On the surface, Chart Industries Inc.'s (NASDAQ:GTLS) third-quarter earnings might not look so great, with expenses seemingly much higher and earnings much lower than they were this time last year. But if you get past the headline numbers and parse the company's results based on the impact of changes to its operations and the nonrecurring expenses after two acquisitions closed in the quarter, results for the maker of cryogenic gas-processing equipment were quite good.

Even better, they could bode very well for upcoming quarters. Let's take a deeper look at Chart Industries' second-quarter results, and how the company is positioned for the future.

Liquid nitrogen being poured into a storage container.

Image source: Chart Industries Inc.

If one-time expenses prove to be just that...

Chart's results didn't really improve on a GAAP (generally accepted accounting principles) basis compared to last year's third quarter:

Metric Q3 2017 Q3 2016 Year-Over-Year Change
Revenue $240.5 million $203.9 million 17.9%
Net income $1.5 million $15.0 million (90.0%)
Earnings per share $0.05 $0.48 (89.6%)
Adjusted earnings per share $0.30 $0.53 (43.4%)

Data source: Chart Industries.

In this case, Chart management said a few things should be considered. First, Chart had $7.4 million in acquisition-related expenses tied to the purchase of Hudson Products and VCT Vogel during the quarter, and $2.4 million in charges related to its restructuring efforts, which management says are now pretty much complete. These two things caused sales, general, and administrative (SG&A) expenses to increase to $56.7 million in the quarter, substantially higher than the $45 million year-over-year figure or the $50 million SG&A spending in the second quarter.

If we take management at face value that those expenses won't recur, that would mean SG&A expenses declined on a normalized (excluding nonrecurring items) basis, and should decline on a real basis in future quarters. CFO Jillian Evanko said as much on the call, stating that "the anticipated change in earnings from 2017 to 2018 associated with the restructuring will be approximately $29 million -- $14 million from restructuring costs in 2017 not repeating in 2018, and $15 million of anticipated full-year benefits from those [2017 restructuring] actions."

Here's where restructuring and acquisitions are paying off already

A big part of Chart's restructuring was consolidation of its facilities, but the early results from its two acquisitions are already boosting segment results.

The company said that its biomedical segment reported gross profit margin of 38.7%, a sequential improvement for the third quarter in a row, primarily due to the consolidation of the segment to a single facility in Georgia.

Chart's energy and chemicals segment is seeing sales and profits benefit from the Hudson acquisition, even as its legacy expenses fall. Energy and chemicals sales were $46.6 million, with $8.7 million of gross margin; $6.1 million of sales and $2.2 million of gross margin were from Hudson Products, which was part of Chart for only 10 days in the quarter. SG&A, adjusting for the additional expense related to Hudson -- which will recur to some extent as Chart integrates its operations -- was down $0.6 million sequentially, and is expected to be lower in the upcoming fourth quarter.

Looking forward

As mentioned above, Chart management is expecting the company's restructuring efforts to net $29 million in earnings gains from this year to 2018, about evenly divided between lower recurring expenses and the one-time expenses this year from the restructuring -- things like severance pay and contract termination expenses, which won't recur going forward.

The company is also seeing sales improvements in some markets, and realizing a boost from its recent acquisitions. Management updated its guidance for 2017 heading into the final quarter, boosting its revenue expectations from a range of $875 million to $925 million, to between $940 million and $975 million. Guidance for adjusted earnings per share (again, excluding those items management expects to be nonrecurring) was also boosted from between $0.60 and $0.80 to between $0.75 and $0.90.

Looking even further into the future: Chart's recent restructuring is essentially complete, both the facilities consolidation and the additional expenses. This will not only lower the company's cost structure, but should also make it more nimble and profitable. Factor in the expanded market opportunity from its recent acquisitions, and Chart is better-positioned and stronger in multiple ways heading into the end of 2017 and beyond.