|
| Gain on sale of assets |
|
(1,041 |
) |
|
(2,505 |
) |
|
|
|
| Depreciation and amortization |
|
17,864 |
|
|
16,909 |
|
|
7,026 |
|
| Income from joint venture |
|
(35 |
) |
|
|
|
|
|
|
| Foreign currency transaction gain |
|
(233 |
) |
|
(232 |
) |
|
|
|
| Minority interest |
|
190 |
|
|
280 |
|
|
|
|
| Deferred income taxes |
|
2,027 |
|
|
(5,449 |
) |
|
943 |
|
| Contribution of stock to employee benefit plans |
|
2,283 |
|
|
1,308 |
|
|
1,045 |
|
Increase (decrease) in cash resulting from changes in operating assets
and liabilities: |
|
|
|
|
|
|
|
|
|
| Accounts
receivable |
|
5,577 |
|
|
(462 |
) |
|
3,807 |
|
| Inventory and other
current assets |
|
(26,322 |
) |
|
1,618 |
|
|
(2,895 |
) |
| Accounts payable and other
current liabilities |
|
11,487 |
|
|
(14,110 |
) |
|
(1,666 |
) |
| Billings in excess of
contract revenue and customer advances |
|
1,398 |
|
|
(12,012 |
) |
|
(5,541 |
) |
| |
|
|
|
|
|
|
|
|
|
| Net Cash Provided By (Used In) Operating Activities |
|
14,646 |
|
|
(5,514 |
) |
|
30,934 |
|
| INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
| Capital expenditures |
|
(5,581 |
) |
|
(7,047 |
) |
|
(10,006 |
) |
| Acquisition of MVE, net of cash acquired |
|
|
|
|
(2,225 |
) |
|
|
|
| Redemption of MVE preferred stock |
|
|
|
|
(74,642 |
) |
|
|
|
| Acquisition of Northcoast Cryogenics, net of cash acquired |
|
|
|
|
(2,185 |
) |
|
|
|
| Acquisition of Chart Marston |
|
|
|
|
|
|
|
(35,324 |
) |
| Proceeds from sale of assets |
|
5,000 |
|
|
3,300 |
|
|
|
|
| Other investing activities |
|
154 |
|
|
605 |
|
|
60 |
|
| |
|
|
|
|
|
|
|
|
|
| Net Cash Used In Investing Activities |
|
(427 |
) |
|
(82,194 |
) |
|
(45,270 |
) |
| FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
| Borrowings on revolving credit facilities |
|
112,254 |
|
|
96,305 |
|
|
43,594 |
|
| Repayments on revolving credit facilities |
|
(102,693 |
) |
|
(87,082 |
) |
|
(36,357 |
) |
| Borrowings for acquisition of MVE |
|
|
|
|
250,000 |
|
|
|
|
| Principal payments on long-term debt |
|
(18,288 |
) |
|
(148,957 |
) |
|
(405 |
) |
| Premiums on repurchase of long-term debt |
|
|
|
|
(12,459 |
) |
|
|
|
| Deferred financing costs |
|
(1,015 |
) |
|
(7,698 |
) |
|
|
|
| Purchases of treasury stock |
|
(156 |
) |
|
(728 |
) |
|
(8,278 |
) |
| Stock options exercised |
|
139 |
|
|
8 |
|
|
783 |
|
| Dividends paid to shareholders |
|
|
|
|
(2,370 |
) |
|
(4,821 |
) |
| |
|
|
|
|
|
|
|
|
|
| Net Cash Provided By (Used In) Financing Activities |
|
(9,759 |
) |
|
87,019 |
|
|
(5,484 |
) |
| |
|
|
|
|
|
|
|
|
|
| Net increase (decrease) in cash and cash equivalents |
|
4,460 |
|
|
(689 |
) |
|
(19,820 |
) |
| Effect of exchange rate changes on cash |
|
(1,853 |
) |
|
834 |
|
|
(106 |
) |
| Cash and cash equivalents at beginning of year |
|
2,314 |
|
|
2,169 |
|
|
22,095 |
|
| |
|
|
|
|
|
|
|
|
|
| CASH AND CASH EQUIVALENTS AT END OF YEAR |
|
$ 4,921 |
|
|
$ 2,314 |
|
|
$ 2,169 |
|
| |
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
CHART INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
NOTE A—Nature of Operations
The Company is involved in the engineering and manufacturing of equipment and systems for the cryogenic and process
industries and low temperature liquid applications. The Company’s operations are primarily located in the United States. The majority of the Company’s sales and trade accounts receivable are related to the industrial gas, hydrocarbon and
chemical processing industries. To reduce credit risk for both foreign and domestic sales the Company requires customer advances, letters of credit and other such guarantees of payment. For certain foreign customers the Company also purchases credit
and political risk insurance.
NOTE B—Significant Accounting Policies
Principles of Consolidation: The consolidated financial statements include the accounts of the Company and its
subsidiaries. Intercompany accounts and transactions are eliminated in consolidation. Investments in affiliates where the Company’s ownership is between 20 percent and 50 percent, or where the Company does not have control but has the ability
to exercise significant influence over operations or financial policy, are accounted for under the equity method. Certain items in prior year financial statements have been reclassified to conform to current year presentation.
Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents: The Company considers all investments with an initial maturity of three months or less
when purchased to be cash equivalents. The December 31, 2000 and 1999 balances include money market investments and cash.
Inventories: Inventories are stated at the lower of cost or market with cost being determined by both the
last-in, first-out (“LIFO”) method (approximately 13 percent and 16 percent of total inventory at December 31, 2000 and 1999, respectively), and the first-in, first-out (“FIFO”) method. The components of inventory are as
follows:
| |
|
December 31,
|
| |
|
2000
|
|
1999
|
| Raw materials and supplies |
|
$35,931 |
|
|
$27,256 |
|
| Work in process |
|
17,998 |
|
|
14,022 |
|
| Finished goods |
|
13,362 |
|
|
9,595 |
|
| LIFO reserve |
|
(304 |
) |
|
(295 |
) |
| |
|
|
|
|
|
|
| |
|
$66,987 |
|
|
$50,578 |
|
| |
|
|
|
|
|
|
NOTE B—Significant Accounting Policies (Continued)
Property, Plant and Equipment: Property, plant and equipment are stated on the basis of cost. Expenditures for
maintenance, repairs and renewals are charged to expense as incurred, whereas major betterments are capitalized. The cost of applicable assets is depreciated over their estimated useful lives. Depreciation is computed using the straight-line method
for financial reporting purposes and accelerated methods for income tax purposes. Depreciation expense was $9,796, $10,781 and $5,629 in 2000, 1999 and 1998, respectively. The following table shows original costs and the estimated useful lives by
classification of assets:
| |
|
|
|
December 31,
|
Classification
|
|
Expected Useful Life
|
|
2000
|
|
1999
|
| Land and buildings |
|
20-35 years (buildings |
) |
|
$ 36,017 |
|
$ 40,524 |
| Machinery and equipment |
|
3-12 years |
|
|
48,768 |
|
52,528 |
| Furniture and fixtures |
|
3-5 years |
|
|
7,777 |
|
6,432 |
| Construction in process |
|
|
|
|
1,279 |
|
540 |
| |
|
|
|
|
|
|
|
| |
|
|
|
|
93,841 |
|
100,024 |
| Less accumulated depreciation |
|
|
|
|
30,459 |
|
25,267 |
| |
|
|
|
|
|
|
|
| Total property, plant and equipment, net |
|
|
|
|
$ 63,382 |
|
$ 74,757 |
| |
|
|
|
|
|
|
|
Property, plant and equipment and intangible assets are periodically evaluated for impairment. The Company assesses
impairment for each of its operating units by measuring future cash flows against the carrying value of these long-lived assets. If the future undiscounted cash flows are less than the carrying value of the assets, an impairment reserve is recorded
in the period identified. Measurement of impairment is based upon discounted cash flows, asset appraisals or market values of similar assets.
Goodwill and Other Intangible Assets: All intangible assets are carried at cost less applicable amortization.
Goodwill represents the excess of purchase price over the fair value of net assets acquired in purchase business combinations. Goodwill is amortized using the straight-line method over the periods of expected benefit, but not in excess of 40 years.
Total amortization expense of all intangibles was $8,068, $6,128 and $1,397 in 2000, 1999 and 1998, respectively. Accumulated amortization for all intangibles was $15,787 and $7,853 at December 31, 2000 and 1999, respectively.
Financial Instruments: The fair values of cash equivalents, accounts receivable and short-term bank debt
approximate their carrying amount because of the short maturity of these instruments. The fair value of long-term debt is estimated based on the present value of the underlying cash flows discounted at the Company’s estimated borrowing rate. At
December 31, 2000 and 1999, the fair value of the Company’s long-term debt approximated its carrying value.
Derivative Instruments: The Company has entered into interest rate derivative contracts with two of its banks to
hedge interest rate exposure. These contracts had an original notional value of $125,000 and amortize following the Company’s amortization schedule for its term borrowings under the Credit Facility. These agreements are generally described as
collars and result in putting a cap on the base LIBOR interest rate at approximately 7.0 percent and a floor at approximately 5.0 percent for approximately half the Company’s floating rate term debt. The fair value of these contracts at
December 31, 2000 is not significant.
The Company enters into foreign exchange forward contracts and option contracts to hedge anticipated and firmly
committed foreign currency transactions. The Company does not hedge foreign currency translation or foreign currency net assets or liabilities. The terms of the derivatives are one year or less.
NOTE B—Significant Accounting Policies (Continued)
The Company held foreign exchange forward contracts for notional amounts as follows:
| |
|
December 31,
|
| |
|
2000
|
|
1999
|
| |
|
Buy
|
|
Sell
|
|
Sell
|
| French Francs |
|
$ 221 |
|
|
|
$ 408 |
| German Deutschmarks |
|
|
|
$ 2,409 |
|
|
| United States Dollars |
|
|
|
320 |
|
667 |
| Euro’s |
|
120 |
|
272 |
|
90 |
| |
|
|
|
|
|
|
| |
|
$ 341 |
|
$ 3,001 |
|
$ 1,165 |
| |
|
|
|
|
|
|
| Fair Value |
|
$ 339 |
|
$ 2,956 |
|
$ 1,170 |
| |
|
|
|
|
|
|
In June 1998, the Financial Accounting Standards Board (“FASB”) issued Statement No. 133, “Accounting for
Derivative Financial Instruments and Hedging Activities,” which will be adopted by the Company in the first quarter of 2001. The adoption of Statement No. 133 is not expected to have a material impact on the Company’s operating results,
cash flows or financial position.
Revenue Recognition: For the majority of the Company’s products, revenue is recognized when products are
shipped and title is transferred. For certain product lines, the Company uses the percentage of completion method of accounting. Earned revenue is based on the percentage that incurred costs to date bear to total estimated costs at completion after
giving effect to the most current estimates. Earned revenue on contracts in process totaled $33,815 through December 31, 2000. Timing of amounts billed on contracts varies from contract to contract causing high variation in working capital needs.
Amounts billed on percentage of completion contracts in process total $25,045 at December 31, 2000. The cumulative impact of revisions in total cost estimates during the progress of work is reflected in the period in which these changes become
known. Earned revenue reflects the original contract price adjusted for agreed upon claims and change orders, if any. Losses expected to be incurred on contracts in process, after consideration of estimated minimum recoveries from claims and change
orders, are charged to operations as soon as such losses are known.
Research and Development Costs: The Company incurred research and development costs of $3,671 and $3,469 in 2000
and 1999 respectively. These costs are expensed as incurred.
Deferred Income Taxes: The Company and its subsidiaries file a consolidated federal income tax return. Deferred
income taxes are provided for temporary differences between financial reporting and the consolidated tax return in accordance with the liability method.
NOTE B—Significant Accounting Policies (Continued)
Earnings Per Share: The following table sets forth the computation of basic and diluted
earnings per share:
| |
|
Years Ended December 31,
|
| |
|
2000
|
|
1999
|
|
1998
|
| |
|
(Shares in thousands) |
| Income (loss) before extraordinary item |
|
$ 2,155 |
|
$(28,471 |
) |
|
$28,215 |
| Extraordinary loss |
|
|
|
(7,809 |
) |
|
|
| |
|
|
|
|
|
|
|
| Net income (loss) |
|
$ 2,155 |
|
$(36,280 |
) |
|
$28,215 |
| |
|
|
|
|
|
|
|
| Weighted-average common shares |
|
24,110 |
|
23,660 |
|
|
24,084 |
| Effect of dilutive securities: |
|
|
|
|
|
|
|
| Employee stock options and warrants |
|
216 |
|
|
|
|
342 |
| |
|
|
|
|
|
|
|
| Dilutive potential common shares |
|
24,326 |
|
23,660 |
|
|
24,426 |
| |
|
|
|
|
|
|
|
| Net income (loss) per common share: |
|
|
|
|
|
|
|
| Income (loss) before extraordinary item |
|
$ .09 |
|
$ (1.20 |
) |
|
$ 1.17 |
| Extraordinary item |
|
|
|
(.33 |
) |
|
|
| |
|
|
|
|
|
|
|
| Net income (loss) per common share |
|
$ .09 |
|
$ (1.53 |
) |
|
$ 1.17 |
| |
|
|
|
|
|
|
|
| Net income (loss) per common share—assuming dilution: |
|
|
|
|
|
|
|
| Income (loss) before extraordinary item |
|
$ .09 |
|
$ (1.20 |
) |
|
$ 1.16 |
| Extraordinary item |
|
|
|
(.33 |
) |
|
|
| |
|
|
|
|
|
|
|
| Net income (loss) per common share—assuming dilution |
|
$ .09 |
|
$ (1.53 |
) |
|
$ 1.16 |
| |
|
|
|
|
|
|
|
Foreign Currency Translation: The functional currency for the majority of the Company’s foreign operations
is the applicable local currency. The translation from the applicable foreign currencies to U.S. dollars is performed for balance sheet accounts using exchange rates in effect at the balance sheet date and for revenue and expense accounts using a
weighted average exchange rate during the period. The resulting translation adjustments are recorded as a component of shareholders’ equity. Gains or losses resulting from foreign currency transactions are charged to income as
incurred.
Employee Stock Options: The Company has elected to follow Accounting Principles Board Opinion No. 25,
“Accounting for Stock Issued to Employees” (“APB 25”) and related interpretations in accounting for its employee stock options. Under APB 25, because the exercise price of the Company’s employee stock options equals the
market price of the underlying stock on the date of grant, compensation expense is not recognized.
Stock Split: All shares of common stock (except for transactions affecting shares outstanding in the Consolidated
Statements of Shareholders’ Equity) and per share amounts have been adjusted to give retroactive effect to a three-for-two stock split effected in the form of a 50 percent stock dividend distributed on June 30, 1998 to shareholders of record on
June 16, 1998.
NOTE C—Balance Sheet Components
| |
|
December 31,
|
| |
|
2000
|
|
1999
|
| Other assets, net: |
|
|
|
|
| Deferred financing costs, net |
|
$ 7,991 |
|
$ 6,919 |
| Existing technologies, net |
|
5,389 |
|
6,736 |
| Patents, trademarks and intellectual property, net |
|
5,969 |
|
7,053 |
| Long term investments |
|
2,396 |
|
952 |
| Cash value life insurance |
|
1,068 |
|
|
| Prepaid pension cost |
|
1,587 |
|
970 |
| Deferred income taxes |
|
2,273 |
|
3,464 |
| Other |
|
1,475 |
|
3,141 |
| |
|
|
|
|
| |
|
$28,148 |
|
$29,235 |
| |
|
|
|
|
| Other current liabilities: |
|
|
|
|
| Accrued interest |
|
$ 5,577 |
|
$ 4,532 |
| Accrued taxes |
|
6,352 |
|
3,313 |
| Accrued rebates |
|
2,899 |
|
3,502 |
| Accrued restructuring |
|
|
|
1,338 |
| Accrued other |
|
7,339 |
|
11,718 |
| |
|
|
|
|
| |
|
$22,167 |
|
$24,403 |
| |
|
|
|
|
| Other long-term liabilities: |
|
|
|
|
| Deferred income taxes |
|
$ 1,140 |
|
$ 6,271 |
| Accrued environmental |
|
3,298 |
|
3,374 |
| Accrued pension cost |
|
5,658 |
|
5,635 |
| Minority interest |
|
1,094 |
|
940 |
| Other |
|
130 |
|
239 |
| |
|
|
|
|
| |
|
$11,320 |
|
$16,459 |
| |
|
|
|
|
NOTE D—Debt and Credit Arrangements
The following table shows the components of the Company’s borrowings at December 31, 2000 and 1999,
respectively.
| |
|
December 31,
|
| |
|
2000
|
|
1999
|
Term loan A, due March 2005, quarterly principal payments, average interest rate of
10.19% at December 31, 2000 |
|
$112,500 |
|
$122,500 |
Term loan B, due March 2006, quarterly principal payments, average interest rate of
10.31% at December 31, 2000 |
|
119,095 |
|
124,688 |
Revolving Credit Facility, due March 2005, average interest rate of 9.86% at December
31, 2000 |
|
28,000 |
|
18,000 |
Industrial Development Revenue Bonds, due June 2011, semi-annual principal
payments, interest at variable rates from 2% to 9% |
|
2,420 |
|
2,860 |
| Revolving foreign credit facility |
|
2,351 |
|
2,932 |
| Several notes payable with varying principal and interest payments |
|
5,504 |
|
7,692 |
| |
|
|
|
|
| Total debt |
|
269,870 |
|
278,672 |
| Less: current maturities |
|
25,484 |
|
19,336 |
| |
|
|
|
|
| Long-term debt |
|
$244,386 |
|
$259,336 |
| |
|
|
|
|
NOTE D—Debt and Credit Arrangements (Continued)
In order to finance the acquisition of MVE, in March 1999 the Company negotiated a consolidated credit and revolving
loan facility (the “Credit Facility”), which originally provided for term loans of up to $250,000 and a revolving credit line of $50,000, which may also be used for the issuance of letters of credit. The Company paid fees of $6,542 in 1999
to establish the Credit Facility. The Credit Facility provides the bank with a secured interest in substantially all of the property, plant and equipment of the Company. At December 31, 2000, the Company had borrowings of $231,595 outstanding under
the term loan portion of the Credit Facility and $28,000 outstanding under the revolving credit portion of the Credit Facility.
Under the terms of the Credit Facility, term loans and revolving credit bear interest, at the Company’s option, at
rates equal to the prime rate plus incremental margins (9.5 percent at December 31, 2000) or LIBOR plus incremental margins. The incremental margins vary based on the Company’s financial position and currently range from 1.0 percent to 3.75
percent. The Company is also required to pay a commitment fee of .5 percent per annum on the unused amount of the revolving portion of the Credit Facility. The Company has letters of credit outstanding and bank guarantees totaling $14,924 supported
by the Credit Facility.
The Credit Facility contains certain covenants and conditions which impose limitations on the Company and its operating
units, including meeting certain financial tests and the quarterly maintenance of certain financial ratios on a consolidated basis such as: minimum net worth, maximum leverage, minimum pre-tax interest coverage ratio and minimum fixed charge
coverage ratio. The Credit Facility was amended in August 1999 and October 2000, at a cost of $1,156 and $786, respectively, to modify certain covenants through 2001 based upon the Company’s performance levels and resulted in increased interest
rates and the suspension of quarterly dividend payments. The October 2000 amendment also provided the Company with the option to enter into an incremental revolving credit facility with a revolving credit line of up to $10,000 through 2001. As of
December 31, 2000, the Company was in compliance with all covenants and conditions of the Credit Facility.
In November 2000, the Company entered into the Series 1 Incremental Revolving Credit Agreement (the “Incremental
Credit Facility”) providing a revolving credit line of $7,500 in addition to the credit line available under the Credit Facility. Borrowings on the revolving credit line of the Incremental Credit Facility are secured by the same collateral as
the Credit Facility. Under the terms of the Incremental Credit Facility, revolving credit bears interest, at the Company’s option, at rates equal to the prime rate plus 2.5 percent or LIBOR plus 3.5 percent. The Company is also required to pay
a commitment fee of .75 percent per annum on the average daily unused amount. At December 31, 2000, there were no borrowings outstanding under the Incremental Credit Facility.
The scheduled annual maturities of debt at December 31, 2000, are as follows:
Year
|
|
Amount
|
| 2001 |
|
$ 25,484 |
| 2002 |
|
26,132 |
| 2003 |
|
31,079 |
| 2004 |
|
35,466 |
| 2005 |
|
123,217 |
| Thereafter |
|
28,492 |
| |
|
|
| |
|
$269,870 |
| |
|
|
Interest paid was $25,859, $11,332 and $1,561 in 2000, 1999 and 1998 respectively.
NOTE E—Acquisitions
The following acquisitions were accounted for using the purchase method of accounting and, accordingly, the related
purchase price was allocated to assets acquired and liabilities assumed based on their estimated fair values. Results of operations for these acquisitions have been included in the consolidated results of operations since the date of acquisition.
The purchase price allocations reflected in these financial statements are final.
NOTE E—Acquisitions (Continued)
On December 15, 1999, the Company acquired certain assets relating to a cryogenic repair business previously operated by
Air Liquide for $1,000 in cash and $2,600 in rebate credits to be given to Air Liquide on sales after December 15, 1999.
On April 12, 1999, the Company acquired the common stock of MVE Holdings, Inc. (“MVE”) for $9,196 in cash
($2,225 net of cash acquired) and redeemed the preferred stock of MVE for $74,642. Finally, the Company paid $156,137 to retire MVE’s existing debt obligations and complete the tender offer and consent solicitation for the 12.5 percent senior
secured notes due 2002 issued by MVE, Inc., a subsidiary of MVE. In allocating the purchase price, $172,353 was allocated to net liabilities assumed, including minority interests in certain consolidated subsidiaries of MVE, $22,010 was allocated to
in-process research and development (“IPR&D”) projects that had not reached technological feasibility and had no alternative future use, $7,690 was allocated to identifiable intangible assets which are being amortized over five years,
and $151,849 was allocated to goodwill, which is being amortized over 40 years. The amount allocated to IPR&D was determined by independent consultants who estimated the costs to develop the technology into commercially viable products,
estimated cash flows resulting from the expected revenues generated from such products and discounted the net cash flows back to their present value using a risk-adjusted discount rate. This amount was recognized as a non-cash expense without tax
benefit at the date of acquisition.
On March 15, 1999, the Company acquired a group of privately held companies, collectively known as Northcoast
Cryogenics, for approximately $2,337 in cash ($2,185 net of cash acquired) and $723 in Chart Common Stock. Additional contingent consideration will be issued in an amount equal to three percent of the net sales of Northcoast Cryogenics, as defined
in the purchase agreement, with respect to each fiscal year or partial fiscal year during the three-year period beginning March 15, 1999, subject to possible extension for one additional year. In allocating the purchase price, $374 was allocated to
net assets acquired and $2,686 was allocated to goodwill, which is being amortized over 15 years.
On March 27, 1998, the Company, through its wholly-owned subsidiary Chart Marston, acquired the net assets of the
industrial heat exchanger division of IMI Marston Limited, a wholly-owned subsidiary of IMI plc, for £21,178 ($35,324). The Company borrowed £11,000 ($18,502) to fund the acquisition. In allocating the purchase price, $15,922 was
allocated to goodwill, which is being amortized over 40 years.
The pro-forma unaudited results of operations for 1999 and 1998, assuming consummation of the acquisition of MVE and
extinguishment of the related debt as of January 1, 1998, are as follows:
| |
|
December 31,
|
| |
|
1999
|
|
1998
|
| Net sales |
|
$337,754 |
|
|
$435,560 |
| Income (loss) before extraordinary item |
|
(30,412 |
) |
|
20,675 |
| Income (loss) before extraordinary item per share |
|
(1.28 |
) |
|
.86 |
Income (loss) before extraordinary item per share—assuming
dilution |
|
(1.28 |
) |
|
.85 |
| Net income (loss) |
|
(38,221 |
) |
|
26,793 |
| Net income (loss) per share |
|
(1.61 |
) |
|
1.11 |
| Net income (loss) per share—assuming dilution |
|
(1.61 |
) |
|
1.10 |
NOTE F—Restructuring Plan
In 1999, the Company recorded net restructuring charges of $12,918. The charges consisted of $2,031 for the write-off of
fixed assets made redundant by the acquisition of MVE, $6,823 for the write-off of impaired goodwill related to operations within the Company’s Distribution and Storage segment, $1,216 for lease payments and other costs related to exiting
certain facilities, $936 for the write-off of inventory to be disposed, which was classified in cost of sales, and $1,912 for severance and other costs related to the elimination of 188 positions throughout the Company. The Company utilized $11,580
of the restructuring reserve in 1999.
NOTE F—Restructuring Plan (Continued)
During 2000, the Company reversed $704 of the restructuring reserve due to reoccupying a leased facility previously
vacated under the restructuring plan, and utilized $346 and $288 of the reserve for the payment of severance benefits to terminated employees and the payment of lease costs for an exited facility, respectively. As of December 31, 2000, the
restructuring reserve was fully utilized.
NOTE G—Income Taxes
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes. At December 31, 2000, the Company had deferred tax assets, associated with domestic net operating loss carryforwards, of $4,105 which expire in years 2003
through 2020 and foreign tax credits, research and developmental credits and other credits of $1,293 which expire in years 2004 through 2020. Additionally, the Company had deferred tax assets associated with foreign net operating loss carryforwards
of $1,007 at December 31, 2000 which have an indefinite carryforward period.
Significant components of the Company’s deferred tax assets and liabilities are as follows:
| |
|
December 31,
|
| |
|
2000
|
|
1999
|
| Deferred tax assets: |
|
|
|
|
|
|
| Accruals and reserves |
|
$15,759 |
|
|
$15,978 |
|
| Net operating loss and credit carryforwards |
|
6,405 |
|
|
4,876 |
|
| Other—net |
|
387 |
|
|
320 |
|
| |
|
|
|
|
|
|
| |
|
22,551 |
|
|
21,174 |
|
| Valuation allowance |
|
(1,692 |
) |
|
(1,299 |
) |
| |
|
|
|
|
|
|
| Total deferred tax assets |
|
20,859 |
|
|
19,875 |
|
| |
|
|
|
|
|
|
| Deferred tax liabilities: |
|
|
|
|
|
|
| Property, plant and equipment |
|
4,209 |
|
|
3,536 |
|
| Intangibles |
|
2,651 |
|
|
1,827 |
|
| Inventory |
|
1,298 |
|
|
540 |
|
| Pensions |
|
359 |
|
|
356 |
|
| Other—net |
|
428 |
|
|
12 |
|
| |
|
|
|
|
|
|
| Total deferred tax liabilities |
|
8,945 |
|
|
6,271 |
|
| |
|
|
|
|
|
|
| Net deferred taxes |
|
$11,914 |
|
|
$13,604 |
|
| |
|
|
|
|
|
|
The valuation allowance of $1,692 and $1,299 at December 31, 2000 and 1999, respectively, relates to foreign net
operating loss carryforwards and foreign tax credit carryforwards. The Company is uncertain whether these deferred tax assets will be realized and, accordingly, has established a valuation allowance against them.
Management has determined, based on the Company’s history of prior earnings and its expectations for the future,
that taxable income of the Company will more likely than not be sufficient to recognize fully the remaining net deferred tax assets.
The Company has not provided for U.S. federal income taxes on approximately $4,227 of foreign subsidiaries undistributed
earnings as of December 31, 2000 because such earnings are intended to be reinvested indefinitely. The amount of U.S. federal income tax that would result had such earnings been repatriated would approximate $1,479.
NOTE G—Income Taxes (Continued)
Income (loss) before income taxes, minority interest and extraordinary items consist of the following:
| |
|
Years Ended December 31,
|
| |
|
2000
|
|
1999
|
|
1998
|
| United States |
|
$1,517 |
|
|
$(24,550 |
) |
|
$41,050 |
|
| Foreign |
|
3,767 |
|
|
(535 |
) |
|
24,084 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
$5,284 |
|
|
$(25,085 |
) |
|
$43,254 |
|
| |
|
|
|
|
|
|
|
|
|
| |
| Significant components of the provision for income taxes are as follows: |
| |
| |
|
Years Ended December 31,
|
| |
|
2000
|
|
1999
|
|
1998
|
| Current: |
|
|
|
|
|
|
|
|
|
| Federal |
|
|
|
|
$ 3,699 |
|
|
$12,844 |
|
| State |
|
$ 40 |
|
|
624 |
|
|
793 |
|
| Foreign |
|
945 |
|
|
2 |
|
|
459 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
985 |
|
|
4,325 |
|
|
14,096 |
|
| |
|
|
|
|
|
|
|
|
|
| Deferred: |
|
|
|
|
|
|
|
|
|
| Federal |
|
1,612 |
|
|
(1,630 |
) |
|
821 |
|
| State |
|
(142 |
) |
|
(389 |
) |
|
77 |
|
| Foreign |
|
557 |
|
|
909 |
|
|
45 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
2,027 |
|
|
(1,110 |
) |
|
943 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
$3,012 |
|
|
$ 3,215 |
|
|
$15,039 |
|
| |
|
|
|
|
|
|
|
|
|
| |
| The reconciliation of income taxes computed at the U.S. federal statutory tax rates to income tax expense is
as follows: |
| |
| |
|
Years Ended December 31,
|
| |
|
2000
|
|
1999
|
|
1998
|
| Tax at U.S. statutory rates |
|
$1,849 |
|
|
$ (8,780 |
) |
|
$15,139 |
|
| State income taxes, net of federal tax benefit |
|
(67 |
) |
|
153 |
|
|
566 |
|
| Effective tax rate differential of earnings outside of U.S. |
|
(16 |
) |
|
183 |
|
|
(267 |
) |
| Federal tax benefit of Foreign Sales Corporation |
|
(388 |
) |
|
(291 |
) |
|
(617 |
) |
| Non-deductible goodwill |
|
1,451 |
|
|
11,157 |
|
|
158 |
|
| Valuation allowance |
|
393 |
|
|
1,299 |
|
|
|
|
| Other—net |
|
(210 |
) |
|
(506 |
) |
|
60 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
$3,012 |
|
|
$ 3,215 |
|
|
$15,039 |
|
| |
|
|
|
|
|
|
|
|
|
The Company received a net income tax refund of $1,693 in 2000, and paid approximately $2,246 and $12,404 of income
taxes in 1999 and 1998, respectively.
NOTE H—Employee Benefit Plans
The Company has five defined benefit pension plans which cover certain hourly and salary employees. The Company’s
funding policy is to contribute at least the minimum funding amounts required by law. Plan assets consist primarily of corporate stocks and bonds.
NOTE H—Employee Benefit Plans (Continued)
The actuarially computed combined pension cost included the following components:
| |
|
Years Ended December 31,
|
| |
|
2000
|
|
1999
|
|
1998
|
| Service cost |
|
$ 1,659 |
|
|
$ 2,194 |
|
|
$227 |
|
| Interest cost |
|
2,625 |
|
|
2,169 |
|
|
383 |
|
| Actual return on plan assets |
|
(2,482 |
) |
|
(5,085 |
) |
|
(183 |
) |
| Net amortization and deferrals |
|
(1,069 |
) |
|
2,701 |
|
|
(194 |
) |
| |
|
|
|
|
|
|
|
|
|
| Total pension cost |
|
$ 733 |
|
|
$ 1,979 |
|
|
$233 |
|
| |
|
|
|
|
|
|
|
|
|
During 1998 the Company curtailed its pension plan related to certain of the union employees at ALTEC and recognized
$161 of expense in addition to the normal pension cost disclosed above. As a result of this curtailment, the Company is making contributions to a multi-employer pension plan maintained by the union. The Company presently makes contributions to two
union supported multi-employer pension plans resulting in expense of $206, $269 and $297 in 2000, 1999 and 1998, respectively.
The following table sets forth changes in the benefit obligation, plan assets, funded status of the plans and amounts
recognized in the balance sheets as of December 31:
| |
|
2000
|
|
1999
|
| |
|
US Plans
|
|
UK Plan
|
|
US Plans
|
|
UK Plan
|
| Change in benefit obligation: |
|
|
|
|
|
|
|
|
|
|
|
|
| January 1 benefit obligation |
|
$18,753 |
|
|
$18,941 |
|
|
$ 6,143 |
|
|
|
|
| Exchange rate changes |
|
|
|
|
(1,458 |
) |
|
|
|
|
|
|
| Benefit obligations assumed |
|
|
|
|
|
|
|
17,707 |
|
|
$17,778 |
|
| Service cost |
|
883 |
|
|
776 |
|
|
976 |
|
|
1,218 |
|
| Interest cost |
|
1,571 |
|
|
1,054 |
|
|
1,192 |
|
|
977 |
|
| Benefits paid |
|
(526 |
) |
|
(478 |
) |
|
(437 |
) |
|
(486 |
) |
| Actuarial gains (losses) and plan changes |
|
1,871 |
|
|
(1,759 |
) |
|
(6,828 |
) |
|
(546 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| December 31 benefit obligation |
|
$22,552 |
|
|
$17,076 |
|
|
$ 18,753 |
|
|
$18,941 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Change in plan assets: |
|
|
|
|
|
|
|
|
|
|
|
|
| Fair value at January 1 |
|
$18,351 |
|
|
$22,982 |
|
|
$ 5,667 |
|
|
|
|
| Exchange rate changes |
|
|
|
|
(1,798 |
) |
|
|
|
|
|
|
| Plan assets acquired |
|
|
|
|
|
|
|
11,431 |
|
|
$18,019 |
|
| Actual return |
|
329 |
|
|
2,153 |
|
|
585 |
|
|
4,500 |
|
| Employer contributions |
|
1,167 |
|
|
80 |
|
|
1,105 |
|
|
794 |
|
| Employee contributions |
|
|
|
|
82 |
|
|
|
|
|
154 |
|
| Benefits paid |
|
(526 |
) |
|
(478 |
) |
|
(437 |
) |
|
(485 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Fair value at December 31 |
|
$19,321 |
|
|
$23,021 |
|
|
$ 18,351 |
|
|
$22,982 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Funded status of the plans |
|
$(3,231 |
) |
|
$ 5,944 |
|
|
$ (402 |
) |
|
$ 4,041 |
|
| Unrecognized actuarial loss |
|
(1,975 |
) |
|
(6,059 |
) |
|
(4,083 |
) |
|
(4,143 |
) |
| Unrecognized prior service cost |
|
1,250 |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net pension liability recognized |
|
$(3,956 |
) |
|
$ (115 |
) |
|
$ (4,485 |
) |
|
$ (102 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Prepaid benefit cost |
|
$ 1,587 |
|
|
|
|
|
$ 1,048 |
|
|
|
|
| Accrued benefit liability |
|
(5,543 |
) |
|
$ (115 |
) |
|
(5,533 |
) |
|
$ (102 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net pension liability recognized |
|
$(3,956 |
) |
|
$ (115 |
) |
|
$ (4,485 |
) |
|
$ (102 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
NOTE H—Employee Benefit Plans (Continued)
The assumptions used in determining pension cost and funded status information for the years ended December 31, 2000 and
1999 are as follows:
| |
|
2000
|
|
1999
|
| United States Plans |
|
|
|
|
| Discount rate |
|
8.00% |
|
8.04% |
| Weighted average rate of increase in compensation |
|
4.00% |
|
3.00% |
Expected long-term weighted average rate of return on plan
assets |
|
9.25% |
|
9.25% |
| United Kingdom Plan |
|
|
|
|
| Discount rate |
|
6.00% |
|
6.00% |
| Weighted average rate of increase in compensation |
|
4.00% |
|
4.00% |
Expected long-term weighted average rate of return on plan
assets |
|
7.50% |
|
7.50% |
While on an overall basis at December 31, 2000 and 1999, plan liabilities exceed plan assets for the Company’s four
United States plans, one of these plans has plan assets which exceed its benefit obligation. This excess totaled $141 and $837 on benefit obligations of $3,785 and $3,168 at December 31, 2000 and 1999, respectively.
The Company has defined contribution savings plans that cover most of its employees. Company contributions to the plans
are based on employee contributions and the level of Company match and discretionary contributions. Expenses under the plans totaled $2,184, $1,792 and $1,583 for the years 2000, 1999 and 1998, respectively.
NOTE I—Stock Option Plans
In July 1992, the Company adopted a Key Employee Stock Option Plan (the “Key Employee Plan”), which, as
amended, allows for the issuance of 1,383,750 shares of Common Stock. In May 1997, shareholders approved the Company’s 1997 Stock Option and Incentive Plan (the “1997 Plan”), which, as amended, allows for the issuance of 862,500
shares of Common Stock. Each of these plans provides for the granting of options to purchase shares of Common Stock to certain key employees of the Company. These nonqualified stock options vest in equal annual installments over a five year period
from the date of grant and are exercisable for up to 10 years at an option price determined by the Compensation Committee of the Board of Directors.
NOTE I—Stock Option Plans (Continued)
Certain information for 2000, 1999 and 1998 relative to the Key Employee Plan and the 1997 Plan is summarized
below:
| |
|
2000
|
|
1999
|
|
1998
|
| |
|
Number
of Shares
|
|
Weighted
Average
Exercise
Price
|
|
Number
of shares
|
|
Weighted
Average
Exercise
Price
|
|
Number
of Shares
|
|
Weighted
Average
Exercise
Price
|
| Outstanding at beginning of year |
|
1,272,975 |
|
|
$5.82 |
|
1,036,437 |
|
|
$5.71 |
|
936,557 |
|
|
$ 6.35 |
| Granted |
|
198,250 |
|
|
4.80 |
|
270,000 |
|
|
6.52 |
|
431,250 |
|
|
9.33 |
| Exercised |
|
(49,625 |
) |
|
2.05 |
|
(500 |
) |
|
2.44 |
|
(63,620 |
) |
|
2.31 |
| Expired or canceled |
|
(95,495 |
) |
|
6.73 |
|
(32,962 |
) |
|
8.31 |
|
(267,750 |
) |
|
14.57 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Outstanding at end of year |
|
1,326,105 |
|
|
$5.74 |
|
1,272,975 |
|
|
$5.82 |
|
1,036,437 |
|
|
$ 5.71 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Exercisable at end of year |
|
691,010 |
|
|
|
|
584,395 |
|
|
|
|
427,872 |
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average fair value of options
granted during the year |
|
|
|
|
$3.04 |
|
|
|
|
$4.14 |
|
|
|
|
$ 3.98 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Participants at end of year |
|
89 |
|
|
|
|
89 |
|
|
|
|
70 |
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for future grant at end of
year |
|
157,970 |
|
|
|
|
260,725 |
|
|
|
|
197,763 |
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise prices for options outstanding as of December 31, 2000 ranged from $.08 to $21.74. The weighted-average
remaining contractual life of such options is 6.8 years. Certain information for ranges of exercise prices is summarized below:
| |
|
Outstanding
|
|
Exercisable
|
Exercise Price
|
|
Number
of Shares
|
|
Weighted
Average
Exercise
Price
|
|
Contractual
Life
|
|
Number
of Shares
|
|
Weighted
Average
Exercise
Price
|
| Less than $5 |
|
384,750 |
|
$ 2.82 |
|
4.7 |
|
305,500 |
|
$ 2.55 |
| $5 to less than $10 |
|
935,411 |
|
6.86 |
|
7.6 |
|
379,566 |
|
7.04 |
| Equal to or greater than $10 |
|
5,944 |
|
18.91 |
|
6.6 |
|
5,944 |
|
18.91 |
| |
|
|
|
|
|
|
|
|
|
|
| |
|
1,326,105 |
|
5.74 |
|
6.8 |
|
691,010 |
|
5.16 |
| |
|
|
|
|
|
|
|
|
|
|
In May 2000, shareholders approved an amendment to the 1996 Stock Option Plan for Outside Directors, to increase the
number of shares available for issuance under this plan by 210,000, supplementing the previously authorized 1995 and 1994 Stock Option Plans for Outside Directors (collectively, the “Directors Stock Option Plan”). The amendment increases
the maximum number of shares available for awards under the Directors Stock Option Plan to a total of 446,250 shares. The option price for options granted under the Directors Stock Option Plan will be equal to the fair market value of a share of
Common Stock on the date of grant. These nonqualified stock options become fully vested and exercisable on the first anniversary of the date of grant and are exercisable for a period of ten years.
NOTE I—Stock Option Plans (Continued)
Certain information for 2000, 1999 and 1998 relative to the Directors Stock Option Plan is summarized below:
| |
|
2000
|
|
1999
|
|
1998
|
| |
|
Number
of Shares
|
|
Weighted
Average
Exercise
Price
|
|
Number
of shares
|
|
Weighted
Average
Exercise
Price
|
|
Number of
Shares
|
|
Weighted
Average
Exercise
Price
|
| Outstanding at beginning of year |
|
124,500 |
|
$10.84 |
|
82,500 |
|
|
$11.52 |
|
63,750 |
|
|
$ 6.72 |
| Granted |
|
45,000 |
|
4.44 |
|
45,000 |
|
|
9.00 |
|
33,750 |
|
|
18.75 |
| Exercised |
|
|
|
|
|
(3,000 |
) |
|
1.78 |
|
(15,000 |
) |
|
7.38 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Outstanding at end of year |
|
169,500 |
|
$ 9.14 |
|
124,500 |
|
|
$10.84 |
|
82,500 |
|
|
$11.52 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Exercisable at end of year |
|
124,500 |
|
|
|
79,500 |
|
|
|
|
48,750 |
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average fair value of
options granted during the year |
|
|
|
$ 2.43 |
|
|
|
|
$ 4.89 |
|
|
|
|
$ 7.99 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Participants at end of year |
|
4 |
|
|
|
4 |
|
|
|
|
3 |
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for future grant at end of
year |
|
198,750 |
|
|
|
33,750 |
|
|
|
|
78,750 |
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In May 2000, shareholders approved the 2000 Executive Incentive Stock Option Plan, which provides for the granting of
options to purchase up to 600,000 shares of Common Stock to executive employees of the Company. These options were granted in May 2000 with an exercise price of $4.44 and a weighted-average fair value of $2.81, and none were exercised, expired or
cancelled. These nonqualified stock options are exercisable for a period of ten years and have two different vesting schedules: 200,000 options vest in equal annual installments over a five-year period and 400,000 options vest based upon the
achievement of specific operating performance goals as determined by the Compensation Committee of the Board of Directors. At December 31, 2000, no options were exercisable.
Pro forma information regarding net income and earnings per share is required by FASB Statement No. 123,
“Accounting for Stock-Based Compensation,” which also requires that the information be determined as if the Company had accounted for its employee stock options granted subsequent to December 31, 1994 under the fair value method of
Statement 123. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 2000, 1999 and 1998:
| |
|
2000
|
|
1999
|
|
1998
|
| Risk free interest rate |
|
5.2% |
|
6.5% |
|
4.7% |
| Dividend yield |
|
0.0% |
|
0.0% |
|
2.5% |
| Market price volatility factor |
|
57.8% |
|
54.2% |
|
50.0% |
| Expected life of key employee options |
|
7 years |
|
7 years |
|
6 years |
| Expected life of directors options |
|
5 years |
|
5 years |
|
3 years |
| Expected life of executive options |
|
7 years |
|
|
|
|
The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which
have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s Key Employee, Directors and
Executive stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing
models do not necessarily provide a reliable single measure of the fair value of these stock options.
NOTE I—Stock Option Plans (Continued)
The Company’s pro forma disclosures showing the estimated fair value of the options, amortized to expense over the
options’ vesting periods, are as follows:
| |
|
2000
|
|
1999
|
|
1998
|
| Pro forma net income (loss) |
|
$1,073 |
|
$(37,332 |
) |
|
$27,460 |
| Pro forma net income (loss) per share |
|
.04 |
|
(1.58 |
) |
|
1.14 |
| Pro forma net income (loss) per share—assuming dilution |
|
.04 |
|
(1.58 |
) |
|
1.12 |
NOTE J—Lease Commitments
The Company incurred $3,702, $2,266 and $1,940 of rental expense under operating leases in 2000, 1999 and 1998,
respectively. At December 31, 2000, future minimum lease payments for non-cancelable operating leases for the next five years total $6,409 and are payable as follows: 2001—$2,278; 2002—$1,503; 2003—$1,222; 2004—$933; and
2005—$473.
NOTE K—Contingencies
The Company’s operating units are parties, in the ordinary course of their businesses, to various legal actions
related to performance under contracts, product liability and other matters, several of which actions claim substantial damages. The Company believes these legal actions will not have a material adverse effect on the Company’s financial
position or liquidity. The Company is subject to federal, state and local environmental laws and regulations concerning, among other matters, waste water effluents, air emissions and handling and disposal of hazardous materials such as cleaning
fluids.
As part of its ongoing environmental compliance and monitoring programs, the Company is voluntarily developing and
executing work plans for remediation of environmental conditions involving certain of its operating facilities. Based upon the Company’s study of the known conditions and its prior experience in investigating and correcting environmental
conditions, the Company estimates that the potential costs of these site remediation efforts will not have a material adverse effect on the Company’s financial position, liquidity, cash flows or results of operations. Expected future
expenditures relating to these remediation efforts are expected to be made over the next 10 years as ongoing operating costs of remediation programs. These costs have been measured on a non-discounted basis and are included in other long-term
liabilities at December 31, 2000 and 1999. Although the Company believes it has adequately provided for the cost of all known environmental conditions, the applicable regulatory agencies could insist upon different and more costly remediative
measures than those the Company believes are adequate or required by existing law. The Company believes that it is currently in substantial compliance with all known material and applicable environmental regulations.
NOTE L—Operating Segments
The Company has the following three reportable segments: applied technologies (“Applied Technologies”),
distribution and storage equipment (“Distribution and Storage”) and process systems and equipment (“Process Systems”). The Company’s reportable segments are business units that offer different products. The reportable
segments are each managed separately because they manufacture and distribute distinct products with different production processes. The Applied Technologies segment consists of three operating divisions that sell products including LNG alternative
fuel systems, telemetry products, DryWash® CO
2
cleaning systems, magnetic resonance imaging cryostat components, vacuum-insulated bulk liquid CO
2
systems, medical oxygen products, biological storage systems, large and small thermal vacuum test chambers,
vacuum-insulated piping systems, nitrogen injection systems, and various cryogenic and non-cryogenic components including pumps, valves and tubing. The Distribution and Storage segment consists of two operating divisions that sell cryogenic tanks,
trailers, intermodal containers, railcars and cryogenic repair services to various companies for the storage and transportation of both industrial and natural gases. The Process Systems segment consists of two operating divisions that sell brazed
aluminum heat exchangers and coldboxes to industrial gas, natural gas and petrochemical processing companies who use them for the liquefaction and separation of industrial and natural gases. Due to the nature of the products that each operating
segment sells, there are no intersegment sales.
NOTE L—Operating Segments (Continued)
The Company evaluates performance and allocates resources based on profit or loss from operations before gain on sale of
assets, interest expense, income taxes and minority interest. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies.
Information for the Company’s three reportable segments and its corporate headquarters, and geographic information
for the Company, is presented below:
| |
|
2000
|
| |
|
Reportable Segments
|
| |
|
Applied
Technologies
|
|
Distribution
and Storage
|
|
Process
Systems
|
|
Corporate
|
|
Total
|
| Revenues from external customers |
|
$136,952 |
|
$137,929 |
|
$ 50,819 |
|
|
|
|
|
$325,700 |
|
| Depreciation and amortization expense |
|
5,414 |
|
6,364 |
|
4,109 |
|
|
$ 1,977 |
|
|
17,864 |
|
Operating income (loss) before gain on sale of
assets, interest expense, income taxes and
minority interest |
|
23,386 |
|
11,832 |
|
1,338 |
|
|
(5,637 |
) |
|
30,919 |
|
| Total assets |
|
171,096 |
|
168,941 |
|
56,353 |
|
|
25,099 |
|
|
421,489 |
|
| Capital expenditures |
|
2,166 |
|
2,596 |
|
258 |
|
|
561 |
|
|
5,581 |
|
| |
| |
|
1999
|
| |
|
Reportable Segments
|
| |
|
Applied
Technologies
|
|
Distribution
and Storage
|
|
Process
Systems
|
|
Corporate
|
|
Total
|
| Revenues from external customers |
|
$105,323 |
|
$105,529 |
|
$ 82,085 |
|
|
|
|
|
$292,937 |
|
| Depreciation and amortization expense |
|
5,953 |
|
4,982 |
|
4,489 |
|
|
$ 1,485 |
|
|
16,909 |
|
Operating income (loss) before gain on sale of
assets, interest expense, income taxes and
minority interest |
|
9,579 |
|
4,923 |
|
(300 |
) |
|
(25,938 |
) |
|
(11,736 |
) |
| Total assets |
|
185,983 |
|
149,869 |
|
61,934 |
|
|
26,784 |
|
|
424,570 |
|
| Capital expenditures |
|
2,633 |
|
1,761 |
|
1,072 |
|
|
1,581 |
|
|
7,047 |
|
| |
| |
|
1998
|
| |
|
Reportable Segments
|
| |
|
Applied
Technologies
|
|
Distribution
and Storage
|
|
Process
Systems
|
|
Corporate
|
|
Total
|
| Revenues from external customers |
|
$ 62,256 |
|
$ 42,558 |
|
$124,609 |
|
|
|
|
|
$229,423 |
|
| Depreciation and amortization expense |
|
1,684 |
|
1,446 |
|
3,557 |
|
|
$ 339 |
|
|
7,026 |
|
Operating income (loss) before gain on sale of
assets, interest expense, income taxes and
minority interest |
|
10,062 |
|
5,760 |
|
30,806 |
|
|
(2,473 |
) |
|
44,155 |
|
| Total assets |
|
40,328 |
|
36,298 |
|
68,342 |
|
|
13,237 |
|
|
158,205 |
|
| Capital expenditures |
|
3,029 |
|
4,426 |
|
2,292 |
|
|
259 |
|
|
10,006 |
|
Geographic information:
| |
|
2000
|
|
1999
|
|
1998
|
| |
|
Revenues
|
|
Long-Lived
Assets
|
|
Revenues
|
|
Long-Lived
Assets
|
|
Revenues
|
|
Long-Lived
Assets
|
| United States |
|
$279,449 |
|
$228,021 |
|
$241,228 |
|
$240,313 |
|
$205,997 |
|
$48,621 |
| Non U.S. countries |
|
46,251 |
|
36,637 |
|
51,709 |
|
40,907 |
|
23,426 |
|
33,473 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
$325,700 |
|
$264,658 |
|
$292,937 |
|
$281,220 |
|
$229,423 |
|
$82,094 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
NOTE M—Extraordinary Item
In the second quarter of 1999, the Company borrowed funds under its Credit Facility and retired prior to maturity
certain debt assumed as part of the MVE acquisition with a fair value of $119.2 million. The debt extinguishment resulted in an extraordinary loss of $12,459, $7,809 net of tax, or $.33 per diluted share.
NOTE N—Quarterly Data (Unaudited)
Selected quarterly data for the years ended December 31, 2000 and 1999 are as follows:
| |
|
Year Ended December 31, 2000
|
| |
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Total
|
| Sales |
|
$68,992 |
|
|
$78,924 |
|
$88,012 |
|
$89,772 |
|
$325,700 |
| Gross profit |
|
19,760 |
|
|
23,653 |
|
26,951 |
|
25,665 |
|
96,029 |
| Operating income |
|
5,087 |
|
|
7,135 |
|
9,506 |
|
9,191 |
|
30,919 |
| Net income (loss) |
|
(385 |
) |
|
291 |
|
1,038 |
|
1,211 |
|
2,155 |
| Net income (loss) per share |
|
(.02 |
) |
|
.01 |
|
.04 |
|
.05 |
|
.09 |
| Net income (loss) per share—assuming dilution |
|
(.02 |
) |
|
.01 |
|
.04 |
|
.05 |
|
.09 |
In the fourth quarter of 2000, net income was decreased by $509 relating to inventory adjustments.
| |
|
Year Ended December 31, 1999
|
| |
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Total
|
| Sales |
|
$44,588 |
|
$84,726 |
|
|
$84,108 |
|
|
$79,515 |
|
$292,937 |
|
| Gross profit |
|
12,317 |
|
20,875 |
|
|
20,147 |
|
|
24,042 |
|
77,381 |
|
| Operating income (loss) |
|
4,725 |
|
(19,758 |
) |
|
(4,169 |
) |
|
7,466 |
|
(11,736 |
) |
| Income (loss) before extraordinary item |
|
2,902 |
|
(24,080 |
) |
|
(8,946 |
) |
|
1,653 |
|
(28,471 |
) |
Extraordinary loss on early extinguishment of debt, net of
taxes of $4.7 million |
|
|
|
(7,809 |
) |
|
|
|
|
|
|
(7,809 |
) |
| Net income (loss) |
|
2,902 |
|
(31,889 |
) |
|
(8,946 |
) |
|
1,653 |
|
(36,280 |
) |
| Income (loss) before extraordinary item per share |
|
.12 |
|
(1.01 |
) |
|
(.38 |
) |
|
.07 |
|
(1.20 |
) |
| Net income (loss) per share |
|
.12 |
|
(1.34 |
) |
|
(.38 |
) |
|
.07 |
|
(1.53 |
) |
Income (loss) before extraordinary item per share—
assuming dilution |
|
.12 |
|
(1.01 |
) |
|
(.38 |
) |
|
.07 |
|
(1.20 |
) |
| Net income (loss) per share—assuming dilution |
|
.12 |
|
(1.34 |
) |
|
(.38 |
) |
|
.07 |
|
(1.53 |
) |
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information appearing under the captions “Election of Directors” and “Section 16(a) Beneficial
Ownership Reporting Compliance” in the registrant’s definitive Proxy Statement to be used in connection with the Annual Meeting of Stockholders to be held on May 3, 2001 (the “2001 Proxy Statement”) is incorporated herein by
reference. Information regarding executive officers of the registrant is set forth in Part I of this Form 10-K.
Item 11. Executive Compensation.
The information appearing under the captions “Election of Directors” and “Executive Compensation”
(other than the Compensation Subcommittee Report on Executive Compensation) in the 2001 Proxy Statement is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information appearing under the caption “Stock Ownership of Principal Holders and Management” in the 2001
Proxy Statement is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
The information appearing under the caption “Other Matters” in the 2001 Proxy Statement is incorporated herein
by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
| (a)(1) |
|
Report of Independent Auditors |
|
22 |
| |
|
Consolidated Balance Sheets at December 31, 2000 and 1999 |
|
23 |
| |
|
Consolidated Statements of Operations for the Years ended December 31, 2000, 1999 and
1998 |
|
24 |
| |
|
Consolidated Statements of Shareholders’ Equity for the Years ended December 31, 2000, 1999
and 1998 |
|
25 |
| |
|
Consolidated Statements of Cash Flows for the Years ended December 31, 2000, 1999 and
1998 |
|
26 |
| |
|
Notes to Consolidated Financial Statements |
|
27 |
| |
| (a)(2) |
|
Financial Statement Schedules. |
|
|
| |
| |
|
No financial statement schedules required. |
|
|
| |
| (a)(3) |
|
Exhibits |
|
|
| |
|
See the Exhibit Index at page 45 of this Form 10-K Annual Report. |
|
|
| |
| (b) |
|
Reports on Form 8-K. |
|
|
| |
| |
|
During the quarter ended December 31, 2000, the Company filed three Current Reports on Form 8-K.
The first Current Report on Form 8-K, dated October 10, 2000, reported that the Company had entered
into an amendment to its Credit Facility. The second, dated October 30, 2000, furnished a press release
pursuant to Regulation FD. The third, dated November 29, 2000, reported that the Company had
entered into the Incremental Credit Facility. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
Chairman & Chief Executive Officer
|
Date: March 16, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
| |
/s/ ARTHUR S. HOLMES
Arthur S. Holmes |
|
Chairman and Chief Executive
Officer (Principal Executive
Officer) |
|
March 16, 2001 |
|
| |
/s/ DON A. BAINES
Don A. Baines |
|
Chief Financial Officer,
Treasurer and a Director
(Principal Financial Officer) |
|
March 16, 2001 |
|
| |
/s/ JOHN T. ROMAIN
John T. Romain |
|
Controller and Chief Accounting
Officer (Principal Accounting
Officer) |
|
March 16, 2001 |
|
| |
/s/ RICHARD J. CAMPBELL
Richard J. Campbell |
|
Director |
|
March 16, 2001 |
|
| |
/s/ THOMAS F. MCKEE
Thomas F. McKee |
|
Director |
|
March 16, 2001 |
|
| |
/s/ LAZZARO G. MODIGLIANI
Lazzaro G. Modigliani |
|
Director |
|
March 16, 2001 |
|
| |
/s/ ROBERT G. TURNER, JR.
Robert G. Turner, Jr. |
|
Director |
|
March 16, 2001 |
EXHIBIT INDEX
Exhibit
No.
|
|
Description
|
| 2.1 |
|
Plan and Agreement of Merger, dated April 30, 1997, by and among the Company,
Greenville Tube Corporation, Chart Acquisition Company, Inc. and Cryenco Sciences,
Inc. |
|
(F) |
| 2.2 |
|
Agreement for the Sale and Purchase of the Industrial Heat Exchanger Group, dated March
5, 1998, by and among the Company, IMI Kynoch Limited, IMI Marston Limited, IMI plc
and Chart Marston Limited |
|
(G) |
| 2.3 |
|
Agreement and Plan of Merger, dated as of February 16, 1999, by and among the Company,
Chart Acquisition Company and MVE Holdings, Inc. |
|
(J) |
| 2.4 |
|
Agreement and Plan of Merger, dated as of February 25, 1999, by and among the Company,
Chart Acquisition Company and MVE Investors, LLC |
|
(J) |
| 3.1 |
|
Amended and Restated Certificate of Incorporation of the Company, as filed with the
Secretary of State of Delaware on December 3, 1992 |
|
(A) |
| 3.1.1 |
|
Certificate of Designations of Series A Junior Participating Preferred Stock of the
Company |
|
|
| 3.2 |
|
Amended and Restated By-Laws of the Company |
|
(B) |
| 4.1 |
|
Specimen certificate of the Company’s Common Stock |
|
|
| 4.2 |
|
Form of Warrant Agreements of various dates by and between Cryenco Sciences, Inc. and
various warrant holders |
|
(F) |
| 4.3 |
|
Form of Amendment No. 1 to Warrant Agreement by and among the Company, Cryenco
Sciences, Inc. and various warrant holders |
|
(F) |
| 4.4 |
|
Form of Warrant Certificate |
|
(F) |
| 4.5 |
|
Rights Agreement, dated as of May 1, 1998, by and between the Company and National City
Bank, as Rights Agent |
|
(H) |
| 4.6 |
|
Amendment No. 1 to Rights Agreement, dated as of February 8, 2001, by and between the
Company and National City Bank, as Rights Agent |
|
|
| 10.1 |
|
Form of Indemnity Agreement of the Company |
|
(B) |
| *10.2 |
|
Key Employees Stock Option Plan of the Company |
|
(B) |
| *10.3 |
|
1994 Stock Option Plan for Outside Directors of the Company |
|
(C) |
| *10.3.1 |
|
1995 Stock Option Plan for Outside Directors of the Company |
|
|
| *10.3.2 |
|
1996 Stock Option Plan for Outside Directors of the Company |
|
(D) |
| *10.3.3 |
|
Amendment No. 1 to the 1996 Stock Option Plan for Outside Directors of the Company |
|
(L) |
| *10.4 |
|
Amended and Restated 1997 Stock Option and Incentive Plan |
|
(C) |
| *10.5 |
|
1997 Stock Bonus Plan |
|
(E) |
| *10.6 |
|
Trust Agreement between Chart Industries, Inc. and Fidelity Management Trust Company
relating to the Deferred Compensation Plan |
|
(I) |
| *10.7 |
|
2000 Executive Incentive Stock Option Plan |
|
(L) |
| *10.7.1 |
|
Form of Stock Option Agreement under the 2000 Executive Incentive Stock Option Plan |
|
(L) |
| 10.8 |
|
License Agreement, dated August 30, 1991, by and between Koch Industries, Inc. and PSI
relating to the Ryan/Holmes Technology |
|
(B) |
| 10.9 |
|
Permitted User Agreement, dated as of March 27, 1998, by and between Chart Marston
Limited and IMI Marston Limited |
|
(G) |
| 10.10 |
|
1998-2001 Labor Agreement, dated March 25, 1998, by and between ALTEC and District
Lodge 66 of the International Association of Machinists and Aerospace Workers, AFL-
CIO |
|
(C) |
| 10.11 |
|
Agreement, effective August 30, 1999 through August 30, 2002, by and between Process
Engineering and The International Brotherhood of Boilermakers, Iron Ship Builders,
Blacksmiths, Forgers & Helpers Local Lodge No. 752 of the AFL-CIO |
|
|
Exhibit
No.
|
|
Description
|
| 10.12 |
|
Agreement, effective January 10, 2000 through January 15, 2002, by and between the
Company and the United Steel Workers |
|
|
| *10.13 |
|
Employment Agreement, dated as of January 24, 2001, by and between the Company and
James R. Sadowski |
|
|
| *10.14 |
|
Salary Continuation Agreement, dated May 12, 1996, by and between the Company and
John T. Romain |
|
(C) |
| *10.14.1 |
|
Amendment No. 1 to Salary Continuation Agreement, dated December 4, 1998, by and
between the Company and John T. Romain |
|
(C) |
| *10.15 |
|
Salary Continuation Agreement, dated May 22, 1996, by and between the Company and
Don A. Baines |
|
(C) |
| *10.15.1 |
|
Amendment No. 1 to Salary Continuation Agreement, dated December 4, 1998, by and
between the Company and Don A. Baines |
|
(C) |
| 10.16 |
|
Credit Agreement, dated as of April 12, 1999, by and among the Company, the Subsidiary
Borrowers, the Subsidiary Guarantors, the Lenders (all as defined therein), The Chase
Manhattan Bank, as Administrative Agent, and National City Bank, as Documentation
Agent |
|
(J) |
| 10.16.1 |
|
Amendment No. 1, dated as of August 24, 1999, to the Credit Agreement, dated as of April
12, 1999, by and among the Company, the Subsidiary Borrowers, the Subsidiary
Guarantors, the Lenders (all as defined therein), The Chase Manhattan Bank, as
Administrative Agent, and National City Bank, as Documentation Agent |
|
(K) |
| 10.16.2 |
|
Amendment No. 2, dated as of October 10, 2000, to the Credit Agreement, dated as of April
12, 1999, by and among the Company, the Subsidiary Borrowers, the Subsidiary
Guarantors, the Lenders signatory thereto (all as defined therein), The Chase Manhattan
Bank, as Administrative Agent, and National City Bank, as Documentation Agent |
|
(M) |
| 10.16.3 |
|
Series 1 Incremental Revolving Credit Agreement, dated as of November 29, 2000, among
the Company, the Subsidiary Borrowers, the Subsidiary Guarantors, the Series 1 Lenders
signatory thereto (all as defined therein), and The Chase Manhattan Bank, as
Administrative Agent |
|
(N) |
| 10.17 |
|
Indemnification and Warrant Purchase Agreement, dated as of April 12, 1999, by and among
the Company, MVE Holdings, Inc. and each of the former members of MVE Investors,
LLC listed on the signature pages thereto |
|
(J) |
| 10.18 |
|
Form of Promissory Note |
|
(J) |
| 10.19 |
|
Form of Mortgage, Assignment of Rents, Security Agreement and Fixture Filing |
|
(J) |
| 10.20 |
|
Warrant Agreement, dated as of April 12, 1999, between the Company and each of the
persons listed on the signature pages thereto |
|
(J) |
| 10.21 |
|
Escrow Agreement, dated as of April 12, 1999, by and among the Company, MVE Holdings,
Inc., Chart Acquisition Company, ACI Capital I, LLC, in its own capacity and, with
respect to the Class B Escrow Amount (as defined therein), as agent and attorney-in-fact
for each of the former members of MVE Investors, LLC listed therein, and Firstar Bank of
Minnesota, N.A. |
|
(J) |
| 21.1 |
|
Subsidiaries of the Registrant |
|
|
| 23.1 |
|
Consent of Ernst & Young LLP |
|
|
*
|
Management contract or compensatory plan or arrangement identified pursuant to Item 14(a)(3) of this Annual Report on Form
10-K.
|
(A)
|
Incorporated herein by reference to the appropriate exhibit to the Company’s Registration Statement on Form S-3 (Reg.
No. 333-35321).
|
(B)
|
Incorporated herein by reference to the appropriate exhibit to the Company’s Registration Statement on Form S-1 (Reg.
No. 33-52754).
|
(C)
|
Incorporated herein by reference to the appropriate exhibit to the Company’s Annual Report on Form 10-K for the year
ended December 31, 1999.
|
(D)
|
Incorporated herein by reference to the appropriate exhibit to the Company’s Annual Report on Form 10-K for the year
ended December 31, 1996.
|
(E)
|
Incorporated herein by reference to the appropriate exhibit to the Company’s Registration Statement on Form S-8 (Reg.
No. 333-32535).
|
(F)
|
Incorporated herein by reference to the appropriate exhibit to the Company’s Current Report on Form 8-K, dated July 31,
1997.
|
(G)
|
Incorporated herein by reference to the appropriate exhibit to the Company’s Current Report on Form 8-K, dated March 27,
1998.
|
(H)
|
Incorporated herein by reference to the appropriate exhibit to the Company’s Registration Statement on Form 8-A, filed
June 3, 1998.
|
(I)
|
Incorporated herein by reference to the appropriate exhibit to the Company’s Annual Report on Form 10-K for the year
ended December 31, 1998.
|
(J)
|
Incorporated herein by reference to the appropriate exhibit to the Company’s Current Report on Form 8-K, dated April 12,
1999.
|
(K)
|
Incorporated herein by reference to the appropriate exhibit to the Company’s Current Report on Form 8-K, dated August
24, 1999.
|
(L)
|
Incorporated herein by reference to the appropriate exhibit to the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2000.
|
(M)
|
Incorporated herein by reference to the appropriate exhibit to the Company’s Current Report on Form 8-K, dated October
10, 2000.
|
(N)
|
Incorporated herein by reference to the appropriate exhibit to the Company’s Current Report on Form 8-K, dated November
29, 2000.
|