EDGAR 10-K Filing

Company CIK: 892553
Filing Year: 2024
Filename: 892553_10-K_2024_0000892553-24-000067.json

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ITEM 1. BUSINESS
Item 1.Business
THE COMPANY
Overview
Chart Industries, Inc., a Delaware corporation incorporated in 1992 (the “Company,” “Chart,” “we,” “us,” or “our” as used herein refers to Chart Industries, Inc. and our consolidated subsidiaries, unless the context indicates otherwise), is an independent global leader in the design, engineering, and manufacturing of process technologies and equipment for gas and liquid molecule handling for the Nexus of Clean™ - clean power, clean water, clean food, and clean industrials, regardless of molecule. The Company’s unique product and solution portfolio across stationary and rotating equipment is used in every phase of the liquid gas supply chain, including engineering, service and repair from installation to preventive maintenance and digital monitoring. Chart is a leading provider of technology, equipment and services related to liquefied natural gas, hydrogen, biogas and carbon capture among other applications. Chart is committed to excellence in environmental, social and corporate governance (“ESG”) issues both for its company as well as its customers. With 64 global manufacturing locations and over 50 service centers from the United States to Asia, Australia, India, Europe and South America, we maintain accountability and transparency to our team members, suppliers, customers and communities.
Our primary customers are large, multinational producers and distributors of hydrocarbon, hydrogen and industrial gases and their end-users. We sell our products and services to more than 7,000 customers worldwide, having developed long-standing relationships with leading companies in the gas production, distribution and processing industries as well as those involved in liquefied natural gas (LNG), chemicals and industrial gases. Our well-established relationships extend to truck manufacturers in addition to those in other clean energy industries such as biofuels, hydrogen, water and carbon capture. Our customers include: Linde, Air Liquide, Air Products, ExxonMobil, Baker Hughes, Wison, Kathairos, Chick-fil-A, Samsung, United Launch Alliance, and Blue Origin, some of whom have been purchasing our products for over 30 years.
We have achieved this competitive position by capitalizing on our technical expertise, broad product and service offering, reputation for a high quality global manufacturing footprint, and by focusing on attractive, growth markets. We have an established sales and customer support presence across the globe with manufacturing operations in the United States, Asia, India, Africa and Europe. For the years ended December 31, 2023, 2022 and 2021, we generated sales of $3.4 billion, $1.6 billion, and $1.3 billion, respectively.
On March 17, 2023, we completed the acquisition of Howden (“Howden”) from affiliates of KPS Capital Partners (the “Acquisition”). The acquisition purchase price was $4.4 billion. We financed the purchase price for the Howden Acquisition with proceeds from borrowings under our senior secured revolving credit facility and term loans due March 2030, common and preferred stock issuance and a private offering of secured notes and unsecured notes. Howden, headquartered in the United Kingdom, is a leading global provider of mission critical air and gas handling products providing service and support to customers around the world in highly diversified end markets and geographies. The combination of Chart and Howden is complementary and furthers our global leadership position in highly engineered process technologies and products serving the Nexus of CleanTM - clean power, clean water, clean food and clean industrials.
Segments, Applications and Products
Our reportable segments, which are also our operating segments, are currently as follows: Cryo Tank Solutions, Heat Transfer Systems, Specialty Products and Repair, Service & Leasing.
Our Cryo Tank Solutions segment, which has principal operations in the United States, Europe and Asia, serves geographic regions around the globe, supplying bulk, microbulk and mobile equipment used in the storage, distribution, vaporization, and application of industrial gases and certain hydrocarbons. Our Heat Transfer Systems segment, with principal operations in the United States and Europe, also serves geographic regions globally, supplying mission critical engineered equipment and systems used in the separation, liquefaction, and purification of hydrocarbon and industrial gases that span gas-to-liquid applications. Operating globally, our Specialty Products segment supplies products used in specialty end-market applications including hydrogen, LNG, biofuels, carbon capture, food and beverage, aerospace, lasers and water treatment, among others. Our Heat Transfer Systems, Specialty Products and Cryo Tank Solutions segments also include products from the Howden Acquisition such as compressors, blowers and fans, rotary heaters and steam turbines. Our Repair, Service & Leasing segment provides installation, service, repair, maintenance, and refurbishment of products globally in addition to providing equipment leasing solutions as well as expanded aftermarket products, services and service locations related to the Howden Acquisition.
Further information about these segments is located in Note 4, “Segment and Geographic Information,” of our consolidated financial statements included under Item 15, “Exhibits and Financial Statement Schedules” of this Annual Report on Form 10-K.
Cryo Tank Solutions
Cryo Tank Solutions (19.0% of consolidated sales for the year ended December 31, 2023) designs and manufactures cryogenic solutions for the storage and delivery of cryogenic liquids used in industrial gas and LNG applications. With operations in the United States, Latin America, Europe and Asia, our Cryo Tank Solutions segment serves customers globally.
Industrial Gas Applications
We design and manufacture bulk and packaged gas cryogenic solutions for the storage, distribution, vaporization, and application of industrial gases. Our products span the entire spectrum of industrial gas demand from small customers requiring cryogenic packaged gases to large users requiring custom engineered cryogenic storage systems in both mobile and stationary applications. Using sophisticated vacuum insulation technology, our cryogenic storage systems are able to store and transport liquefied industrial gases and hydrocarbon gases at temperatures from 0° Fahrenheit to temperatures nearing absolute zero. Industrial gas applications include any end-use of the major elements of air (nitrogen, oxygen, and argon), including manufacturing, welding, electronics and medical. Principal customers for industrial applications are global industrial gas producers and distributors. Other end-users of our equipment include chemical producers, manufacturers of electrical components, health care organizations and companies in the oil and natural gas industries.
Demand for industrial gas applications is driven primarily by the significant installed base of users of molecules, as well as new applications and distribution technologies for cryogenic liquids. Our competitors tend to be regionally focused while we supply a broad range of systems on a worldwide basis. We also compete with several suppliers owned by the global industrial gas producers and in some cases they are also our customer. From a technology perspective, we compete with compressed gas alternatives or on-site generated gas supply.
LNG Applications
We supply cryogenic solutions for the storage, distribution, regasification, and use of LNG. LNG may be utilized as an alternative to other fossil fuels such as diesel, propane, or fuel oil in transportation or off pipeline applications. Examples include transit bus transportation, locomotive propulsion, marine, and power generation in remote areas. We refer to our LNG distribution products as a “Virtual Pipeline,” as the traditional natural gas pipeline is replaced with cryogenic distribution to deliver the gas to the end-user. We supply cryogenic trailers, ISO containers, bulk storage tanks, loading facilities, and regasification equipment specially configured for delivering LNG into Virtual Pipeline applications. We sell LNG applications around the world from various Eastern and Western Hemisphere facilities to numerous end-users, energy companies, and gas distributors. Additionally, we supply large vacuum insulated storage tanks as equipment for purchasers of standard liquefaction plants sold by our Heat Transfer Systems segment.
Demand for LNG applications is driven by diesel displacement initiatives, environmental and energy security considerations, and the associated cost of equipment. Our competitors tend to be regionally focused or product-specific, while we supply a broad range of solutions required by LNG applications.
Heat Transfer Systems
Heat Transfer Systems (26.4% of consolidated sales for the year ended December 31, 2023) facilitates major natural gas, petrochemical processing, petroleum refining, power generation and industrial gas companies in the production or processing of their products. With primary manufacturing capabilities in the United States and Europe, Heat Transfer Systems serves customers globally. This segment supplies mission critical engineered equipment and technology-driven process systems used in the separation, liquefaction, and purification of hydrocarbon and industrial gases that span most gas-to-liquid applications.
Natural Gas Processing (including Petrochemical) Applications
We provide natural gas processing solutions that facilitate the progressive cooling and liquefaction of hydrocarbon mixtures for the subsequent recovery or purification of component gases. Primary products used in these applications include brazed aluminum heat exchangers, cold boxes, pressure vessels, Core-in-Kettle® and air cooled heat exchangers. Our brazed aluminum 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. Our cold boxes are highly engineered systems that incorporate brazed aluminum heat exchangers, pressure vessels, and interconnecting piping used to significantly reduce the temperature of gas mixtures to liquefy component gases so that they can be separated and purified for further use in
multiple energy, industrial, scientific, and commercial applications. Chart’s air cooled heat exchangers are used to cool or condense fluids to allow for further processing and for cooling gas compression equipment. Our process technology includes standard and modular plant solutions and comprises detailed mechanical design, Chart manufactured proprietary equipment and all other plant items required to liquefy pipeline quality natural gas. Customers for our natural gas processing applications include large companies in the hydrocarbon processing industry, as well as engineering, procurement and construction (“EPC”) contractors.
Demand for these applications is primarily driven by the growth in the natural gas liquids (or NGLs) separation and other natural gas segments of the hydrocarbon processing industries, including LNG. In the future, management believes that continuing efforts by petroleum producing countries to better utilize stranded natural gas and associated gases which historically had been flared, present a promising source of demand. We have several competitors for our heat exchangers and fans, including many smaller fabrication-only facilities around the world. Competition with respect to our more specialized brazed aluminum heat exchangers includes a small number of global (European and Asian) manufacturers.
LNG Applications
We provide process technology, liquefaction capabilities, and independent mission critical equipment for the liquefaction of natural gas (LNG), including small to mid-scale facilities, floating LNG applications, and large base-load export facilities. We are a leading supplier to EPC firms where we provide equipment and process technology, providing an integrated and optimized approach to the project. These “Concept-to-Reality” process systems incorporate many of Chart’s core products, including brazed aluminum heat exchangers, Core-in-Kettle® heat exchangers, cold boxes, air cooled heat exchangers, pressure vessels, and pipe work. These systems are used in global LNG projects, for both local LNG production as well as LNG export terminals. Our proprietary IPSMR® (Integrated Pre-cooled Single Mixed Refrigerant) and IPSMR+® liquefaction process technology offers lower capital expenditure requirements than competing processes measured on a per ton of LNG produced basis, along with very competitive operating costs.
Demand for LNG applications is primarily driven by increased use and global trade in natural gas (transported as LNG) since natural gas offers significant cost and environmental advantages over other fossil fuels. Demand for LNG for fuel applications is also driven by diesel displacement and continuing efforts by petroleum producing countries to better utilize stranded natural gas and previously flared gases. We have several competitors for these applications, including leading industrial gas companies, other brazed aluminum heat exchanger manufacturers, and other equipment fabricators to whom we also act as a supplier of equipment, including heat exchangers and cold boxes.
HVAC, Power and Refining Applications
Our air cooled heat exchangers and axial cooling fans are used in HVAC, power and refining applications. Demand for HVAC is driven by growing construction activities and demand for energy efficient devices, and there is also positive impact from growing industrial production. Refining demand continues to be driven by United States shale production, benefiting from low cost shale oil, natural gas liquids and gas resulting in high utilization and increased investment. Our air cooled heat exchangers are used in each phase of the refining process to condense and cool gases and fluids. Worldwide power use is projected to grow 50% through 2050. This growth is focused in regions where strong economic growth is driving demand, particularly in Asia.
Specialty Products
Specialty Products (24.2% of consolidated sales for the year ended December 31, 2023) supplies highly-engineered equipment and process technologies used in specialty end-market applications for hydrogen, LNG, biofuels, carbon capture, food and beverage, aerospace, space exploration, lasers, helium and water treatment, among others. Leveraging our global manufacturing presence, Specialty Products serves customers globally. We have made a number of acquisitions over the past three years to capitalize on clean power, clean industrials, clean water and clean food, beverages and agriculture market opportunities within this segment. These include the acquisitions of Howden, BlueInGreen, LLC, Sustainable Energy Solutions, Inc., Cryogenic Gas Technologies, Inc., L.A. Turbine, AdEdge Holdings, LLC and Earthly Labs Inc.
We supply a wide range of solutions used in the production, storage, distribution and end-use of hydrogen, including liquefaction technology and equipment and compression equipment. We also provide highly-specialized mobility and transportation equipment for use with both hydrogen and LNG, including onboard vehicle tanks and fueling stations. More specifically, our horizontal LNG vehicle tanks are widely used onboard heavy-duty trucks and buses while our recently-released liquid hydrogen vehicle tank enjoys many of the same characteristics. Chart also manufactures specialized cryogenic railcars used to transport not only LNG, but a number of other gaseous and liquid molecules. Additionally, we design and manufacture nitrogen dosing products and other equipment used in packaging as well as the food and beverage industry. These applications include processing, preservation and beverage carbonation.
Our water treatment technology is also offered through the Specialty Products segment. Serving both municipal and industrial end markets globally, our water treatment process technology utilizes Chart’s cryogenic storage and vaporization equipment to efficiently deliver dissolved oxygen, carbon dioxide and ozone into water. Our technology is used for oxygenation, pH adjustment, oxidation and odor control with modular and mobile solution options. Additional water treatment capabilities include but are not limited to adsorption, filtration, ion exchange, reverse osmosis and flow reversal processes, to name a few. Our expanded solution set effectively addresses a wide range of organic and inorganic contaminants including arsenic and per- and polyfluorinated alkylated substances (PFAS), often referred to as “forever chemicals.” Other equipment and technology offered through Specialty Products have applications in carbon capture and space industries. We also offer cryogenic components, including turboexpanders, vacuum insulated pipe (“VIP”), specialty liquid nitrogen, or LN2, end-use equipment and cryogenic flow meters.
We design and manufacture solutions for the liquefaction, storage, distribution, regasification and use of hydrogen as both a liquid and a gas. We have over 57 years of experience in manufacturing hydrogen-related equipment. There are a number of commercial uses for hydrogen including applications in the chemical, refining and space industries. More recently, hydrogen is increasingly being used as an alternative fuel for the power transportation sectors, with both onshore and marine applications. Given the global movement towards a lower carbon footprint, there are also a number of other potential uses for hydrogen on the horizon including power generation. To help enable this transition, we supply ISO containers and transport trailers for both gaseous and liquid hydrogen, in addition to fuel stations and other fueling solutions. We also manufacture various types of heat exchangers for hydrogen applications including brazed aluminum, air cooled and shell & tube varieties.
Howden Ventsim™ DESIGN is the world's bestselling mine ventilation software, used and trusted by over 2,500 mines, universities, consultants, government and research organizations. Ventsim™ DESIGN is a complete integrated mine and tunnel ventilation software package for the design and testing of ventilation circuits including airflow, pressure, heat, gases, power, radon, fire and many other types of ventilation information. Ventsim™ CONTROL utilizes intelligent software connected to hardware devices to remotely monitor, control and automate airflow, heating and cooling to deliver safer, more productive and lower cost ventilation for mines.
Demand for many of our specialty applications including hydrogen is primarily driven by the global, public and private sector movement towards a lower-carbon footprint, reduced greenhouse gas emissions and overall sustainability trends. These efforts are being guided not only by government policies and related global climate goals, but also by social and environmental actions by various stakeholders. Management believes hydrogen in particular will play an ever-increasing role in the energy transition, given its zero emission characteristics and naturally abundant supply. Similarly, management believes other equipment offered by Chart’s Specialty Products segment will be required to achieve global greenhouse gas reduction targets and other environmental-related goals, including our carbon capture and biofuel technology, water treatment offerings and specialty packaging equipment. Demand for LNG is also likely to continue benefiting from the ongoing energy transition given its environmental advantages over other fossil fuels. While we have competitors in a portion of these applications, many of our specialty product markets have limited competition.
Repair, Service & Leasing
Our Repair, Service & Leasing segment (30.4% of consolidated sales for the year ended December 31, 2023) provides installation, service, repair, maintenance, and refurbishment of our products globally in addition to providing equipment leasing solutions. With primary operations in the United States and Europe, our Repair, Service & Leasing segment serves customers globally. We have made a number of acquisitions over the years to expand our global footprint including Howden, CSC Cryogenic Service Center AB, Skaff, LLC and VCT Vogel GmbH.
To support the products and solutions we sell, our Repair, Service & Leasing segment offers services through the entire lifecycle of our products, which is unique and unparalleled in the markets we serve. Our focus is to build relationships with plant stakeholders, from process and mechanical engineers to operations and maintenance personnel, focusing on the optimized performance and lifespan of Chart proprietary equipment. Aftermarket services include extended warranties, plant start-up, parts, 24/7 support, monitoring and process optimization, as well as repair, maintenance, and upgrades. We perform plant services on equipment, including brazed aluminum heat exchangers, cold boxes, etc.
We also install, service, maintain and refurbish bulk and packaged gas cryogenic solutions for the storage, distribution, vaporization, and application of industrial gases. With multiple service locations in the Americas, Europe and Asia, we not only service Chart products, we also service numerous other manufacturers including many of our competitors. We provide services for storage vessels, VIP, reconfiguration, relocation, trailers, ISO containers, vaporizers, and other gas to liquid equipment.
Additionally, we offer a variety of leasing options on certain types of Chart equipment, providing our customers with the flexibility to quickly respond to seasonal or sudden increases in demand with similar flexibility when existing equipment is
being repaired or refurbished. We offer short and long-term operating leases as well as lease to own options with up to a ten-year term. Typical equipment we offer with leasing options are standard trailers, bulk and micro bulk storage systems, vaporizers and delivery tankers. Chart also offers Treatment-as-a-Service options for water treatment customers in addition to remote monitoring services.
The Howden Acquisition expanded our offerings in the areas of spare parts, retrofits, service and software. Howden Uptime is a digital platform that seamlessly integrates data related to rotating equipment’s performance. The system combines active inputs, such as temperature, pressure and vibration, with reference parameters from manuals, specifications and maintenance reports. When the data is analyzed, it provides a unique foundation for maintaining and enhancing operational excellence.
Demand for services provided by this segment is being driven by our substantial existing and growing install base, exceptional reputation for high-quality service, breadth of services offered and expanded geographic footprint. Additionally, this segment is benefiting from new long-term agreements being executed that incorporate parts, repair and aftermarket service components not included in prior agreements. Our competitors tend to be regionally focused while we supply a broader array of services on a worldwide basis.
Engineering and Product Development
Our engineering and product development activities are focused primarily on developing new and improved technologies, solutions and equipment for the users of molecules, hydrocarbons and industrial gases across all industries served. Our engineering, technical, and commercial employees actively assist customers in specifying their needs and in determining appropriate products to meet those needs. Portions of our engineering expenditures typically are charged to customers, either as separate items or as components of product cost.
Competition
We believe we can compete effectively around the world and that we are a leading competitor in the industries we serve. 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 industries we serve. Price and terms of sale are also important competitive factors. Although we believe we rank among the leaders in each of the markets we serve and because our equipment is specialized and independent third-party prepared market share data is not available, it is difficult to know for certain our exact position in our markets. We base our statements about industry and market positions on our reviews of annual reports and published investor presentations of our competitors and augment this data with information received by marketing consultants conducting competition interviews and our sales force and field contacts. For information concerning competition within a specific segment of our business, see the descriptions provided under segment captions in this Annual Report on Form 10-K.
Marketing
We market our products and services in each of our segments throughout the world primarily through direct sales personnel and independent sales representatives as well as distributors. The technical and custom design nature of our products requires a professional, highly trained sales force. We use independent sales representatives and distributors to market our products and services in certain foreign countries and in certain North American regions. These independent sales representatives supplement our direct sales force in dealing with language and cultural matters. Our domestic and foreign independent sales representatives earn commissions on sales, which vary by product type.
Backlog
For information about our backlog, including backlog by business segment, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Customers
We sell our products primarily to gas producers, distributors, and end-users across energy, industrial, power, HVAC and refining applications in countries throughout the world. We capture clean power, clean water, clean food and clean industrials as our unique offering for the Nexus of CleanTM. Sales to our top ten customers accounted for 25%, 38%, and 39% of consolidated sales in 2023, 2022 and 2021, respectively.
Our sales to particular customers fluctuate from period to period, but the global producers and distributors of hydrocarbon and industrial gases as well as their suppliers tend to be a consistently large source of revenue for us. Our supply contracts are generally contracts for “requirements” only. Also, generally our contracts may be canceled at any time, subject to possible cancellation charges. To minimize credit risk from trade receivables, we review the financial condition of potential customers in relation to established credit requirements before sales credit is extended and we monitor the financial condition of customers to help ensure timely collections and to minimize losses. In addition, for certain domestic and foreign customers, we require advance payments, letters of credit, bankers’ acceptances, and other such guarantees of payment. Certain customers also require us to issue letters of credit or performance bonds, particularly in instances where advance payments are involved, as a condition to placing the order.
Intellectual Property
Although we have a number of patents, trademarks, and licenses related to our business, no one of them or related group of them is considered by us to be of such importance that its expiration or termination would have a material adverse effect on our business. In general, we depend upon technological capabilities, manufacturing quality control, and application of know-how, rather than patents or other proprietary rights, in the conduct of our business.
Raw Materials and Suppliers
We manufacture most of the products we sell. The raw materials used in manufacturing include aluminum products (including sheets, bars, plate, and piping), stainless steel products (including sheets, plates, heads, and piping), palladium oxide, carbon steel products (including sheets, plates, and heads), valves and gauges, and fabricated metal components. Most raw materials are available from multiple sources of supply, although shortages and delays to certain materials have been experienced during the past three years, as a result of market disruptions caused by macroeconomic conditions such as inflation and supply chain disruptions. We have long-term relationships with our raw material suppliers and other vendors. Commodity components of our raw material (aluminum, stainless steel and carbon steel) could experience additional levels of volatility during 2024 and may have a relational impact on raw material pricing. Subject to certain short-term risks related to our suppliers as discussed under Item 1A. “Risk Factors,” we foresee no acute shortages of any raw materials that would have a material adverse effect on our operations.
Human Capital Resources
As of January 31, 2024, we had 11,637 employees, including 3,717 domestic employees and 7,920 international employees.
We are party to one collective bargaining agreement with the International Association of Machinists and Aerospace Workers (“IAM”) covering 350 employees at our La Crosse, Wisconsin heat exchanger facility. Effective February 7, 2021, we entered into a five-year agreement with the IAM which expires on February 6, 2026. Certain international employees are part of trade unions or work councils across Europe, the Americas, Asia and Africa. We have proactive engagement and believe we have positive relations with our employees, including those represented by trade unions and work councils. We have had no material work stoppages.
Chart is committed to attracting and retaining the best talent. Therefore, investing, developing, and maintaining human capital is critical to our success. As a global manufacturing company, a meaningful number of our employees are engineers or trained trade or technical workers focusing on advanced manufacturing. Chart prioritizes several measures and objectives in managing its human capital assets, including, among others, employee safety and wellness, talent acquisition and retention, employee engagement, development, and training, diversity and inclusion, and compensation and pay equity. In 2023, we did not experience any employee-generated work stoppages or disruptions.
Our key human capital measures include employee safety, turnover, absenteeism, recruitment and productivity. We frequently benchmark our compensation practices and benefits programs against those of comparable industries and in the geographic areas where our facilities are located. We believe that our compensation and employee benefits are competitive and allow us to attract and retain skilled and unskilled labor throughout our organization. Our notable health, welfare and retirement benefits include company-subsidized health insurance, 401(k) plan with company matching contributions, tuition assistance program and paid time off.
Employee Safety and Wellness
The safety and well-being of our employees and their families has been a top priority as we continue to serve our customers. Chart has ongoing communications about safety performance at all levels of the organization. Our head of global environmental, health and safety (EHS) coordinates all EHS matters with our sites, regularly updates our executive staff on our
EHS matters and coordinates with our Global Safety Council, which meets monthly to discuss accidents, injuries, near misses, trends and lessons learned. Council members or executive management present metrics and other safety information at every executive staff and Board of Directors meeting. The cross-functional Global Safety Council is dedicated to reaching our target of zero accidents. All Chart employees have Stop Work Authority and are expected to use it if there is concern that any task or procedure could be unsafe. Each site recognizes and rewards employees based on local and global objectives such as achieving safety performance milestones and completing regular audits. All Chart sites implement our Occupational Health and Safety Program Requirements for training, reporting, accident investigation, auditing, implementation, and compliance. The policy encourages employee involvement, a crucial element of a successful safety program, by requiring each site to create a safety committee and safety suggestion program.
Employee Engagement, Development and Training
Chart strives to recruit, hire, develop and promote a diverse workforce. It is our goal to provide each employee a challenging and rewarding experience that allows for personal and professional development. We encourage and support the growth and development of our employees and, wherever possible, seek to fill positions by promotion and transfer from within the organization. We advance continual learning and career development through ongoing performance and development conversations or evaluations with employees, internally and externally developed training programs, and educational reimbursement programs. In connection with the latter, reimbursement is available to employees enrolled in pre-approved degree or certification programs at accredited institutions that teach skills or knowledge relative to our business or otherwise to the development of the employee’s skill set or knowledge base. In addition, we routinely invest in seminar, conference and other training or continuing education events for our employees. We believe education empowers our people to identify and adopt best practices that will enhance our sustainability. Our university relations program includes recruitment, co-operative programs and internships. To train a local workforce, our manufacturing facilities forge relationships with community colleges and trade schools and pay their employees based on the job and level of skill.
Other examples of Chart employee development programs include our Emerging Leaders program, Welding Council, Rotational Engineering program, Engineering Fellows, Key Experts program, and Operations Leaders Program, in addition to the aforementioned Global Safety Council. Chart’s Emerging Leaders accelerated development program assigns immersive, high-impact projects to high-potential employees across the organization to prepare them for advancement to executive roles. Engineering Fellows are long-tenured employees who are recognized externally and internally as having contributed to our success in unique ways while our Key Experts are widely recognized within Chart for their engineering expertise and contributions to the field. Together, Fellows and Key Experts manage the rotational engineering program to mentor and develop our early-career engineers.
We have several employee resource groups including our Network of Women and Chart Pride, which were started to help create a more equitable workplace and offer career advancement opportunities across Chart. Chart has also partnered with Historically Black Colleges and Universities (HBCUs) to drive a more diverse and inclusive workforce. Our Chief Executive Officer and President, Jillian Evanko, has also signed the CEO Action for Diversity & Inclusion™ pledge, and our Global Diversity & Inclusion Committee is working with our 11,637 team members to ensure all of our key themes and priorities work seamlessly together in our culture for the best employee experience.
We strive to maintain an inclusive environment free from discrimination of any kind, including sexual or other discriminatory harassment. All employees are expected to follow our Code of Ethics, related policies, laws, rules and regulations in all countries where we operate. In addition, employees have a duty to report violations and have multiple avenues available through which inappropriate behavior can be reported, such as supervisors, managers, ethics representatives or the confidential, anonymous Chart Ethics Hotline. Designated ethics representatives are always available for employees who have questions or need guidance on compliance. All reports of inappropriate behavior are promptly investigated with appropriate action taken to stop such behavior. Chart investigates alleged incidents and communicates the resolution to the person who reported it. We prohibit retaliation and threats of retaliation against anyone who reports a possible violation or misconduct in good faith and protect employees with our Whistleblower Policy.
Environmental Matters
We monitor and review our procedures and policies for compliance with environmental laws and regulations. Our management is familiar with these regulations and supports an ongoing program to maintain our adherence to required standards. Our operations have historically included and currently include the handling and use of hazardous and other regulated substances, such as various cleaning fluids used to remove grease from metal that are subject to federal, state, local, and foreign environmental laws and regulations. These regulations impose limitations on the discharge of pollutants into the soil, air, and water and establish standards for their handling, management, use, storage, and disposal.
We are involved with environmental compliance, investigation, monitoring, and remediation activities at certain of our owned or formerly owned manufacturing facilities and at one owned facility that is leased to a third party. We believe that we are currently in substantial compliance with all known environmental regulations. We accrue for certain environmental remediation-related activities for which commitments or remediation plans have been developed or for which costs can be reasonably estimated. These estimates are determined based upon currently available facts regarding each facility. Actual costs incurred may vary from these estimates due to the inherent uncertainties involved. Future expenditures relating to these environmental remediation efforts are expected to be made over the coming years as ongoing costs of remediation programs. We do not believe that these regulatory requirements have had a material effect on our capital expenditures, earnings, or competitive position. We are not anticipating any material capital expenditures in 2024 relating to our existing business that are directly related to regulatory compliance matters. Although we believe we have adequately provided for the cost of all known environmental conditions, additional contamination, the outcome of disputed matters, or changes in regulatory posture could result in more costly remediation measures than budgeted, or those we believe are adequate or required by existing law. We believe that any additional liability in excess of amounts accrued which may result from the resolution of such matters will not have a material adverse effect on our financial position, liquidity, cash flows, or results of operations.
Available Information
Additional information about the Company is available at www.chartindustries.com. On the Investor Relations page of the website, the public may obtain free copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable following the time that they are filed with, or furnished to, the Securities and Exchange Commission (“SEC”). Additionally, we have posted our Code of Ethical Business Conduct and Officer Code of Ethics on our website, which are also available free of charge to any shareholder interested in obtaining a copy. References to our website do not constitute incorporation by reference of the information contained on such website, and such information is not part of this Form 10-K.

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ITEM 1A. RISK FACTORS
Item 1A.Risk Factors
Investing in our common stock involves risk. You should carefully consider the risks described below, as well as the other information contained in this Annual Report on Form 10-K in evaluating your investment in us. If any of the following risks actually occur, our business, financial condition, operating results, or cash flows could be harmed materially. Additional risks, uncertainties, and other factors that are not currently known to us or that we believe are not currently material may also adversely affect our business, financial condition, operating results or cash flows. In any of these cases, you may lose all or part of your investment in us.
Risks Related to Our Business
The markets we serve are subject to cyclical demand and vulnerable to economic downturn, which could harm our business and make it difficult to project long-term performance.
Demand for our products depends to a significant extent upon the level of capital and maintenance expenditures by many of our customers and end-users, in particular those customers in the global hydrocarbon and industrial gas markets. These customers’ expenditures historically have been cyclical in nature and vulnerable to economic downturns. Decreased capital and maintenance spending by these customers could have a material adverse effect on the demand for our products and our business, financial condition, and results of operations. In addition, this historically cyclical demand limits our ability to make accurate long-term predictions about the performance of our company.
The loss of, or significant reduction or delay in, purchases by our largest customers could reduce our sales and profitability.
While we sell to more than 7,000 customers, sales to our top ten customers accounted for 25%, 38%, and 39% of consolidated sales in 2023, 2022 and 2021, respectively. While our sales to particular customers fluctuate from period to period, sales to large customers, including the global producers, distributors and users of energy and industrial gases and their suppliers, tend to be a consistently large source of our sales.
The loss of any of our major customers, consolidation of our customers, or a decrease or delay in orders or anticipated spending by such customers could materially reduce our sales and profitability. Although order activity in 2023 increased year over year, we continued to experience energy price volatility and our customers’ adjusted project timing.
We may fail to successfully integrate companies that provide complementary products or technologies.
An important component of our recent business strategy has been the acquisition of businesses that complement our existing products and services. Such a strategy involves the potential risks inherent in assessing the value, strengths, weaknesses, contingent or other liabilities, and potential profitability of acquisition candidates and in integrating the operations of acquired companies. In addition, any acquisitions of businesses with foreign operations or sales may increase our exposure to risks inherent in doing business outside the United States.
As part of this acquisition strategy, we have closed on several acquisitions in the past three years including the Howden Acquisition. These acquisitions included new businesses that are complementary to our existing LNG and gas technologies. The failure to achieve the anticipated cost savings or commercial synergies of our recent significant acquisitions or recognize the anticipated market opportunities or integration from our acquisitions could have a material adverse effect on our business, financial condition, and results of operations. Our ability to realize the expected cost savings and commercial synergies depend on factors such as operating difficulties, increased operating costs, competitors and customers, delays in implementing initiatives and general economic or industry conditions. We may be required to make significant cash expenditures to achieve such cost savings and commercial synergies and we cannot be assured that these expenditures will not be higher than anticipated. Furthermore, there can be no assurances that such cost savings measures will not cause disruptions or other negative impacts to our operations, business or revenues.
There can be no assurances that these acquisitions, including Howden, will be successful or that we will realize the expected benefits currently anticipated. For example, we may not be able to maintain the levels of revenue, earnings or operating efficiency that we and Howden have achieved or might have achieved separately. The business and financial performance of us and Howden are subject to certain risks and uncertainties, including the risk of the loss of, or changes to, our and its relationships with customers. We may be unable to achieve the same growth, revenues and profitability that we and Howden have achieved in the past.
Potential acquisition opportunities become available to us from time to time, and we periodically engage in discussions or negotiations relating to potential acquisitions, including acquisitions that may be material in size or scope to our business. Any acquisition may or may not occur and, if an acquisition does occur, it may not be successful in enhancing our business.
If we are unable to successfully control our costs and efficiently manage our operations, it may lead to increased costs and reduced profitability.
We have implemented cost savings initiatives to align our business with current and expected economic conditions. Our ability to operate our business successfully and implement our strategies depends, in part, on our ability to allocate our resources optimally in each of our facilities in order to maintain efficient operations. If we are unable to align our cost structure in response to prevailing economic conditions on a timely basis, or if implementation or failure to implement any cost structure adjustments has an adverse impact on our business or prospects, then our financial condition, results of operations, and cash flows may be negatively affected.
It is critical that we appropriately manage our planned capital expenditures. If we fail to manage the projects related to these capital expenditures in an effective and timely manner, we may lose the opportunity to obtain some new customer orders or the ability to operate our business efficiently. Even if we effectively implement the projects, the orders needed to support the capital expenditures or increased capacity may not be obtained, may be delayed, or may be less than expected, which may result in sales or profitability at lower levels than expected.
Our results of operations could materially suffer if we are unable to obtain sufficient pricing for our products and services to meet our profitability expectations.
If we are unable to obtain favorable pricing for our products and services in a timely manner, our revenues and profitability could materially suffer. Furthermore, the prices we are able to charge for our products and services are affected by a number of other factors, including:
•general economic and political conditions;
•our customers’ desire to reduce their costs;
•the competitive environment;
•our ability to accurately estimate our costs, including our ability to estimate the impact of inflation on our costs over long-term contracts; and
•the procurement practices of our customers.
Our inability to pass increased prices along to our customers in a timely manner could have a material adverse effect on our business, financial condition or results of operations.
We depend on the availability of certain key suppliers; if we experience difficulty with a supplier, we may have difficulty finding alternative sources of supply.
The cost, quality, and availability of raw materials, certain specialty metals and specialized components used to manufacture our products are critical to our success. The materials and components we use to manufacture our products are sometimes custom made and may be available only from a few suppliers, and the lead times required to obtain these materials and components can often be significant. We rely on a limited number of suppliers for some of these materials, including special grades of aluminum used in our brazed aluminum heat exchangers and compressors included in some of our product offerings. If our vendors for these materials and components are unable to meet our requirements, fail to make shipments in a timely manner, or ship defective materials or components, we could experience a shortage or delay in supply or fail to meet our contractual requirements, which would adversely affect our results of operations and negatively impact our cash flow and profitability.
We carry goodwill and indefinite-lived intangible assets on our balance sheet, which are subject to impairment testing and could subject us to significant non-cash charges to earnings in the future if impairment occurs.
As of December 31, 2023, we had goodwill and indefinite-lived intangible assets of $3,516.9 million, which represented approximately 38.6% of our total assets. Goodwill and indefinite-lived intangible assets are not amortized but are tested for impairment annually in the fourth quarter or more often if events or changes in circumstances indicate a potential impairment may exist. Factors that could indicate that our goodwill or indefinite-lived intangible assets are impaired include a decline in our stock price and market capitalization, lower than projected operating results and cash flows, and slower growth rates in our industry. Our stock price historically has shown volatility and often fluctuates significantly in response to market and other factors. Declines in our stock price, lower operating results and any decline in industry conditions in the future could increase the risk of impairment. Impairment testing incorporates our estimates of future operating results and cash flows, estimates of allocations of certain assets and cash flows among reporting segments, estimates of future growth rates, and our judgment regarding the applicable discount rates used on estimated operating results and cash flows. If we determine at a future time that an impairment exists, it may result in a significant non-cash charge to earnings and lower stockholders’ equity.
A public health crisis could cause disruptions to our operations which could adversely affect our business in the future.
A significant public health crisis could cause disruptions to our operations similar to the effects of the Covid-19 pandemic. It affected our business due to the impact on the global economy, including its effects on transportation networks, raw material availability, production efforts and customer demand for our products. Our ability to predict and respond to future changes resulting from a potential health crisis is uncertain. Even after a public health crisis subsides, there may be long-term effects on our business practices and customers in economies in which we operate that could severely disrupt our operations and could have a material adverse effect on our business, results of operations, cash flows and financial condition.
Our backlog is subject to modification, termination or reduction of orders, which could negatively impact our sales.
Our backlog is comprised of the portion of firm signed purchase orders or other written contractual commitments received from customers that we have not recognized as sales. The dollar amount of backlog as of December 31, 2023 was $4,278.8 million. Our backlog can be significantly affected by the timing of orders for large projects, and the amount of our backlog at December 31, 2023 is not necessarily indicative of future backlog levels or the rate at which backlog will be recognized as sales. Although modifications and terminations of our orders may be fully or partially offset by cancellation fees, customers can, and sometimes do, terminate or modify these orders. We cannot predict whether cancellations will accelerate or diminish in the future. Cancellations of purchase orders, indications that the customers will not perform or reductions of product quantities in existing contracts could substantially and materially reduce our backlog and, consequently, our future sales. Our failure to replace canceled orders could negatively impact our sales and results of operations. We did not have any significant cancellations in 2023, 2022 and 2021.
Due to the nature of our business and products, we may be liable for damages based on product liability and warranty claims.
Due to the high pressures and low temperatures at which many of our products are used, the inherent risks associated with concentrated industrial and hydrocarbon gases, and the fact that some of our products are relied upon by our customers or end users in their facilities or operations or are manufactured for relatively broad industrial, transportation, or consumer use, we face an inherent risk of exposure to claims (which we have been subject to from time to time and some of which were substantial including the cryobiological storage tank lawsuits as discussed in Item 3. “Legal Proceedings” relating to our since divested
Cryobiological business, but for which we retained and settled certain liabilities) in the event that the failure, use, or misuse of our products results, or is alleged to result, in death, bodily injury, property damage, or economic loss. We believe that we meet or exceed existing professional specification standards recognized or required in the industries in which we operate. Although we currently maintain product liability coverage, which has generally been adequate for existing product liability claims and for the continued operation of our business, it includes customary exclusions and conditions, it may not cover certain specialized applications such as aerospace-related applications, and it generally does not cover warranty claims. Additionally, such insurance may become difficult to obtain or be unobtainable in the future on terms acceptable to us. We had net out-of-pocket exposure with respect to the March 2023 settlement related to the Cryobiological business in the amount of $73.0 million. A successful product liability claim or series of claims against us, including one or more consumer claims purporting to constitute class actions or claims resulting from extraordinary loss events, in excess of or outside our insurance coverage, or a significant warranty claim or series of claims against us, could materially decrease our liquidity, impair our financial condition, and adversely affect our results of operations.
Energy policies could change or expected changes could fail to materialize which could adversely affect our business or prospects.
Energy policy can develop rapidly in the global markets we serve. Within the last few years, significant developments have taken place, primarily in international markets that we serve with respect to energy policy and related regulations. We anticipate that energy policy will continue to be an important regulatory priority globally, as well as on a national, state, and local level. As energy policy continues to evolve, the existing rules and incentives that impact the energy-related segments of our business may change. It is difficult, if not impossible, to predict what changes in energy policy might occur in the future and the timing of potential changes and their impact on our business.
Our exposure to fixed pricing on certain long-term customer contracts and performance guarantees, could negatively impact our financial results.
A portion of our sales has historically been derived from long-term contracts which may involve long-term fixed price commitments to customers or guarantees of equipment or process performance and which are sometimes difficult to execute. To the extent that any of our contracts are delayed, we fail to satisfy a performance guarantee, our subcontractors fail to perform, contract counterparties successfully assert claims against us, the original cost estimates in these or other contracts prove to be inaccurate or the contracts do not permit us to pass increased costs on to our customers, profitability from a particular contract may decrease or project losses may be incurred, which, in turn, could decrease our sales and overall profitability.
Fluctuations in currency exchange or interest rates may adversely affect our financial condition and operating results.
A significant portion of our revenue and expense is incurred outside of the United States. We must translate revenues, income and expenses, as well as assets and liabilities into U.S. dollars using exchange rates during or at the end of each period. Fluctuations in currency exchange rates have had and will continue to have an impact on our financial condition, operating results, and cash flow. While we monitor and manage our foreign currency exposure with use of derivative financial instruments to mitigate these exposures, fluctuations in currency exchange rates may materially impact our financial and operational results.
In addition, we are exposed to changes in interest rates. While our senior secured and senior unsecured notes have a fixed cash coupon, other instruments, primarily borrowings under our senior secured revolving credit facility due October 2026 are exposed to variable interest rates. Our convertible notes contain cumulative dividends that can be paid in cash or equity shares, in certain circumstances. The impact of a 100 basis point increase in interest rates to our senior secured revolving credit facility is discussed in the “Quantitative and Qualitative Disclosures About Market Risk” section of this Annual Report. We also have increased interest rate exposure with respect to certain indebtedness incurred in connection with the Howden Acquisition.
As a global business, we are exposed to economic, political, and other risks in different countries which could materially reduce our sales, profitability or cash flows, or materially increase our liabilities.
Since we manufacture and sell our products worldwide, our business is subject to risks associated with doing business internationally. In 2023, 2022 and 2021, 59%, 42%, and 56%, respectively, of our sales occurred in international markets. Our future results could be harmed by a variety of factors, including:
•changes in foreign currency exchange rates;
•exchange controls and currency restrictions;
•changes in a specific country’s or region’s political, social or economic conditions, particularly in emerging markets;
•civil unrest, the threat of or actual military conflict between nations, other turmoil or outbreak of disease or illness, such as Covid-19, in any of the countries in which we sell our products or in which we or our suppliers operate;
•tariffs, other trade protection measures, as discussed in more detail below, and import or export licensing requirements;
•potential adverse changes in trade agreements between the United States and foreign countries, including the recently enacted United States-Mexico-Canada Agreement (USMCA), among the United States, Canada and Mexico;
•potentially negative consequences from changes in U.S. and international tax laws;
•difficulty in staffing and managing geographically widespread operations;
•differing labor regulations;
•requirements relating to withholding taxes on remittances and other payments by subsidiaries;
•different regulatory regimes controlling the protection of our intellectual property;
•restrictions on our ability to own or operate subsidiaries, make investments or acquire new businesses in these jurisdictions;
•restrictions on our ability to repatriate dividends from our foreign subsidiaries;
•difficulty in enforcement of contractual obligations under non-U.S. law;
•transportation delays or interruptions;
•changes in regulatory requirements; and
•the burden of complying with multiple and potentially conflicting laws.
Our international operations and sales also expose us to different local political and business risks and challenges. In addition, at times some of our sales are to suppliers that perform work for foreign governments, and as a result we may be subject to the political risks associated with foreign government projects. For example, certain foreign governments may require suppliers for a project to obtain products solely from local manufacturers or may prohibit the use of products manufactured in certain countries.
Our operations in markets such as Asia, Australia, India, Europe, and South America, may cause us difficulty due to greater regulatory barriers than in the United States, the necessity of adapting to new regulatory systems, problems related to entering new markets with different economic, social and political systems and conditions, and significant competition from the primary participants in these markets, some of which may have substantially greater resources than us. In addition, unstable political conditions or civil unrest, including political instability or threatened military actions could negatively impact our order levels and sales in a region or our ability to collect receivables from customers or operate or execute projects in a region.
Changes in U.S. trade policy, tariff and import/export regulations may have a material adverse effect on our business, financial condition and results of operations.
Our international operations and transactions also depend upon favorable trade relations between the United States and the foreign countries in which our customers and suppliers have operations. Changes in U.S. or international social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories or countries where we currently sell our products or conduct our business, as well as any negative sentiment toward the United States as a result of such changes, could adversely affect our business.
U.S. government policy changes and proposals may result in greater restrictions and economic disincentives on international trade. The implementation of new tariffs and other changes in U.S. trade policy could trigger retaliatory actions by affected countries, and certain foreign governments have instituted or have been considering imposing trade sanctions on certain U.S. goods. We do business that could be impacted by changes to the trade policies of the United States and foreign countries (including governmental action related to tariffs, international trade agreements, or economic sanctions). Such changes have the potential to adversely impact the U.S. economy or certain sectors thereof, our industry and the global demand for our products. We may not succeed in developing and implementing policies and strategies to counter the foregoing factors effectively in each location where we do business and the foregoing factors may cause a reduction in our sales, profitability or cash flows, or cause an increase in our liabilities.
Data privacy and data security considerations could impact our business.
The interpretation and application of data protection laws are uncertain and evolving. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data security practices. Complying with these various laws is
difficult and could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business.
Despite our efforts to protect sensitive information and confidential and personal data, comply with applicable laws, rules and regulations and implement data security measures, our facilities and systems may be vulnerable to security breaches and other data loss, including cyber-attacks. In addition, it is not possible to predict the impact on our business of the future loss, alteration or misappropriation of information in our possession related to us, our employees, former employees, customers, suppliers or others. This could lead to negative publicity, legal claims, theft, modification or destruction of proprietary information or key information, damage to or inaccessibility of critical systems, manufacture of defective products, production downtimes, operational disruptions and other significant costs, which could adversely affect our reputation, financial condition and results of operations.
We are subject to potential insolvency or financial distress of third parties.
We are exposed to the risk that third parties to various arrangements who owe us money or goods and services, or who purchase goods and services from us, will not be able to perform their obligations or continue to place orders due to insolvency or financial distress. If third parties fail to perform their obligations under arrangements with us, we may be forced to replace the underlying commitment at current or above market prices or on other terms that are less favorable to us or we may have to write off receivables in the case of customer failures to pay. If this happens, whether as a result of the insolvency or financial distress of a third party or otherwise, we may incur losses, or our results of operations, financial position or liquidity could otherwise be adversely affected.
Failure to protect our intellectual property and know-how could reduce or eliminate any competitive advantage and reduce our sales and profitability, and the cost of protecting our intellectual property may be significant.
We rely on a combination of internal procedures, nondisclosure agreements and intellectual property rights assignment agreements, as well as licenses, patents, trademarks and copyright law to protect our intellectual property and know-how. Our intellectual property rights may not be successfully asserted in the future or may be invalidated, circumvented or challenged. For example, we frequently explore and evaluate potential relationships and projects with other parties, which often require that we provide the potential partner with confidential technical information. While confidentiality agreements are typically put in place, there is a risk the potential partner could violate the confidentiality agreement and use our technical information for its own benefit or the benefit of others or compromise the confidentiality. In addition, the laws of certain foreign countries in which our products may be sold or manufactured do not protect our intellectual property rights to the same extent as the laws of the United States. In addition, the United States has transitioned from a “first-to-invent” to a “first-to-file” patent system, which means that between two identical, pending patent applications, the first inventor no longer receives priority on the patent to the invention. As a result, the Leahy-Smith America Invents Act may require us to incur significant additional expense and effort to protect our intellectual property. Failure or inability to protect our proprietary information could result in a decrease in our sales or profitability.
We have obtained and applied for some U.S. and foreign trademark and patent registrations and will continue to evaluate the registration of additional trademarks and patents, as appropriate. We cannot guarantee that any of our pending applications will be approved. Moreover, even if the applications are approved, third parties may seek to oppose or otherwise challenge them. A failure to obtain registrations in the United States or elsewhere could limit our ability to protect our trademarks and technologies and could impede our business. Further, the protection of our intellectual property may require expensive investment in protracted litigation and the investment of substantial management time and there is no assurance we ultimately would prevail or that a successful outcome would lead to an economic benefit that is greater than the investment in the litigation. The patents in our patent portfolio are scheduled to expire from 2024 to 2042.
In addition, we may be unable to prevent third parties from using our intellectual property rights and know-how without our authorization or from independently developing intellectual property that is the same as or similar to ours, particularly in those countries where the laws do not protect our intellectual property rights as fully as in the United States. We compete in a number of industries (e.g., heat exchangers and cryogenic storage) that are small or specialized, which makes it easier for a competitor to monitor our activities and increases the risk that ideas will be stolen. The unauthorized use of our know-how by third parties could reduce or eliminate any competitive advantage we have developed, cause us to lose sales or otherwise harm our business or increase our expenses as we attempt to enforce our rights.
We may be required to make expenditures in order to comply with environmental, health and safety laws and climate change regulations, or incur additional liabilities under these laws and regulations.
We are subject to numerous environmental, health and safety laws and regulations that impose various environmental controls on us or otherwise relate to environmental protection and various health and safety matters, including the discharge of
pollutants in the air and water, the handling, use, treatment, storage and clean-up of solid and hazardous materials and wastes, the investigation and remediation of soil and groundwater affected by hazardous substances and the requirement to obtain and maintain permits and licenses. These laws and regulations often impose strict, retroactive and joint and several liability for the costs and damages resulting from cleaning up our or our predecessors’ facilities and third-party disposal sites. Compliance with these laws generally increases the costs of transportation and storage of raw materials and finished products, as well as the costs of storing and disposing waste, and could decrease our liquidity and profitability and increase our liabilities. If we are found to have violated any of these laws, we may become subject to corrective action orders and fines or penalties, and incur substantial costs, including substantial remediation costs and commercial liability to our customers. Further, we also could be subject to future liability resulting from conditions that are currently unknown to us that could be discovered in the future.
We are currently remediating or developing work plans for remediation of environmental conditions involving certain current facilities. We have also been subject to environmental liabilities for other sites where we formerly operated or at locations where we or our predecessors did or are alleged to have operated. To date, our environmental remediation expenditures and costs for otherwise complying with environmental laws and regulations have not been material, but the uncertainties associated with the investigation and remediation of contamination and the fact that such laws or regulations change frequently makes predicting the cost or impact of such laws and regulations on our future operations uncertain. Stricter environmental, safety and health laws, regulations or enforcement policies could result in substantial costs and liabilities to us and could subject us to more rigorous scrutiny. Consequently, compliance with these laws could result in significant expenditures, as well as other costs and liabilities that could decrease our liquidity and profitability and increase our liabilities.
There is a growing political and scientific consensus that emissions of greenhouse gases alter the composition of the global atmosphere in ways that are affecting the global climate. Various stakeholders, including legislators and regulators, stockholders and non-governmental organizations, as well as companies in many business sectors, are considering ways to reduce greenhouse gas emissions. New regulations could result in product standard requirements for our global businesses but because any impact is dependent on the design of the mandate or standard, we are unable to predict its significance at this time. Furthermore, the potential physical impacts of climate change on our customers, and therefore on our operations, are speculative and highly uncertain, and would be particular to the circumstances developing in various geographical regions. These may include changes in weather patterns (including drought and rainfall levels), water availability, storm patterns and intensities, and temperature levels. These potential physical effects may adversely impact the cost, production, sales and financial performance of our operations.
We could be obligated to make significant contributions to our pension plans, some of which are underfunded, and we contribute to a multi-employer plan for collective bargaining U.S. employees, which is underfunded.
Certain U.S. hourly and salaried employees are covered by our Chart defined benefit pension plan. The defined benefit pension plan has been frozen since February 2006. As of December 31, 2023, the projected benefit obligation under our pension plan was $48.1 million, and the value of the assets of the plan was $54.0 million. Although our Chart pension plan was fully funded as of December 31, 2023, the performance of assets in the plan and other related factors beyond our control have the potential to adversely affect the funding status of our pension plan in the future.
As part of the Howden Acquisition, we assumed responsibility for ten additional defined benefit plans outside of the United States, which are predominantly in Germany, covering certain employees of Howden. As of December 31, 2023, the aggregate projected benefit obligation of the Howden pension plans was $43.0 million, and the aggregate value of the assets of the Howden pension plans was $41.8 million, resulting in the Howden pension plans being underfunded by $1.2 million in the aggregate.
We are also a participant in a multi-employer plan, which is underfunded. Among other risks associated with multi-employer plans, contributions and unfunded obligations of the multi-employer plan are shared by the plan participants and we may inherit unfunded obligations if other plan participants withdraw from the plan or cease to participate. Additionally, if we elect to stop participating in the multi-employer plan, we may be required to pay amounts related to withdrawal liabilities associated with the underfunded status of the plan. If the performance of the assets in our Chart pension plan, the Howden pension plans or the multi-employer plan does not meet expectations or if other actuarial assumptions are modified, our required pension contributions for future years could be higher than we expect, which may negatively impact our results of operations, cash flows and financial condition.
We operate in many different jurisdictions, and we could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-corruption laws.
The U.S. Foreign Corrupt Practices Act (“FCPA”) and similar worldwide anti-corruption laws generally prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business. Our internal policies mandate compliance with these anti-corruption laws. We operate in many parts of the world that have
experienced corruption to some degree, and in certain circumstances, strict compliance with anti-corruption laws may conflict with local customs and practices. Despite our training and compliance programs, we cannot assure you that our internal control policies and procedures always will protect us from reckless or criminal acts committed by our employees or agents. Our continued expansion outside the United States, including in developing countries, could increase the risk of such violations in the future. Violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our results of operations or financial condition.
Our operations could be impacted by the effects of severe weather.
Some of our operations, including our operations in the U.S. Gulf Coast, are located in geographic regions and physical locations that are susceptible to physical damage and longer-term economic disruption from severe weather. We also could make significant future capital expenditures in hurricane-susceptible or other severe weather locations from time to time. These weather events can disrupt our operations, result in damage to our properties and negatively affect the local economy in which these facilities operate. Severe weather may cause production or delivery delays as a result of the physical damage to the facilities, the unavailability of employees and temporary workers, the shortage of or delay in receiving certain raw materials or manufacturing supplies and the diminished availability or delay of transportation for customer shipments, any of which may have an adverse effect on our sales and profitability. Although we maintain insurance subject to certain deductibles, which may cover some of our losses, that insurance may become unavailable or prove to be inadequate.
We are subject to regulations governing the export of our products.
Our export activities are subject to regulation, including the U.S. Treasury Department’s Office of Foreign Assets Control’s regulations. We believe we are in compliance with these regulations and maintain robust programs intended to maintain compliance. However, unintentional lapses in our compliance or uncertainties associated with changing regulatory requirements could result in future violations (or alleged violations) of these regulations. Any violations may subject us to government scrutiny, investigation and civil and criminal penalties and may limit our ability to export our products.
As a provider of products to the U.S. government, we are subject to certain federal rules, regulations, audits and investigations, the violation or failure of which could adversely affect our business.
From time to time, certain of our products and services may be provided to the U.S. government; and, therefore, we must comply with and are affected by laws and regulations governing purchases by the U.S. government. Although we are not subject to all contractor requirements, the generally more extensive requirements governing “Government contract laws and regulations” affect how we do business with our government customers and, in some instances, impose added costs on our business. For example, a violation of specific laws and regulations could result in the imposition of fines and penalties or the termination of our contracts or debarment from bidding on contracts. In some instances, these laws and regulations impose terms or rights that are more favorable to the government than those typically available to commercial parties in negotiated transactions.
Tax rules are subject to change, and unanticipated changes in our effective tax rate could adversely affect our future results.
Our future results of operations could be affected by changes in the effective tax rate as a result of changes in tax laws, regulations and judicial rulings. In December 2017, the Tax Cuts and Jobs Act of 2017 was signed into law in the United States, which among other things, lowered the federal corporate income tax rate from 35% to 21% and moved the country towards a territorial tax system with a one-time mandatory tax on previously deferred foreign earnings of foreign subsidiaries. As of December 31, 2023, provisions of the law as currently constructed are expected to change for future tax years. Although our effective tax rate decreased during 2018, there can be no assurances that any expected benefit from the Tax Cuts and Jobs Act will be maintained long-term given political and other uncertainties.
The Organisation for Economic Co-operation and Development (OECD)’s base erosion and profit shifting (BEPS) project is an area we continue to monitor due to its global reach. The OECD, which represents a coalition of member countries, has issued recommendations that, in some cases, would make substantial changes to numerous long-standing tax positions and principles. As countries, in which we operate, continue to pass laws to adopt the tenants of the BEPS Framework (tiered adoption over multiple years), we will continue to monitor potential impacts to the Company’s tax stature. These contemplated changes have begun adoption by various countries during 2023, could increase tax uncertainty and may adversely affect our provision for income taxes. We will continue to monitor developments and impacts to our provision for income taxes.
Our effective tax rate could also be adversely affected by changes in the mix of earnings and losses in countries with differing statutory tax rates, certain non-deductible expenses arising from share-based compensation, the valuation of deferred
tax assets and liabilities and changes in accounting principles. In addition, we are subject to income tax audits by many tax jurisdictions throughout the world. Although we believe our income tax liabilities are reasonably estimated and accounted for in accordance with applicable laws and principles, an adverse resolution of one or more uncertain tax positions in any period could have a material impact on the results of operations for that period.
Dividend requirements associated with the Series B Mandatory Convertible Preferred Stock that Chart issued to fund a portion of the Howden Acquisition subject it to certain risks.
In December 2022, we issued 8,050,000 depositary shares, each representing a 1/20th interest in a share of Chart’s Series B Mandatory Convertible Preferred Stock (the “Mandatory Convertible Preferred Stock”). Any future payments of cash dividends, and the amount of any cash dividends we pay, on the Mandatory Convertible Preferred Stock will depend on, among other things, business condition, our financial condition, earnings and liquidity, as well as other factors that our board of directors (or an authorized committee thereof) may consider relevant. Dividends will accumulate from the initial issue date and, to the extent that we are legally permitted to pay dividends and our board of directors, or an authorized committee thereof, declares a dividend payable with respect to the Mandatory Convertible Preferred Stock, we will pay such dividends in cash, or subject to certain limitations, by delivery of shares of our common stock or through any combination of cash and shares of our common stock, as determined by our board of directors in its sole discretion. Any unpaid dividends will continue to accumulate.
The terms of the Mandatory Convertible Preferred Stock further provide that if dividends have not been declared and paid for six or more dividend periods whether or not for consecutive dividend periods, the holders of such shares of Mandatory Convertible Preferred Stock, voting together as a single class with holders of all other preferred stock of equal rank having similar voting rights, will be entitled at our next annual or special meeting of stockholders to vote for the election of a total of two additional members of our board of directors, subject to certain limitations.
Risks Related to Our Leverage
Our leverage and future debt service obligations could adversely affect our business, financial condition, and results of operations and our ability to meet our payment obligations under our debt.
We are leveraged and have future debt service obligations. As of December 31, 2023, our total indebtedness was $3,963.9 million. In addition, at that date, under our senior secured revolving credit facility, we had $272.0 million of letters of credit and bank guarantees outstanding and borrowing capacity of approximately $625.2 million. Through separate facilities, our subsidiaries had $134.3 million of letters of credit and bank guarantees outstanding at December 31, 2023.
Our level of indebtedness could have significant consequences, including:
•reduced availability of cash for our operations and other business activities;
•difficulty in obtaining financing in the future;
•exposure to risk of increased interest rates on variable rate indebtedness under our senior secured revolving credit facility and term loans;
•vulnerability to general economic downturns and adverse industry conditions;
•increased competitive disadvantage compared to our competitors that have less debt or are less leveraged;
•adverse customer reaction to our debt levels;
•inability to comply with covenants in, and potential for default under, our debt instruments; and
•failure to refinance any of our debt. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.”
If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to sell assets, seek additional capital or seek to restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. We may be unable to consummate those asset sales to raise capital or sell assets at prices that we believe are fair and proceeds that we do receive may be inadequate to meet any debt service obligations then due.
We may incur substantial additional indebtedness, which could further exacerbate the risks that we face.
We may be able to incur substantial additional indebtedness in the future. The terms of our debt instruments do not fully prohibit us from doing so. Our senior secured revolving credit facility provides commitments of up to $1,000.0 million, approximately $625.2 million of which would have been available for future borrowings (after giving effect to letters of credit and bank guarantees outstanding) as of December 31, 2023. See Item 7. “Management’s Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources - Debt Instruments and Related Covenants.” If new debt is added to our current debt levels, the related risks that we now face could intensify.
The terms of our existing debt may limit our ability to finance future operations or capital needs or engage in other business activities that may be in our interest.
The terms of our existing debt impose, and the terms of any future indebtedness may impose, operating and other restrictions on us and our subsidiaries. Such restrictions affect or will affect, and in various circumstances limit or prohibit, among other things, our ability and the ability of our subsidiaries to:
•incur or guarantee additional indebtedness;
•create liens;
•pay dividends based on our leverage ratio and make other distributions in respect of our capital stock;
•redeem or buy back our capital stock based on our leverage ratio;
•make certain investments or certain other restricted payments;
•enter into a new line of business;
•sell or transfer certain kinds of assets;
•enter into certain types of transactions with affiliates; and
•effect mergers or consolidations.
The senior secured revolving credit facility due October 2026 also requires us to achieve certain financial and operating results and maintain compliance with specified financial ratios. Our ability to comply with these ratios may be affected by events beyond our control.
The restrictions contained in the senior secured revolving credit facility and our indentures could:
•limit our ability to plan for or react to market or economic conditions or meet capital needs or otherwise restrict our activities or business plans; and
•adversely affect our ability to finance our operations, acquisitions, investments or strategic alliances or other capital needs or to engage in other business activities that would be in our interest.
A breach of any of these covenants could result in a default under our debt agreements. If an event of default occurs under our debt agreements, which includes an event of default under the other debt agreements, the lenders or holders could elect to declare all indebtedness outstanding, together with accrued and unpaid interest, to be immediately due and payable. The lenders under our senior secured revolving credit facility will also have the right in these circumstances to terminate any commitments they have to provide further financing.
If we were unable to repay or otherwise refinance this indebtedness when due, our lenders could sell the collateral securing the senior secured revolving credit facility due October 2026 and the secured notes, which constitutes substantially all of our domestic wholly-owned subsidiaries’ assets.
Our 1.00% Convertible Senior Subordinated Notes due November 2024 have certain fundamental change and conditional conversion features and our Senior Secured Notes due 2030 and our Senior Unsecured Notes due 2031 have certain change in control features which, if triggered, may adversely affect our financial condition.
If a fundamental change occurs under our 1.00% Convertible Senior Subordinated Notes due November 2024, the holders of the convertible notes may require us to purchase for cash any or all of the convertible notes. In addition, upon the occurrence of certain kinds of change of control, we will be required to offer to repurchase all of the outstanding secured notes and unsecured notes at 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase. However, there can be no assurance that we will have sufficient funds at the time of the fundamental change or change in control to purchase all of the convertible notes, secured notes or unsecured notes delivered for purchase, and we may not be able to arrange necessary financing on acceptable terms, if at all. Likewise, if one of the conversion contingencies of our convertible notes is triggered, holders of convertible notes will be entitled to convert the convertible notes at any time during specified periods.
We are subject to counterparty risk with respect to the convertible note hedge and capped call transactions associated with our 1.00% Convertible Senior Subordinated Notes due November 2024.
The option counterparties for our convertible note hedging arrangements are financial institutions, and we will be subject to the risk that any or all of them might default under the convertible note hedge and capped call transactions. Our exposure to
the credit risk of the option counterparties is not secured by any collateral. Global economic conditions have from time to time resulted in the actual or perceived failure or financial difficulties of many financial institutions. If an option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under the convertible note hedge and capped call transactions with that option counterparty. Our exposure will depend on many factors but, generally, the increase in our exposure will be correlated to the increase in the market price and in the volatility of our common stock. In addition, upon a default by an option counterparty, we may suffer adverse tax consequences and more dilution than we currently anticipate with respect to our common stock. We can provide no assurances as to the financial stability or viability of the option counterparties.
Risks Related to the Trading Market for Our Preferred and Common Stock
The issuance of common stock upon conversion of our 1.00% Convertible Senior Subordinated Notes due November 2024 or 6.75% Series B Mandatory Convertible Preferred Stock could cause dilution to the interests of our existing stockholders.
As of December 31, 2023, we had $258.7 million aggregate principal amount of our 1.00% Convertible Senior Subordinated Notes due November 2024. Prior to the close of business on the business day immediately preceding August 15, 2024, the convertible notes will be convertible only upon satisfaction of certain conditions. Holders may convert their 1.00% convertible notes at their option at any time after August 15, 2024 until the close of business on the second scheduled trading day immediately preceding November 15, 2024. As a result of attaining these specified market price conditions, the notes are convertible in the first quarter of 2024, although there have been no significant conversions to date. On December 31, 2020, we amended the Indenture governing our 1.00% Convertible Senior Subordinated Notes due November 2024 to eliminate share settlement thus leaving us with two settlement options: (1) cash settlement or (2) cash for par and any combination of cash and shares for the excess settlement amount above the $258.7 million aggregate principal amount of our 1.00% Convertible Senior Subordinated Notes due November 2024. We currently intend to settle conversions of 1.00% convertible notes through a combination of the payment of cash and issuance of shares, with payments of cash up to the aggregate principal amount of the convertible notes to be converted and delivering shares of our common stock in respect of the remainder, if any, of our conversion obligation in excess of the aggregate principal amount of the notes being converted.
In addition, unless earlier converted, each share of the Mandatory Convertible Preferred Stock will automatically convert on or around December 15, 2025 into between 7.0520 and 8.4620 shares of our common stock, subject to customary anti-dilution adjustments. At any time prior to December 15, 2025, a holder of Mandatory Convertible Preferred Stock may elect to convert such holder’s shares of the Mandatory Convertible Preferred Stock, in whole or in part, at the minimum conversion rate of 7.0520 shares of common stock per share. If a fundamental change occurs on or prior to December 15, 2025, holders of the Mandatory Convertible Preferred Stock will have the right to convert their shares of Mandatory Convertible Preferred Stock, in whole or in part, into shares of common stock at a conversion rate based on the effective date of the fundamental change and the price paid (or deemed paid) per share of our common stock in such fundamental change. We may also pay declared dividends in cash or, subject to certain limitations, in shares of common stock or in any combination of cash and common stock. Conversion of the Mandatory Convertible Preferred Stock into common stock, as well as the payment of dividends in shares of common stock, could be dilutive to our existing stockholders.
Our common stock ranks junior to the Mandatory Convertible Preferred Stock with respect to dividends and amounts payable in the event of our liquidation, dissolution or winding-up of our affairs.
Our common stock ranks junior to the Mandatory Convertible Preferred Stock with respect to the payment of dividends and amounts payable in the event of our liquidation, dissolution or winding-up of our affairs. This means that, unless accumulated dividends have been paid or set aside for payment on all the outstanding Mandatory Convertible Preferred Stock through the most recently completed dividend period, no dividends may be declared or paid on our common stock subject to limited exceptions. Likewise, in the event of our voluntary or involuntary liquidation, dissolution or winding-up of our affairs, no distribution of our assets may be made to holders of our common stock until we have paid to holders of the Mandatory Convertible Preferred Stock a liquidation preference equal to $1,000 per share plus accumulated and unpaid dividends.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B.Unresolved Staff Comments
Not applicable.

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ITEM 2. PROPERTIES
Item 2.Properties
We occupy 186 facilities throughout the world totaling approximately 13.0 million square feet with the majority devoted to manufacturing, assembly, and storage, none of which are individually material. Of these facilities, approximately 8.6 million square feet are owned, and 4.4 million square feet are occupied under operating leases. Because Chart is global in nature, with substantial inter-segment cooperation, properties are often used by multiple business segments.
Regulatory Environment
We are subject to federal, state, and local regulations relating to the discharge of materials into the environment, production and handling of hazardous and regulated materials, and the conduct and condition of our production facilities. We do not believe that these regulatory requirements have had a material effect on our capital expenditures, earnings, or competitive position. We are not anticipating any material capital expenditures in 2024 that are directly related to regulatory compliance matters. We are also not aware of any pending or potential regulatory changes that would have a material adverse impact on our business.

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ITEM 3. LEGAL PROCEEDINGS
Item 3.Legal Proceedings
In connection with our divestiture of our cryobiological products business on October 1, 2020, Chart retained certain potential liabilities, including claims in connection with lawsuits filed in the U.S. District Court for the Northern District of California and the San Francisco Superior Court during the second quarter of 2018 against Chart and other defendants with respect to the alleged failure of a stainless steel cryobiological storage tank at the Pacific Fertility Center in San Francisco, California.
As previously disclosed, the Company reached a settlement in late January 2023 to resolve these cases. In the fourth quarter of 2022, the Company recorded a loss contingency accrual of $305.6 and a related loss receivable of $231.9 from insurance proceeds from these combined cases, which were recognized in our consolidated balance sheet as of December 31, 2022. The net loss of approximately $73.0 was recognized in discontinued operations and represented the expected out-of-pocket payments in connection with these settlements. The settlement was finalized and funded on March 20, 2023; therefore the previously disclosed loss contingency accrual and related loss receivable are no longer recorded as of December 31, 2023. This settlement and the net out-of-pocket payments do not reflect third-party recoveries which the Company is pursuing with respect to the underlying facts in these cases, and which the Company currently anticipates will result in recoveries approximating one-quarter or more of the Company’s out-of-pocket, net payments.
We continue to evaluate the merits of the sole remaining lawsuit that was not included in the settlement in light of the information available. Based on the status of that lawsuit, a current estimate of reasonably possible losses in that case cannot be made; however, the Company does not anticipate the potential exposure to be material. The Company does not intend to report on this lawsuit quarterly, absent developments that would impact the materiality of the claim.
We are occasionally subject to various legal claims related to performance under contracts, product liability, taxes, employment matters, environmental matters, intellectual property, and other matters incidental to the normal course of our business. Based on our historical experience in litigating these claims, as well as our current assessment of the underlying merits of the claims and applicable insurance, if any, management believes that the final resolution of these matters, including the sole remaining Pacific Fertility Center case described above, will not have a material adverse effect on our financial position, liquidity, cash flows, or results of operations, except that our results of operations for any particular reporting period may be adversely affected by any potential or actual loss that is accrued in such period. Future developments may, however, result in resolution of these legal claims in a way that could have a material adverse effect.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Chart’s common stock is traded on the New York Stock Exchange under the symbol “GTLS.” As of January 31, 2024, there were 203 holders of record of our common stock. Since many holders hold shares in “street name,” we believe that there are a significantly larger number of beneficial owners of our common stock than the number of record holders.
Apart from the dividend requirements associated with the Series B Mandatory Convertible Preferred Stock that we issued to fund a portion of the Acquisition, we do not currently intend to pay any cash dividends on our common stock, and instead intend to retain earnings, if any, for debt reduction, organic capital expenditures for productivity and capacity and potential acquisitions. The amounts available to us to pay future cash dividends may be restricted by our 2026 Credit Facilities to the extent our pro forma leverage ratio exceeds certain targets. Any decision to declare and pay dividends in the future will be made at the discretion of our board of directors and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions, and other factors that our board of directors may deem relevant.
Cumulative Total Return Comparison
Set forth below is a line graph comparing the cumulative total return of a hypothetical investment in the shares of common stock of Chart with the cumulative return of a hypothetical investment in each of the S&P MidCap 400 Index, S&P SmallCap 600 Index and our current and previous Peer Group Indexes based on the respective market prices of each such investment on the dates shown below, assuming an initial investment of $100 on December 31, 2018, including reinvestment of dividends, if any.
December 31,
2018 2019 2020 2021 2022 2023
Chart Industries, Inc. $ 100.00 $ 103.78 $ 181.13 $ 245.26 $ 177.20 $ 209.64
S&P MidCap 400 Index 100.00 126.17 143.39 178.85 155.42 180.90
S&P SmallCap 600 Index 100.00 122.74 136.53 173.04 145.10 168.23
Peer Group Index - Current 100.00 132.76 158.82 182.55 189.89 193.52
Peer Group Index - Previous 100.00 138.62 166.22 191.85 200.96 203.79
The cumulative total return comparison presents both the S&P MidCap 400 Index and S&P SmallCap 600 Index. During 2023, we transitioned from the S&P SmallCap 600 Index to the S&P MidCap 400 Index, which better aligns to the performance of our peers.
We select the peer companies that comprise the Peer Group Index solely on the basis of objective criteria. These criteria result in an index composed of oil field equipment/service and other comparable industrial companies. During 2023, we modified our peer group to include certain competitors of Howden. The cumulative total return comparison presents both the current and previous Peer Group Index. The current Peer Group Index is comprised of Air Products and Chemicals, Inc., Atlas Copco AB, Baker Hughes Company, Barnes Group Inc., Burckhardt Compression Holding AG, ChampionX Corporation, Cheniere Energy, Inc., CIMC Enric Holdings Limited, CNH Industrial N.V., EnPro Inc., ESCO Technologies Inc., Franklin Electric Co., Inc., IDEX Corporation, ITT Inc., New Fortress Energy LLC, NIKKISO CO., LTD., Plug Power Inc., SPX Corporation and Worthington Enterprises, Inc. The previous Peer Group Index is comprised of Air Products and Chemicals, Inc., Baker Hughes Company, Barnes Group Inc., ChampionX Corporation, Cheniere Energy, Inc., CIMC Enric Holdings Limited, CNH Industrial N.V., EnPro Inc., ESCO Technologies Inc., Franklin Electric Co., Inc., Harsco Corporation, IDEX Corporation, ITT Inc., New Fortress Energy LLC, NIKKISO CO., LTD., Plug Power Inc., SPX Corporation and Worthington Enterprises, Inc.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Issuer Purchases of Equity Securities
Period Total Number of Shares Purchased (1)
Average Price Paid Per Share (1)
Total Number of Shares Purchased As Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
October 1 - 31, 2023 - $ - - $ -
November 1 - 30, 2023 13 127.28 - -
December 1 - 31, 2023 51 130.16 - -
Total 64 $ 129.58 - $ -
_______________
(1)Includes shares of common stock surrendered to us during the fourth quarter of 2023 by participants under our share-based compensation plans to satisfy tax withholding obligations relating to the vesting or payment of equity awards for an aggregate purchase price of approximately $8,300. The total number of shares repurchased represents the net shares issued to satisfy tax withholding. All such repurchased shares were subsequently retired during the three months ended December 31, 2023.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6.[Reserved]

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our results of operations and financial condition should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements. Actual results may differ materially from those discussed below. See “Forward-Looking Statements” at the end of this discussion and Item 1A. “Risk Factors” for a discussion of the uncertainties, risks and assumptions associated with this discussion.
Overview
We are a leading independent global leader in the design, engineering, and manufacturing of process technologies and equipment for gas and liquid molecule handling for the Nexus of Clean™ - clean power, clean water, clean food, and clean industrials, regardless of molecule. Our unique product and solution portfolio across stationary and rotating equipment is used in every phase of the liquid gas supply chain, including engineering, service and repair from installation to preventive maintenance and digital monitoring. Chart is a leading provider of technology, equipment and services related to liquefied natural gas, hydrogen, biogas and carbon capture among other applications. We are committed to excellence in environmental, social and corporate governance (ESG) issues both for our company as well as our customers. With 64 global manufacturing locations and over 50 service centers from the United States to Asia, Australia, India, Europe and South America, we maintain accountability and transparency to our team members, suppliers, customers and communities.
Macroeconomic Impacts
The current conflict between Russia and Ukraine and the related sanctions imposed by countries against Russia, along with the heightened tensions between the United States and China and recent unrest in the Middle East continue to create uncertainty in the global economy. We are unable to predict the impact these actions will have on the global economy or on our business, financial condition and results of operations. These events did not have a material adverse effect on our reported results for the year ended December 31, 2023, however we will continue to actively monitor in terms of their potential impact on our results of operations beyond 2023.
Environmental, Social, Governance
Chart is proud to be at the forefront of the clean energy transition as a leading provider of technology, equipment and services related to liquefied natural gas (LNG), hydrogen, biogas, carbon capture and water treatment, among other applications. We also have a unique offering for the Nexus of Clean™ - clean power, clean water, clean food and clean industrials. This leadership position is possible not only because we have the broadest offering of clean innovative solutions for the various end markets we serve, but also because we are committed to global responsibility. Reporting our ESG performance is one of the ways we demonstrate accountability and transparency to our team members, suppliers, customers, shareholders and communities. Below are some highlights of our ESG efforts, and further information can be found in our fourth Annual Sustainability report with scorecard which was released in April 2023. Our fifth Annual Sustainability report with scorecard will be released in April 2024.
We measure our ESG and sustainability targets and progress against them.
•We measure progress through the Sustainability Accounting Standards Board (SASB) and Task Force on Climate Related Financial Disclosures (TCFD) indices, as well as contributing to the Global Reporting Initiative (GRI) and United Nations Sustainable Development Goals (SDGs). We contribute to 10 of the 17 United Nations Sustainable Development Goals (SDGs).
•Safety: total recordable incident rate (TRIR) of 0.52 as of January 31, 2024, our lowest in our history.
•Many of our safety programs and practices reflect requirements of the ISO 45001 Occupational Health and Safety standard for management systems. Chart voluntarily certifies certain manufacturing and fabrication facilities to this internationally recognized standard to increase safety and reduce workplace risks.
•We utilize iPoint and Riskmethods analytics to proactively monitor our supply chain for proper governance in our supplier network including their climate targets and other ESG activities.
•Chart remains committed to its ambitious climate targets of 50% emission intensity reduction by 2030 and net zero emissions by 2050 and are ahead of our 2030 target in terms of progress toward it. In addition to decreasing our emissions intensity in 2022, we also managed to reduce emissions 5.8% on an absolute basis. We made plant improvements including energy efficient upgrades for various equipment - including replacement of diesel powered equipment with electric and installation of LED lighting in office spaces. In addition, we plan to achieve our targets by switching energy from fossil fuel based to carbon free supply and installing on-site renewables where applicable, as
well as continuing to participate in ongoing energy audits. At a local site level, we also continue to find ways to reduce both waste-to-landfill as well as mains water usage.
•We began tracking and reporting our global water consumption and waste recycled, an effort that speaks to our commitment to ESG transparency.
•We remain committed to our social targets:
◦Increase female representation to 40% on our management team by 2030.
◦Increase female representation to 35% in senior roles by 2030.
◦Achieve team member volunteer participation of 25% as part of our community program by 2030.
We provide our One Chart global team members with various programs and practices to support our ESG and employee-drive culture:
•We have a Global Sustainability Committee, Global Safety Council, and Global Diversity & Inclusion Committee, all comprised of team member volunteers and engagement from our global locations.
◦Our Global Sustainability Committee has five sub-committees focused on energy management, zero waste, electrification, renewable energy and water management. In 2023, this committee focused on sustainable global best practice and knowledge sharing between the Chart and Howden businesses.
•We have numerous employee resource groups (ERG), including:
◦Chart Network of Women (NOW) with a mission of empowering women both personally and professionally with local chapters globally across the United States, Europe, and Asia.
◦Chart Pride ERG supporting LGBTQIA+ team members.
◦In Q1 2024, there are planned launch dates for Chart Young Professionals and Veterans ERGs.
•Chart adopted Howden’s Bright Futures community volunteering program, which is now a facet of Chart’s Giving Back Program. Bright Futures is a program focused around giving back to the younger generation, with particular focus on promoting STEM.
•We have an employee relief fund for our own team members that need assistance.
•Our team members raised over $25,000 to support women in the Dress For Success campaign in March 2023. This is the third year in a row raising $25,000 for this cause.
•Our team members raised over $60,000 in 2023 through an internal STEPtember campaign, coordinated by our finance organization.
We are our helping customers to achieve their own sustainability targets in a number of different ways whether that’s through reducing the amount of plastic used in packaging to lowering greenhouse gas emissions by enabling the transition towards cleaner fuels.
•Howden’s installed base of products enables the avoidance of over 245 million tons of CO2 a year. This is equivalent to removing 52 million fossil-fueled cars from the road in the same period.
•A single gas-gas heater is estimated to avoid 64,000 tons of CO2 emissions from flue gas. Our current gas-gas heater installed base (doubled since 2022) saves approximately 32 million tons of CO2 per year.
•Our ChartWater team treats over 4.5 billion gallons of water a day in the United States and provides clean water to approximately a billion people worldwide daily.
•We helped to eliminate nearly 280 million of PET (plastic) used in water bottles in the United States. Our liquid nitrogen doser enables customers to produce 432,000,000 cans of water annually (instead of plastic bottles) which avoids production of 8.21 billion grams of plastic per year.
•In 2023, Chart products produced about 65 million tons of LNG to replace coal fired power generation (non-U.S.).
•In 2023, Chart products reduced over 800 million liters of diesel used by over-the-road trucks.
•Ventsim™ DESIGN is used by over 2,800 mines, universities, consultants, government, and research organizations in 70 countries. Ventsim™ CONTROL has been successfully installed on over 30 mine sites in 5 continents. For example, a mining customer is seeing a 56% reduction in underground ventilation electricity costs by utilizing Ventsim™ CONTROL for mine optimization.
Our governance supports our ESG focus
•We have an independent Board of Directors that is comprised of ten directors (four of our ten directors are female and four of our ten are diverse) and governed with a separate independent Chairwoman and CEO.
•We regularly hold reviews on ESG and cybersecurity with our Board of Directors.
•We link our executives and their direct reports short-term incentive payout (25% of the strategic and operational goals) to a metric driven, percentage-reduction ESG metric, and have done this for three years (and continue to do in 2024).
•We offer every team member worldwide one paid day off each year to volunteer in our communities. In 2021, Chart started matching employee donations up to $250 per employee per year to charitable organizations.
In 2023, we received the following ESG-oriented recognition:
•S&P Global Platts Energy Awards Corporate Impact - Comprehensive Portfolio finalist (2023)
•Hydrogen Technology of the Year finalist in the 2023 Hydrogen Future Awards
•Named to Newsweek’s America’s Most Responsible Companies 2024 list, demonstrating our commitment to corporate social responsibility, sustainability, and giving back to our communities.
2023 Highlights
On March 17, 2023, we completed the acquisition of Howden (the “Howden Acquisition”), a leading global provider of mission critical air and gas handling products and services, from affiliates of KPS Capital Partners, LP. Results of operations include results of Howden from the date of acquisition and exclude Roots™ (“Roots”) business financial results for our entire ownership period of March 17, 2023 through the divestiture date, August 18, 2023. Record order activity, mainly driven by the impact of the Howden Acquisition, contributed to record ending total backlog of $4,278.8 million as of December 31, 2023 compared to $2,338.1 million as of December 31, 2022, representing an increase of $1,940.7 million or 83.0%, which reflects the broad-based demand we continue to see year-over-year across our product categories. The increase in backlog was largely driven by record orders for the year ended December 31, 2023 of $4,140.2 million compared to $2,779.9 million for the year ended December 31, 2022 representing an increase of $1,360.3 million or 48.9%. Record order intake in our Repair, Service & Leasing segment of $1,100.8 million in 2023 compared to $218.9 million in 2022, was mainly driven by the inclusion of the Howden aftermarket business and LNG retrofit. Record orders in our Specialty Products segment for 2023 of $1,341.6 million compared to $665.5 million for 2022 were mainly driven by strong order intake for hydrogen and helium, space exploration, water treatment, carbon capture and other specialty applications. Heat Transfer Systems segment backlog totaled a record $1,716.5 million as of December 31, 2023 compared to $1,300.1 million as of December 31, 2022. Specialty Products segment backlog totaled a record $1,631.1 million as of December 31, 2023, compared to $645.9 million as of December 31, 2022. Cryo Tank Solutions segment backlog totaled $361.9 million as of December 31, 2023, compared to $371.0 million as of December 31, 2022.
Consolidated sales increased to a record $3,352.5 million in 2023 from $1,612.4 million in 2022, representing an increase of $1,740.1 million or 107.9%. The consolidated sales increase was bolstered by sales from the Howden Acquisition. This increase was mainly driven by growth in our Repair, Service & Leasing segment, increased sales in our Heat Transfer Systems segment on favorable sales in process systems related to big and small-scale LNG liquefaction and floating LNG, gains within our Cryo Tank Solutions segment on favorable sales in general industrials and within our Specialty Products segment on favorable sales in energy recovery, water treatment, space applications, metals, mining and carbon capture. Consolidated gross profit in 2023 increased by $633.0 million from $407.4 million to a record $1,040.4 million or 155.4% compared to 2022. Gross profit margin of 31.0% in 2023 increased from 25.3% in 2022. The increase in gross profit and gross profit margin for 2023 compared to 2022 was mainly driven by product mix and also demonstrates our progress in improvement in our margin profile as we continued to take further pricing and cost reduction actions.
Consolidated SG&A expenses as a percentage of consolidated sales for 2023 increased by 1.2% as compared to 2022 primarily due to integration related costs incurred in 2023.
Operating Results
The following table sets forth the percentage relationship that each line item in our consolidated statements of income represents to sales for the years ended December 31, 2023, 2022, and 2021:
2023 2022 2021
Sales 100.0 % 100.0 % 100.0 %
Cost of sales (1)
69.0 74.7 75.4
Gross profit 31.0 25.3 24.6
Selling, general and administrative expenses (2)-(4)
14.5 13.3 14.9
Amortization expense 4.9 2.6 3.0
Operating income 11.7 9.4 6.7
Acquisition related finance fees 0.8 2.3 -
Interest expense, net 8.1 1.8 0.8
Financing costs amortization (5)
0.5 0.2 0.6
Loss on extinguishment of debt 0.2 - -
Unrealized loss (gain) on investment in equity securities 0.4 (0.8) (0.2)
Realized gain on investment in equity securities - - (0.2)
Foreign currency (gain) loss (0.1) - 0.1
Other (income) expense, net - (0.1) -
Income tax expense, net 0.1 1.0 1.0
Net income from continuing operations 1.7 5.1 4.6
Loss from discontinued operations, net of tax - (3.6) -
Net income 1.7 1.6 4.6
Less: Income attributable to noncontrolling interests of continuing operations, net of taxes 0.3 0.1 0.1
Net income attributable to Chart Industries 1.4 1.5 4.5
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(1)Cost of sales includes restructuring costs/(credits) of $0.5, $(1.0) and $2.6 for the years ended December 31, 2023, 2022 and 2021, respectively.
(2)Selling, general and administrative expenses include restructuring costs of $13.0, $0.0 and $0.9 for the years ended December 31, 2023, 2022 and 2021, respectively.
(3)Includes deal-related and integration costs of $38.5 and $17.6 for the years ended December 31, 2023 and 2022.
(4)Includes share-based compensation expense of $12.6, $10.6 and $11.2, representing 0.4%, 0.7% and 0.8% of sales, for the years ended December 31, 2023, 2022 and 2021, respectively.
Consolidated Results for the Years Ended December 31, 2023, 2022 and 2021
The following table includes key metrics used to evaluate our business and measure our performance and represents selected financial data for our operating segments for the years ended December 31, 2023, 2022 and 2021 (dollar amounts in millions). Further detailed information regarding our operating segments is presented in Note 4, “Segment and Geographic Information,” of the consolidated financial statements included under Item 15 “Exhibits and Financial Statement Schedules” of this Annual Report on Form 10-K.
Selected Segment Financial Information
Year Ended December 31,
2023 2022 2021
Sales
Cryo Tank Solutions $ 640.8 $ 504.3 $ 447.4
Heat Transfer Systems 891.2 462.7 262.7
Specialty Products 819.9 448.3 432.9
Repair, Service & Leasing 1,029.2 209.6 187.0
Intersegment eliminations (28.6) (12.5) (12.3)
Consolidated $ 3,352.5 $ 1,612.4 $ 1,317.7
Gross Profit
Cryo Tank Solutions $ 132.0 $ 98.7 $ 93.5
Heat Transfer Systems 246.8 90.6 35.6
Specialty Products 221.4 138.6 145.5
Repair, Service & Leasing 440.2 79.5 49.6
Consolidated $ 1,040.4 $ 407.4 $ 324.2
Gross Profit Margin
Cryo Tank Solutions 20.6 % 19.6 % 20.9 %
Heat Transfer Systems 27.7 % 19.6 % 13.6 %
Specialty Products 27.0 % 30.9 % 33.6 %
Repair, Service & Leasing 42.8 % 37.9 % 26.5 %
Consolidated 31.0 % 25.3 % 24.6 %
SG&A Expenses
Cryo Tank Solutions $ 70.9 $ 41.8 $ 38.1
Heat Transfer Systems 54.1 24.0 28.1
Specialty Products 82.6 55.6 43.3
Repair, Service & Leasing 116.1 15.2 17.8
Corporate
162.6 77.9 69.5
Consolidated $ 486.3 $ 214.5 $ 196.8
SG&A Expenses (% of Sales)
Cryo Tank Solutions 11.1 % 8.3 % 8.5 %
Heat Transfer Systems 6.1 % 5.2 % 10.7 %
Specialty Products 10.1 % 12.4 % 10.0 %
Repair, Service & Leasing 11.3 % 7.3 % 9.5 %
Consolidated 14.5 % 13.3 % 14.9 %
Operating Income (Loss) (1)
Cryo Tank Solutions $ 54.5 $ 54.0 $ 52.9
Heat Transfer Systems (2)
175.8 51.7 (12.3)
Specialty Products 119.7 72.9 94.1
Repair, Service & Leasing 203.3 51.0 23.3
Corporate (162.6) (78.1) (69.5)
Consolidated $ 390.7 $ 151.5 $ 88.5
Operating Margin
Cryo Tank Solutions 8.5 % 10.7 % 11.8 %
Heat Transfer Systems 19.7 % 11.2 % (4.7) %
Specialty Products 14.6 % 16.3 % 21.7 %
Repair, Service & Leasing 19.8 % 24.3 % 12.5 %
Consolidated 11.7 % 9.4 % 6.7 %
_______________
(1)Restructuring charges/(credits) for the years ended:
•December 31, 2023 were $13.5 ($5.2 - Corporate, $4.0 - Repair, Service & Leasing, $1.8 - Specialty Products, $1.6 - Cryo Tank Solutions and $0.9 - Heat Transfer Systems);
•December 31, 2022 were $(1.0) ($(1.4) - Repair, Service & Leasing, $0.3 - Heat Transfer Systems and $0.1 - Cryo Tank Solutions); and
•December 31, 2021 were $3.5 ($1.7 - Heat Transfer Systems, $1.5 - Repair, Service & Leasing, $0.3 - Cryo Tank Solutions).
(2)Includes deal-related and integration costs of $38.5 and $17.6 for the years ended December 31, 2023 and 2022, respectively.
Results of Operations for the Years Ended December 31, 2023 and 2022
Sales in 2023 increased by $1,740.1 million from $1,612.4 million to a record $3,352.5 million, or 107.9%. This increase was mainly driven by the sales contribution from the Howden Acquisition, including growth in our Repair, Service & Leasing segment, increased sales in our Heat Transfer Systems segment on favorable sales in process systems related to big and small-scale LNG liquefaction and floating LNG, gains within our Cryo Tank Solutions segment on favorable sales in general industrials and within our Specialty Products segment on favorable sales in energy recovery, water treatment, space applications, metals, mining and carbon capture.
Gross profit in 2023 increased by $633.0 million from $407.4 million to $1,040.4 million or 155.4% compared to 2022. The increase in gross profit was primarily driven by the contribution from the Howden Acquisition. Gross profit margin of 31.0% in 2023 increased from 25.3% in 2022. The increase in gross profit margin for 2023 compared to 2022 was primarily driven by our ongoing cost out actions, productivity, early synergy achievement and pricing actions. Restructuring costs/(credits) recorded to cost of sales were $0.5 million and $(1.0) million for the years ended December 31, 2023 and 2022, respectively.
Consolidated SG&A expenses increased by $271.8 million or 126.7% during 2023 compared to the same period in 2022 primarily driven by the inclusion of Howden SG&A expenses, including higher employee-related costs, while consolidated SG&A expenses as a percentage of consolidated sales for 2023 increased by 1.2% as compared to 2022 primarily due to activities related to the integration of the Howden Acquisition.
Acquisition Related Finance Fees
Acquisition related finance fees for the year ended December 31, 2023 were $26.1 million related to bridge loan financing for our acquisition of Howden. Acquisition related finance fees for the year ended December 31, 2022 were $37.0 million related to financing for the acquisition of Howden.
Interest Expense, Net and Financing Costs Amortization
Interest expense, net for the year ended December 31, 2023 and 2022 was $271.9 million and $28.8 million, respectively. The increase in interest expense, net, is primarily due to higher borrowings outstanding, specifically our senior secured notes due 2030 and senior unsecured notes due 2031, both issued on December 22, 2022 with interest payable semi-annually on January 1 and July 1 of each year, commencing July 1, 2023, as well as borrowings related to our term loan, drawn on March 17, 2023 for the Howden Acquisition and an additional incremental term loan drawn on June 30, 2023, compared to borrowings outstanding during the same period in 2022. The increase in interest expense, net was also driven by higher average interest rates during the year ended December 31, 2023. The increase in interest expense, net was partially offset by interest income of $21.5 million earned primarily from deposits of proceeds from the senior secured notes due 2030, senior unsecured notes due 2031, common stock and preferred stock offerings held until the consummation of the Howden Acquisition, interest income on sales-type leases of $3.3 million, and $1.6 million interest income from our cross-currency swaps entered into on September 16, 2022. Interest expense, net for the year ended December 31, 2023 and 2022 included $147.2 million and $23.4 million, respectively, in interest related to borrowings on our current senior secured revolving credit facility due 2026 and previous
senior secured revolving credit facility and term loan due 2030. Interest expense, net for the year ended December 31, 2023 related to borrowings on our senior secured notes due 2030 and senior unsecured notes due 2031 was $109.7 million and $48.6 million, respectively. Interest expense, net for the year ended December 31, 2022 related to borrowings on our senior secured notes due 2030 and senior unsecured notes due 2031 was $3.0 million and $1.3 million, respectively. Interest expense, net for the year ended December 31, 2023 included $2.4 million of 1.0% cash interest expense related to our convertible notes due November 2024. Interest expense, net for the year ended December 31, 2022 included $4.0 million of 1.0% cash interest expense related to our convertible notes due November 2024.
For 2023 and 2022, financing costs amortization was $17.2 million and $2.9 million, respectively. The increase of $14.3 million was primarily due to the amendment of our senior secured revolving credit facility due 2026, the issuance of senior secured notes due 2030 and senior unsecured notes due 2031 during the fourth quarter of 2022 as well as the issuance of incremental term loans on March 17, 2023 and June 30, 2023, all of which increased deferred debt issuance costs.
Loss on Extinguishment of Debt
As a result of the events of both the October 2, 2023 Credit Agreement amendment and the December 4, 2023 partial prepayment of the term loans due March 2030, we recognized a loss on extinguishment of debt of $7.8 million for the year ended December 31, 2023. For further information, refer to Note 10, “Debt and Credit Arrangements” of this Annual Report on Form 10-K.
Unrealized Loss (Gain) On Investments In Equity Securities
During 2023, we recognized an unrealized loss on investments in equity securities of $14.4 million, which was driven by an unrealized loss of $12.7 million on the mark-to-market adjustment of our investment in McPhy (Euronext Paris: MCPHY - ISIN; FR0011742329) (“McPhy”) and a $1.7 million unrealized loss on the mark-to-market adjustment of our investment in Stabilis Energy, Inc. (NasdaqCM: SLNG) (“Stabilis”). During 2022, we recognized an unrealized gain on investments in equity securities of $13.1 million, which was driven by an unrealized gain of $23.3 million upon remeasurement of the Svante investment due to an observable price change in an orderly transaction for similar instruments of the same issuer and a $1.6 million unrealized gain on the mark-to-market adjustment of our investment in Stabilis, partially offset by a $11.8 million unrealized loss on the mark-to-market adjustment of our investment in McPhy.
Foreign Currency (Gain) Loss
For the year ended December 31, 2023, foreign currency gain was $4.1 million, and for the year ended December 31, 2022 foreign currency gain was $0.8 million. The variance between periods was primarily driven by fluctuations in the U.S. dollar as compared to the euro and British pound.
Income Tax Expense
Income tax expense of $3.0 million and $15.9 million for the years ended December 31, 2023 and 2022, respectively, represents taxes on both U.S. and foreign earnings at a combined effective income tax rate of 5.2% and 16.1%, respectively. The effective income tax rate of 5.2% for the year ended December 31, 2023 differed from the U.S. federal statutory rate of 21% due primarily to tax benefits associated with the Howden integration, release of previously booked valuation allowances, research and development credits and share-based compensation offset by the effect of income earned by certain of our foreign entities being taxed at higher rates than the federal statutory rate.
The effective income tax rate of 16.1% for the year ended December 31, 2022 differed from the U.S. federal statutory rate of 21% primarily due to tax benefits associated with share-based compensation and the release of previously booked valuation allowances offset by the effect of income earned by certain of our foreign entities being taxed at higher rates than the federal statutory rate as well as increases in our state taxes due to expansion in new jurisdictions.
Net Income Attributable to Chart Industries, Inc. From Continuing Operations
As a result of the foregoing, net income attributable to Chart Industries, Inc. from continuing operations was $47.9 million and $81.6 million for 2023 and 2022, respectively.
Discontinued Operations
The financial results of the Roots business are reflected in our consolidated financial statements as discontinued operations for the years ended December 31, 2023. For further information, refer to Note 3, “Discontinued Operations and Other Businesses Sold” of our consolidated financial statements included under Item 15, “Exhibits and Financial Statement Schedules” of this Annual Report on Form 10-K.
Results of Operations for the Years Ended December 31, 2022 and 2021
Sales in 2022 increased by $294.7 million from $1,317.7 million to $1,612.4 million, or 22.4%. This increase was primarily driven by growth in our Heat Transfer Systems segment on favorable sales in process systems related to big and small-scale LNG liquefaction and floating LNG, as well as gains within our Cryo Tank Solutions segment on favorable sales in storage equipment and mobile equipment, within our Repair, Service & Leasing segment on favorable sales in parts, repairs, and services, aftermarket fans, aftermarket air cooled heat exchangers and in our lifecycle business and within our Specialty Products segment on favorable sales in hydrogen and helium applications, water treatment, space applications, food & beverage applications and carbon capture.
Gross profit in 2022 increased by $83.2 million from $324.2 million to $407.4 million or 25.7% compared to 2021. Gross profit margin of 25.3% in 2022 increased from 24.6% in 2021. The increase in gross profit margin for 2022 compared to 2021 was primarily driven by product mix and pricing and cost reduction actions we took for all segments overall. Restructuring (credits)/costs recorded to cost of sales were $(1.0) million and $2.6 million for the years ended December 31, 2022 and 2021, respectively.
Consolidated SG&A expenses increased by $17.7 million, or 9.0% during 2022, compared to the same period in 2021 primarily driven by higher employee-related costs while consolidated SG&A expenses as a percentage of consolidated sales for 2022 decreased by 1.6% as compared to 2021 primarily due to the effect of cost reduction actions we took in 2022.
Acquisition Related Finance Fees
Acquisition related finance fees for the year ended December 31, 2022 were $37.0 million related to financing for the acquisition of Howden. There were no acquisition related finance fees for the year ended December 31, 2021.
Interest Expense, Net and Financing Costs Amortization
Interest expense, net for the year ended December 31, 2022 and 2021 was $28.8 million and $10.7 million, respectively. The increase in interest expense, net, is primarily due to higher borrowings outstanding and higher average interest rates during 2022 on our senior secured revolving credit facility due October 2026, as compared to borrowings outstanding and average interest rates on our previous senior secured revolving credit facility and term loan due June 2024 during 2021 as well as borrowings related to our senior secured notes due 2030 and senior unsecured notes due 2031, which were issued on December 22, 2022. The increase was partially offset by interest income of $1.3 million from our cross-currency swaps entered into during 2022. Interest expense, net for the year ended December 31, 2022 included $4.0 million of 1.5% cash interest expense related to our convertible notes due November 2024. Interest expense, net for the year ended December 31, 2021 included $2.6 million of 1.0% cash interest expense related to our convertible notes due November 2024. Interest expense, net for the year ended December 31, 2022 and 2021 included $23.4 million and $9.0 million, respectively, in interest related to borrowings on our current senior secured revolving credit facility due 2026 and previous senior secured revolving credit facility and term loan due 2024. Interest expense, net for the year ended December 31, 2022 related to borrowings on our senior secured notes due 2030 and senior unsecured notes due 2031 was $3.0 million and $1.3 million, respectively.
For 2022 and 2021, financing costs amortization was $2.9 million and $8.3 million, respectively. The decrease of $5.4 million was primarily due to the amendment of our credit facilities during the fourth quarter of 2021 and the related write off of the unamortized deferred debt issuance costs associated with the senior secured revolving credit facility due June 2024 and the term loan due June 2024, respectively. In conjunction with the amendment of our credit facilities in the fourth quarter of 2021, we recorded charges to net income of $3.8 million of the unamortized deferred debt issuance costs associated with the senior secured revolving credit facility due 2024 and the term loan due June 2024 as well as $0.3 million in new debt issuance costs resulting in a total one-time charge to net income of $4.1 million.
Unrealized Gain On Investments In Equity Securities
During 2022, we recognized an unrealized gain on investments in equity securities of $13.1 million, which was driven by an unrealized gain of $23.3 million upon remeasurement of the Svante investment due to an observable price change in an orderly transaction for similar instruments of the same issuer and a $1.6 million unrealized gain on the mark-to-market adjustment of our investment in Stabilis, partially offset by a $11.8 million unrealized loss on the mark-to-market adjustment of our investment in McPhy. During 2021, we recognized an unrealized gain of $3.2 million, which was driven by an unrealized gain of $20.7 million upon remeasurement of the initial HTEC investment due to an observable orderly transaction for similar instruments of the same issuer and a $2.2 million unrealized gain on the mark-to-mark adjustment of our investment in Stabilis, partially offset by a $19.7 million unrealized loss on the mark-to-market adjustment of our investment in McPhy.
Realized Gain on Investment In Equity Securities
On December 14, 2021 we completed the acquisition of the remaining 85% of the shares of Earthly Labs. On the acquisition date, we recognized a gain of $2.6 on the remeasurement of our initial 15% investment, which was recorded as realized gain on investment in equity securities in the consolidated statement of income for the year ended December 31, 2021.
Foreign Currency (Gain) Loss
For the year ended December 31, 2022, foreign currency gain was $0.8 million, and for the year ended December 31, 2021 foreign currency loss was $0.9 million. The variance between the periods was primarily driven by fluctuations in the U.S. dollar as compared to the euro and Chinese yuan.
Income Tax Expense
Income tax expense of $15.9 million and $13.5 million for the years ended December 31, 2022 and 2021, respectively, represents taxes on both U.S. and foreign earnings at a combined effective income tax rate of 16.1% and 18.2%, respectively. The effective income tax rate of 16.1% for the year ended December 31, 2022 differed from the U.S. federal statutory rate of 21% primarily due to tax benefits associated with share-based compensation and the release of previously booked valuation allowances offset by the effect of income earned by certain of our foreign entities being taxed at higher rates than the federal statutory rate as well as increases in our state taxes due to expansion into new jurisdictions.
The effective income tax rate of 18.2% for the year ended December 31, 2021 differed from the U.S. federal statutory rate of 21% primarily due to tax benefits associated with share-based compensation and the Alabama Trailers bargain purchase gain offset by the effect of income earned by certain of our foreign entities being taxed at higher rates than the federal statutory rate as well as losses incurred by certain of our Chinese operations for which no benefit was recorded.
Net Income Attributable to Chart Industries, Inc. From Continuing Operations
As a result of the foregoing, net income attributable to Chart Industries, Inc. from continuing operations was $81.6 million and $59.1 million for 2022 and 2021, respectively.
Segment Results for the Years Ended December 31, 2023, 2022 and 2021
Our reportable and operating segments include: Cryo Tank Solutions, Heat Transfer Systems, Specialty Products and Repair, Service & Leasing. Corporate includes operating expenses for executive management, accounting, tax, treasury, corporate development, human resources, information technology, investor relations, legal, internal audit, and risk management. Corporate support functions are not currently allocated to the segments. For further information, refer to Note 4, “Segment and Geographic Information” of our consolidated financial statements included under Item 15, “Exhibits and Financial Statement Schedules” of this Annual Report on Form 10-K. The following tables include key metrics used to evaluate our business and measure our performance and represents selected financial data for our operating segments for the years ended December 31, 2023, 2022 and 2021 (dollar amounts in millions):
Cryo Tank Solutions-Results of Operations for the Years Ended December 31, 2023 and 2022
Year Ended December 31, 2023 vs. 2022
2023 2022 Variance
($) Variance
(%)
Sales $ 640.8 $ 504.3 $ 136.5 27.1 %
Gross Profit 132.0 98.7 33.3 33.7 %
Gross Profit Margin 20.6 % 19.6 %
SG&A Expenses $ 70.9 $ 41.8 $ 29.1 69.6 %
SG&A Expenses (% of Sales) 11.1 % 8.3 %
Operating Income $ 54.5 $ 54.0 $ 0.5 0.9 %
Operating Margin 8.5 % 10.7 %
Cryo Tank Solutions segment sales increased by $136.5 million during 2023 as compared to 2022 to $640.8 million. As mentioned in the results of operations above, this increase was mainly driven by favorable sales in general industrials. The increase in the sales was also partially driven by the impact of the Howden Acquisition.
Cryo Tank Solutions segment gross profit increased by $33.3 million during 2023 as compared to 2022 primarily due to higher volume, while gross profit margin increased 100 basis points compared to 2022 due to improved cost conditions in 2023. The increase in gross profit was also partially driven by the impact of the Howden Acquisition.
Cryo Tank Solutions SG&A expenses increased during 2023 as compared to 2022 while SG&A expenses as a percentage of sales increased by 280 basis points. The increase in SG&A expenses was mainly due to employee and integration related costs driven by the Howden Acquisition.
Cryo Tank Solutions-Results of Operations for the Years Ended December 31, 2022 and 2021
Year Ended December 31, 2022 vs. 2021
2022 2021 Variance
($) Variance
(%)
Sales $ 504.3 $ 447.4 $ 56.9 12.7 %
Gross Profit 98.7 93.5 5.2 5.6 %
Gross Profit Margin 19.6 % 20.9 %
SG&A Expenses $ 41.8 $ 38.1 $ 3.7 9.7 %
SG&A Expenses (% of Sales) 8.3 % 8.5 %
Operating Income $ 54.0 $ 52.9 $ 1.1 2.1 %
Operating Margin 10.7 % 11.8 %
Cryo Tank Solutions segment sales increased by $56.9 million during 2022 as compared to 2021. This increase was mainly driven by favorable sales in storage equipment in the United States and Europe and mobile equipment in the United States.
Cryo Tank Solutions segment gross profit increased by $5.2 million during 2022 as compared to 2021, and gross profit margin decreased by 130 basis points. The decrease in gross profit and gross profit margin was mainly driven by higher material prices and higher labor costs due to macroeconomic conditions.
Cryo Tank Solutions segment SG&A expenses increased by $3.7 million during 2022 as compared to 2021. Furthermore, Cryo Tank Solutions segment SG&A expenses as a percentage of Cryo Tank Solutions segment sales decreased by 20 basis points in 2022 as compared to 2021. The increase in SG&A expenses was mainly due to higher employee-related costs.
Heat Transfer Systems-Results of Operations for the Years Ended December 31, 2023 and 2022
Year Ended December 31, 2023 vs. 2022
2023 2022 Variance
($) Variance
(%)
Sales $ 891.2 $ 462.7 $ 428.5 92.6 %
Gross Profit 246.8 90.6 156.2 172.4 %
Gross Profit Margin 27.7 % 19.6 %
SG&A Expenses $ 54.1 $ 24.0 $ 30.1 125.4 %
SG&A Expenses (% of Sales) 6.1 % 5.2 %
Operating Income (Loss) $ 175.8 $ 51.7 $ 124.1 240.0 %
Operating Margin 19.7 % 11.2 %
Heat Transfer Systems segment sales increased by $428.5 million during 2023 as compared to 2022 to a record $891.2 million. The increase was primarily driven by LNG products that utilized brazed aluminum heat exchangers and air coolers and systems servicing big LNG, floating LNG and small scale LNG applications as well as traditional energy applications.
Heat Transfer Systems segment gross profit increased by $156.2 million during 2023 as compared to 2022, and gross profit margin increased by 810 basis points. The increase in Heat Transfer Systems segment gross profit was primarily due to volume, and the increase in the related margin was mainly due to overall product and project volume mix.
Heat Transfer Systems segment SG&A expenses increased by $30.1 million during 2023 as compared to 2022, and SG&A expenses as a percentage of sales increased by 90 basis points. The increase in SG&A expenses was mainly due to higher employee and integration related costs driven by the Howden Acquisition.
Heat Transfer Systems-Results of Operations for the Years Ended December 31, 2022 and 2021
Year Ended December 31, 2022 vs. 2021
2022 2021 Variance
($) Variance
(%)
Sales $ 462.7 $ 262.7 $ 200.0 76.1 %
Gross Profit 90.6 35.6 55.0 154.5 %
Gross Profit Margin 19.6 % 13.6 %
SG&A Expenses $ 24.0 $ 28.1 $ (4.1) (14.6) %
SG&A Expenses (% of Sales) 5.2 % 10.7 %
Operating Income $ 51.7 $ (12.3) $ 64.0 (520.3) %
Operating Margin 11.2 % (4.7) %
Heat Transfer Systems segment sales increased by $200.0 million during 2022 as compared to 2021. The increase was primarily driven by sales in small-scale, floating LNG and big LNG.
Heat Transfer Systems segment gross profit increased by $55.0 million during 2022 compared to 2021, and gross profit margin increased by 600 basis points driven by lower volume, partially offset by lower restructuring costs. The increase in Heat Transfer Systems segment gross profit was primarily due to overall product and project volume mix.
Heat Transfer Systems segment SG&A expenses decreased by $4.1 million during 2022 as compared to 2021 mainly due to lower restructuring costs and lower employee-related costs.
Specialty Products-Results of Operations for the Years Ended December 31, 2023 and 2022
Year Ended December 31, 2023 vs. 2022
2023 2022 Variance
($) Variance
(%)
Sales $ 819.9 $ 448.3 $ 371.6 82.9 %
Gross Profit 221.4 138.6 82.8 59.7 %
Gross Profit Margin 27.0 % 30.9 %
SG&A Expenses 82.6 $ 55.6 $ 27.0 48.6 %
SG&A Expenses (% of Sales) 10.1 % 12.4 %
Operating Income 119.7 $ 72.9 $ 46.8 64.2 %
Operating Margin 14.6 % 16.3 %
Specialty Products segment sales increased by $371.6 million during 2023 as compared to 2022 to a record $819.9 million. The increase in Specialty Products sales was primarily driven by the inclusion of the acquired Howden business in the current year, including favorable sales in energy recovery, marine, metals, space, water treatment and carbon capture.
Specialty Products segment gross profit increased by $82.8 million during 2023 as compared to 2022 largely due to the Howden Acquisition and volume, while gross profit margin decreased by 390 basis points largely due to product and project volume mix.
Specialty Products segment SG&A expenses increased by $27.0 million during 2023 as compared to 2022 primarily driven by inclusion of the Howden business, along with employee and integration related costs driven by the Howden Acquisition.
Specialty Products-Results of Operations for the Years Ended December 31, 2022 and 2021
Year Ended December 31, 2022 vs. 2021
2022 2021 Variance
($) Variance
(%)
Sales $ 448.3 $ 432.9 $ 15.4 3.6 %
Gross Profit 138.6 145.5 (6.9) (4.7) %
Gross Profit Margin 30.9 % 33.6 %
SG&A Expenses $ 55.6 $ 43.3 $ 12.3 28.4 %
SG&A Expenses (% of Sales) 12.4 % 10.0 %
Operating Income $ 72.9 $ 94.1 $ (21.2) (22.5) %
Operating Margin 16.3 % 21.7 %
Specialty Products segment sales increased by $15.4 million during 2022 as compared to 2021 to $448.3 million. Similar to the comments previously mentioned in the results of operations section, the increase in Specialty Products sales was primarily driven by favorable sales in hydrogen and helium applications, water treatment, space applications, food & beverage applications and carbon capture. The sales increase was almost fully offset by a 79.2% decline in HLNG vehicle tank sales driven by higher natural gas prices and our customers’ availability of semiconductors due to macroeconomic conditions.
Specialty Products segment gross profit decreased by $6.9 million during 2022 as compared to 2021, and gross profit margin decreased by 270 basis points largely due to stronger HLNG vehicle tank sales in 2021 as compared to 2022. The decrease in gross profit margin was mainly driven by overall product and project volume mix.
Specialty Products segment SG&A expenses increased by $12.3 million during 2022 as compared to 2021 primarily driven by ramp up in the business and acquisition additions.
Repair, Service & Leasing-Results of Operations for the Years Ended December 31, 2023 and 2022
Year Ended December 31, 2023 vs. 2022
2023 2022 Variance
($) Variance
(%)
Sales $ 1,029.2 $ 209.6 $ 819.6 391.0 %
Gross Profit 440.2 79.5 360.7 453.7 %
Gross Profit Margin 42.8 % 37.9 %
SG&A Expenses $ 116.1 $ 15.2 $ 100.9 663.8 %
SG&A Expenses (% of Sales) 11.3 % 7.3 %
Operating Income $ 203.3 $ 51.0 $ 152.3 298.6 %
Operating Margin 19.8 % 24.3 %
Repair, Service & Leasing segment sales increased by $819.6 million during 2023 as compared to 2022 to a record $1,029.2 million. The increase in the sales was largely attributed to the Howden Acquisition.
Repair, Service & Leasing segment gross profit increased by $360.7 million during 2023 as compared to 2022 to a record $440.2 million, and gross profit margin increased by 490 basis points to 42.8%. The increase in gross profit and the related margin was driven by volumes from the Howden Acquisition and early synergies achieved.
Repair, Service & Leasing segment SG&A expenses increased by $100.9 million during 2023 as compared to 2022. SG&A expenses as a percentage of sales increased by 400 basis points. The increase in SG&A expenses was largely attributed to inclusion of the Howden Acquisition in the current year and restructuring associated with the acquisition integration.
Repair, Service & Leasing-Results of Operations for the Years Ended December 31, 2022 and 2021
Year Ended December 31, 2022 vs. 2021
2022 2021 Variance
($) Variance
(%)
Sales $ 209.6 $ 187.0 $ 22.6 12.1 %
Gross Profit 79.5 49.6 29.9 60.3 %
Gross Profit Margin 37.9 % 26.5 %
SG&A Expenses $ 15.2 $ 17.8 $ (2.6) (14.6) %
SG&A Expenses (% of Sales) 7.3 % 9.5 %
Operating Income $ 51.0 $ 23.3 $ 27.7 118.9 %
Operating Margin 24.3 % 12.5 %
Repair, Service & Leasing segment sales increased by $22.6 million during 2022 as compared to 2021. Similar to the comments previously mentioned in the results of operations section, the increase was mainly driven by favorable sales in parts, repairs, and services, aftermarket fans, aftermarket air cooled heat exchangers and in our lifecycle business.
Repair, Service & Leasing segment gross profit increased by $29.9 million during 2022 as compared to 2021, and gross profit margin increased by 1,140 basis points. The increase in gross profit and the related margin was driven by more high margin, short-lead time replacement equipment sales during 2022 as compared to 2021. Furthermore, during 2021 we incurred unfavorable material costs relative to our leasing business which we did not incur during 2022.
Repair, Service & Leasing segment SG&A expenses decreased by $2.6 million during 2022 as compared to 2021. SG&A expenses as a percentage of sales decreased by 220 basis points as a result of large aftermarket sales without incremental SG&A.
Corporate
Corporate SG&A expenses increased by $84.7 million during 2023 as compared to 2022 mainly due to higher professional fees and employee-related costs. Corporate SG&A expenses increased by $8.4 million during 2022 as compared to 2021 mainly due to higher employee-related costs.
Orders and Backlog
We consider orders to be those for which we have received a firm signed purchase order or other written contractual commitment from the customer. Backlog is comprised of the portion of firm signed purchase orders or other written contractual commitments from customers for which work has not been performed, or is partially completed, that we have not recognized as revenue and excludes unexercised contract options and potential orders. Our backlog as of December 31, 2023, 2022 and 2021 was $4,278.8 million, $2,338.1 million and $1,190.1 million, respectively.
The tables below represent orders received and backlog by segment for the periods indicated (dollar amounts in millions):
Year Ended December 31,
2023 2022 2021
Orders
Cryo Tank Solutions $ 608.8 $ 508.4 $ 555.4
Heat Transfer Systems 1,114.2 1,417.6 312.0
Specialty Products 1,341.6 665.5 648.6
Repair, Service & Leasing 1,100.8 218.9 180.6
Intersegment eliminations (25.2) (30.5) (20.5)
Consolidated $ 4,140.2 $ 2,779.9 $ 1,676.1
As of December 31,
2023 2022 2021
Backlog
Cryo Tank Solutions $ 361.9 $ 371.0 $ 346.8
Heat Transfer Systems 1,716.5 1,300.1 370.4
Specialty Products 1,631.1 645.9 438.2
Repair, Service & Leasing 587.9 57.0 56.5
Intersegment eliminations (18.6) (35.9) (21.8)
Consolidated $ 4,278.8 $ 2,338.1 $ 1,190.1
Orders and Backlog for the Year Ended and As of December 31, 2023 Compared to the Year Ended and As of December 31, 2022
Cryo Tank Solutions segment orders for 2023 were $608.8 million, as compared to $508.4 million for 2022, an increase of $100.4 million. This increase was driven by higher orders in general industrials offset by decreases in mobile and storage equipment. Cryo Tank Solutions segment backlog totaled $361.9 million as of December 31, 2023, compared to $371.0 million as of December 31, 2022, a decrease of $9.1 million.
Heat Transfer Systems segment orders for 2023 were $1,114.2 million compared to $1,417.6 million for 2022, a decrease of $303.4 million mainly driven by lower orders for brazed aluminum heat exchangers, air exchangers and across systems. Heat Transfer Systems segment backlog totaled a record $1,716.5 million as of December 31, 2023 compared to $1,300.1 million as of December 31, 2022, an increase of $416.4 million.
Specialty Products segment orders for 2023 were $1,341.6 million compared to $665.5 million for 2022, an increase of $676.1 million. The increase in Specialty Products was mainly driven by strong order intake for hydrogen and helium liquefaction, space, water treatment, carbon capture and other specialty applications. Specialty Products segment backlog totaled a record $1,631.1 million as of December 31, 2023, compared to $645.9 million as of December 31, 2022, an increase of $985.2 million.
Repair, Service & Leasing segment orders for 2023 were $1,100.8 million compared to $218.9 million in 2022, an increase of $881.9 million. The increase was primarily driven by the Howden Acquisition. Repair, Service & Leasing segment backlog totaled $587.9 million as of December 31, 2023, compared to $57.0 million as of December 31, 2022, an increase of $530.9 million.
Orders and Backlog for the Year Ended and As of December 31, 2022 Compared to the Year Ended and As of December 31, 2021
Cryo Tank Solutions segment orders for 2022 were $508.4 million, as compared to $555.4 million for 2021, a decrease of $47.0 million. This decrease was driven by lower order intake for mobile equipment and storage equipment due to timing shifts of customer orders. Cryo Tank Solutions segment backlog totaled $371.0 million as of December 31, 2022, compared to $346.8 million as of December 31, 2021, an increase of $24.2 million.
Heat Transfer Systems segment orders for 2022 were $1,417.6 million compared to $312.0 million for 2021, an increase of $1,105.6 million mainly driven by higher order intake for LNG including big and small-scale LNG, as well as floating LNG. Heat Transfer Systems segment backlog totaled $1,300.1 million as of December 31, 2022 compared to $370.4 million as of December 31, 2021, an increase of $929.7 million.
Specialty Products segment orders for 2022 were $665.5 million compared to $648.6 million for 2021, an increase of $16.9 million. Comparatively, during 2022 we recorded hydrogen and helium orders of $300.1 million that included four liquefaction orders totaling $194.4 million whereas during 2021 we recorded hydrogen and helium orders of $282.1 million that included four liquefaction orders totaling approximately $150.0 million. The increase in orders was also attributed to an increase in space, water treatment, carbon capture and other specialty applications partially offset by lower order intake for HLNG vehicle tanks driven by higher natural gas prices and our customers’ availability of semiconductors due to macroeconomic conditions. Specialty Products segment backlog totaled $645.9 million as of December 31, 2022, compared to $438.2 million as of December 31, 2021, an increase of $207.7 million.
Repair, Service & Leasing segment orders for 2022 were $218.9 million compared to $180.6 million for 2021, an increase of $38.3 million. This increase was primarily driven by higher order intake within lifecycle services, aftermarket fans and our leasing business. Repair, Service & Leasing segment backlog totaled $57.0 million as of December 31, 2022, compared to $56.5 million as of December 31, 2021, an increase of $0.5 million.
Liquidity and Capital Resources
In connection with the funding of the Howden Acquisition, we borrowed incremental term loans in March 2023 and entered into a revised and expanded senior secured revolving credit facility and issued senior secured notes due 2030 and senior unsecured notes due 2031 during the fourth quarter of 2022. A description of these and our other debt instruments and related covenants are described in Note 10, “Debt and Credit Arrangements,” of our consolidated financial statements included under Item 15, “Exhibits and Financial Statement Schedules” of this Annual Report on Form 10-K.
Sources and Uses of Cash
Our cash and cash equivalents totaled $201.1 million, which includes $12.8 million of restricted cash as of December 31, 2023, a decrease of $2,404.2 from the balance at December 31, 2022, which included borrowings in connection with the Howden Acquisition. Our foreign subsidiaries held cash of approximately $170.1 million and $66.7 million at December 31, 2023 and 2022, respectively, to meet their liquidity needs. No material restrictions exist to accessing cash held by our foreign subsidiaries. Cash equivalents are primarily invested in money market funds that invest in high quality, short-term instruments, such as U.S. government obligations, certificates of deposit, repurchase obligations, and commercial paper issued by corporations that have been highly rated by at least one nationally recognized rating organization, and in the case of cash equivalents in China, obligations of local banks. We believe that our existing cash and cash equivalents, funds available under our senior secured revolving credit facility due October 2026 or other financing alternatives, and cash provided by operations will be sufficient to meet our normal working capital needs, capital expenditures and investments for the foreseeable future.
Years Ended December 31, 2023 and 2022
Cash provided by operating activities during 2023 was $167.2 million, an increase of $86.4 million from 2022, primarily due to an increase in cash generated by operations, partially offset by higher interest payments as a result of the debt raised in connection with the Howden Acquisition and the settlement of claims related to the Pacific Fertility Clinic lawsuits in the amount of $73.0 million as discussed in Item 3. Legal Proceedings.
Cash used in investing activities during 2023 was $3,990.1 million, as compared to cash used in investing activities of $101.6 million during 2022. During 2023 we used $4,322.3 million of cash for the acquisition of Howden, $135.6 million for capital expenditures, and $11.6 million for investments, primarily Avina and Hylium Industries. In 2023 we also received proceeds, net of cash divested, of $474.8 million from the sale of our Roots, Cofimco, American Fan, and Cryo Diffusion businesses. See below for discussion regarding the composition of cash provided by investing activities during 2022.
Cash provided by financing activities during 2023 was $1,412.5 million compared to cash provided by financing activities of $2,504.2 million during 2022. In connection with the Howden Acquisition, we borrowed incremental term loans in the aggregate principal amount of $1,534.8 million and borrowed incremental term loans in the aggregate principal amount of $250.0 million for general corporate purposes during 2023. On December 4, 2023, we voluntarily prepaid a portion of our term loans due March 2030 in the amount of $150.0 million. During 2023, we borrowed $1,895.1 million from revolving credit facilities and raised $11.7 million in proceeds for the issuance of common stock, primarily to fund the Howden Acquisition and repaid $1,901.2 million in borrowings on credit facilities. A portion of debt repayments was funded with the proceeds from the previously mentioned divestitures. During 2023 we paid $136.2 million in debt issuance costs and paid $27.3 million of dividends on our mandatory convertible preferred stock. We also paid $12.2 million in dividend distributions to noncontrolling interest owners during 2023. See below for discussion regarding the composition of cash provided by financing activities during 2022.
Years Ended December 31, 2022 and 2021
Cash provided by operating activities during 2022 was $80.8 million, an increase of $102.1 million from 2021, primarily due to an increase in operating cash provided by working capital, particularly within accounts payable and inventory.
Cash used in investing activities during 2022 was $101.6 million, as compared to cash used in investing activities of $361.2 million during 2021. During 2022, we paid $74.2 million for capital expenditures. We also used $25.8 million of cash for the acquisitions of Fronti Fabrications, Inc., CSC Cryogenic Service Center AB, 100% of a joint venture in AdEdge India and a final net working capital adjustment related to our 2021 acquisition of AdEdge. We used $9.9 million for investments in Hy24, Gold Hydrogen LLC and Avina Clean Hydrogen Inc., partially offset by $9.4 million cash received from settlements of our cross-currency swaps.
Cash provided by financing activities during 2022 was $2,504.2 million compared to cash provided by financing activities of $381.9 million during 2021. During 2022, we borrowed $2,575.3 million on credit facilities, primarily related to senior secured notes due 2030, senior unsecured notes due 2031 and our senior secured revolving credit facility and repaid $1,128.2 million in borrowings on credit facilities using proceeds from equity offerings related to the Howden Acquisition to pay down a portion of our senior secured revolving credit facility. Also during 2022, we received $675.1 million net proceeds from the issuance of common stock and $388.1 million net proceeds from the issuance of preferred stock, both related to the Howden Acquisition.
Cash Requirements
We do not currently anticipate any unusual cash requirements for working capital needs for the year ending December 31, 2024 relating to our existing business. Management anticipates we will be able to satisfy cash requirements for our ongoing business for the foreseeable future with cash generated by operations, existing cash balances and available borrowings under our credit facilities. We expect capital expenditures for 2024 to be in the range of $115.0 million to $125.0 million.
Contractual Obligations
Our material cash requirements from known contractual obligations include those related to debt and leases, refer to Note 10, “Debt and Credit Arrangements” and Note 20, “Leases”, respectively, within Item 15, “Exhibits and Financial Statement Schedules” of this Annual Report on Form 10-K for payments due by period. We also have contractual coupon interest related to our 1.00% convertible notes due November 2024, 7.500% senior secured notes due 2030 and 9.500% senior unsecured notes due 2031, which, as of December 31, 2023 totals $160.5 million for the next twelve months and $917.2 million thereafter. Purchase obligations arising from purchases of inventory and services are entered into with vendors in the normal course of business and are within our expected requirements for resource planning. We occasionally enter into firm purchase commitments to procure raw materials such as stainless steel, carbon steel and aluminum. As of December 31, 2023, firm purchase commitments were not material.
We also have a 44.1 million euros investment commitment for the Clean H2 Infra Fund as mentioned in Note 6, “Investments” within Item 15, “Exhibits and Financial Statement Schedules” of this Annual Report on Form 10-K. Funding is required when the fund manager issues a capital call, which shall not exceed 30% of our capital commitment in any rolling 12-month period. We also have contingent consideration arrangements from prior acquisitions with a potential payout range of $0.0 million to $12.5 million. Refer to Note 14, “Business Combinations” within Item 15, “Exhibits and Financial Statement Schedules” of this Annual Report on Form 10-K for further information.
Our commercial commitments as of December 31, 2023, which include standby letters of credit and bank guarantees, represent potential cash requirements resulting from contingent events that require performance by us or our subsidiaries pursuant to funding commitments, and are as follows (dollar amounts in millions):
Total Expiring in 2024 Expiring in 2025 and beyond
Standby letters of credit $ 272.1 $ 165.8 $ 106.3
Bank guarantees 134.3 85.3 49.0
Total commercial commitments $ 406.4 $ 251.1 $ 155.3
Contingencies
We are subject to federal, state, local, and foreign environmental laws and regulations concerning, among other matters, waste water effluents, air emissions, and handling and disposal of hazardous materials, such as cleaning fluids. We are involved with environmental compliance, investigation, monitoring, and remediation activities at certain of our owned and formerly owned manufacturing facilities and at one owned facility that is leased to a third party, and, except for these continuing remediation efforts, believe we are currently in substantial compliance with all known environmental regulations. Management believes that any additional liability in excess of amounts accrued, which may result from the resolution of such matters, should not have a material adverse effect on our financial position, liquidity, cash flows or results of operations.
We are occasionally subject to various legal claims related to performance under contracts, product liability, taxes, employment matters, environmental matters, intellectual property, and other matters, several of which claims assert substantial damages, in the ordinary course of our business. Based on our historical experience in litigating these claims, as well as our current assessment of the underlying merits of the claims and applicable insurance, if any, we believe the resolution of these legal claims will not have a material adverse effect on our financial position, liquidity, cash flows or results of operations. Future developments may, however, result in resolution of these legal claims in a way that could have a material adverse effect. See Item 1A. “Risk Factors” and Item 3, “Legal Proceedings” for further information.
Foreign Operations
Our foreign operations accounted for approximately 58.6% of 2023 consolidated sales and 57.4% of total property, plant and equipment at December 31, 2023. Functional currencies used by these operations include the Chinese yuan, the euro, the British pound, the South African rand, the Indian rupee, and the Canadian dollar. We are exposed to foreign currency exchange risk as a result of transactions by these subsidiaries in currencies other than their functional currencies, and from transactions by our domestic operations in currencies other than the U.S. dollar. The majority of these functional currencies and the other currencies in which we record transactions are fairly stable, although we experienced variability in the current year as more fully discussed in Item 7A. The use of these currencies, combined with the use of foreign currency forward purchase and sale contracts, has enabled us to be sheltered from significant gains or losses resulting from foreign currency transactions. This situation could change if these currencies experience significant fluctuations or the volume of forward contracts changes.
Critical Accounting Estimates
Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles and are based on the selection and application of significant accounting policies, which require management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates. There were no material changes to estimates or methodologies used to develop those estimates in 2023. Management believes the following are the more critical judgmental areas in the application of its accounting policies that affect its financial position and results of operations.
Goodwill and Indefinite-Lived Intangible Assets: We evaluate goodwill and indefinite-lived intangible assets for impairment on an annual basis, as of October 1 or whenever events or changes in circumstances indicate that an evaluation should be completed. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include deterioration in general economic conditions, negative developments in equity and credit markets, a decline in stock price and market capitalization, adverse changes in the markets in which we operate, and a trend of negative or declining cash flows over multiple periods. The fair value that could be realized in an actual transaction may differ from that used to evaluate the impairment of goodwill.
Goodwill is analyzed on a reporting unit basis. The reporting units are the same as our operating and reportable segments, which are as follows: Cryo Tank Solutions, Heat Transfer Systems, Specialty Products and Repair, Service & Leasing. To test goodwill for impairment, we first evaluate qualitative factors, such as macroeconomic conditions and our overall financial performance to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying
amount, including goodwill (the “Step 0 Test”). If we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, the first step of the goodwill impairment test is not necessary. Otherwise, we would proceed to the first step of the goodwill impairment test.
Alternatively, we may also bypass the Step 0 Test and proceed directly to the first step of the goodwill impairment test. Under the first step (“Step 1”), we estimate the fair value of our reporting units by considering income and market approaches to develop fair value estimates, which are weighted to arrive at a fair value estimate for each reporting unit. With respect to the income approach, a model has been developed to estimate the fair value of each reporting unit. This fair value model incorporates estimates of future cash flows, estimates of allocations of certain assets and cash flows among reporting units, estimates of future growth rates, and management’s judgment regarding the applicable discount rates to use to discount such estimates of cash flows. With respect to the market approach, a guideline company method is employed whereby pricing multiples are derived from companies with similar assets or businesses to estimate fair value of each reporting unit. If the fair value of the reporting unit exceeds the carrying amount of the net assets assigned to that reporting unit, then goodwill is not impaired, and no further testing is required. However, if the fair value of the reporting unit is less than its carrying amount, the impairment charge is based on the excess of a reporting unit’s carrying amount over its fair value (i.e., we would measure the charge based on the result from Step 1). The assumptions and judgment used by management to estimate future cash flows, allocation of assets and cash flows among reporting units, estimates of future growth rates and selection of discount rates are subject to change due to the economic environment, including such factors as interest rates, expected market returns and volatility of markets served. Changes to the assumptions and estimates used throughout the steps described above may result in a significantly different estimate of the fair value of the reporting units, which could result in a different assessment of the recoverability of goodwill and result in future impairment charges.
In order to assess the reasonableness of the calculated fair values of our reporting units, we also compare the sum of the reporting units’ fair values to our market capitalization and calculate an implied control premium (the excess of the sum of the reporting units’ fair values over the market capitalization). We evaluate the control premium by comparing it to control premiums of recent comparable transactions. If the implied control premium is not reasonable in light of this assessment, we reevaluate our fair value estimates of the reporting units by adjusting the discount rates and other assumptions as necessary.
With respect to indefinite-lived intangible assets, we first evaluate relevant events and circumstances to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount. If, in weighing all relevant events and circumstances in totality, we determine that it is not more likely than not that an indefinite-lived intangible asset is impaired, no further action is necessary. Otherwise, we would determine the fair value of indefinite-lived intangible assets and perform a quantitative impairment assessment by comparing the indefinite-lived intangible asset’s fair value to its carrying amount. We may bypass such a qualitative assessment and proceed directly to the quantitative assessment. We estimate the fair value of our indefinite-lived assets using the income approach. This may include the relief from royalty method or use of a model similar to the one described above related to goodwill which estimates the future cash flows attributed to the indefinite-lived intangible asset and then discounting these cash flows back to a present value. Under the relief from royalty method, fair value is estimated by discounting the royalty savings, as well as any tax benefits related to ownership to a present value. The fair value from either approach is compared to the carrying value and an impairment is recorded if the fair value is determined to be less than the carrying value. Management’s estimates regarding future cash flows, selection of discount rates and estimated tax benefits are subject to change due to various economic factors and changes to the assumptions and estimates used throughout the steps described above and may result in a significantly different estimate of the fair value of indefinite-lived intangible assets which could result in a different assessment of the recoverability of these assets and result in future impairment charges.
As of October 1, 2023, 2022 and 2021 (“annual reporting unit assessment dates”) we elected to bypass the Step 0 test and based on our Step 1 test, we determined that the fair value of each of our reporting units was greater than its respective carrying value at each annual reporting unit assessment date, and therefore, no further action was necessary.
As of October 1, 2023, we elected to bypass the Step 0 test and based on our Step 1 test, we determined that the fair value of each of our indefinite-lived intangible assets was greater than its respective carrying value, and therefore, no further action was necessary. As of October 1, 2022 and 2021, we also elected to bypass the qualitative assessment for indefinite-lived intangible assets with the exception of Earthly Labs and Fronti Fabrications, Inc trade names for the October 1, 2022 assessments. Based on our qualitative assessment of these trade names, we determined that it is not “more likely than not” that the fair value of each of these trade names is less than its respective carrying amount. Based on our quantitative assessments of all other indefinite-lived intangible assets, we determined that the fair value of each of the indefinite-lived intangible assets was greater than its respective carrying value at both October 1, 2022 and 2021, and therefore, no further action was necessary.
Long-Lived Assets: We monitor our property, plant and equipment, and finite-lived intangible assets for impairment indicators on an ongoing basis. If impairment indicators exist, assets are grouped and tested at the lowest level for which
identifiable cash flows are available, and we perform the required analysis and record impairment charges if applicable. In conducting this analysis, we compare the undiscounted cash flows expected to be generated from the long-lived assets to the related net book values. If the undiscounted cash flows exceed the net book value, the long-lived assets are considered not to be impaired. If the net book value exceeds the undiscounted cash flows, an impairment loss is measured and recognized. An impairment loss is measured as the difference between the net book value and the fair value of the long-lived assets. Fair value is estimated from discounted future net cash flows (for assets held for use) or net realizable value (for assets held for sale). In assessing the recoverability of our long-lived assets, a significant amount of judgment is involved in estimating the future cash flows, discount rates and other factors necessary to determine the fair value of the respective assets. Key assumptions used in these estimates include industry and market conditions, costs to produce and projected revenue growth. If these estimates or the related assumptions change in the future, we may be required to record impairment charges for these assets in the period such determination was made. We amortize intangible assets that have finite lives over their estimated useful lives. We had no long-lived asset impairments in the last three years.
Business Combinations: We account for business combinations in accordance with Accounting Standards Codification (“ASC”) 805, “Business Combinations.” We recognize and measure identifiable assets acquired and liabilities assumed based on their estimated fair values. The excess of the consideration transferred over the fair value of the net assets acquired, including identifiable intangible assets, is assigned to goodwill. We estimate the fair value of identifiable intangible assets under income approaches where the fair value models incorporate estimates of future cash flows, estimates of allocations of certain assets and cash flows, estimates of future growth rates, and management’s judgment regarding the applicable discount rates to use to discount such estimates of cash flows. Assigning estimated fair values to the identifiable assets acquired and liabilities assumed requires the use of significant estimates, judgments, inputs and assumptions. Such assumptions are based in part on historical experience, industry and market conditions and information obtained from management of the acquired companies and are thus inherently uncertain. As additional information becomes available, we may further revise the preliminary acquisition consideration allocation during the remainder of the measurement period, which shall not exceed twelve months from the closing of the acquisition.
Investments in Equity Securities Without a Readily Determinable Fair Value: Our investments in equity securities for which there is no readily determinable fair value are measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. As part of our assessment for impairment indicators, judgement is involved in considering significant deterioration in the earnings performance, credit rating, asset quality or overall business prospects of the investee as well as significant adverse changes in the external environment in which an investee operates, a significant adverse change in the general market condition of either the geographical area or the industry in which the investee operates or factors that raise significant concerns about the investee’s ability to continue as a going concern, such as negative cash flows from operations, working capital deficiencies, or noncompliance with statutory capital requirements or debt covenants. Furthermore, management must use reasonable efforts to identify an observable price change on a timely basis. Despite these efforts, we may not be able to obtain this information. If we determine that an investment is impaired, we shall measure the investment at fair value, which may involve a significant degree of judgement and subjectivity. The carrying amount of our investments in equity securities without a readily determinable fair value was $80.3 million as of December 31, 2023.
Contingencies: On an ongoing basis, we assess the potential liabilities related to any lawsuits or claims brought against us. While it is typically very difficult to determine the timing and ultimate outcome of such actions, management uses its best judgment to determine if it is probable that we will incur an expense related to the settlement or final adjudication of such matters and whether a reasonable estimation of such probable loss, if any, can be made. In assessing probable losses, we take into consideration estimates of the amount of insurance recoveries, if any, which are recorded in other current assets when recoverability is probable. We accrue a liability when we believe a loss is probable and the amount of loss can be reasonably estimated. Due to the inherent uncertainties related to the eventual outcome of litigation and potential insurance recoveries, it is possible that certain matters may be resolved for amounts materially different from any provisions or disclosures that we have previously made.
Revenue Recognition: Revenue is recognized when (or as) we satisfy performance obligations by transferring a promised good or service, an asset, to a customer. An asset is transferred to a customer when, or as, the customer obtains control over that asset. In most contracts, the transaction price includes both fixed and variable consideration. The variable consideration contained within our contracts with customers includes discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties and other similar items. When a contract includes variable consideration, we evaluate the estimate of the variable consideration to determine whether the estimate needs to be constrained; therefore, we include the variable consideration in the transaction price only to the extent that it is probable that a significant reversal of the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Variable consideration estimates are updated at each reporting date.
In certain contracts, we are engaged to engineer and build highly-customized products and systems. In these circumstances, we produce an asset with no alternative use and have a right to payment for performance completed to date. For these contracts, revenue is recognized as we satisfy the performance obligations by an allocation of the transaction price to the accounting period computed using input methods such as costs incurred. Selecting the method used to measure progress towards completion for our contracts requires judgment and is based on the nature of the products to be provided. Accounting for contracts using the costs incurred input method requires management judgment relative to assessing risks and their impact on the estimates of revenue and costs. Certain factors can impact these estimates including, but not limited to, the potential for incentives or penalties on performance, schedule delays, labor productivity, the complexity of work performed and the cost and availability of materials. Revisions to estimated cost to complete a project that result from inefficiencies in our performance that were not expected in the pricing of the contract are expensed in the period in which these inefficiencies become known. Contract modifications can change a contract’s scope, price, or both. Approved contract modifications are accounted for as either a separate contract or as part of the existing contract depending on the nature of the modification which is subject to management’s judgment.
Income Taxes: The Company and its U.S. 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. A valuation allowance is provided against net deferred tax assets when conditions indicate that it is more likely than not that the benefit related to such assets will not be realized. In the event that we change our determination as to the amount of deferred tax assets that can be realized, the valuation allowance will be adjusted with a corresponding impact to the provision for income taxes in the period in which such determination is made. Management must make assumptions, judgments and estimates to determine our deferred tax assets and liabilities, current provision for income taxes and valuation allowances. In making such assumptions we consider all available evidence including past operating results, estimates of future taxable income and the feasibility of tax planning strategies.
We utilize a two-step approach for the recognition and measurement of uncertain tax positions. The first step is to evaluate the tax position and determine whether it is more likely than not that the position will be sustained upon examination by tax authorities. The second step is to measure the tax benefit as the largest amount that is more likely than not of being realized upon settlement. Our income tax positions are based on research and interpretations of the income tax laws and rulings in each of the jurisdictions in which we do business. Due to the subjectivity of interpretations of laws and rulings in each jurisdiction, the differences and interplay in tax laws between those jurisdictions, as well as the inherent uncertainty in estimating the final resolution of complex tax audit matters, management’s estimates of income tax liabilities may differ from actual payments or assessments. Resolution of uncertain tax positions could have a material adverse effect or materially benefit our results of operations in future periods depending on their ultimate resolution.
We use an estimate of our annual effective tax rate at each interim reporting period based on the facts and circumstances available at that time, while the actual effective tax rate is calculated at year-end. In calculating these rates, significant judgment is involved regarding the application of global income tax laws and regulations and when projecting the jurisdictional mix of income. Additionally, interpretation of tax laws, court decisions or other guidance provided by taxing authorities influences our estimate of the effective income tax rates. As a result, our actual effective income tax rates and related income tax liabilities may differ materially from our estimated effective tax rates and related income tax liabilities. Any resulting differences are recorded in the period they become known. An increase or decrease of one percentage point in our effective tax rate would have affected our 2023 net income by $0.6 million.
Recent Accounting Standards
For disclosures regarding recent accounting standards, refer to Note 2, “Significant Accounting Policies,” of our consolidated financial statements included under Item 15, “Exhibits and Financial Statement Schedules” of this Annual Report on Form 10-K.
Forward-Looking Statements
We are making this statement in order to satisfy the “safe harbor” provisions contained in the Private Securities Litigation Reform Act of 1995. This Annual Report includes “forward-looking statements.” These forward-looking statements include statements relating to our business, including statements regarding completed acquisitions and investments and related accretion or statements with respect to the use of proceeds or redeployment of capital from recent divestitures, as well statements regarding revenues, cost and commercial synergies and efficiency savings, objectives, future orders, margins, segment sales mix, earnings or performance, liquidity and cash flow, inventory levels, capital expenditures, supply chain challenges, inflationary pressures including materials costs and pricing increases, business trends, clean energy market opportunities including addressable market and projected industry-wide investments, carbon and GHG emission targets, governmental initiatives, including executive orders and other information that is not historical in nature. In some cases, forward-looking
statements may be identified by terminology such as “may,” “will”, “should,” “expects,” “anticipates,” “believes,” “projects,” “forecasts,” “outlook,” “guidance,” “target,” “continue” or the negative of such terms or comparable terminology. Forward-looking statements contained herein (including future cash contractual obligations, liquidity, cash flow, orders, results of operations, projected revenues, margins, capital expenditures, industry and business, trends, clean energy and other new market or expansion opportunities, cost and commercial synergies and savings objectives, and government initiatives among other matters) or in other statements made by us are made based on management’s expectations and beliefs concerning future events impacting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed or implied by forward-looking statements.
The risk factors discussed in Item 1A. “Risk Factors” and the factors discussed in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” among others, could affect our future performance and liquidity and value of our securities and could cause our actual results to differ materially from those expressed or implied by forward-looking statements made by us or on our behalf. These factors should not be construed as exhaustive and there may also be other risks that we are unable to predict at this time. All forward-looking statements included in this Annual Report are expressly qualified in their entirety by these cautionary statements.
All forward-looking statements attributable to us or persons acting on our behalf apply only as of the date of this Annual Report and are expressly qualified in their entirety by the cautionary statements included in this Annual Report. We undertake no obligation to update or revise forward-looking statements which may be made to reflect events or circumstances that arise after the filing date of this document or to reflect the occurrence of unanticipated events, except as otherwise required by law.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A.Quantitative and Qualitative Disclosures About Market Risk
In the normal course of business, our operations are exposed to fluctuations in interest rates and foreign currency values that can affect the cost of operating and financing. Accordingly, we address a portion of these risks through a program of risk management.
Interest Rate Risk: Our primary interest rate risk exposure results from various floating rate pricing mechanisms contained in our senior secured revolving credit facility due October 2026 and term loans due March 2030. If interest rates were to increase 100 basis points (1 percent) from the weighted-average interest rate of 6.2% at December 31, 2023, and assuming no changes in the $102.8 million of borrowings outstanding under the senior secured revolving credit facility due October 2026 at December 31, 2023, our additional annual expense would be approximately $1.0 million on a pre-tax basis. If interest rates were to increase 100 basis points (1 percent) from the interest rate for our term loan of 8.7% at December 31, 2023, and assuming no changes in the $1,631.0 million of borrowings outstanding under the term loan at December 31, 2023, our additional annual expense would be approximately $16.3 million on a pre-tax basis.
Foreign Currency Exchange Rate Risk: We operate in the United States and other foreign countries, which creates exposure to foreign currency exchange fluctuations in the normal course of business, which can impact our financial position, results of operations, cash flow, and competitive position. The financial statements of foreign subsidiaries are translated into their U.S. dollar equivalents at end-of-period exchange rates for assets and liabilities, while income and expenses are translated at average monthly exchange rates. Translation gains and losses are components of other comprehensive income as reported in the consolidated statements of income and comprehensive income. Translation exposure is primarily with the euro, the Czech koruna, the Chinese yuan, the South African rand, the British pound and the Indian rupee. During 2023, the U.S. dollar strengthened in relation to the South African rand by 9% and Chinese yuan by 2%, and weakened in relation to the British pound by 5% and the euro by 3%. There was no notable movement between the U.S. dollar and the Indian rupee or Czech koruna. At December 31, 2023, a hypothetical further 10% strengthening of the U.S. dollar would not materially affect our financial statements.
EUR Revolver Borrowings: Additionally, assuming no changes in the euro 88.5 million in EUR Revolver Borrowings outstanding under the senior secured revolving credit facility due October 2026 and an additional 100 basis points (1 percent) strengthening in the U.S. dollar in relation to the euro as of the beginning of 2023, during the year ended December 31, 2023, our additional unrealized foreign currency gain would be approximately $1.0 million on a pre-tax basis.
Transaction Gains and Losses: Chart’s primary transaction exchange rate exposures are with the euro, the Chinese yuan, the Czech koruna, the Indian rupee, the Australian dollar, the British pound, the Canadian dollar and the South African rand. Transaction gains and losses arising from fluctuations in currency exchange rates on transactions denominated in currencies other than the functional currency are recognized in the consolidated statements of income and comprehensive income as a component of foreign currency gain.
Derivative Instruments: We enter into foreign currency contracts not designated as hedging instruments to mitigate foreign currency risk for anticipated and firmly committed foreign currency transactions. At December 31, 2023, a hypothetical 10% weakening of the U.S. dollar would not materially affect our outstanding foreign exchange forward contracts. We enter into a combination of cross-currency swaps and foreign exchange collars as a net investment hedge of our investments in certain international subsidiaries that use the euro as their functional currency in order to reduce the volatility caused by changes in exchange rates. As disclosed in Note 10, “Debt and Credit Arrangements,” we have an out-of-the-money protective call while writing a put option with a strike price at which the premium received is equal to the premium of the protective call purchased, which involved no initial capital outlay. The call was structured with a strike price higher than our cost basis in such investments, thereby limiting any foreign exchange losses to approximately $11.4 million on a pre-tax basis. We do not use derivative financial instruments for speculative or trading purposes. The terms of the contracts are generally one to three years.
Market Price Sensitive Instruments
In connection with the pricing of the 2024 Notes, we entered into privately negotiated convertible note hedge transactions (the “Note Hedge Transactions”) with certain parties, including affiliates of the initial purchasers of the 2024 Notes (the “Option Counterparties”) which relate to 4.41 million shares of our common stock and represents the number of shares of our common stock underlying the 2024 Notes. These Note Hedge Transactions are expected to reduce the potential dilution upon any future conversion of the 2024 Notes to the extent that the market price per share of our common stock exceeds the conversion price of $58.725 per share.
We also entered into separate, privately negotiated warrant transactions with the Option Counterparties to acquire up to 4.41 million shares of our common stock. The warrant transactions will have a dilutive effect with respect to our common stock to the extent that the price per share of our common stock exceeds the strike price of the warrants unless we elect, subject to certain conditions, to settle the warrants in cash. The strike price of the warrant transactions related to the 2024 Notes was initially $71.775 per share. Further information is located in Note 10, “Debt and Credit Arrangements,” of our consolidated financial statements included under Item 15, “Exhibits and Financial Statement Schedules” of this Annual Report on Form 10-K.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8.Financial Statements and Supplementary Data
Our Financial Statements and the accompanying Notes that are filed as part of this Annual Report are listed under Item 15. “Exhibits and Financial Statement Schedules” and are set forth beginning on page immediately following the signature page of this Form 10-K and are incorporated into this Item 8 by reference.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A.Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of December 31, 2023, an evaluation was performed under the supervision and with the participation of our management including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). The term “disclosure controls” means disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act (1) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (2) is accumulated and communicated to our management including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow for timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on the evaluation of our disclosure controls and procedures as of December 31, 2023, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at a reasonable level of assurance.
Management’s Report on Internal Control Over Financial Reporting
Management of Chart Industries, Inc. and its subsidiaries (the “Company,” “Chart,” “we,” “us,” or “our”) is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed under the supervision of our principal executive and financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.
The Company’s internal control over financial reporting includes policies and procedures that:
•Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets of the Company;
•Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and the directors of the Company; and
•Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the Company’s financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. Management has assessed the effectiveness of its internal control over financial reporting as of December 31, 2023 based on the framework established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the “COSO criteria”).
We did not include an evaluation of the internal control over financial reporting of Howden, which was acquired during 2023 and which, constituted $6,005.0 million and $4,058.7 million of total and net assets, respectively, as of December 31, 2023, and $1,537.9 million and $188.5 million of sales and operating income, respectively, for the year then ended.
Based on our assessment of internal control over financial reporting, management has concluded that, as of December 31, 2023, our internal control over financial reporting was effective.
The effectiveness of our internal control over financial reporting as of December 31, 2023 has been audited by Deloitte & Touche, LLP, an independent registered public accounting firm, and is included in this Annual Report on Form 10-K on page under the caption “Report of Independent Registered Public Accounting Firm.”
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
Item 9B.Other Information
Not applicable.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10.Directors, Executive Officers and Corporate Governance
Information required by this item as to the Directors of the Company appearing under the caption “Election of Directors” in our 2024 Proxy Statement is incorporated herein by reference. Information required by Item 405 is set forth in the 2024 Proxy Statement under the heading “Delinquent section 16(a) Reports,” which information is incorporated herein by reference. Information required by Items 406 and 407(c)(3), (d)(4) and (d)(5) of Regulation S-K is set forth in the 2024 Proxy Statement under the headings “Information Regarding Meetings and Committees of the Board of Directors,” “Code of Ethical Business Conduct and Officer Code of Ethics” and “Stockholder Communications with the Board,” which information is incorporated herein by reference.
The Charters of the Audit Committee, Compensation Committee and Nominations and Corporate Governance Committee and the Corporate Governance Guidelines, Officer Code of Ethics and Code of Ethical Business Conduct are available free of charge on our website at www.chartindustries.com and in print to any stockholder who requests a copy. Requests for copies should be directed to Secretary, Chart Industries, Inc., 2200 Airport Industrial Drive, Suite 100, Ball Ground, Georgia 30107. We intend to disclose any amendments to the Code of Ethical Business Conduct or Officer Code of Ethics and any waiver of the Code of Ethical Business Conduct or Officer Code of Ethics granted to any Director or Executive Officer of the Company on our website.
Executive Officers
The name, age and positions of each Executive Officer of the Company as of February 28, 2024 are as follows:
Name Age Position
Jillian C. (Jill) Evanko 46 Chief Executive Officer and President (Principal Executive Officer)
Joseph R. (Joe) Brinkman 54 Vice President and Chief Financial Officer (Principal Financial Officer)
Gerald F. (Gerry) Vinci 58 Vice President, Chief Human Resources Officer
Herbert G. (Herb) Hotchkiss 53 Vice President, General Counsel and Secretary
Joseph A. (Joe) Belling 54 Chief Commercial Officer
Brian P. Bostrom 50 Chief Technology Officer
Jillian C. (Jill) Evanko was appointed Chief Executive Officer and President on June 12, 2018 and served as Chief Financial Officer from March 1, 2017 until January 14, 2019 and from August 29, 2019 until March 16, 2021. Ms. Evanko joined Chart on February 13, 2017 as Vice President of Finance. Prior to joining Chart, Ms. Evanko served as the Vice President and Chief Financial Officer of Truck-Lite Co., LLC, a manufacturer of lighting and specialty products for the truck and commercial vehicle industries, since October 2016. Prior to that, she held multiple executive positions at Dover Corporation (NYSE: DOV), a diversified global manufacturer, and its subsidiaries, including the role of Vice President and Chief Financial Officer of Dover Fluids since January 2014. Prior to joining Dover in 2004, Ms. Evanko worked in valuation services at Arthur Andersen, LLP and also held audit and accounting roles for Honeywell and Sony Corporation of America. Ms. Evanko also serves as a director of Parker-Hannifin Corporation (NYSE: PH).
Joseph R. (Joe) Brinkman was appointed our Vice President and Chief Financial Officer on October 1, 2021. Prior to his appointment, Mr. Brinkman was Vice President and General Manager of Industrial Gas Products, the Company’s largest business. In his 24 years with the Company Mr. Brinkman has held various roles including Materials Manager, Director of Global Sourcing and most recently Vice President & General Manager of Bulk Gas Products.
Gerald F. (Gerry) Vinci was appointed our Vice President and Chief Human Resources Officer and has served in that capacity since December 5, 2016, when he joined Chart. Mr. Vinci was designated an executive officer of Chart on August 23, 2017. Prior to joining Chart, Mr. Vinci held various executive Human Resources roles at Dover Corporation (NYSE:DOV), a diversified global manufacturer, from February 2013 to November 2016, including Vice President, Human Resources for Dover Engineered Systems and Dover Refrigeration and Food Equipment Segments. From 1997 to 2013, Mr. Vinci served in numerous Human Resources executive roles and as Senior Counsel for Harsco Corporation (NYSE:HSC). Prior to that, Mr. Vinci was an attorney for Sunoco, Inc.(NYSE:SUN).
Herbert G. (Herb) Hotchkiss was appointed Vice President, General Counsel and Secretary on March 3, 2019. Prior to joining Chart, Mr. Hotchkiss spent over 11 years at Truck-Lite Co., LLC, a manufacturer of lighting and specialty products for the truck and commercial vehicle industries, as Vice President and Corporate Counsel. Prior to joining Truck-Lite, Mr. Hotchkiss worked for Blair Corporation as its Vice President and General Counsel. Prior to joining Blair Corporation, Mr.
Hotchkiss was employed as a Cleveland attorney, working as corporate associate at Calfee, Halter & Griswold LLP and Hahn, Loeser & Parks LLP.
Joseph A. (Joe) Belling was appointed Chief Commercial Officer on August 11, 2020. Prior to his appointment, Mr. Belling held various roles at Chart, most recently as President of the Chart Energy and Chemicals (E&C) segment and prior to that as President of E&C Cryogenics and VP/GM of Chart’s Brazed Aluminum Heat Exchangers (BAHX) business. Prior to joining Chart, Mr. Belling served in various roles of increasing responsibility at Trane Technologies (NYSE: TT), a multi-national corporation specializing in the HVAC industry. Mr. Belling was also employed by ALTEC International, which transitioned into Chart Energy and Chemicals.
Brian P. Bostrom was appointed Chief Technology Officer on January 9, 2023. Mr. Bostrom joined Chart in 1994. During his 28 years with the Company, Mr. Bostrom has held numerous engineering roles, including his most recent role of President of Global Engineering. As Chief Technology Officer, Mr. Bostrom has responsibility for all global engineering activities and advancement and commercialization of global product applications across the Company. He will also continue to be a leader in developing the Company’s engineering depth and capabilities. Mr. Bostrom holds an engineering degree from the University of Minnesota, is a member of the Compressed Gas Association and a member of the 2019 inaugural class of Chart Fellows.
Set forth below is a list of the members of our Board of Directors as of February 28, 2024:
Directors
SINGLETON B. MCALLISTER (2)
Chairman of the Board
Of Counsel and Senior Advisor
Husch Blackwell LLP
Law firm
JILLIAN C. EVANKO
President, Chief Executive Officer and Director
Chart Industries, Inc.
ANDREW R. CICHOCKI (1) (3)
Retired Chief Operating Officer
Airgas, Inc.
Supplier of gases, welding equipment and supplies, and safety products
PAULA M. HARRIS (1) (3)
Senior Vice President of Community Affairs and Foundation Executive Director
Houston Astros
Major league baseball club
LINDA A. HARTY (2) (3)
Retired Finance Executive
Medtronic
Global company specializing in medical technology, services and solutions
PAUL E. MAHONEY (1) (2)
President of Production and Automation Technologies
ChampionX
Global provider of chemistry solutions and highly engineered equipment and technologies for the oil and gas industry
MICHAEL L. MOLININI (1) (3)
Retired Chief Executive Officer and President
Airgas, Inc.
Supplier of gases, welding equipment and supplies, and safety products
DAVID M. SAGEHORN (1) (3)
Retired Executive Vice President and Chief Financial Officer
Oshkosh Corporation
Global producer of specialty trucks, truck bodies, and access equipment used in defense, construction and service markets
SPENCER S. STILES (1) (2)
Group President
Stryker Corporation
Global company specializing in medical technology products and services
ROGER A. STRAUCH (2)
Chairman
The Roda Group
Early-stage venture capital group focused on investment opportunities that address the consequences of climate change and increased demand for low carbon energy
_______________
(1)Compensation Committee
(2)Nominations and Corporate Governance Committee
(3)Audit Committee

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ITEM 11. EXECUTIVE COMPENSATION
Item 11.Executive Compensation
The information required by Item 402 of Regulation S-K is set forth in the 2024 Proxy Statement under the heading “Executive and Director Compensation,” which information is incorporated herein by reference. The information required by Items 407(e)(4) and 407(e)(5) of Regulation S-K is set forth in the 2024 Proxy Statement under the headings “Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report,” respectively, which information is incorporated herein by reference.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is set forth in the 2024 Proxy Statement under the headings “Security Ownership of Certain Beneficial Owners” and “Equity Compensation Plan Information,” which information is incorporated herein by reference.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13.Certain Relationships, Related Transactions, and Director Independence
The information required by this item is set forth in the 2024 Proxy Statement under the headings “Related Party Transactions” and “Director Independence,” which information is incorporated herein by reference.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14.Principal Accounting Fees and Services
The information required by this item is set forth in the 2024 Proxy Statement under the heading “Principal Accounting Fees and Services,” which information is incorporated herein by reference.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15.Exhibits and Financial Statement Schedules
(a) The following documents are filed as part of this 2023 Annual Report on Form 10-K:
1. Financial Statements. The following consolidated financial statements of the Company and its subsidiaries and the reports of the Company’s independent registered public accounting firm are incorporated by reference in Item 8:
Reports of Independent Registered Public Accounting Firm (PCAOB ID No. 34)
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Cash Flows
Consolidated Statements of Equity
Notes to Consolidated Financial Statements
2. Financial Statement Schedules. The following additional information should be read in conjunction with the consolidated financial statements:
Schedule II Valuation and Qualifying Accounts for the Years Ended December 31, 2023, 2022 and 2021.
All other financial statement schedules have been omitted since they are either not required, not applicable, or the information is otherwise included.
3. Exhibits. See the Index to Exhibits at page E-1 of this Annual Report on Form 10-K.