ATLANTA, Oct. 22, 2020 (GLOBE NEWSWIRE) -- Chart Industries, Inc. (NASDAQ: GTLS), a leading diversified global manufacturer of highly engineered equipment for the industrial gas and energy industries, today reported results for the third quarter ended September 30, 2020. Further details can be found in the supplemental presentation included with this release. All figures in this release and supplemental presentation represent our continuing operations. Highlights include:

• Third quarter 2020 orders of $262.7 million, a sequential increase of 7.4% over the second quarter 2020 (and flat to the third quarter of 2019), including record orders in Distribution & Storage hydrogen equipment, water treatment, LNG regas, ISO Containers and repair, service & leasing
• Backlog of $684.9 million, includes record backlog in both the Distribution & Storage Eastern Hemisphere (“D&S East”) and Distribution & Storage Western Hemisphere (“D&S West”)
• Booked orders with 147 new customers in the third quarter 2020; total new customers year-to-date of 407 includes 115 specialty market customers
• Signed ten new long-term agreements (“LTAs”) with major customers including repair and service, hydrogen, LNG fueling stations
• In October 2020, completed the divestiture of the cryobiological business for $320 million in cash; proceeds used to pay down debt, close the $10 million acquisition of Worthington’s cryogenic trailer and hydrogen trailer business, and invest in McPhy for expanded commercial hydrogen opportunities
• Reported earnings per diluted share of $0.43 includes restructuring, deal costs and other one-time items resulting in adjusted earnings per diluted share of $0.63 supported by gross margin improvement of 130 bps over the third quarter 2019 and all-time low SG&A as a percent of sales of 15.9% (14.8% normalized) on a year-to-date basis
• Full year 2020 guidance of revenue of $1.18 billion and associated diluted adjusted EPS of $2.25
• Full year 2021 outlook of revenue of $1.25 billion to $1.325 billion and associated diluted adjusted EPS of $3.00 to $3.40, an increase from previous estimate of $2.90 to $3.25 per share

On October 1, 2020, we completed the divestiture of our non-core cryobiological product line for $320 million in cash and the transfer of certain pre-closing liabilities. This step is considerable in our strategic plan to take advantage of the fundamentals of the global clean energy transition with our broad set of products as well as leverage our high growth, high margin specialty products and repair, service and leasing business. The $320 million was used to pay down debt and will in part be utilized to drive further organic and inorganic investment.

As we have said on numerous occasions, we consider ourselves the provider of cryogenic equipment regardless of molecule and we believe that there will be a hybrid of renewable energy sources as the clean energy transition continues. Hydrogen will be significant in this transition, and with our 50 plus years of hydrogen equipment experience, we will play a key part in the full hydrogen value chain, enhanced by our recent inorganic investments.

On October 13, 2020, we completed the acquisition of Worthington Industries, Inc. (NYSE: WOR) cryogenic trailer and hydrogen trailer business for a purchase price of $10 million. This acquisition includes ownership of the Theodore, Alabama manufacturing site (fondly referred to internally as “Teddy Trailers”), all trailer-related intellectual property, manufacturing capabilities, equipment and repair backlog. The addition of the trailer business to Chart’s hydrogen equipment and solution offering expands our mobile equipment to larger sized transports and brings another location already certified by significant hydrogen customers. Within our first week of ownership, we have received order commitments of $6.4 million and $2.4 million for hydrogen trailers from two different customers. Additionally, we have received a $2.0 million order for gaseous hydrogen trailers from our Germany facility. Month-to-date October 21, 2020 hydrogen related order commitments have ballooned to over $10.8 million (pun intended)! This already exceeds our prior record which was this past quarter – third quarter 2020 D&S hydrogen orders were $9.3 million.

On October 14, 2020, we completed our subscription to the share capital increase of McPhy (Euronext Paris: MCPHY – ISIN: FR0011742329) for 30 million euros, which resulted in our owning 4.6% of the capital of McPhy, post completion of their 180 million euros capital offering. McPhy specializes in zero-carbon hydrogen production and distribution equipment. In conjunction with our strategic investment, Chart and McPhy also executed a commercial Memorandum of Understanding (“MOU”). The MOU between McPhy and Chart is intended to set the pace of commercial collaboration to stimulate new hydrogen demand for the parties’ respective equipment and solutions globally.

We are also excited to announce that we will participate in a U.S. Department of Energy project, Demonstration and Framework for H2@Scale in Texas and Beyond. The project is supported by DOE’s Hydrogen and Fuel Cell Technologies Office within the Office of Energy Efficiency and Renewable Energy. H2@Scale in Texas and Beyond intends to show that renewable hydrogen can be a cost-effective fuel for multiple end-use applications, including fuel cell electric vehicles, when coupled with large, baseload consumers that use hydrogen for clean, reliable stationary power. Chart is partnering with Frontier Energy, GTI, University of Texas at Austin, OneH2, Texas Gas Service, SoCalGas, Toyota Motor North America, Shell, Mitsubishi Heavy Industries, and Air Liquide to conduct two related projects: (1) UT-Austin will host a first-of-its-kind integration of commercial hydrogen production, distribution, storage, and use. The project partners will generate zero-carbon hydrogen onsite via electrolysis with solar and wind power and reformation of renewable natural gas from a Texas landfill. It is the first time that both sources of renewable hydrogen will be used in the same project. The hydrogen will power a stationary fuel cell to provide clean, reliable power for the Texas Advanced Computing Center and supply a hydrogen station with zero-emission fuel to fill a fleet of Toyota Mirai fuel cell electric vehicles and (2) At the Port of Houston, the project team will conduct a feasibility study for scaling up hydrogen production and use. The team will assess available resources, prospective hydrogen users, and delivery infrastructure, such as existing pipelines that supply hydrogen to refineries.

Through these strategic activities, in particular the divestiture, we have been able to prioritize debt pay down but also continue to invest in the business. As of September 30, 2020, our net leverage ratio was 2.92. After the completion of the divestiture, debt paydown, and the two hydrogen inorganic investments, September 30, 2020 pro forma net leverage ratio was 1.98, and we have $120.7 million cash on hand.

We continue to see strengthening demand across the business with the exception of our Energy & Chemicals FinFans (“E&C FinFans”) segment where third quarter 2020 orders were down $28.9 million when compared to the third quarter of 2019. Chart orders of $262.7 million were down slightly from the third quarter of 2019, which included a $6.6 million air cooled heat exchanger order for Calcasieu Pass. D&S West and D&S East orders increased 38% and 13.9% respectively over the third quarter of 2019. Orders continued to be very strong for LNG infrastructure related equipment, including the highest trailer order quarter since the third quarter of 2018, continued record levels for fueling stations, and record order levels for ISO containers. Orders in the third quarter of 2020 for ISO containers totaled $17 million, compared to 2019 and 2018 full year orders for this product of $17.3 million and $18.3 million. We received orders for 20 fueling stations in the quarter, contributing to our year-to-date 56 stations, a 36.6% increase over year-to-date 2019 fueling station orders.

Backlog of $638.5 million excluding Big LNG (Venture Global Calcasieu Pass) is the highest quarter since the third quarter of 2014. Both D&S East and D&S West had record backlog quarters. D&S West backlog of $179.7 million was supported by a record order quarter ($126 million). Records were set in: (a.) repair, service & leasing orders, reflecting our first full quarter of our expanded leasing assets as we booked 8 new sales leases and 18 new operating leases in the third quarter of 2020; (b.) ISO Containers; (c.) LNG regas; (d.) D&S hydrogen equipment and (e.) water treatment, another of our specialty markets. Year-to-date through September 30, 2020, water treatment orders were $10.3 million, compared to $6 million for the full year of 2019. This increase is being driven by a focus on ESG and increased regulations for water quality. Additionally, in locations such as the Middle East and Africa, facing water scarcity, desalination is a solution, and can use our equipment partnered with large CO2 dissolution systems. In the third quarter 2020, we booked orders for 6 facilities. One of them in collaboration with Air Supply Group in Egypt is an order for equipment (12 tanks and 4 vaporizers) for the Bahr Albaqar wastewater treatment plant with a capacity of 5,000,000 m3/day being constructed in Egypt by Orascom Construction & Arab Contractors Joint Venture. This facility is being described as the world’s largest for water treatment.

Water treatment contributed to our third quarter 2020 D&S specialty product orders of $55.7 million, an increase of 30.5% over the third quarter of 2019. In addition to our record water treatment orders, we also had a 64% increase in hydrogen orders and a 38% increase in HLNG vehicle tanks orders. Sequentially, D&S specialty products orders increased 17.9%, even including the second quarter 2020 HLNG vehicle tank “catch up” order following COVID-19 shutdowns of our key customers.

Year-to-date through September 30, 2020, D&S hydrogen equipment, water treatment, LNG vehicle tank and cannabis orders are higher than the full year of 2019 respective orders. Supporting this activity was our second quarter record HLNG vehicle tank orders, which were above $25 million. The third quarter 2020 HLNG vehicle tank orders were over $20 million, the second highest quarter in history. This has been driven by high demand from our customers on long-term agreements, demand for LNG over-the-road vehicles in geographies outside of Europe including South America, Russia, and Japan, and expanded applications for these tanks such as LNG buses. For example, we received an order for HLNG vehicle tanks from a prominent Japanese automotive company for their on-road trials. It is worth noting that many of these same customers are also working with us on HLH2 (horizontal liquid hydrogen) onboard vehicle tanks for future applications. As you can see, LNG infrastructure and small-scale applications are continuing to expand, and we expect that to continue over the next several years. And while big LNG projects remain on the horizon, Final Investment Decisions (“FID”) have been delayed. Yet even with those delays, in the third quarter 2020, we received an early engineering release for a big LNG terminal for brazed aluminum heat exchangers and cold boxes to be used on the natural gas pre-treatment train.

One area of focus has been to expand our long-term agreements to a broader set of customers, longer durations, and to include repair, service and refurbishment. In the third quarter of 2020, we executed ten new agreements, two LOIs and one MOU (in addition to the McPhy MOU):

• Signed a MOU with an industrial gas major for a significant new hydrogen project in Asia.
• Received a LOI and associated $800,000 order with Cimco for Molson Breweries. We are fabricating and designing all of the CO2 equipment used for Molson’s new production line.
• Executed a LOI for LNG Fueling stations and multiple semi-trailers for Renergen, who is positioned as the first commercial supplier of LNG in South Africa, targeting domestic consumers in the transport industry.
• Executed an exclusive three-year design and supply agreement with Increment Power for liquefaction, storage, truck loading and pipe for their proprietary ISTOR™ liquid air energy storage system. We expect liquid air to be a preferred solution for long-duration energy storage.
• Completed our first LTA with one of the industrial gas majors in the United States inclusive of bulk original equipment and repair and service capabilities.
• Signed five new LTAs in Europe, including 2 for multi-year LNG fueling station buildouts and repair and service.
• Executed an agreement for air-cooled heat exchanger global supply.
• Completed a Master Service Agreement with Stratolaunch for engineering solutions of a liquid oxygen tank for use on a carrier plane as part of their hypersonic aerospace vehicle program.

“The strength of our order activity in the third quarter 2020 including multiple records as well as the very strong start to October orders, even without all industrial gas customers fully back in the field due to continued COVID-19 restrictions, reflects the broad and diverse end markets that our unique product offering serves,” stated Jill Evanko, Chart’s CEO and President. “Coupling that with our recent steps to expand our hydrogen product offering, additional capacity to be as close to our customers as possible, and expanded long-term agreements sets the stage for strong 2021 results.”

Third quarter 2020 sales of $273.2 million were down 19.2% when compared to the third quarter of 2019, entirely driven by E&C FinFans. Excluding FinFans, the rest of the business’ sales were up 11.1% year over year, with D&S East up 20.9%. Year-to-date 2020 sales are down only 3.3% from 2019 year-to-date, or down 4.9% organically, reflecting the diversification and strength of our business even through this pandemic. Third quarter 2020 sales were impacted by order flow within the quarter for short lead time packaged gas products, in particular related to restaurant and beverage orders very strong recovery in late August and September, which had minimal sales impact to the third quarter 2020 but will have considerable positive sales impact in the fourth quarter. Additionally, certain timing of project deliveries from our backlog impacted the third quarter of 2020 sales but will benefit the fourth quarter 2020 and 2021.

• E&C Cryo had a large Canadian petrochemical project delayed by project owner execution, thereby increasing the full year 2021 by $12 million, with approximately $4 million per quarter of revenue, beginning in the second quarter.
• E&C FinFans had a $3.8 million West African E&P project moved to either the fourth quarter of 2020 or first quarter of 2021.
• D&S East (China) $4.1 million COVID-related delays on deliveries for Singapore and Taiwan, which we expect to be shipped in the first half of 2021.
• D&S East (EMEA) $2.5 million related to customer delays in building permits, civil work or timing of ability to receive goods. We expect this to be recognized in the first half of 2021.

Typically, our first and fourth quarter are our lowest sales and order quarters of the year. 2020 will be different in that the second quarter is expected to be our lowest order quarter of the year, and the third quarter is expected to be our lowest sales quarter of 2020.

Finally, we are very pleased with our earnings in the third quarter 2020. Even with certain timing shifts of shipments, we were able to deliver reported gross margin as a percent of sales of 28.8%, and when normalized for restructuring costs was 29.7%, bringing our year-to-date normalized gross margin as a percent of sales to 29.2%. We expect the fourth quarter gross margin as a percent of sales to be the highest of the year. SG&A of $41.1 million in the third quarter of 2020 ($38.4 million when normalized for one-time expenses) contributed to our record low SG&A as a percent of sales this year-to-date. Gross margin combined with our continued cost improvements in SG&A resulted in reported diluted earnings per share of $0.43 and adjusted diluted earnings per share of $0.63, both of which were the highest of 2020.

OUTLOOK 2020

Full year 2020 sales are expected to be approximately $1.18 billion, inclusive of $23 million of Venture Global’s Calcasieu Pass revenue in the fourth quarter of 2021. We anticipate full year diluted adjusted earnings per share to be approximately $2.25 on 35.3 million weighted average shares outstanding. Our assumed effective tax rate is 19% for the full year 2020. We continue to anticipate capex spend will be in the $30 million to $35 million range. Year-to-date capital expenditures through September 30, 2020 are $26.9 million.

OUTLOOK 2021

Full year 2021 sales are expected to be approximately $1.25 billion to $1.325 billion, inclusive of $23 million of Venture Global’s Calcasieu Pass revenue in the first quarter of 2021. There is no additional Big LNG revenue included in our outlook. As we have indicated previously, there are many moving pieces that contribute to a range, and in an effort to avoid simply taking the midpoint, our approximate revenue outlook for 2021 is $1.28 billion. We anticipate full year diluted adjusted earnings per share to be approximately $3.00 to $3.40 on 35.3 million weighted average shares outstanding, up from our previous estimate of $2.90 to $3.25 per share. Our assumed effective tax rate is 18% for the full year 2021. We expect capital expenditure spend to be in the $30 million to $35 million range.