8-K
CHART INDUSTRIES INC (GTLS)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________________________
FORM 8-K
_____________________________________
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 28, 2023
____________________________________
CHART INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
_____________________________________
| Delaware | 001-11442 | 34-1712937 |
|---|---|---|
| (State of other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) |
2200 Airport Industrial Drive, Suite 100, Ball Ground, Georgia 30107
(Address of principal executive offices) (ZIP Code)
Registrant’s telephone number, including area code: (770) 721-8800
NOT APPLICABLE
(Former name or former address, if changed since last report)
_____________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $0.01 | GTLS | New York Stock Exchange |
| Depositary shares, each representing 1/20th interest in a share of 6.75% Series B Mandatory Convertible Preferred Stock, par value $0.01 | GTLS.PRB | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On July 28, 2023, Chart Industries, Inc. (the “Company”) issued a news release announcing the Company’s financial results for the second quarter ended June 30, 2023, as well as supplemental information for the second quarter ended June 30, 2023. A copy of the news release is furnished with this Current Report on Form 8-K as Exhibit 99.1, and a copy of the supplemental information is furnished with this Current Report on Form 8-K as Exhibit 99.2. All information in the news release and the supplemental information is furnished and shall not be deemed “filed” with the Securities and Exchange Commission for purposes of Section 18 of the Exchange Act, or otherwise be subject to the liability of that Section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent the Company specifically incorporated it by reference.
The news release and supplemental information furnished with this Current Report on Form 8-K include measures of which exclude certain items required to be presented under generally accepted accounting principles (“GAAP”). These measures are not recognized under GAAP and are referred to as “non-GAAP financial measures” in Regulation G under the Exchange Act. The Company believes these measures are of interest to investors and facilitate useful period-to-period comparisons of the Company’s financial results, and this information is used by the Company in evaluating internal performance. The non-GAAP measures are reconciled to the most directly comparable GAAP measure in tables at the end of the news release and in the supplemental information.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Chart Industries, Inc. | |
|---|---|
| Date: July 28, 2023 | |
| By: /s/ Jillian C. Evanko <br>Jillian C. Evanko<br><br>President and Chief Executive Officer |
3
Document
Exhibit 99.1
Chart Industries Reports Record 2023 Second Quarter Financial Metrics
Atlanta, Georgia – July 28, 2023 - Chart Industries, Inc. (NYSE: GTLS) today reported results for the second quarter ended June 30, 2023. Results from continuing operations reflect our first full quarter of ownership of Howden and exclude the Roots™ financial results for our entire ownership period of March 17, 2023 through June 30, 2023. On June 11, 2023 we signed a definitive agreement to sell the Roots™ business to Ingersoll Rand, and accordingly Roots™ is included in discontinued operations. Earlier this week, the Roots™ divestiture received the required regulatory approval and is anticipated to close no later than August 18, 2023 with cash proceeds of approximately $300 million to be used for debt paydown. Further details can be found in the supplemental presentation accompanying this release and published in the investor relations section of our website. Highlights include:
•Record total backlog of $3.96 billion increased 24.1% compared to second quarter 2022 proforma backlog, driven by record backlog for both Chart standalone and Howden standalone
•Record orders of $1.06 billion driven by Howden standalone record orders, record Repair, Service and Leasing (“RSL”) results and a Big LNG equipment award; Book-to-bill of 1.17 supports our 2023 and 2024 growth outlook
•Record sales of $908.1 million increased 10.3% (11.5% excluding foreign exchange impact) when compared to the second quarter of 2022 on a proforma basis for the combined business
•Record reported gross profit of $280.6 million and associated record reported gross profit as a percent of sales of 30.9% was 32.5% when adjusted for one-time items (primarily Howden deal and integration-related costs), resulting from our ongoing cost out actions, productivity, early synergy achievement and pricing actions.
•Second quarter 2023 reported operating income of $95.7 million included one-time Howden deal and integration related costs and inventory amortization step up; adjusting for these items, adjusted operating income was $154.4 million, or 17.0% operating income as a percent of sales
•Reported earnings per share (“EPS”) of ($0.01) and when adjusted for one-time costs, adjusted EPS of $1.19
•Reported EBITDA of $158.8 million included record Howden standalone EBITDA; adjusted for one-time costs, adjusted EBITDA was a record of $195.3 million and record 21.5% EBITDA margin
•Achieved $94.3 million of commercial synergies and $96.5 million of cost synergies to date, reinforcing our opportunity to exceed our year-one commercial and cost synergy targets
•Second quarter 2023 net cash provided by operating activities of $97.1 million less capital expenditures of $20.9 million results in strong free cash flow (“FCF”) of $76.2 million; when adjusted for one-time impacts, adjusted FCF was $86.6 million
•Executed numerous deleveraging actions resulting in a net leverage ratio of 3.86 (proforma 6/30/2023 net leverage ratio for announced divestitures is 3.72)
•Signed definitive agreement to sell Roots™ business to Ingersoll Rand for $300 million all cash (a low-teens EBITDA multiple); the transaction has received regulatory clearance and is expected to close no later than August 18, 2023
•Signed definitive agreement on July 26, 2023 to sell Cofimco fans business to PX3 Partners, the London headquartered private equity firm, for an $80 million purchase price (multiples in line with prior Chart transactions); the transaction is anticipated to close in the second half 2023
•We continue to anticipate generating approximately $500 million of potential proceeds from divestitures inclusive of the $380 million from the announced Roots and Cofimco divestitures.
Record second quarter 2023 financial metrics (backlog, orders, sales, gross profit, gross profit margin, operating income, and EBITDA).
Heat Transfer Solutions (“HTS”) posted records in reported backlog, sales, gross profit, gross profit as a percent of sales, operating income and operating income as a percent of sales. Also in the second quarter 2023, Howden (on a standalone basis) had record reported backlog, orders, gross profit and EBITDA.
Second quarter 2023 backlog of $3.96 billion (excludes $71.3 million from Roots™ backlog) set a record, following the prior historical high backlog of $3.86 billion as of the end of the first quarter 2023 (excluding Roots backlog of $73.6 million). Second quarter 2023 backlog increased 24.1% compared to the second quarter 2022 (proforma to include Howden), and both Chart and Howden backlogs on a standalone basis were records as of the end of the second quarter 2023.
Second quarter 2023 sales of $908.1 million grew 10.3% reported and 11.5% excluding foreign exchange impacts when compared to the second quarter of 2022 (on a proforma basis for the combined businesses excluding Roots™ divestiture revenue). Inclusive of Roots™ and excluding negative FX, second quarter 2023 sales were approximately $959 million. We expect sequential sales growth each quarter in the second half of 2023. We had approximately $70 million of sales shift from the second quarter 2023 to the second half 2023 due to customer delivery timing changes and inbound material receipt related to percent of completion revenue recognition, neither of which is atypical in our business given the longer project nature of our business now, reflecting our execution on our strategy to provide more complete solutions to our customers.
Second quarter 2023 reported operating income of $95.7 million included Howden deal and integration related costs and inventory amortization step up. Adjusted operating income was $154.4 million, or 17.0% operating income as a percent of sales. Second quarter 2023 reported EBITDA was $158.8 million and when adjusted for one-time, primarily Howden deal and integration-related costs, was $195.3 million, or 21.5% of sales. This record EBITDA was driven by record reported gross profit of $280.6 million and record reported gross profit margin of 30.9% both in the combined business as well as record Howden standalone gross profit. This record gross profit margin when adjusted is 32.5% and is the result of our ongoing cost out actions, early synergy achievements, pricing and productivity improvements. Both second quarter 2023 reported gross profit as a percent of sales and EBITDA as a percent of sales grew 300 basis points or more compared to the second quarter 2022 (proforma to include Howden).
Demand continued strong in the second quarter, with orders of $1.06 billion driven by record total Howden orders, record RSL orders (both combined and Howden standalone aftermarket, service and repair), orders in the Middle East and Africa region up 92% compared to the second quarter 2022 and a Big LNG equipment award (our second Big LNG award year-to-date 2023). This quarter’s book-to-bill of 1.17 supports our growth outlook for 2023 and 2024. The second quarter 2023 order book did not include any hydrogen liquefier orders or small-scale or floating LNG orders. We continue to expect at least two hydrogen liquefier orders in the second half 2023 as well as at least one additional Big LNG award.
We booked orders with 86 new customers in the second quarter 2023, including an iron/manganese water treatment system for storm water from E&W Welding and an aerospace customer ordering their first liquid hydrogen trailer. We also had 22 first-of-a-kind orders, including the largest cryogenic tanks ever ordered in the world (1700 cubic meters) for a space exploration customer and a novel fan design for a new metro train platform order by a global rail company.
We continue to see hydrogen demand expand globally, across the gaseous and liquid hydrogen value chain, with more end-use applications entering our backlog. Recently we were awarded an order for liquid hydrogen storage tank from Linde Engineering Hangzhou Co., Ltd for a project located in Korea, a BAHX replacement for a U.S. customer’s liquefier, and an order for a green hydrogen project to supply hydrogen compressors for Dalian Seawater Hydrogen Production Industry Integration Demonstration Project.
Our commercial pipeline remains very strong with over $20 billion of potential orders. Over $1 billion in our active sales pipeline are potential commercial synergy orders resulting from the Chart and Howden combination, and this is expected to continue to grow.
Synergy execution is on-track to achieve or exceed our year-one targets of cost synergies of $175 million and commercial synergies of $150 million.
We continue to make ahead-of-schedule progress on our cost and commercial synergies related to the Howden integration. We reiterate our year-one cost synergy target of $175 million and our year-one commercial synergy target of $150 million, both of which we have the opportunity to exceed between now and March 2024. To date, we have achieved $96.5 million of annualized cost synergies, ranging from reductions in overlapping headcount, to insourcing savings, to elimination of redundant systems and activities. More cost synergy potential has been identified as the teams work together. Additionally, we are thrilled with the earlier-than-anticipated achievement of commercial cross-selling, including $94.3 million of synergy orders booked to date. Said differently, we have achieved approximately 55% of our year-one cost synergy target and approximately 63% of our year-one commercial synergy target after only four months of ownership. In July 2023, we were awarded a $41.5 million synergy order to provide a large Middle Eastern customer with eight cold boxes for an ethane recovery project. This Chart and Howden synergy commercial win is the result of having Chart’s local Howden physical operation and team member presence in the region. We also received our largest ever Earthly Labs small-scale carbon capture award with Babcock & Wilcox for $3.1 million, which is a synergy win as well.
Since closing on the Howden acquisition, we have signed new and expanded existing memorandums of understanding (“MOU”) with 43 different partners which include both Chart and Howden content, representing significant order potential in both the near and long-term. Many have already placed orders and we anticipate receiving orders before year-end 2023 from approximately 70% of these partners. Recent strategic partnership examples include the completion of a Master Framework Agreement with Siemens Mobility for both Chart and Howden content and applications globally. Our efforts with Siemens Mobility will focus on emission-free traction systems such as hydrogen powered trains, rail electrification and turnkey rail solutions. Additionally, we executed an MOU with North American Helium (“NAH”) for a merchant Helium Recovery, Purification, and Liquefaction plant (which has not yet been booked into our backlog).
Aftermarket, service and repair demand and execution is exceptionally strong.
The RSL segment had an exceptionally strong quarter as we continue to see global aftermarket demand and increase our long-term service agreements (“LTSAs”) for multi-year service and repair capabilities. The RSL segment had record sales, gross profit and operating income, and orders increased by 32.9% and sales by 8.2% in the second quarter 2023 when compared to the second quarter 2022 (proforma to include Howden).
Leveraging the Howden digital tools and installed base management team, we have added approximately 46,500 Chart legacy installed assets into the digital tool, identifying over 500 customer sites where there are both Chart and Howden assets (totaling over 7,500). This is another avenue for us to expand the customer base and scope for our framework agreements and LTSAs. We executed numerous agreements and LTSAs in the second quarter 2023 and
July 2023 including a Frame Agreement with Veolia for our turbo fans for Mechanical Vapor Recompression solutions and received more than $8 million of related orders.
Multiple deleveraging actions completed driving June 30, 2023 net leverage ratio for our banking covenant of 3.86 (proforma 6/30/2023 net leverage ratio for announced divestitures of 3.72); anticipate achieving our original targeted year-end 2024 net leverage ratio range of 2.5X to 2.9X by the middle of 2024.
Second quarter 2023 net cash from operations of $97.1 million less capital expenditures of $20.9 million results in free cash flow for the quarter of $76.2 million. When adjusting for net income adjustments resulting from Howden deal and integration related costs, adjusted free cash flow for the second quarter was $86.3 million. We also executed numerous other cash generation and balance sheet capacity optimization actions, including but not limited to:
•Executed a definitive agreement to sell the Roots™ business for an all-cash price of $300 million. The Roots™ transaction has received regulatory clearances and is anticipated to close no later than August 18, 2023.
•Signed definitive agreement on July 26, 2023 to sell our Cofimco fans business to PX3 Partners, the London headquartered private equity firm, for an $80 million purchase price (multiples in line with prior Chart transactions); the transaction is anticipated to close in the second half 2023. Cofimco is one part of our axial flow fans product offering, manufactured in a dedicated, standalone building in Italy and is original equipment sales only, primarily to traditional energy customers and end markets. With the addition of Howden’s Cooling Fans that are differentiated with low noise operating capabilities and complement our Chart Tuf-Lite fans, which operate in extreme environments, we see numerous synergies. Additionally, Howden’s Cooling Fans and Tuf-Lite are both primarily serving the energy transition end markets in which customers are focusing on optimizing their facilities.
•Executed a definitive agreement to sell a French product line for 4.25 million euros, which is expected to close in August 2023 pending regulatory approval and subject to customary closing conditions.
•Completed the working capital settlement related to the Howden acquisition, which resulted in cash from seller to Chart of $17.5 million. This cash was received this week.
•Implemented additional bank-fronted guarantees and surety program resulting in additional non-debt capacity of approximately $100 million for future issuances.
•Repatriated approximately $20 million of cash from China and anticipate an incremental approximately $60 million of cash to repatriate in the second half 2023.
“The Howden acquisition has exceeded our already high expectations at the time of purchase of the business metrics and synergy opportunities, with record Howden performance in the second quarter 2023” stated Jill Evanko, Chart’s CEO and President. “Our record backlog supports our
near-term and medium-term outlooks, and we are on pace to hit our net leverage ratio targets sooner than originally thought.”
2023 Outlook Update and Reiteration of 2024 EBITDA Forecast
.
We have more than typical of our second half sales outlook already booked in backlog and given the synergy achievement to date, the continued demand in our commercial pipeline of the combined business, the timing of project revenues including Big LNG in backlog and our second quarter 2023 record backlog, we are reiterating our outlook for 2023 sales to be in the anticipated range of $3.66 billion to $3.80 billion, with associated adjusted EBITDA of $780 million to $810 million.
Our 2023 outlook for adjusted diluted EPS is in the expected range of $5.70 to $6.70 on approximately 47 million shares outstanding. Our 2023 outlook for adjusted free cash flow is in the anticipated range of $300 million to $350 million (unchanged from prior outlook), and our cash available for debt paydown is expected to be in the range of $655 million to $705 million (inclusive of announced divestiture proceeds of $380 million).
While our guidance does not include any new big LNG orders beyond what is in backlog, we expect to book an additional Big LNG order in the second half 2023 (in addition to the first quarter 2023 Sempra Port Arthur award and the second quarter 2023 Big LNG equipment award) and continue to expect ongoing Big LNG demand in the years ahead.
Additionally, we reiterate our 2024 adjusted EBITDA outlook of approximately $1.3 billion.
FORWARD-LOOKING STATEMENTS
Certain statements made in this press release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning the Company’s business plans, including statements regarding completed acquisitions, divestitures, and investments, cost and commercial synergies and efficiency savings, objectives, future orders, revenues, margins, segment sales mix, earnings or performance, liquidity and cash flow, inventory levels, capital expenditures, supply chain challenges, inflationary pressures including material cost and pricing increases, business trends, clean energy market opportunities including addressable markets, and governmental initiatives, including executive orders and other information that is not historical in nature. Forward-looking statements may be identified by terminology such as "may," "will," "should," "could," "expects," "anticipates," "believes," "projects," "forecasts," “outlook,” “guidance,” "continue," “target,” or the negative of such terms or comparable terminology.
Forward-looking statements contained in this press release or in other statements made by the Company are made based on management's expectations and beliefs concerning future events impacting the Company and are subject to uncertainties and factors relating to the Company's
operations and business environment, all of which are difficult to predict and many of which are beyond the Company's control, that could cause the Company's actual results to differ materially from those matters expressed or implied by forward-looking statements. Factors that could cause the Company’s actual results to differ materially from those described in the forward-looking statements include: the Company’s ability to successfully integrate the Howden acquisition and other recent acquisitions and achieve the anticipated revenue, earnings, accretion and other benefits from these acquisitions; the Company’s ability to successfully close on its identified divestitures and achieve the anticipated proceeds from these divestitures; slower than anticipated growth and market acceptance of new clean energy product offerings; inability to achieve expected pricing increases or continued supply chain challenges including volatility in raw materials and supply; risks relating to the outbreak and continued uncertainty associated with the coronavirus (COVID-19) and the conflict between Russia and Ukraine including potential energy shortages in Europe and elsewhere; and the other factors discussed in Item 1A (Risk Factors) in the Company’s most recent Annual Report on Form 10-K filed with the SEC, which should be reviewed carefully. The Company undertakes no obligation to update or revise any forward-looking statement.
USE OF NON-GAAP FINANCIAL INFORMATION
This press release contains non-GAAP financial information, including adjusted gross profit as a percent of sales, adjusted net income, adjusted operating income, adjusted operating margin, adjusted earnings per diluted share, net income attributable to Chart Industries, Inc. adjusted, free cash flow and adjusted free cash flow and EBITDA and adjusted EBITDA. For additional information regarding the Company's use of non-GAAP financial information, as well as reconciliations of non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States ("GAAP"), please see the reconciliation pages at the end of this news release and the slides titled "Second Quarter 2023 Adjusted EPS," “Segment Information,” “Second Quarter 2023 Free Cash Flow”, and “Second Quarter 2023 Adjusted EBITDA” included in the supplemental slides accompanying this release.
The Company believes these non-GAAP measures are of interest to investors and facilitate useful period-to-period comparisons of the Company’s financial results, and this information is used by the Company in evaluating internal performance. With respect to the Company’s second half 2023 outlook, and 2023 and 2024 full year earnings outlook, the Company is not able to provide a reconciliation of the adjusted earnings per non-diluted share, adjusted free cash flow or adjusted EBITDA because certain items may have not yet occurred or are out of the Company’s control and/or cannot be reasonably predicted.
CONFERENCE CALL
As previously announced, the Company has scheduled a conference call for Friday, July 28, 2023 at 8:30 a.m. ET to discuss its second quarter 2023 financial results. Participants wishing to join the live Q&A session must dial-in with the following information:
A live webcast and replay will be available on the Company's investor relations website through the following link: Q2 2023 Webcast Registration.
About Chart Industries, Inc.
Chart Industries, Inc. is 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. 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 CO2 capture amongst 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, the company maintains accountability and transparency to its team members, suppliers, customers and communities. To learn more, visit www.chartindustries.com
For more information, click here:
http://ir.chartindustries.com/
Investor Relations Contact:
John Walsh
VP, Investor Relations
770-721-8899
john.walsh@chartindustries.com
CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Dollars and shares in millions, except per share amounts)
| Three Months Ended | Six Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| June 30, 2023 | June 30, 2022 | March 31, 2023 | June 30, 2023 | June 30, 2022 | ||||||
| Sales | $ | 908.1 | $ | 404.8 | $ | 531.5 | $ | 1,439.6 | $ | 758.9 |
| Cost of sales | 627.5 | 310.0 | 382.2 | 1,009.7 | 580.4 | |||||
| Gross profit | 280.6 | 94.8 | 149.3 | 429.9 | 178.5 | |||||
| Selling, general, and administrative expenses | 140.7 | 53.5 | 92.9 | 233.6 | 107.0 | |||||
| Amortization expense | 44.2 | 11.7 | 21.8 | 66.0 | 21.8 | |||||
| Operating expenses | 184.9 | 65.2 | 114.7 | 299.6 | 128.8 | |||||
| Operating income (1) – (4) | 95.7 | 29.6 | 34.6 | 130.3 | 49.7 | |||||
| Acquisition related finance fees | — | — | 26.1 | 26.1 | — | |||||
| Interest expense, net | 79.5 | 4.4 | 25.5 | 105.0 | 7.6 | |||||
| Financing costs amortization | 4.4 | 0.7 | 2.8 | 7.2 | 1.4 | |||||
| Unrealized loss on investments in equity securities | 4.6 | 9.6 | 2.0 | 6.6 | 12.2 | |||||
| Realized gain on equity method investment | — | (0.3) | — | — | (0.3) | |||||
| Foreign currency gain | (4.1) | (1.7) | (1.1) | (5.2) | (0.1) | |||||
| Other expense (income) | 0.8 | (0.2) | 0.8 | 1.6 | (0.9) | |||||
| Income (loss) from continuing operations before income taxes and equity in earnings (loss) of unconsolidated affiliates, net | 10.5 | 17.1 | (21.5) | (11.0) | 29.8 | |||||
| Income tax expense (benefit) | 2.4 | 3.5 | (6.7) | (4.3) | 5.6 | |||||
| Income (loss) from continuing operations before equity in earnings (loss) of unconsolidated affiliates, net | 8.1 | 13.6 | (14.8) | (6.7) | 24.2 | |||||
| Equity in earnings (loss) of unconsolidated affiliates, net | 1.5 | (0.2) | (0.4) | 1.1 | (0.5) | |||||
| Net income (loss) from continuing operations | 9.6 | 13.4 | (15.2) | (5.6) | 23.7 | |||||
| Income from discontinued operations, net of tax | 2.5 | — | 1.3 | 3.4 | — | |||||
| Net income (loss) | 12.1 | 13.4 | (13.9) | (2.2) | 23.7 | |||||
| Less: Income attributable to noncontrolling interests of continuing operations, net of taxes | 3.0 | 0.4 | 0.7 | 3.7 | 0.5 | |||||
| Net income (loss) attributable to Chart Industries, Inc. | $ | 9.1 | $ | 13.0 | $ | (14.6) | $ | (5.9) | $ | 23.2 |
| Amounts attributable to Chart common stockholders | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Income (loss) from continuing operations | $ | 6.6 | $ | 13.0 | $ | (15.9) | $ | (9.3) | $ | 23.2 |
| Less: Mandatory convertible preferred stock dividend requirement | 6.9 | — | 6.8 | 13.7 | — | |||||
| (Loss) income from continuing operations attributable to Chart | (0.3) | 13.0 | (22.7) | (23.0) | 23.2 | |||||
| Income from discontinued operations, net of tax | 2.5 | — | 1.3 | 3.4 | — | |||||
| Net income (loss) attributable to Chart common stockholders | $ | 2.2 | $ | 13.0 | $ | (21.4) | $ | (19.6) | $ | 23.2 |
| Basic earnings per common share attributable to Chart Industries, Inc. | ||||||||||
| (Loss) income from continuing operations | $ | (0.01) | $ | 0.36 | $ | (0.54) | $ | (0.55) | $ | 0.65 |
| Income from discontinued operations | 0.06 | — | 0.03 | 0.08 | — | |||||
| Net income (loss) attributable to Chart Industries, Inc. | $ | 0.05 | $ | 0.36 | $ | (0.51) | $ | (0.47) | $ | 0.65 |
| Diluted earnings per common share attributable to Chart Industries, Inc. | ||||||||||
| (Loss) income from continuing operations | $ | (0.01) | $ | 0.31 | $ | (0.54) | $ | (0.55) | $ | 0.56 |
| Income from discontinued operations | 0.06 | — | 0.03 | 0.08 | — | |||||
| Net income (loss) attributable to Chart Industries, Inc. | $ | 0.05 | $ | 0.31 | $ | (0.51) | $ | (0.47) | $ | 0.56 |
| Weighted-average number of common shares outstanding: | ||||||||||
| Basic | 41.97 | 35.86 | 41.94 | 41.96 | 35.85 | |||||
| Diluted (5) – (7) | 46.45 | 41.56 | 41.94 | 41.96 | 41.18 |
_______________
(1)Includes depreciation expense of:
•$18.7, $10.0 and $11.5 for the three months ended June 30, 2023, June 30, 2022 and March 31, 2023, respectively, and
•$30.2 and $20.4 for the six months ended June 30, 2023 and June 30, 2022, respectively.
(2)Includes restructuring costs of:
•$5.4, $0.2, and $1.6 for the three months ended June 30, 2023, June 30, 2022 and March 31, 2023, respectively, and
•$7.0 and $0.3 for the six months ended June 30, 2023 and June 30, 2022, respectively.
(3)Includes acquisition-related contingent consideration charges (credits) in our Specialty Products segment of:
•$1.1, $(0.2), and $(7.4) for the three months ended June 30, 2023, June 30, 2022 and March 31, 2023, respectively, and
•$(6.5) and $(1.0) for the six months ended June 30, 2023 and June 30, 2022, respectively.
(4)Includes deal-related and integration costs of:
•$11.3, for the three months ended June 30, 2023 which includes costs related to the Howden acquisition such as interest, deal advisory and financing costs and $5.1 and $81.7 for the three months ended June 30, 2022 and March 31, 2023, respectively, and
•$93.0 and $9.3 for the six months ended June 30, 2023 and June 30, 2022, respectively.
(5)Does not include an additional 4.31 shares related to the convertible notes due 2024 and associated warrants in our diluted earnings per share calculation for the three months ended June 30, 2023 as they are anti-dilutive for the period. Also, the associated hedge, which helps offset this dilution, cannot be taken into account under U.S. generally accepted accounting principles (“GAAP”). If the hedge could have been considered, it would have reduced the additional shares by 2.38 for the three months ended June 30, 2023.
(6)Includes an additional 5.44 shares related to the convertible notes due 2024 and associated warrants in our diluted earnings per share calculation for the three months ended June 30, 2022. The associated hedge, which helps offset this dilution,
cannot be taken into account under U.S.GAAP. If the hedge could have been considered, it would have reduced the additional shares by 2.89 shares for the three months ended June 30, 2022.
(7)Includes an additional 5.08 shares related to the convertible notes due 2024 and associated warrants in our diluted earnings per share calculation for the three months ended March 31, 2023. The associated hedge, which helps offset this dilution, cannot be taken into account under U.S.GAAP. If the hedge could have been considered, it would have reduced the additional shares by 2.73 shares for the three months ended March 31, 2023.
CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in millions)
| Three Months Ended | Six Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| June 30, 2023 | June 30, 2022 | March 31, 2023 | June 30, 2023 | June 30, 2022 | ||||||
| Net Cash Provided By (Used In) Operating Activities | $ | 91.6 | $ | 34.7 | $ | (32.1) | $ | 59.5 | $ | 12.5 |
| Investing Activities | ||||||||||
| Acquisition of businesses, net of cash acquired | — | (24.5) | (4,339.8) | (4,339.8) | (25.3) | |||||
| Investments | (0.5) | — | (2.1) | (2.6) | (3.9) | |||||
| Capital expenditures | (23.0) | (17.2) | (31.4) | (54.4) | (29.8) | |||||
| Proceeds from sale of assets | (0.1) | — | 0.1 | — | — | |||||
| Cash received from settlement of cross-currency swap agreements | — | 3.6 | — | — | 3.6 | |||||
| Government grants and other | (0.4) | (0.1) | (0.6) | (1.0) | (0.3) | |||||
| Net Cash Used In Investing Activities | (24.0) | (38.2) | (4,373.8) | (4,397.8) | (55.7) | |||||
| Financing Activities | ||||||||||
| Borrowings on credit facilities | 88.0 | 179.3 | 634.8 | 722.8 | 433.3 | |||||
| Repayments on credit facilities | (339.8) | (125.3) | (45.0) | (384.8) | (361.2) | |||||
| Borrowings on term loan | 250.0 | — | 1,497.2 | 1,747.2 | — | |||||
| Repayments on term loan | (3.8) | — | — | (3.8) | — | |||||
| Payments for debt issuance costs | (11.9) | — | (121.5) | (133.4) | — | |||||
| Payment of contingent consideration | (1.7) | — | — | (1.7) | — | |||||
| Proceeds from issuance of common stock, net | — | — | 11.7 | 11.7 | — | |||||
| Proceeds from exercise of stock options | 0.1 | 0.4 | 0.1 | 0.2 | 1.4 | |||||
| Common stock repurchases from share-based compensation plans | (0.1) | (0.1) | (2.6) | (2.7) | (3.3) | |||||
| Dividend distribution to noncontrolling interest | (8.4) | — | — | (8.4) | — | |||||
| Dividends paid on mandatory convertible preferred stock | (6.8) | — | (6.9) | (13.7) | — | |||||
| Net Cash (Used In) Provided By Financing Activities | (34.4) | 54.3 | 1,967.8 | 1,933.4 | 70.2 | |||||
| Effect of exchange rate changes on cash | (0.3) | (1.0) | 2.2 | 1.9 | 0.3 | |||||
| Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents | 32.9 | 49.8 | (2,435.9) | (2,403.0) | 27.3 | |||||
| Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period (1) | 169.4 | 99.9 | 2,605.3 | 2,605.3 | 122.4 | |||||
| CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND RESTRICTED CASH EQUIVALENTS AT END OF PERIOD (1) | $ | 202.3 | $ | 149.7 | $ | 169.4 | $ | 202.3 | $ | 149.7 |
_______________
(1)Includes restricted cash and restricted cash equivalents of $12.5, $2.5 and $1,941.7 as of June 30, 2023, March 31, 2023 and December 31, 2022, respectively and $0.2 as of both March 31, 2022 and December 31, 2021.
CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in millions)
| June 30,<br>2023 | December 31,<br>2022 | |||
|---|---|---|---|---|
| ASSETS | ||||
| Cash and cash equivalents | $ | 189.8 | $ | 663.6 |
| Restricted cash | 12.5 | 1,941.7 | ||
| Accounts receivable, net | 769.7 | 278.4 | ||
| Inventories, net | 634.6 | 357.9 | ||
| Other current assets | 641.6 | 449.3 | ||
| Property, plant, and equipment, net | 782.7 | 430.0 | ||
| Goodwill | 2,827.8 | 992.0 | ||
| Identifiable intangible assets, net | 2,913.4 | 535.3 | ||
| Equity method investments | 120.6 | 93.0 | ||
| Investments in equity securities | 89.9 | 96.5 | ||
| Other assets | 117.5 | 64.2 | ||
| Total assets of discontinued operations | 307.4 | — | ||
| TOTAL ASSETS | $ | 9,407.5 | $ | 5,901.9 |
| LIABILITIES AND EQUITY | ||||
| Current liabilities | $ | 1,815.5 | $ | 1,081.6 |
| Long-term debt | 4,039.5 | 2,039.8 | ||
| Other long-term liabilities | 715.3 | 96.2 | ||
| Total liabilities of discontinued operations | 30.0 | — | ||
| Equity | 2,807.2 | 2,684.3 | ||
| TOTAL LIABILITIES AND EQUITY | $ | 9,407.5 | $ | 5,901.9 |
CHART INDUSTRIES, INC. AND SUBSIDIARIES
OPERATING SEGMENTS (UNAUDITED)
(Dollars in millions)
| Three Months Ended | Six Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30, 2023 | June 30, 2022 | March 31, 2023 | June 30, 2023 | June 30, 2022 | |||||||||||
| Sales | |||||||||||||||
| Cryo Tank Solutions | $ | 152.7 | $ | 132.9 | $ | 123.5 | $ | 276.2 | $ | 251.0 | |||||
| Heat Transfer Systems | 236.0 | 102.9 | 167.5 | 403.5 | 182.2 | ||||||||||
| Specialty Products | 236.7 | 115.3 | 126.2 | 362.9 | 222.8 | ||||||||||
| Repair, Service & Leasing | 298.7 | 55.4 | 118.5 | 417.2 | 104.7 | ||||||||||
| Intersegment eliminations | (16.0) | (1.7) | (4.2) | (20.2) | (1.8) | ||||||||||
| Consolidated | $ | 908.1 | $ | 404.8 | $ | 531.5 | $ | 1,439.6 | $ | 758.9 | |||||
| Gross Profit | |||||||||||||||
| Cryo Tank Solutions | $ | 28.8 | $ | 21.6 | $ | 21.5 | $ | 50.3 | $ | 47.0 | |||||
| Heat Transfer Systems | 67.3 | 14.8 | 41.3 | 108.6 | 24.9 | ||||||||||
| Specialty Products | 61.0 | 39.4 | 35.9 | 96.9 | 72.0 | ||||||||||
| Repair, Service & Leasing | 123.5 | 19.0 | 50.6 | 174.1 | 34.6 | ||||||||||
| Consolidated | $ | 280.6 | $ | 94.8 | $ | 149.3 | $ | 429.9 | $ | 178.5 | |||||
| Gross Profit Margin | |||||||||||||||
| Cryo Tank Solutions | 18.9 | % | 16.3 | % | 17.4 | % | 18.2 | % | 18.7 | % | |||||
| Heat Transfer Systems | 28.5 | % | 14.4 | % | 24.7 | % | 26.9 | % | 13.7 | % | |||||
| Specialty Products | 25.8 | % | 34.2 | % | 28.4 | % | 26.7 | % | 32.3 | % | |||||
| Repair, Service & Leasing | 41.3 | % | 34.3 | % | 42.7 | % | 41.7 | % | 33.0 | % | |||||
| Consolidated | 30.9 | % | 23.4 | % | 28.1 | % | 29.9 | % | 23.5 | % | |||||
| Operating Income (Loss) | |||||||||||||||
| Cryo Tank Solutions | $ | 10.5 | $ | 9.9 | $ | 4.3 | $ | 14.8 | $ | 24.0 | |||||
| Heat Transfer Systems | 49.8 | 5.7 | 27.3 | 77.1 | 5.5 | ||||||||||
| Specialty Products | 29.1 | 20.8 | 21.8 | 50.9 | 37.0 | ||||||||||
| Repair, Service & Leasing | 45.6 | 12.0 | 33.1 | 78.7 | 20.3 | ||||||||||
| Corporate | (39.3) | (18.8) | (51.9) | (91.2) | (37.1) | ||||||||||
| Consolidated (1) – (6) | $ | 95.7 | $ | 29.6 | $ | 34.6 | $ | 130.3 | $ | 49.7 | |||||
| Operating Margin (Loss) | |||||||||||||||
| Cryo Tank Solutions | 6.9 | % | 7.4 | % | 3.5 | % | 5.4 | % | 9.6 | % | |||||
| Heat Transfer Systems | 21.1 | % | 5.5 | % | 16.3 | % | 19.1 | % | 3.0 | % | |||||
| Specialty Products | 12.3 | % | 18.0 | % | 17.3 | % | 14.0 | % | 16.6 | % | |||||
| Repair, Service & Leasing | 15.3 | % | 21.7 | % | 27.9 | % | 18.9 | % | 19.4 | % | |||||
| Consolidated | 10.5 | % | 7.3 | % | 6.5 | % | 9.1 | % | 6.5 | % |
_______________
(1)Restructuring costs for the three months ended:
•June 30, 2023 were $5.4 ($3.7 - Corporate, $0.7 - Repair, Service & Leasing, $0.5 - Specialty Products, $0.3 - Cryo Tank Solutions and $0.2 - Heat Transfer Systems).
•June 30, 2022 were $0.2 ($0.1 - Cryo Tank Solutions and $0.1 - Specialty Products).
•March 31, 2023 were $1.6 ($0.8 - Cryo Tank Solutions and $0.8 - Repair, Service & Leasing).
(2)Restructuring costs for the six months ended:
•June 30, 2023 were $7.0 ($1.5 Repair, Service and Leasing, $1.1 - Cryo Tank Solutions, $0.2 - Heat Transfer Systems and $3.7 - Corporate).
•June 30, 2022 were $0.3 ($0.1 - Cryo Tank Solutions, $0.1 - Heat Transfer Systems and $0.1 - Specialty Products).
(3)Acquisition-related contingent consideration adjustments in our Specialty Products segment for the three months ended:
•June 30, 2023 were an increase in fair value of $1.1.
•June 30, 2022 were a decrease in fair value of $0.2.
•March 31, 2023 were a decrease in fair value of $7.4.
(4)Acquisition-related contingent consideration adjustments in our Specialty Products segment for the six months ended:
•June 30, 2023 were a decrease in fair value of $6.5.
•June 30, 2022 were a decrease in fair value of $1.0.
(5)Deal-related and integration costs, which includes costs related to the Howden acquisition such as interest, deal advisory and financing costs, for the three months ended:
•June 30, 2023 were $11.3.
•June 30, 2022 were $5.1.
•March 31, 2023 were $81.7.
(6)Deal-related and integration costs, which includes costs related to the Howden acquisition such as interest, deal advisory and financing costs for the six months ended:
•June 30, 2023 were $93.0.
•June 30, 2022 were $9.3.
CHART INDUSTRIES, INC. AND SUBSIDIARIES
ORDERS AND BACKLOG (UNAUDITED)
(Dollars in millions)
| Three Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30,<br>2023 | June 30,<br>2022 | March 31,<br>2023 | ||||||||||||
| Orders | ||||||||||||||
| Cryo Tank Solutions | $ | 155.0 | $ | 106.1 | $ | 140.6 | ||||||||
| Heat Transfer Systems | 302.2 | 470.1 | 311.2 | |||||||||||
| Specialty Products | 293.2 | 265.7 | 179.5 | |||||||||||
| Repair, Service & Leasing | 319.7 | 47.4 | 121.5 | |||||||||||
| Intersegment eliminations | (7.0) | (1.5) | (12.1) | |||||||||||
| Consolidated | $ | 1,063.1 | $ | 887.8 | $ | 740.7 | As of | |||||||
| --- | --- | --- | --- | --- | --- | --- | ||||||||
| June 30,<br>2023 | June 30,<br>2022 | March 31,<br>2023 | ||||||||||||
| Backlog | ||||||||||||||
| Cryo Tank Solutions | $ | 452.7 | $ | 331.9 | $ | 473.2 | ||||||||
| Heat Transfer Systems | 1,708.9 | 1,003.8 | 1,590.2 | |||||||||||
| Specialty Products | 1,259.5 | 570.4 | 1,316.0 | |||||||||||
| Repair, Service & Leasing | 580.7 | 48.5 | 524.3 | |||||||||||
| Intersegment eliminations | (37.0) | (1.3) | (45.4) | |||||||||||
| Consolidated | $ | 3,964.8 | $ | 1,953.3 | $ | 3,858.3 |
CHART INDUSTRIES, INC. AND SUBSIDIARIES
RECONCILIATION OF EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CHART INDUSTRIES, INC.– CONTINUING OPERATIONS TO ADJUSTED EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CHART INDUSTRIES, INC. (UNAUDITED)
(Dollars in millions, except per share amounts)
| Q2 2023 Diluted EPS | YTD June 2023 Diluted EPS | |||
|---|---|---|---|---|
| Amounts attributable to Chart common stockholders | ||||
| Income (loss) from continuing operations | $ | 6.6 | $ | (9.3) |
| Less: Mandatory convertible preferred stock dividend requirement | 6.9 | 13.7 | ||
| Reported loss from continuing operations attributable to Chart (U.S. GAAP) | (0.3) | (23.0) | ||
| Earnings per common share attributable to Chart Industries, Inc. – continuing operations | $ | (0.01) | $ | (0.50) |
| Investment equities mark-to-market (1) | 0.10 | 0.15 | ||
| Debt and financing costs | — | 1.29 | ||
| Mandatory convertible preferred stock dividend | 0.15 | 0.29 | ||
| Deal related and integration costs (2) | 0.16 | 0.71 | ||
| Howden amortization | 0.99 | 1.24 | ||
| Startup costs – organic | — | 0.03 | ||
| Restructuring & related costs (3) | 0.13 | 0.16 | ||
| Other one-time items | — | 0.01 | ||
| Tax effects | (0.33) | (0.83) | ||
| Adjusted earnings per common share attributable to Chart Industries, Inc. (non-GAAP) | $ | 1.19 | $ | 2.55 |
| Share Count | 46.45 | 46.46 |
_____________
(1) Includes the mark-to-market of our inorganic investments in McPhy, Stabilis and other minority investments.
(2) Includes third party support fees for the three months ended June 30, 2023.
(3) Includes restructuring costs of $5.4 for the three months ended June 30, 2023.
_____________
Adjusted earnings per common share attributable to Chart Industries, Inc. is not a measure of financial performance under U.S. GAAP and should not be considered as an alternative to earnings per share in accordance with U.S. GAAP. Management believes that adjusted earnings per common share attributable to Chart Industries, Inc. facilitate useful period-to-period comparisons of our financial results and this information is used by us in evaluating internal performance. Our calculation of these non-GAAP measures may not be comparable to the calculations of similarly titled measures reported by other companies.
CHART INDUSTRIES, INC. AND SUBSIDIARIES
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO CHART INDUSTRIES, INC. TO NET INCOME, ADJUSTED (UNAUDITED)
(Dollars in millions)
| Three Months Ended | Six Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| June 30,<br>2023 | June 30,<br>2022 | June 30,<br>2023 | June 30,<br>2022 | |||||
| Net income (loss) attributable to Chart Industries, Inc. (U.S. GAAP) | $ | 9.1 | $ | 13.0 | $ | (5.9) | $ | 23.2 |
| Income attributable to noncontrolling interests of continuing operations, net of taxes (U.S. GAAP) | 3.0 | 0.4 | 3.7 | 0.5 | ||||
| Net income (loss) (U.S. GAAP) | 12.1 | 13.4 | (2.2) | 23.7 | ||||
| Financing costs amortization | 4.4 | 0.7 | 7.2 | 1.4 | ||||
| Unrealized foreign currency transaction gain | (2.5) | (3.2) | (0.8) | (4.3) | ||||
| Employee share-based compensation expense | 2.6 | 2.3 | 6.6 | 5.6 | ||||
| Unrealized loss on investment in equity securities | 4.6 | 9.6 | 6.6 | 12.2 | ||||
| Realized gain on equity method investment | — | (0.3) | — | (0.3) | ||||
| Equity in loss of unconsolidated affiliates, net | (1.7) | 0.3 | (1.2) | 0.6 | ||||
| Other non-cash operating activities | 1.3 | (0.9) | 1.4 | 1.1 | ||||
| Net income adjusted (non-GAAP) | $ | 20.8 | $ | 21.9 | $ | 17.6 | $ | 40.0 |
_______________
Net income adjusted is not a measure of financial performance under U.S. GAAP and should not be considered as an alternative to net income in accordance with U.S. GAAP. Management believes that net income adjusted, facilitates useful period-to-period comparisons of our financial results and this information is used by us in evaluating internal performance. Our calculation of this non-GAAP measure may not be comparable to the calculations of similarly titled measures reported by other companies.
RECONCILIATION OF NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW AND ADJUSTED FREE CASH FLOW (UNAUDITED)
(Dollars in millions)
| Three Months Ended | Six Months Ended | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30,<br>2023 | June 30,<br>2022 | June 30,<br>2023 | June 30,<br>2022 | |||||||||||||||
| Net cash provided by operating activities – consolidated (U.S. GAAP) | $ | 91.6 | $ | 34.7 | $ | 59.5 | $ | 12.5 | ||||||||||
| Capital expenditures – consolidated | (23.0) | (17.2) | (54.4) | (29.8) | ||||||||||||||
| Free cash flow – consolidated (non-GAAP) | $ | 68.6 | $ | 17.5 | $ | 5.1 | $ | (17.3) | Three Months Ended | Six Months Ended | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| June 30,<br>2023 | June 30,<br>2022 | June 30,<br>2023 | June 30,<br>2022 | |||||||||||||||
| Net cash provided by operating activities – discontinued operations (U.S. GAAP) | $ | (5.5) | $ | — | $ | (5.5) | $ | — | ||||||||||
| Capital expenditures – discontinued operations | (2.1) | — | (2.1) | — | ||||||||||||||
| Free cash flow – discontinued operations (non-GAAP) | $ | (7.6) | $ | — | $ | (7.6) | $ | — |
_______________
Free cash flow is not a measure of financial performance under U.S. GAAP and should not be considered as an alternative to net cash provided by (used in) operating activities in accordance with U.S. GAAP. Management believes that free cash flow facilitates useful period-to-period comparisons of our financial results and this information is used by us in evaluating internal performance. Our calculation of this non-GAAP measure may not be comparable to the calculations of similarly titled measures reported by other companies.
CHART INDUSTRIES, INC. AND SUBSIDIARIES
RECONCILIATIONS OF GROSS PROFIT TO ADJUSTED GROSS PROFIT AND OPERATING INCOME (LOSS) TO ADJUSTED OPERATING INCOME (LOSS) (UNAUDITED)
(Dollars in millions)
| Three Months Ended June 30, 2023 | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cryo Tank Solutions | Heat Transfer Systems | Specialty Products | Repair, Service & Leasing | Intersegment Eliminations | Corporate | Consolidated | |||||||||||||||
| Sales | $ | 152.7 | $ | 236.0 | $ | 236.7 | $ | 298.7 | $ | (16.0) | $ | — | $ | 908.1 | |||||||
| Gross profit as reported (U.S. GAAP) | 28.8 | 67.3 | 61.0 | 123.5 | — | — | 280.6 | ||||||||||||||
| Restructuring, transaction-related and other one-time costs | 4.1 | 0.6 | 2.8 | 6.6 | — | — | 14.1 | ||||||||||||||
| Adjusted gross profit (non-GAAP) | $ | 32.9 | $ | 67.9 | $ | 63.8 | $ | 130.1 | $ | — | $ | — | $ | 294.7 | |||||||
| Adjusted gross profit margin (non-GAAP) | 21.5 | % | 28.8 | % | 27.0 | % | 43.6 | % | — | % | — | % | 32.5 | % | |||||||
| Operating income (loss) as reported (U.S. GAAP) | $ | 10.5 | $ | 49.8 | $ | 29.1 | $ | 45.6 | $ | — | $ | (39.3) | 95.7 | ||||||||
| Restructuring, transaction-related and other one-time costs | 2.7 | 0.8 | 3.4 | 44.5 | — | 7.3 | 58.7 | ||||||||||||||
| Adjusted operating income (loss) (non-GAAP) | $ | 13.2 | $ | 50.6 | $ | 32.5 | $ | 90.1 | $ | — | $ | (32.0) | $ | 154.4 | |||||||
| Adjusted operating margin (non-GAAP) | 8.6 | % | 21.4 | % | 13.7 | % | 30.2 | % | — | % | — | % | 17.0 | % | |||||||
| Three Months Ended June 30, 2022 | |||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Cryo Tank Solutions | Heat Transfer Systems | Specialty Products | Repair, Service & Leasing | Intersegment Eliminations | Corporate | Consolidated | |||||||||||||||
| Sales | $ | 132.9 | $ | 102.9 | $ | 115.3 | $ | 55.4 | $ | (1.7) | $ | — | $ | 404.8 | |||||||
| Gross profit as reported (U.S. GAAP) | 21.6 | 14.8 | 39.4 | 19.0 | — | — | 94.8 | ||||||||||||||
| Restructuring related, deal-related, integration and other one time costs | 3.4 | 1.6 | 1.9 | 0.7 | — | — | 7.6 | ||||||||||||||
| Adjusted gross profit (non-GAAP) | $ | 25.0 | $ | 16.4 | $ | 41.3 | $ | 19.7 | $ | — | $ | — | $ | 102.4 | |||||||
| Adjusted gross profit margin (non-GAAP) | 18.8 | % | 15.9 | % | 35.8 | % | 35.6 | % | — | % | — | % | 25.3 | % | |||||||
| Operating income (loss) as reported (U.S. GAAP) | $ | 9.9 | $ | 5.7 | $ | 20.8 | $ | 12.0 | $ | — | $ | (18.8) | 29.6 | ||||||||
| Restructuring related, deal-related, integration and other one time costs | 3.4 | 1.9 | 2.8 | 0.7 | — | 1.6 | 10.4 | ||||||||||||||
| Adjusted operating income (loss) (non-GAAP) | $ | 13.3 | $ | 7.6 | $ | 23.6 | $ | 12.7 | $ | — | $ | (17.2) | $ | 40.0 | |||||||
| Adjusted operating margin (non-GAAP) | 10.0 | % | 7.4 | % | 20.5 | % | 22.9 | % | — | % | — | % | 9.9 | % |
CHART INDUSTRIES, INC. AND SUBSIDIARIES
RECONCILIATIONS OF GROSS PROFIT TO ADJUSTED GROSS PROFIT AND OPERATING INCOME (LOSS) TO ADJUSTED OPERATING INCOME (LOSS) (UNAUDITED) (CONTINUED)
(Dollars in millions)
| Three Months Ended March 31, 2023 | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cryo Tank Solutions | Heat Transfer Systems | Specialty Products | Repair, Service & Leasing | Intersegment Eliminations | Corporate | Consolidated | |||||||||||||||
| Sales | $ | 123.5 | $ | 167.5 | $ | 126.2 | $ | 118.5 | $ | (4.2) | $ | — | $ | 531.5 | |||||||
| Gross profit as reported (U.S. GAAP) | 21.5 | 41.3 | 35.9 | 50.6 | — | — | 149.3 | ||||||||||||||
| Restructuring, transaction-related and other one-time costs | 0.4 | 1.0 | 0.7 | — | — | — | 2.1 | ||||||||||||||
| Adjusted gross profit (non-GAAP) | $ | 21.9 | $ | 42.3 | $ | 36.6 | $ | 50.6 | $ | — | $ | — | $ | 151.4 | |||||||
| Adjusted gross profit margin (non-GAAP) | 17.7 | % | 25.3 | % | 29.0 | % | 42.7 | % | — | % | — | % | 28.5 | % | |||||||
| Operating income (loss) as reported (U.S. GAAP) | $ | 4.3 | $ | 27.3 | $ | 21.8 | $ | 33.1 | $ | — | $ | (51.9) | 34.6 | ||||||||
| Restructuring, transaction-related and other one-time costs | 0.4 | 1.1 | (4.9) | 11.6 | — | 28.1 | 36.3 | ||||||||||||||
| Adjusted operating income (loss) (non-GAAP) | $ | 4.7 | $ | 28.4 | $ | 16.9 | $ | 44.7 | $ | — | $ | (23.8) | $ | 70.9 | |||||||
| Adjusted operating margin (non-GAAP) | 3.8 | % | 17.0 | % | 13.4 | % | 37.7 | % | — | % | — | % | 13.3 | % |
_______________
Adjusted gross profit and adjusted operating income (loss) are not measures of financial performance under U.S. GAAP and should not be considered as an alternative to gross profit and operating income (loss) in accordance with U.S. GAAP. Management believes that adjusted gross profit and adjusted operating income (loss) facilitate useful period-to-period comparisons of our financial results and this information is used by us in evaluating internal performance. Our calculation of these non-GAAP measures may not be comparable to the calculations of similarly titled measures reported by other companies.
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gtls-20230630xearningsre
Chart Industries, Inc. Second Quarter 2023 Earnings Call JULY 28, 2023 Exhibit 99.2
GTLS: GAS TO LIQUID SYSTEMS® Forward Looking Statements (1/2) CERTAIN STATEMENTS MADE IN THIS INVESTOR PRESENTATION ARE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. FORWARD-LOOKING STATEMENTS INCLUDE STATEMENTS CONCERNING CHART’S BUSINESS PLANS, INCLUDING STATEMENTS REGARDING OBJECTIVES, FUTURE ORDERS, REVENUES, MARGINS, EARNINGS, PERFORMANCE OR OUTLOOK, BUSINESS OR INDUSTRY TRENDS AND OTHER INFORMATION THAT IS NOT HISTORICAL IN NATURE. FORWARD-LOOKING STATEMENTS MAY BE IDENTIFIED BY TERMINOLOGY SUCH AS “MAY,” “WILL,” “SHOULD,” “COULD,” “EXPECTS,” “ANTICIPATES,” “BELIEVES,” “PROJECTS,” “FORECASTS,” “INDICATORS”, “OUTLOOK,” “GUIDANCE,” “CONTINUE,” “TARGET,” OR THE NEGATIVE OF SUCH TERMS OR COMPARABLE TERMINOLOGY. FORWARD-LOOKING STATEMENTS CONTAINED IN THIS PRESENTATION OR IN OTHER STATEMENTS MADE BY CHART ARE MADE BASED ON MANAGEMENT’S EXPECTATIONS AND BELIEFS CONCERNING FUTURE EVENTS IMPACTING CHART AND ARE SUBJECT TO UNCERTAINTIES AND FACTORS RELATING TO CHART’S OPERATIONS AND BUSINESS ENVIRONMENT, ALL OF WHICH ARE DIFFICULT TO PREDICT AND MANY OF WHICH ARE BEYOND CHART’S CONTROL, THAT COULD CAUSE CHART’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE MATTERS EXPRESSED OR IMPLIED BY FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE CHART’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE DESCRIBED IN THE FORWARD-LOOKING STATEMENTS INCLUDE: CHART MAY BE UNABLE TO ACHIEVE THE ANTICIPATED BENEFITS OF THE ACQUISITION OF HOWDEN (THE “ACQUISIT ION”) ( INCLUDING WITH RESPECT TO ESTIMATED FUTURE COST AND COMMERCIAL SYNERGIES); REVENUES FOLLOWING THE ACQUISIT ION MAY BE LOWER THAN EXPECTED; OPERATING COSTS, CUSTOMER LOSSES, AND BUSINESS DISRUPTION (INCLUDING, WITHOUT LIMITATION, DIFFICULTIES IN MAINTAINING RELATIONSHIPS WITH EMPLOYEES, CUSTOMERS AND SUPPLIERS) RESULTING FROM THE ACQUISIT ION MAY BE GREATER THAN EXPECTED; OUR ABILITY TO SUCCESSFULLY CLOSE ON OUR IDENTIFIED DIVESTITURES AND ACHIEVE THE ANTICIPATED PROCEEDS FROM THOSE DIVESTITURES; SLOWER THAN ANTICIPATED GROWTH AND MARKET ACCEPTANCE OF NEW CLEAN ENERGY PRODUCT OFFERINGS; INABILITY TO ACHIEVE EXPECTED PRICING INCREASES OR CONTINUED SUPPLY CHAIN CHALLENGES INCLUDING VOLATILITY IN RAW MATERIALS AND SUPPLY; RISKS RELATING TO THE CONFLICT BETWEEN RUSSIA AND UKRAINE, INCLUDING POTENTIAL ENERGY SHORTAGES IN EUROPE AND ELSEWHERE AND THE OTHER FACTORS DISCUSSED IN ITEM 1A (RISK FACTORS) IN CHART’S MOST RECENT ANNUAL REPORT ON FORM 10-K FILED WITH THE SEC, WHICH SHOULD BE REVIEWED CAREFULLY. CHART UNDERTAKES NO OBLIGATION TO UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENT. 2
GTLS: GAS TO LIQUID SYSTEMS® Forward Looking Statements (2/2) 3 THIS PRESENTATION CONTAINS NON-GAAP FINANCIAL INFORMATION, WITH RESPECT TO THE COMPANY’S 2023 AND 2024 FULL YEAR EARNINGS OUTLOOK, THE COMPANY IS NOT ABLE TO PROVIDE A RECONCILIATION OF THE ADJUSTED EBITDA, ADJUSTED GROSS MARGIN, ADJUSTED OPERATING MARGIN, ADJUSTED EARNINGS PER DILUTED SHARE OR ADJUSTED FREE CASH ZFLOW OUTLOOKS BECAUSE CERTAIN ITEMS MAY HAVE NOT YET OCCURRED OR ARE OUT OF THE COMPANY’S CONTROL AND/OR CANNOT BE REASONABLY PREDICTED. CHART INDUSTRIES, INC. IS A LEADING INDEPENDENT GLOBAL LEADER IN THE DESIGN, ENGINEERING, AND MANUFACTURING OF PROCESS TECHNOLOGIES AND EQUIPMENT FOR GAS AND LIQUID MOLECULE HANDING 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 CO2 CAPTURE AMONGST 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 OVER 48 GLOBAL MANUFACTURING LOCATIONS AND 41 SERVICE CENTERS FROM THE UNITED STATES TO ASIA, AUSTRALIA, INDIA, EUROPE AND SOUTH AMERICA, THE COMPANY MAINTAINS ACCOUNTABILITY AND TRANSPARENCY TO ITS TEAM MEMBERS, SUPPLIERS, CUSTOMERS AND COMMUNITIES. TO LEARN MORE, VISIT WWW.CHARTINDUSTRIES.COM
GTLS: GAS TO LIQUID SYSTEMS® All Figures Presented are Continuing Operations Unless otherwise noted 4 • Our second quarter 2023 results from continuing operations reflect our first full quarter of ownership of Howden and exclude the Roots™ financial results for our entire ownership period (Roots™ is in discontinued operations) • This is the result of our execution on June 11, 2023 of a definitive agreement to sell the Roots™ business to Ingersoll Rand for $300 million, all cash (a low-teens EBITDA multiple) • The Roots™ divestiture received the required regulatory approval and is anticipated to close no later than August 18, 2023 and we intend to use the cash proceeds for debt paydown
GTLS: GAS TO LIQUID SYSTEMS® Today’s Key Takeaways 5© 2023 Chart Industries, Inc. Confidential and Proprietary • Market demand continues to build driven by aftermarket, service, and repair, LNG, hydrogen, carbon capture and storage, mining (i.e., electrification metals), and nuclear/ helium • Q2 2023 book-to-bill was 1.17 • Q2 2023 ending record backlog of $3.96 billion (+24.1% compared to proforma to include Howden in Q2 2022) • Synergy achievement continues to progress ahead of schedule • $96.5 million of annualized cost savings through July 27, 2023 (vs. $50.9 million at Q1 2023) • $94.3 million of commercial synergies through July 27, 2023 (vs. $11.4 million at Q1 2023) • Commercial synergies pipeline increased to ~$1 billion from ~$800 million • Q2 2023 performance results in multiple operational records • Record reported gross profit margin of 30.9% and record adjusted gross profit margin of 32.5% • Record adjusted EBITDA of $195.3 million and record adjusted EBITDA margin of 21.5% • Free cash flow (“FCF”) of $76.2 million (adjusted FCF of $86.6 million) resulted in net leverage of 3.86X (3.72X proforma for divestitures) • Outlook remains on track; accelerating deleveraging actions • Updating 2023 outlook and reiterating 2024 adjusted EBITDA of ~$1.3 billion • Expect to reach net leverage ratio of 2.5-2.9X by midyear 2024 vs. year-end 2024 prior • Received regulatory clearance for Roots™ divestiture, expected closing no later than August 18, 2023 ($300M all cash) • Signed definitive agreement to sell Cofimco for $80M, expected to close 2H 2023 • Continue to progress anticipated defined asset perimeter of divestitures (anticipated ~$500M of proceeds in total)
GTLS: GAS TO LIQUID SYSTEMS® Executed to Date On-Schedule and to Targets 6 # Action What we said in November 2022 As of July 27, 2023 Status 1 Financing Did not expect to close into the bridge and would seek to limit amount of KPS Capital Partners (KPS) preferred stock Completed financing in December 2022; Closed without the bridge or any preferred issuance to KPS Completed, Oversubscribed No KPS preferred Options for balance sheet optimization 2 Weighted avg cost of debt 7% to 8.5% Actual well within the range Completed 3 Expected closing First half 2023 Q1 2023, actual Completed; One quarter early 4 Customer demand Strong demand in most end markets in both businesses Strong demand in most end markets in both businesses Unchanged from original 5 Backlog supporting 2023 More of next (2023) year’s forecasted revenue already booked than typical More of next (2023) year’s forecasted revenue already booked than typical Completed and unchanged from original 6 Synergy action & early achievement First days and weeks of ownership would yield quick-hit synergies First quarter of ownership has yielded quick-hit synergies above expectations Continuing to progress to original year-1 target, with upside 7 Balance sheet optimization We would optimize our balance sheet through various activities Multiple balance sheet and capital structure activities completed with ongoing evaluation of advantageous options Underway and progressing on schedule 8 Other cash generating activities to accelerate debt paydown N/A Real estate sales, insurance settlement, cash repatriation Underway with properties sold, cash repatriated, w/cap settlement agreed and received 9 Divestitures Working to complete shortly after the close of Howden with anticipated potential proceeds of ~$500 million Executed definitive agreement to sell Roots™ business to Ingersoll Rand for ~$300 million all-cash Executed definitive agreement to sell Cofimco business to PX3 Partners for $80 million Underway, progressing on schedule, with Roots™ expected to close and fund by no later than August , 2023 Cofimco divestiture expected to close in the second half 2023
GTLS: GAS TO LIQUID SYSTEMS® Continue to Execute On-Schedule and to Targets 7 # Action What we said in November 2022 As of July 27, 2023 Status 1 Cost synergies, year 1 $175 million $175 million Additional opportunities for upside and buffer, with over $95 million already achieved 2 Commercial synergies, year 1 $150 million $150 million with customer inbounds increasing Additional opportunities with $78 million already booked beyond initial target 3 Deliver 2023 outlook N/A On track to deliver 2023 outlook Reiterating 2023 outlook 4 Proforma 2023 EBITDA outlook Approximately $1 billion Approximately $1 billion Reiterating 2023 EBITDA outlook 5 2024 EBITDA outlook Approximately $1.3 billion Approximately $1.3 billion Unchanged from original 6 Divestitures Working to complete shortly after the close of Howden with anticipated potential proceeds of ~$500 million Expected cash in from announced divestitures and additional remaining asset scope to move to agreement in 2H 2023; total anticipated potential proceeds of ~$500 million for all Underway with ~$380 million already executed in definitive agreements 7 Net leverage ratio by end of 2024 2.5-2.9X, ex potential divestitures 2.5-2.9X, ex potential divestitures Accelerating to earlier decrease in net leverage ratio to 2.5-2.9X by mid-2024 8 Target net leverage ratio & financial policy 2.0-2.5X target range; stay within published financial policy until this is achieved 2.0-2.5X target range; stay within published financial policy until this is achieved Unchanged from original and reiterated (1) The status of all identified potential divestitures and property sales is based on our current information and expectations regarding those projects. There can be no assurances that such divestitures and sales will be completed at all or within the timeframes indicated or generate the level of proceeds currently anticipated.
GTLS: GAS TO LIQUID SYSTEMS® 8© 2023 Chart Industries, Inc. Confidential and Proprietary Agenda Q2 2023 Results Market and Demand Update Synergy Update Progress on Deleveraging 2023 Outlook
GTLS: GAS TO LIQUID SYSTEMS® Macro Activity 9 # End Market Recent News 1 CCUS • Wyoming and Colorado signed an MoU to accelerate the development and activity of direct air capture, highlighting combined assets, infrastructure, policies 2 Hydrogen • U.S. National Clean Hydrogen Strategy and Roadmap released • NEOM announced financial close of world’s largest green hydrogen project • New Delhi announced that the World Bank’s board of executive directors approved $1.5 billion investment to accelerate India’s development of low-carbon energy by growing green hydrogen and renewable energy • South Africa and Germany signed an agreement to form a hydrogen pact to grow the H2 market in Africa 3 Water Treatment • The EPA’s proposed rule requiring business to disclose any PFAS in any product from 2011 is said to go into effect in the coming months and could cost companies $1 billion to comply 4 Electrification / Mining • BYD, a Chinese electric vehicle maker, began their $290 million lithium processing plant in Chile • HMS Bergbau AG of Germany announced their $700 million investment to lithium mining project in East Kazakhstan. • British Lithium and French mining group Imerys have partnered together to develop the UK’s largest lithium mine • Lithium mining revenues are projected to be $3.1 billion by 2031; Lithium output is expected to triple this decade 5 Space Exploration • Indian and French leaders held a strategic space dialogue, further strengthening their space exploration partnership that focuses on developing technologies for satellite launches, research, innovation • India and Ecuador became the 26th and 27th countries to sign the Artemis Accords, a framework promoting peaceful and sustainable exploration of the moon • NASA and the Indian Space Research Organization plan to have a framework for human space exploration by year-end 2023 6 LNG • The UK government decided to fund TotalEnergies’ LNG development project in Mozambique • Venture Global LNG and Securing Energy for Europe (SEFE) announced a 20 year sales and purchase agreement • NextDecade FID on Rio Grande project • Delfin step closer to phase 1 FID as Centrica 1 MTPA MOU converted to firm 15-yr SPA • Mexico Pacific and China’s Zhejiang Energy International signed a 20 year LNG supply agreement to Saguaro Energia export facility in Mexico.
GTLS: GAS TO LIQUID SYSTEMS® Chart End Market Trends 10 # End Market Recent Activity Trend 1 Aftermarket, service, repair • Penetration of Howden and Chart installed base plus competitors’ installed base • Very strong multi-year agreements being executed in mine safety, LNG stations, broad geographies 2 Big LNG / ssLNG / FLNG • FID reached on Sempra Port Arthur; additional Big LNG award received Q2; expect 1 more BigLNG order in 2023 • New projects entering commercial pipeline each month and more international focused on IPSMR® as technology 3 LNG infrastructure • ISO containers continue to be highly sought, LNG station demand is consistent (+ station service agreements) • HLNG over the road tank demand is broadening (more customers) yet not higher than 2022 to date in 2023 4 Hydrogen • Marine activity, HLH2 demos and fuel station inquiries are all increasing • DOE H2 Hub announcements expected later 2023 and to drive FID decisions 5 CCUS and water treatment • Small-scale Earthly Labs units/order sizes getting larger with continued CO2 shortages + biogas demand • Direct air capture wins in both Chart and Howden YTD 2023 (RAM and ACHX) • Water - New regulations are spurring multi-site cleanup discussions and booking PFAS remediation orders • Global desalination creating CDOX/CO2 opportunities and summer temperatures driving SDOX TaaS wins • Customers looking for food, beverage, CCUS & water solutions (Nexus of Clean™ in action) 6 Other Specialty • Space exploration demand broadening and frequency increasing for larger (jumbo) tanks • Food and CO2 industry are showing robust ordering and funnel indicates that should continue • Heightened demand for blowers linked to Nox reduction for power engines in marine 7 Cryo tank and trailers • Customers continue to expect mid-single digit growth in 2023; Demand for trailers, railcars following typical trends • European demand increasing while China demand remains consistent 8 Electrification / mine safety / green metals • Energy transition continues to drive demand for critical minerals • Seeing near-term capital spend from customers particularly in intelligent and responsible mining • Demand increasing from decarbonisation (green steel) and electrification (non-ferrous metal) 9 Nuclear / Helium • Alternative types of potential helium customers are spending on engineering studies (i.e. LNG players, etc) • Nuclear SMR market expected to grow more rapidly to meet 2% of total electricity demand by 2043 in US 10 Traditional Energy • Traditional energy end markets are mixed, with petchem, PDH, NRU and fans very active while conventional gas, compression and cryo plants activity is moderating.
GTLS: GAS TO LIQUID SYSTEMS® © 2023 Chart Industries, Inc. Confidential and Proprietary 11 Chart’s End Market Opportunity Pipeline End Market One Year Ago June 30, 2022 Prior Quarter March 31, 2023* Current Quarter June 30, 2023* Big LNG • $5.35 billion • 24 projects • 3 intl projects (potential IPSMR®) • $7.6 billion • 24 projects • 6 intl projects for potential IPSMR® • $7.6 billion • 27 projects • 9 intl projects for potential IPSMR® ssLNG/FLNG • 276 potential projects in commercial pipeline • 349 potential projects in commercial pipeline • 386 potential projects in commercial pipeline Hydrogen • 512 customers & potential customers • 1,091 customers & potential customers • 1,170 customers & potential customers Carbon Capture • 301 customers & potential customers • $1.3 billion of approximate value of top 30 opportunities in global CCUS commercial pipeline • 692 customers & potential customers • $2.1 billion of approximate value of top 30 opportunities in global CCUS commercial pipeline • 818 customers & potential customers • $2.72 billion of approximate value of top 30 opportunities in global CCUS commercial pipeline Water Treatment • 560 customers & potential customers • 630 customers & potential customers • 778 customers & potential customers *Includes Chart and Howden figures
GTLS: GAS TO LIQUID SYSTEMS® 43 Agreements / MOUs / Partnerships New and Expanded 12 Category Q1 2023 Total New MOUs # of partnerships expanded to both Chart & Howden as of April 27, 2023 # of new or expanded partnerships to both Chart & Howden (April 27, 2023 to July 27, 2023) Total # of MOUs/partnerships new and expanded YTD 2023 Multiple decarbonization/ efficiency/ energy transition 1 4 5 9 CCUS / CO2 4 2 6 Hydrogen (including liquefaction) 3 10 6 16 Water treatment 1 1 2 3 LNG (including liquefaction) 3 2 5 Marine Decarbonization 1 3 1 4 Total 6 25 18 43 New partner and partners that have expanded their MOUs / agreements to include both Chart & Howden In the period of April 27, 2023 to July 27, 2023 Confidential aerospace company New agreements since June 6, 2023 Investor Update
GTLS: GAS TO LIQUID SYSTEMS® 13 2023 Demand Strength Continues • 133 orders each greater than $1 million booked • 19 orders each greater than $5 million booked • 8 orders each greater than $10 million booked: • Big LNG BAHX/cold box equipment order • Private space exploration customer tanks including first-of- a-kind 1700 cubic meter tanks • Different private space exploration tanks • Primary ventilation fans for S. African mine • Fans for APAC mining customer • LTSA for service and repair for S. Africa customer • Piston compressor for hydrogen • Spares for industrial customer in Americas Q2 2023 Month-to-date July 26, 2023 • 43 orders each greater than $1 million booked • Synergy wins increasing in frequency • Example larger orders from July 2023 MTD: • SYNERGY: Middle East BAHX/cold boxes: $41.5M • S. Africa hard ice plant expansion at mine $14.1M • Australia customer ventilation fans $8.1M • EU LNG refueling station order $6.3M • APAC power application 2x APH: $6.1M • S. Korea customer, EGR blowers: 4.4M euros • U.S. hydrogen liquefier BAHX replacement $4.4M • S. Africa spares, install, etc. for 2 power customers $4M • Gas-gas heaters steel applications $3.7M • Install SG blowers Africa wastewater treatment $3.7M • Retrofit/rebuild of fabric filter plant $3.5M • Groundwater remediation in Chicago $2.3M
GTLS: GAS TO LIQUID SYSTEMS® First-of-a-Kinds, New Customers and RSL Strength 14 22 First-of-a-Kind Orders in the Second Quarter 2023 including: • World’s largest cryogenic tanks (1700 cubic meters) for space exploration • Novel fan design for the new metro train platform of a large rail company 86 New Customers Booked Orders in the Second Quarter 2023 including: • AECON placed an order for CO2 storage and a CDOX water treatment system as part of a mine remediation project • JEV Construction with a PFAS treatment system in Ho Ho Kus, New Jersey • Harris Beef Ranch with a 30-ton CO2 Vertical Storage tank • Northstar Energy Services with an air-cooled heat exchanger Aftermarket, Service & Repair Strength • Repair, Service Leasing Q2 2023 book-to-bill of 1.09 • Chart legacy installed base assets into Howden digital system increased to ~46,500 • Additional meaningful installed base to add into the system in Q3 2023 • Over 500 customer sites identified with both Chart and Howden assets • 15 Digital Uptime projects won the first half 2023 • Example framework agreements signed in Q2 2023 include: • Leading African power utility Air Heater Element pack spares and installation three-year LTSA @ US$17.2 million • Fan spares with APAC power group for 2 years Example end market customer installed base overlaps: Energy - 160 Sites 1,020 Chart assets 1,936 Howden assets Chemicals - 30 Sites 295 Chart assets 371 Howden assets Food & Beverage - 21 Sites 53 Chart assets 103 Howden assets Power - 89 Sites 1542 Chart assets 339 Howden assets Metal Processing - 16 Sites 143 Chart assets 239 Howden assets 20% of Chart install base is included in system to date
GTLS: GAS TO LIQUID SYSTEMS® Input Costs Continue to Temper 15Sources: LME (Aluminum), MEPS (Carbon and Stainless Steel), Freightos
GTLS: GAS TO LIQUID SYSTEMS® 16© 2023 Chart Industries, Inc. Confidential and Proprietary Agenda Q2 2023 Results Market and Demand Update Synergy Update Progress on Deleveraging 2023 Outlook
GTLS: GAS TO LIQUID SYSTEMS® Second Quarter 2023 Results 17 (1) Adjusted gross margin, EBITDA, and Adjusted EBITDA and Adjusted Diluted EPS are not measures of financial performance under U.S. GAAP and should not be considered as an alternative to net income (in the case of EBITDA and Adjusted EBITDA) in accordance with U.S. GAAP. A reconciliation table for these measures in provided in the appendix under “Second Quarter 2023 Adjusted EBITDA” and in the tables accompanying the earnings release. $ millions, except per share amounts Q2 2023 Q2 2022PF Change Consolidated 1 Orders 1,063.1 1,350.5 -21.3% 2 Backlog 3,964.8 3,195.9 +24.1% 3 Sales 908.1 823.4 +10.3% 4 Reported GM % 30.9% 27.9% +300bps 5 Adjusted GM% 32.5% 6 Reported EBITDA 158.8 109.4 +45.2% 7 Reported EBITDA % of Sales 17.5% 13.3% +420bps 8 Adjusted EBITDA 195.3 135.7 +43.9% 9 Adjusted EBITDA % of Sales 21.5% 16.5% +500bps 10 Reported Diluted EPS ($0.01) n/a 11 Adjusted Diluted EPS $1.19 n/a 12 Free Cash Flow (“FCF”) $76.2 n/a 13 Adjusted FCF $86.6 n/a Comments (all related to Q2 2023 Chart continuing operations (including Howden, ex Roots) results): • RECORD Total backlog • RECORD Howden backlog • RECORD Chart backlog • RECORD Total orders • RECORD Howden orders • RECORD Total Sales • RECORD GM% of 30.9% • RECORD Adjusted GM% of 32.5% • RECORD EBITDA • RECORD Howden EBITDA • RECORD free cash flow • Over 99% of adjustments relate to Howden deal and integration related costs
GTLS: GAS TO LIQUID SYSTEMS® $312 $289 $322 $328 $379 $354 $405 $412 $441 $532 $908 28.1% 29.1% 25.8% 22.8% 21.7% 23.6% 23.4% 25.4% 28.2% 28.1% 30.9% 28.7% 29.9% 29.0% 26.5% 24.2% 26.1% 25.3% 27.3% 29.9% 28.5% 32.5% 20.0% 25.0% 30.0% $200 $300 $400 $500 $600 $700 $800 $900 $1,000 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Sales ($M) Gross Margin % Adj Gross Margin % © 2022 Chart Industries, Inc. Confidential and Proprietary 18 Q2 2023 Sales and Gross Margin Trends GTLS Standalone Metrics Chart + Howden ex Roots Metrics for ownership period
GTLS: GAS TO LIQUID SYSTEMS® 19© 2023 Chart Industries, Inc. Confidential and Proprietary Agenda Q2 2023 Results Market and Demand Update Synergy Update Progress on Deleveraging 2023 Outlook
GTLS: GAS TO LIQUID SYSTEMS® 20 # Category Description Synergy orders (Revenue) achieved to date $ millions Annualized cost savings achieved to date $ millions Original annualized year-one target $ millions 1 Cost Sourcing $40.1 $70 2 Cost Optimization and organization 55.6 70 3 Cost Facilities 0.7 35 4 Commercial Total commercial orders won to date $94.3 150 5 Total synergies achieved to date as of 07/27/2023 $94.3 $96.5 Synergy Achievement (March 17, 2023 to July 27, 2023) • New commercial synergy orders include: • Earthly Labs largest ever award with Babcock & Wilcox • Carbon Ridge CO2 ISO • Middle East customer BAHX project • Tuf-Lite fans • FEED contract for potential Cryogenic Carbon Capture Plant to be utilized and tested by the HECO2 Saturn Consortium (CRM Group, Carmeuse, Aperam, Prayon, AGC), funded by the Walloon Government and the European Union • Howden compressors for green ammonia facility with Chart customer • 5 year LTSA for U.S. hydrogen trailer filling plant compression • Commercial synergy pipeline of opportunity for next 12 months is over $1 billion (compared to prior $800 million)
Chart and Howden Creating Early Synergies in the Middle East 21 How are we leveraging the combined company in the Middle East? • Chart and Howden each had sales people in the Middle East region before the acquisition and these resources now work together in our OneChart global commercial organizational structure • In-country value (content) and presence is critical for customers in the region and we have leveraged Howden’s local facility and team • We are expanding support for increased volume of packaging and project installation works in the region Howden’s Middle East facility in Jebel Ali Free Zone Dubai July 2023 synergy win = $41.5 million award • Order is for a large Middle Eastern customer’s project in the region and Chart content is 8 cold boxes • A key reason we won the order is that we will have In-Country Value supported by Chart’s local Howden operation.
GTLS: GAS TO LIQUID SYSTEMS® One Chart – One Culture “I am very happy to see this welding program and expect it to bring much more value to Howden Canada on welding and operational guidelines, further improving our quality of welding, delivery & productivity “Howden-Hosur has successfully completed manufacturing of our 200th VARIAX rotor. I would like to sincerely thank you all for the hard work and diligent self-motivation, without which, it would not have been possible.” “The aim of the young talent program is to support their first career step. Many thanks to all Chart & Howden colleagues who have supported this great opportunity to work together so quickly & professionally!” “In order to win an order, our customer needed a rebuild in Houston area. Houston Service Center didn’t have the crane capacity to lift the customer’s compressor. Chart Beasley site were glad to help and together, we were able to say YES to the customer! “We got further updates today and have surpassed $10M on rapid negotiations! A significant milestone for synergies. I am really proud of the global teams efforts on this & how they are collaborating in the true spirit of ‘One Chart’!” “Good to know that we can get some news of real social impact through our internal channel!” One Chart Culture Combined Team Identifying and Executing Synergies
GTLS: GAS TO LIQUID SYSTEMS® 23 Leveraging Our Strong Global Talent ➢Howden China team member recognized as “Shandong Model Worker” for being an outstanding model worker ➢Howden Tech Sponsors support local universities by presenting a prize to outstanding final year presenters ➢ChartWater PM passed the Reverse Osmosis Special Level lV Certification, the highest ranking of RO certifications ➢Howden Thomassen Compressors team introduces manufacturing at students’ exhibition Rotational Engineering Welding Council Apprenticeship Program Emerging Leaders Program ➢ 30% Female ➢ 80% Diversity ➢Network of welders across the company continuously share expertise and strategy ➢Co-op program allows local students to come to the jobsite to get “on the job experience” ➢High potential employees work on high-impact projects sponsored by executives Weihai, China Renfrew, Scotland Duluth, Georgia, US Rheden, Netherlands
GTLS: GAS TO LIQUID SYSTEMS® 24© 2023 Chart Industries, Inc. Confidential and Proprietary Agenda Q2 2023 Results Market and Demand Update Synergy Update Progress on Deleveraging 2023 Outlook
GTLS: GAS TO LIQUID SYSTEMS® Cash and Balance Sheet Activities 25 1. Action completed totaling approximately $220 million in additional capacity and over $2.26 million in cost savings a) Howden acquisition working capital settlement ($17.5 million; cash received July 26, 2023) b) Executed two building/property sales agreements totaling ~5.4 million (close and cash anticipated in Q3 2023) c) Bank guarantee capacity (non-debt) instrument in Europe d) Additional bank fronted guarantees and surety program with specific parties - additional non-debt capacity of ~$100 million e) Completed repatriation of ~$20 million from China f) Additional reduction of LC requirement through bank negotiation g) Bank fronted surety bond program = capacity, fee savings and no negative ratings views h) Letter of credit capacity outside of RCF (non-debt) in India i) Purchasing card consolidation and moved Howden LCs to our fee structure 2. Underway: Divestitures anticipated to result in approximately $500 million of cash available for debt paydown a) Executed definitive agreement to sell Roots™ to Ingersoll Rand (NYSE: IR) for $300 million all-cash, low teens adjusted EBITDA multiple, accelerating our deleveraging (expected to close by no later than August 18, 2023 as regulatory clearance received) b) Executed definitive agreement to sell Cofimco to PX3 Partners for $80 million (expected to close in 2H 2023) c) Executed definitive agreement for the sale of a French product line for 4.25M Euros that is expected to close in August pending French regulatory approval as well as Works Council consultation, the process of which has begun. d) Asset scope and timing unchanged; potential for additional divestiture(s) as we maximize value with deal perimeters e) Exit from minority ownership investment well-underway 3. Underway: Other Balance Sheet Activities totaling more than ~$105 million of potential additional capacity and/or cash for debt paydown a) Sale of 5 additional specific properties underway (underutilized and/or being consolidated into other Chart facilities) b) Consolidating or reducing other offices/sites (30+) c) Cash recovery process announced from Chart supplier (re: divested Cryobio business; completed PFC funding & settlement in March 2023) d) Cash repatriation throughout next 2 quarters e) Replacement of US Insurance collateral SBLCs 4. Ongoing Evaluation: opportunistic action including interest rate swaps, cross currency swaps, maturities optimization, etc. New updates since our June 15, 2023 investor presentation are in green text on this slide
GTLS: GAS TO LIQUID SYSTEMS® Q2 2023 Act Midyear 2024 Fcst Net Leverage (bank EBITDA) Net Leverage (covenant ceiling) Accelerating Net Leverage Reduction 26 3.86X 2.5-2.9X 4.5X 6.0X Debt Covenant: Net Debt/ LTM Adjusted EBITDA(1) ▪ Reiterate our financial policy that until we are within our target net leverage ratio range of 2- 2.5X, we will: ▪ Not do any additional material cash acquisitions ▪ Not do share repurchases ▪ Credit Ratings ▪ Moody’s LTR B1 Stable ▪ S&P LT Issuer Credit B+ Stable (1) Adjusted EBITDA is a non-GAAP measure and should not be consulted as an alternative to net income in accordance with U.S. GAAP ▪ Q2 2023 net leverage of 3.86X; pro forma of 3.72X for Roots™ and Cofimco divestitures © 2023 Chart Industries, Inc. Confidential and Proprietary 3.72X proforma for announced divestitures
GTLS: GAS TO LIQUID SYSTEMS® 27© 2023 Chart Industries, Inc. Confidential and Proprietary Agenda Q2 2023 Results Market and Demand Update Synergy Update Progress on Deleveraging 2023 Outlook
GTLS: GAS TO LIQUID SYSTEMS® © 2023 Chart Industries, Inc. Confidential and Proprietary 28 2023 Consolidated Chart Industries Outlook $ millions except per share amounts Continuing Operations Guidance Metrics as of July 28, 2023 Revenue $3,660 - $3,800 Adjusted EBITDA (1) $780 - $810 Adjusted Free cash flow (2) $300 - $350 Cash available for debt paydown in 2023 $655 - $705 Diluted share count ~47M Adjusted diluted EPS (3) $5.70 - $6.70 1) EBITDA and Adjusted EBITDA are not measures of financial performance under U.S. GAAP and should not be considered as an alternative to net income in accordance with U.S. GAAP. Management believes that EBITDA and Adjusted EBITDA facilitate useful period-to-period comparisons of financial results and the information is used by us in evaluating our internal performance. 2) “Adjusted free cash flow” is not a measure of financial performance under U.S. GAAP and should not be considered as an alternative to net cash provided by (used in) operating activities in accordance with U.S. GAAP. The Company believes this figure is of interest to investors and facilities useful period-to-period comparisons of the Company’s operating results. 3) Adjusted diluted EPS (a non-GAAP measure) guidance excludes incremental intangible amortization related to Howden acquisition. Cash available for debt paydown includes the use of proceeds from both the Roots and Cofimco sales but no other potential divestitures. The treatment of commercial synergies remains unchanged and are not included until realized. Guidance Metrics as of July 28, 2023
GTLS: GAS TO LIQUID SYSTEMS® Growth Acceleration in H2 2023 © 2023 Chart Industries, Inc. Confidential and Proprietary 29 • Six months of Howden EBITDA and FCF in H2 2023 vs. Three months and 10 days in H1 2023 • Cost Synergies ramp in H2 vs H1, on track for $175 million of annualized cost synergies first 12- months of ownership • Price/ Cost tailwind (In line with Q1 2023 commentary) • Small and medium new build project revenue increases at Chart and Howden • Big LNG project revenue greater in H2 2023 vs. H1 2023 (In line with Q1 2023 commentary) • Continued growth in all segments • Above historical average backlog to forward sales coverage embedded in guidance
GTLS: GAS TO LIQUID SYSTEMS® Pro Forma Adjusted EBITDA 2023 and 2024 Combined Chart + Howden 30 • Revenue growth led by energy transition markets and backlog conversion • Implied organic volume leverage of ~30% • Favorable mix driven by energy transition verticals • Cost synergies embedded in margin expansion and SG&A improvement © 2023 Chart Industries, Inc. Confidential and Proprietary Reiterating our 2024 EBITDA Forecast
GTLS: GAS TO LIQUID SYSTEMS® 31 Thank you to the Chart Global Team! Safety First: • Total recordable incident rate (TRIR) of 0.57 • 71% of our locations are injury free one year or more. • Our Chennai, Hosur, India Decin, CR, Canton, GA (USA) and Frankenthal, Germany facilities achieved 1 million or more hours without incident • Chart China (CCDEC) passed the official Safety Standardization System, a new China legal requirement • Our team members participated in a multinational International Standards Organization (ISO) TC220 committee meeting, which develops safety-related standards for cryogenic equipment & solutions Differentiation via Certifications: • Successful re-certification of ISO 9001 at eight of our sites • ISO 14001 initial certification for Monheim, Germany and Howden China; • ISO 45001 initial certification for Decin, Czech Republic and Howden China • Granted type approval for first-ever liquid hydrogen ISO container; received certificate of “Convention for Safe Containers” • China achieved LRCCS Factory Approval for offshore containers and ISO Tanks Recognition: • ChartWater’s AdEdge named Medium Manufacturer of the Year in the Partnership Gwinnett 2023 Movers & Makers Awards • Named top 10 carbon capture companies in the world by Carbon Herald • One of four Georgia public companies who have reached gender parity on its Board of Directors • Hudson Products de Mexico has been selected as the winner of the Medium Exporting Company category for The Mexico Council of Foreign Trade of the Northeast recognizing excellence in their export performance
APPENDIX
GTLS: GAS TO LIQUID SYSTEMS® Second Quarter 2023 Adjusted EPS © 2023 Chart Industries, Inc. Confidential and Proprietary 33 (1) Tax effect reflects adjustment at normalized periodic rates (2) Adjusted Basic EPS, Normalized Basic EPS, Adjusted Diluted EPS, and Normalized Diluted EPS (all non-GAAP measures) are as reported on a historical basis. EPS adjustment reconciliation table is provided in accompanying press release financial tables. $ millions, except per share amounts Q2 2023 Diluted EPS YTD Q2 2023 Diluted EPSContinuing Operations Net income attributable to Chart Industries, Inc. 6.6 (9.3) Less: Mandatory convertible preferred stock dividend 6.9 13.7 Income from continuing operations attributable to Chart (0.3) (23.0) Reported EPS $ (0.01) $ (0.50) 1 Investment equities mark-to-market, net of FX 0.10 0.15 2 Debt and financing costs - 1.29 3 Mandatory convertible preferred stock dividend 0.15 0.29 4 Deal related and integration costs 0.16 0.71 5 Howden amortization 0.99 1.24 6 Startup costs - organic - 0.03 7 Restructuring & related costs 0.13 0.16 8 Other one-time Items - 0.01 9 Tax effects (1) (0.33) (0.83) Adjusted EPS (2) $1.19 $2.55 Share Count (millions) 46.45 46.46
GTLS: GAS TO LIQUID SYSTEMS® Second Quarter 2023 Free Cash Flow © 2023 Chart Industries, Inc. Confidential and Proprietary 34 (1) Free cash flow” and “adjusted free cash flow” are not measures of financial performance under U.S. GAAP and should not be considered as an alternative to net cash provided by (used in) operating activities in accordance with U.S. GAAP. The Company believes this figure is of interest to investors and facilities useful period-to-period comparisons of the Company’s operating results. $ millions, consolidated, continuing ops Q2 2023 Continuing Ops Adjustments Q2 ‘23 Adj. Net Income 9.6 - 9.6 Operating income adjustments 12.5 12.5 Tax affect on operating income adjustments (2.9) (2.9) Non operating income adjustments 1.1 1.1 Tax affect on non operating income adjustments (0.3) (0.3) Deal financing and interest costs - - Tax affect on deal financing and interest costs - - Bridge loan facility fees - Depreciation and amortization 62.9 62.9 Share based compensation 2.6 2.6 Financing costs amortization 4.4 4.4 Unrealized gain on investment in equity securities 4.6 4.6 Unrealized foreign currency transaction loss (gain) (2.3) (2.3) Equity in loss (earnings) of unconsolidated affiliates (1.7) (1.7) Deferred income tax expense (benefit) - - Other non-cash operating activities 1.3 1.3 Changes in: Accounts Receivable (53.6) (53.6) Inventory (15.4) (15.4) Unbilled contract revenues and other assets (24.8) (24.8) Accounts payable and other liabilities 81.7 81.7 Customer advances and billings in excess of 27.8 27.8 Net cash provided by operating activities 97.1 10.4 107.5 Capital Expenditures (20.9) (20.9) Free Cash Flow / Adjusted Free Cash Flow 76.2 10.4 86.6
GTLS: GAS TO LIQUID SYSTEMS® 35 Second Quarter 2023 Adjusted EBITDA (1) EBITDA and Adjusted EBITDA are not measures of financial performance under U.S. GAAP and should not be considered as an alternative to net income in accordance with U.S. GAAP. Management believes that EBITDA and Adjusted EBITDA facilitate useful period-to-period comparisons of financial results and the information is used by us in evaluating our internal performance. $ millions, except per share amounts Consolidated Q2 2023 Q2 2022 Change v. PY Q1 2023 Change v. PQ Net income from continuing operations $9.6 $13.4 ($3.8) ($15.2) $24.8 Income tax expense, net 2.4 3.5 (1.1) (6.7) 9.1 Interest expense, net 83.9 5.1 78.8 28.3 55.6 Acquisition Related Finance Fees - - - 26.10 (26.1) Depreciation and amortization 62.9 21.7 41.2 33.3 29.6 EBITDA (1) $158.8 $43.7 $115.1 $65.8 $93.0 Non-recurring costs 29.3 9.9 19.4 26.0 3.3 Share-based compensation 2.6 2.3 0.3 4.0 (1.4) MTM / Svante Revaluation 4.6 9.6 (5.0) 2.0 2.6 Howden FX hedge - - - 2.8 (2.8) Adjusted EBITDA (1) $195.3 $65.5 $129.8 $100.6 $94.7 % of Sales 21.5% 16.2% +530 bps 18.9% +260 bps
GTLS: GAS TO LIQUID SYSTEMS® 36 Q2 2023 Sales and EBITDA Margin Trends $289 $322 $328 $379 $354 $405 $412 $441 $532 $908 17.1% 9.8% 13.6% 10.6% 10.4% 10.8% 16.2% 23.1% 12.4% 17.5% 19.0% 18.7% 15.3% 15.3% 15.5% 16.2% 18.9% 22.1% 18.9% 21.5% 5.0% 10.0% 15.0% 20.0% 25.0% $200 $250 $300 $350 $400 $450 $500 $550 $600 $650 $700 $750 $800 $850 $900 $950 Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Sales ($M) EBITDA % Adj EBITDA % GTLS Standalone Metrics Chart + Howden ex Roots Metrics for ownership period (1) EBITDA and Adjusted EBITDA are not measures of financial performance under U.S. GAAP and should not be considered as an alternative to net income in accordance with U.S. GAAP. Management believes that EBITDA and Adjusted EBITDA facilitate useful period-to-period comparisons of financial results and the information is used by us in evaluating our internal performance.
GTLS: GAS TO LIQUID SYSTEMS® Second Quarter 2023 Net Income Bridge © 2020 Chart Industries, Inc. Confidential and Proprietary 37 $ millions, except per share amounts Q2 2023, Reported Adjustments Q2 2023, AdjustedContinuing Operations Sales $908.1 - $908.1 Cost of sales 627.5 (14.1) 613.4 Gross profit 280.6 14.1 294.7 Selling, general, and administrative expenses 140.7 (10.7) 130.0 Amortization expense 44.2 (33.9) 10.3 Operating expenses 184.9 (44.6) 140.3 Operating income 95.7 58.7 154.4 Interest expense, net 79.5 - 79.5 Financing costs amortization 4.4 - 4.4 Unrealized loss (gain) on investments in equity securities 4.6 (4.6) - Acquisition Related Financing Fees - - - Foreign currency loss (4.1) - (4.1) Other income 0.8 (1.1) (0.3) Income tax expense 2.4 15.1 17.5 Income before equity in (loss) earnings of unconsolidated affiliates, net 8.1 49.3 57.4 Equity in (loss) earnings of unconsolidated affiliates, net 1.5 - 1.5 Net income 9.6 49.3 58.9 Less: Income attributable to noncontrolling interests, net of taxes 3.0 - 3.0 Net income attributable to Chart Industries, Inc. $6.6 $49.3 $55.9
GTLS: GAS TO LIQUID SYSTEMS® Q2 2023 Addback Detail © 2023 Chart Industries, Inc. Confidential and Proprietary 38 Main category Detailed Description Q2 2023 gross amount (+ added to / (-) reduced income) Impact to operating income Repeating in Q3-Q4 2023? 1 Mark-to-Market of inorganic investments • McPhy MTM • Stabilis MTM • Minority investments, other (Liberty and HTEC) 4.6 No, net income only Yes 2 Howden deal and integration related • Third party support fees 5.4 Yes, 4.3 operating and net income Yes 3 Amortization • Howden Q2 amortization • Inventory and PPE Step-up D&A 46.2 Yes, operating and net income Yes 4 Deal, Integration, & other one-time costs, non-Howden • Integration costs including IT system implementations, legal, travel and earnout related to Chart’s acquisitions completed (non-Howden) • One-time out of period inventory adjustment 1.9 Yes, operating and net income No 5 Restructuring and related expense • Specific to org structure changes, movement of people between facilities, sign-on bonuses • Cost to achieve synergies 6.3 Yes, operating and net income Yes 6 Tax effect on all above adjustments • Tax effect on gross adjustments as shown above (15.1) No, net income only Yes
GTLS: GAS TO LIQUID SYSTEMS® 39 Segment Information (1) Adjusted gross margin is not a measure of financial performance under U.S. GAAP. Please see reconciliation at end of the accompanying earnings release for a reconciliation to the relevant GAAP metric. Sales ($M, except %) Q2 ‘23 Q1 ‘23 % Chg PQ Q2 ‘22 % Chg PY Specialty Products 236.7 126.2 +87.6% 115.3 +105.3% Cryo Tank Solutions 152.7 123.5 +23.6% 132.9 +14.9% Repair, Service, Leasing 298.7 118.5 +152.1% 55.4 +439.2% Heat Transfer Systems 236.0 167.5 +40.9% 102.9 +129.3% Reported GM % ($M, except %) Q2 ‘23 Q1 ‘23 % Chg PQ Q2 ‘22 % Chg PY Specialty Products 25.8% 28.4% -260 bps 34.2% -840 bps Cryo Tank Solutions 18.9% 17.4% +150 bps 16.3% +260 bps Repair, Service, Leasing 41.3% 42.7% -140 bps 34.3% +700 bps Heat Transfer Systems 28.5% 24.7% +380 bps 14.4% +1410 bps Adjusted GM % ($M, except %) Q2 ‘23 Q1 ‘23 Bps Chg PQ Q2 ‘22 Bps Chg PY Specialty Products 27.0% 29.0% -200 bps 35.8% -880 bps Cryo Tank Solutions 21.5% 17.7% +380 bps 18.8% +270 bps Repair, Service, Leasing 43.6% 42.7% +90 bps 35.6% +800 bps Heat Transfer Systems 28.8% 25.3% +350 bps 15.9% +1280 bps
GTLS: GAS TO LIQUID SYSTEMS® 40 Segment Information (1) Adjusted operating margin is not a measure of financial performance under U.S. GAAP. Please see reconciliation at end of the accompanying earnings release for a reconciliation to the relevant GAAP metric. Sales ($M, except %) Q2 ‘23 Q1 ‘23 % Chg PQ Q2 ‘22 % Chg PY Specialty Products 236.7 126.2 +87.6% 115.3 +105.3% Cryo Tank Solutions 152.7 123.5 +23.6% 132.9 +14.9% Repair, Service, Leasing 298.7 118.5 +152.1% 55.4 +439.2% Heat Transfer Systems 236.0 167.5 +40.9% 102.9 +129.3% Reported Op Income ($M, except %) Q2 ‘23 Q1 ‘23 % Chg PQ Q2 ‘22 % Chg PY Specialty Products 29.1 21.8 +33.5% 20.8 +39.9% Cryo Tank Solutions 10.5 4.3 +144.2% 9.9 +6.1% Repair, Service, Leasing 45.6 33.1 +37.8% 12.0 +280% Heat Transfer Systems 49.8 27.3 +82.4% 5.7 +773.7% Adjusted Op Income ($M, except %) Q2 ‘23 Q1 ‘23 % Chg PQ Q2 ‘22 % Chg PY Specialty Products 32.5 16.9 +92.3% 23.6 +37.7% Cryo Tank Solutions 13.2 4.7 +180.9% 13.3 -0.8% Repair, Service, Leasing 90.1 44.5 +102.5% 12.7 +609.4% Heat Transfer Systems 50.6 28.4 +78.2% 7.6 +565.8% Adjusted Op Margin ($M, except %) Q2 ‘23 Q1 ‘23 Bps Chg PQ Q2 ‘22 Bps Chg PY Specialty Products 13.7% 13.4% +30 bps 20.5% -670 bps Cryo Tank Solutions 8.6% 3.8% +480 bps 10.0% -140 bps Repair, Service, Leasing 30.2% 37.7% -750 bps 22.9% +720 bps Heat Transfer Systems 21.4% 17.0% +450 bps 7.4% +1410 bps