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| 8-K - 8-K - CHART INDUSTRIES INC | a3q2018investorpresentatio.htm |
Chart Industries Third Quarter 2018 October 18, 2018 © 2018 Chart Industries, Inc. Confidential and Proprietary
Forward-Looking Statements Certain statements made in this news release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning the Company's plans, objectives, future orders, revenues, margins, earnings or performance, liquidity and cash flow, capital expenditures, business trends, and other information that is not historical in nature. Forward- looking statements may be identified by terminology such as "may," "will," "should," "could," "expects," "anticipates," "believes," "projects," "forecasts," “outlook,” “guidance,” "continue," or the negative of such terms or comparable terminology. Forward-looking statements contained in this presentation 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 Company's control, that could cause the Company's actual results to differ materially from those matters expressed or implied by forward-looking statements. Factors that could cause the Company’s actual results to differ materially from those described in the forward-looking statements include: those found in Item 1A (Risk Factors) in the Company’s most recent Annual Report on Form 10-K filed with the SEC, which should be reviewed carefully; Chart’s ability to close the VRV acquisition, successfully integrate VRV, and achieve anticipated revenue, earnings and accretion; estimated segment revenues, future revenue, earnings, cash flows, and margin targets and run rates; and Chart’s ability to close the sale of its oxygen-related products business within the BioMedical segment. The Company undertakes no obligation to update or revise any forward-looking statement. Chart is a leading diversified global manufacturer of highly engineered equipment for the industrial gas, energy, and biomedical industries. The majority of Chart's products are used throughout the liquid gas supply chain for purification, liquefaction, distribution, storage and end-use applications, a large portion of which are energy- related. Chart has domestic operations located across the United States and an international presence in Asia, Australia, Europe and Latin America. For more information, visit: http://www.chartindustries.com. © 2018 Chart Industries, Inc. Confidential and Proprietary
Leading Supplier of Mission Critical Equipment 1 Energy & Chemical 2 Distribution & Storage ▪ ▪ Supply Brazed Aluminum Heat Exchangers (BAHX), Offer a complete portfolio of cryogenic distribution and Air Cooled Heat Exchangers (ACHX) and Cold storage equipment Boxes ▪ Spearhead innovation in cryogenic packaged gas and ▪ Provide integrated systems and aftermarket services MicroBulk systems for gas processing, LNG and petrochemical ▪ Excel with over 20 years of experience in LNG applications applications ▪ Lead in technological advancements ▪ Set the standard for storage of biological materials at low temperatures 3 © 2018 Chart Industries, Inc. Confidential and Proprietary
Recent Changes to Support Our Strategy Segmentation with Sale of Oxygen- Acquisition of VRV, Global Commercial Related Products s.p.a Team Business A Take Advantage of Favorable Market Trends Building Blocks of Our Deliver Profitable Growth Through Strategic Initiatives Three Year B Strategy C Achieve Financial Targets Predictable, Disciplined and Profitable Growth 4 © 2018 Chart Industries, Inc. Confidential and Proprietary
Segmentation Energy & Chemicals Distribution & Storage Distribution & Storage Western Hemisphere Eastern Hemisphere Global Key Account Commercial Team 5 © 2018 Chart Industries, Inc. Confidential and Proprietary
Divestiture of Oxygen-Related Products ◼ Leading global engineered solutions company specializing Former BioMedical Segment in oxygen related products across the respiratory industry CryoBio Respiratory CAIRE − Stationary − Onsite generation systems Description − Portable − Liquid Revenue: $75-85M1 Revenue: $150-160M1 − Military − Spare parts ◼ NGK Spark Plug Co., Ltd. − Manufactures and sells spark plugs and related Acquiror products for internal-combustion engines, technical Description (1) ceramics and applicable products − ~$6B market cap ◼ Transaction $133.5M all-cash transaction ◼ Consideration Gain on sale to be recorded at close ◼ Expected closing in Q4 2018 Closing ◼ Reporting in discontinued operations in Q3 2018 (1) Fiscal year end at March 31. 1. FY18 Estimate. 6 © 2018 Chart Industries, Inc. Confidential and Proprietary
VRV Company Overview Business description Products overview ◼ VRV s.p.a. manufactures medium / high pressure and cryogenic equipment for the chemical, petrochemical and power industries Energy & Petrochemicals ◼ Founded: 1956 ◼ Headquarters: Ornago, Italy ◼ Operates in two divisions: Cryogenics − Energy & Petrochemical Division: product categories include refining, petrochemical, fertilizer, reaction and drying technology and polysilicon technology − Cryogenic Division: products categories include industrial, Energy & Petrochemical Cryogenics ◼ healthcare, cryobiology, liquefied natural gas (LNG), research & ◼ Hydrotreating / hydrocracking Bulk storage special projects and services & maintenance ◼ ◼ Alkylation Equipment Engineered-to-order ◼ ◼ Vaporizers ◼ Six manufacturing facilities in Italy, France and India and commercial Styrene ◼ offices in the Czech Republic, France, Germany, the UK, Saudi ◼ PE / HDPE / LDPE Trailers and transport ◼ Arabia, India (Mumbai), Malaysia, Brazil and North America ◼ Elastomer ISO containers ◼ ◼ Ammonia Microbulk ◼ ◼ Methanol LN2 Dewars ◼ ◼ Urea LOX therapy equipment ◼ ◼ Polysilicon Cryo freezers 7 © 2018 Chart Industries, Inc. Confidential and Proprietary
VRV Strategic Rationale Cost Synergies ✓+ • Adds D&S Indian, Italian and France manufacturing Expand Chart’s Global Footprint • Adds E&C manufacturing in Europe • Additional port access for lead time reduction Maximize Production Capabilities and ✓ • Leverage operational automation in place at VRV Efficiency + • Supply chain and material handling savings Innovation Through Technology ✓+ • Complementary and expanded technology offering • Cryogenic valve offering Pursue New Organic and Inorganic Growth • Expanded service and repair access Opportunities ✓+ • Improved access to high growth markets (India / Middle East) Supported by: Chart Business Services, 80/20 Process, Special Operations Task Force 8 © 2018 Chart Industries, Inc. Confidential and Proprietary
Expanding Service & Repair Footprint Exploration, Processing/ Re- Lifecycle Value Proposition/ Treatment Transportation Storage Production & Pipeline Liquefaction gasification Services Application Current Chart Service Locations VCT Vogel D&S Canton Current Location and Regional ▪ Direct coverage in the northeast United States ▪ Service capabilities in southern Germany with reach into Switzerland, ▪ Further expansion of direct service opportunity in the southeast Italy, Austria, etc. ▪ Reduced transportation costs ▪ Further expansion opportunities in Europe 9 © 2018 Chart Industries, Inc. Confidential and Proprietary
A Take Advantage of Favorable Macro Trends Market Dynamics Chart Exploitation ▪ Supply / demand for LNG needs in ▪ Chart’s patented IPSMR technology 2022-2023 and shift toward modular is key to mid-scale technology facilities ▪ Chart’s and VRV’s customer ▪ Increasing regulatory environment intimacy drives engineering solutions ahead of regulatory ▪ Pollution and keen environmental changes awareness, in particular in emerging geographies ▪ Chart and VRV’s combined global manufacturing footprint allows for ▪ Demand for industrial gases cost and price effective solutions for continues to outpace GDP targeted emerging markets 10 © 2018 Chart Industries, Inc. Confidential and Proprietary
B Accelerate Growth through Acquisitions Acquisition Criteria: Prioritize Key Market Opportunities: ▪ Strong level of strategic fit SERVICE & ▪ TEMPERATURE High degree of leveragability REPAIR EXPANSION (specific and attainable BUILDOUT synergies) ▪ Proven growth and profitability ▪ Reasonable price expectations ▪ Management bench strength CRYOGENIC FANS VALVES AND ▪ Ownership that’s willing PUMPS to assist in the transition 11 © 2018 Chart Industries, Inc. Confidential and Proprietary
Previous Gas to Liquids Offerings Exploration, Value Processing/ Re- Lifecycle Production & Treatment Transportation Storage Proposition/ Pipeline Liquefaction gasification Services Application ACHX Orca Microbulk Engineered Tanks Ambient Vaporizers Installation & Startup N2 Dosing Cold Boxes Trailers Standard Bulk Powered Vaporizers Support & Training GeN2 BAHX Rail Cars Specialty Bulk Process Optimization CO2 Beverage Engineered Tanks ISO Containers VJ Pipe Shop Repair/Refub Packaged Gas Cyl Industrial Gas VJ Pipe Military LOX Storage Dewars & Filling Syst AirSep On-Site Gen Engineered Systems ACHX (Oil Refining & ACHX (Oil Refining & ACHX (Oil & Gas Offshore) PetroChem) PetroChem) Trailers Standard Bulk Ambient Vaporizers Installation & Startup IPMSR & Licensing NRUs Cold Boxes Rail Cars Engineered Tanks Powered Vaporizers Support & Training On-Vehicle Tanks BAHX BAHX ISO Containers ACHX (Power) Process Optimization Tender Cars Fueling Stations Energy Engineered Tanks Fans VJ Pipe O2 Stationary Conc. Stainless Stl Shippers Stainless Freezers Mil. Medical Conc. O2 Portable Conc. Aluminum Shippers LOX Cylinders O2 Therapy LOX Portables Lifescience Storage Medical AI Storage E&C D&S BioMed 12 © 2018 Chart Industries, Inc. Confidential and Proprietary
Current Focused Gas to Liquids Offerings Exploration, Value Processing/ Re- Lifecycle Production & Treatment Transportation Storage Proposition/ Pipeline Liquefaction gasification Services Application ACHX Orca Microbulk Engineered Tanks Ambient Vaporizers Installation & Startup N2 Dosing Cold Boxes Trailers Standard Bulk Powered Vaporizers Support & Training GeN2 BAHX Rail Cars Specialty Bulk Process Optimization CO2 Beverage Breech lock ISO Containers VJ Pipe Shop Repair/Refub Packaged Gas Cyl Engineered Tanks Stainless Stl Shippers Stainless Freezers Dewars & Filling Syst Industrial Gas VJ Pipe Aluminum Shippers Valves Engineered Systems Valves Valves Lifescience Storage AI Storage ACHX (Oil Refining & ACHX (Oil Refining & ACHX (Oil & Gas Offshore) PetroChem) PetroChem) Trailers Standard Bulk Ambient Vaporizers Installation & Startup IPMSR & Licensing Shell & Tube HX NRUs Cold Boxes Rail Cars Engineered Tanks Powered Vaporizers Support & Training On-Vehicle Tanks BAHX BAHX ISO Containers Valves ACHX (Power) Process Optimization Tender Cars Energy Shell & Tube HX Shell & Tube HX Fans Fueling Stations Reactors & Pressure Vessels Engineered Tanks VJ Pipe Valves E&C D&S West & East New with VRV acquisition 13 © 2018 Chart Industries, Inc. Confidential and Proprietary
Chart Significant LNG Opportunities Project Opportunity Chart Customer Operator Country Capacity Scope of Supply PA ssLNG Confidential Confidential USA 50,000 gpd C50N Cold box, BAHX, ACHX FL ssLNG Expansion EPC TBD Confidential USA 250,000 gpd C250N, Cold boxes, BAHX, ACHX MA ssLNG Confidential Confidential USA 250,000 gpd C250N, Cold boxes, BAHX, ACHX Driftwood LNG Bechtel Tellurian USA 26 MTPA IPSMR®, Cold boxes, BAHX, ACHX Calcasieu Pass GE Venture Global USA 10 MTPA 9 Trains - 2xCold Boxes/train, BAHX Corpus Christi TX - Stage 3 KBR/Siemens Cheniere USA 9.5 MTPA IPSMR®, Cold boxes, BAHX, ACHX Gimi (FLNG #3) Black & Veatch Golar W. Africa 3.75 MTPA 4x Cold Boxes, BAHX PA MultiTrain LNG EPC TBD Confidential USA 3 MM gpd IPSMR®, Cold boxes, BAHX, ACHX Magnolia LNG Magnolia Magnolia USA 8 MTPA Cold Boxes, BAHX, Core-in-kettles FL ssLNG EPC TBD Confidential USA 500,000 gpd C500 IPSMR®, Cold boxes, BAHX, ACHX, Tanks Gandria (FLNG #2) Black & Veatch Golar W. Africa 3.75 MTPA 4x Cold Boxes, BAHX Pointe LNG EPC TBD Pointe LNG USA 6 MTPA IPSMR®, Cold boxes, BAHX, ACHX SE Asia LNG EPC TBD Confidential SE Asia 3 MTPA IPSMR®, Cold boxes, BAHX, ACHX SE Asia Expansion EPC TBD Confidential SE Asia 8 MTPA IPSMR®+, Cold boxes, BAHX, ACHX 14 © 2018 Chart Industries, Inc. Confidential and Proprietary
Third Quarter 2018 Financial Results Sales & Revenue1 Adjusted Q3 Highlights 1 1,2 ($USD Million) Earnings Per Share Earnings Per Share $272 $0.65 $0.74 • Sales increase of 34.3% over the third quarter of 2017, 16.0% excluding Hudson Products $0.65 $0.74 $272 • Reported earnings per diluted share increased $0.67 compared to the $203 third quarter 2017, and adjusted EPS grew $0.52 in the same comparative period $0.22 • Orders of $264 million increased compared to $217 million in the third ($0.02) quarter of 2017, and increased 3.3% organically Q3 2017 Q3 2018 Q3 2017 Q3 2018 Q3 2017 Q3 2018 1. All results reflect continuing operations 2. Adjusted earnings per share is a non-GAAP measure, see reconciliation to the comparable GAAP measure on page 5. 15 © 2018 Chart Industries, Inc. Confidential and Proprietary 15
2018 YTD Financial Results Sales & Revenue1 Adjusted YTD Q3 2018 Highlights 1 1,2 ($USD Million) Earnings Per Share Earnings Per Share $794 $1.11 $1.41 • Sales increase of 38.5% over YTD third quarter of 2017, 16.2% excluding Hudson Products $1.11 $1.41 $794 • Reported earnings per diluted share increased $1.15 compared to the first $574 three quarters of 2017, and adjusted EPS grew $1.06 in the same comparative period $0.35 • Orders of $869 million increased compared to $613 million in the first three quarters of 2017, ($0.04) and increased 14.4% YTD 2017 YTD 2018 YTD 2017 YTD 2018 YTD 2017 YTD 2018 organically 1. All results reflect continuing operations 2. Adjusted earnings per share is a non-GAAP measure, see reconciliation to the comparable GAAP measure on page 5. 16 © 2018 Chart Industries, Inc. Confidential and Proprietary 16
2017 Results – Continuing Operations Segments Energy & Chemicals Q1 2017 Q2 2017 Q3 2017 Q4 2017 FY 2017 $M Sales $39.9 $40.0 $46.6 $99.1 $225.6 Gross Margin 8.4 5.4 8.6 22.7 45.1 GM % 21.1% 13.5% 18.5% 22.9% 20.0% SG&A 7.8 7.4 7.4 11.7 34.3 % / Sales 19.5% 18.5% 15.9% 11.8% 15.2% Operating Income $(0.2) $(2.5) $0.3 $7.5 $5.1 % / Sales -0.5% -6.3% 0.6% 7.6% 2.3% Distribution & Storage Western Hemisphere Q1 2017 Q2 2017 Q3 2017 Q4 2017 FY 2017 $M Sales $91.1 $104.9 $99.6 $105.7 $401.3 Gross Margin 32.2 36.1 37.0 36.6 141.9 GM % 35.3% 34.4% 37.1% 34.6% 35.4% SG&A 13.9 12.5 13.0 12.4 51.8 % / Sales 15.3% 11.9% 13.1% 11.7% 12.9% Operating Income $17.0 $22.2 $23.1 $23.2 $85.5 % / Sales 18.7% 21.2% 23.2% 21.9% 21.3% Distribution & Storage Eastern Hemisphere Q1 2017 Q2 2017 Q3 2017 Q4 2017 FY 2017 $M Sales $45.2 $58.3 $63.2 $65.5 $232.2 Gross Margin 9.1 11.6 13.7 13.8 48.2 GM % 20.1% 19.9% 21.7% 21.1% 20.8% SG&A 6.4 7.8 7.8 11.3 33.3 % / Sales 14.2% 13.4% 12.3% 17.3% 14.3% Operating Income $2.5 $3.7 $5.6 $2.1 $13.9 % / Sales 5.5% 6.3% 8.9% 3.2% 6.0% 17 © 2018 Chart Industries, Inc. Confidential and Proprietary 17
2018 Results – Continuing Operations Segments Energy & Chemicals Q1 2018 Q2 2018 Q3 2018 YTD 2018 $M Sales $89.9 $100.8 $98.1 $288.8 Gross Margin 19.4 21.3 26.9 67.6 GM % 21.6% 21.1% 27.4% 23.4% SG&A 12.6 11.7 11.3 35.6 % / Sales 14.0% 11.6% 11.5% 12.3% Operating Income $2.8 $5.9 $12.1 $20.8 % / Sales 3.1% 5.9% 12.3% 7.2% Distribution & Storage Western Hemisphere Q1 2018 Q2 2018 Q3 2018 YTD 2018 $M Sales $100.6 $117.6 $119.0 $337.2 Gross Margin 36.1 38.2 44.7 119.0 GM % 35.9% 32.5% 37.6% 35.3% SG&A 12.7 13.4 11.6 37.7 % / Sales 12.6% 11.4% 9.7% 11.2% Operating Income $22.2 $23.6 $31.9 $77.7 % / Sales 22.1% 20.1% 26.8% 23.0% Distribution & Storage Eastern Hemisphere Q1 2018 Q2 2018 Q3 2018 YTD 2018 $M Sales $55.1 $62.4 $56.8 $174.3 Gross Margin 11.8 14.1 11.2 37.1 GM % 21.4% 22.6% 19.7% 21.3% SG&A 7.8 7.3 7.7 22.8 % / Sales 14.2% 11.7% 13.6% 13.1% Operating Income $3.6 $6.6 $3.3 $13.5 % / Sales 6.5% 10.6% 5.8% 7.7% 18 © 2018 Chart Industries, Inc. Confidential and Proprietary 18
Financial Results – Continuing Operations Consolidated Chart Industries - Consolidated Q1 2017 Q2 2017 Q3 2017 Q4 2017 FY 2017 $M Sales $171.0 $199.8 $202.7 $269.4 $842.9 Gross Margin 48.3 52.3 57.9 73.1 231.6 GM % 28.2% 26.2% 28.6% 27.1% 27.5% SG&A 44.1 41.7 48.1 49.4 183.3 % / Sales 25.8% 20.9% 23.7% 18.3% 21.7% Operating Income $1.8 $8.6 $7.2 $18.6 $36.2 % / Sales 1.1% 4.3% 3.6% 6.9% 4.3% Chart Industries - Consolidated Q1 2018 Q2 2018 Q3 2018 YTD 2018 YTD 2017 $M Sales $244.1 $277.9 $272.2 $794.2 $573.5 Gross Margin 66.9 72.8 82.3 222.0 158.5 GM % 27.4% 26.2% 30.2% 28.0% 27.6% SG&A 46.6 48.1 45.8 140.5 133.9 % / Sales 19.1% 17.3% 16.8% 17.7% 23.3% Operating Income $14.7 $19.6 $31.5 $65.8 $17.6 % / Sales 6.0% 7.1% 11.6% 8.3% 3.1% 19 © 2018 Chart Industries, Inc. Confidential and Proprietary 19
2018 Guidance Prior Guidance Prior Guidance, FY 2018 Guidance2 (Q2 2018)1 Q2 2018, Continuing Ops2 Sales Sales Sales $1.20B - $1.25B $1.04B - $1.09B $1.06B - $1.10B 7-9% organic growth Adjusted EPS $1.85 - $2.05 Adjusted EPS Adjusted EPS Inclusive of ~$0.15 impact from U.S. tax $1.64 - $1.84 $1.90 - $2.00 reform Assumes 27% full year tax rate Capital Expenditures Capital Expenditures Capital Expenditures $35M - $45M $34M - $44M $35M - $40M Inclusive of ~$11M for finalization of Inclusive of ~$11M for finalization of Inclusive of ~$11M for finalization of La Crosse, WI capacity expansion La Crosse, WI capacity expansion La Crosse, WI capacity expansion 1. The Company’s prior guidance assumed continued ownership of all assets for the entire calendar year. 2. The Company’s current guidance reflects continuing operations only, and prior guidance restated to reflect continuing operations only. 20 © 2018 Chart Industries, Inc. Confidential and Proprietary 20
2019 First Look at Guidance Full Year 2019 Sales $1.24B - $1.30B 16-%18% growth 6%-7% organic growth Adjusted EPS $2.40 - $2.75 Assumes 22% to 23% full year tax rate Excludes any large LNG related revenue Includes Full Year of VRV, s.p.a. and Excludes CAIRE Capital Expenditures $30M - $40M 21 © 2018 Chart Industries, Inc. Confidential and Proprietary
Capital Allocation Strategy Organic growth initiatives ▪ Expect $250M Free Cash Flow1 over the next 3 years Deleverage ▪ Long-term leverage target of 2x – 3x ▪ M&A Capital allocated to position the company for growth and maintain a Direct shareholder return strong balance sheet (when/if appropriate) Focused on long-term shareholder value creation 1) “Free Cash Flow” is not a measure of financial performance under U.S. GAAP and should not be considered as an alternative to net cash provided by (used in) operating activities in accordance with U.S. GAAP. The Company believes this figure is of interest to investors and facilitates useful period to period comparisons of the Company’s operating results. 22 © 2018 Chart Industries, Inc. Confidential and Proprietary
Strategic Realignment Supports Achieving 2021 Financial Targets ~ 40+% 700bps 21% Revenue Growth to $1.7B Operating Margin Expansion to ~17% of Sales from Aftermarket from 13% ▪ Leading Positions Across the Portfolio ▪ Well-Balanced Portfolio of Long-Cycle and Short-Cycle Products ▪ Consistent Growth in Operating Income, EPS and FCF Predictable, Disciplined and Profitable Growth © 2018 Chart Industries, Inc. Confidential and Proprietary
Chart Investment Highlights Leading diversified industrial global manufacturer with diverse Operate in attractive, growing and broad product offering markets Innovative technical expertise Cross-operating segment scale and and reputation collaboration Longstanding relationships with industry leading and global customers 24 © 2018 Chart Industries, Inc. Confidential and Proprietary
www.chartindustries.com © 2018 Chart Industries, Inc. Confidential and Proprietary