UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

~~WASHINGTON,~~Washington, D.C. 20549

FORM 10-Q

(Mark One)



x☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2017~~March 31, 2020



¨☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File ~~Number~~ Number: 1-11442

CHART INDUSTRIES, INC.

(Exact ~~Name~~name of ~~Registrant~~registrant as ~~Specified~~specified in its ~~Charter)~~charter)



Delaware			34-1712937
(State or ~~Other Jurisdiction~~other jurisdiction of ~~Incorporation~~ incorporation or ~~Organization)~~ organization)			(I.R.S. Employer Identification No.)

3055 Torrington Drive, Ball Ground, Georgia30107

(Address of ~~Principal Executive Offices)~~principal executive offices) (ZIP Code)

~~(770)~~ (770) 721-8800

(~~Registrant’s Telephone Number, Including Area Code)~~Registrant's telephone number, including area code)

NOT APPLICABLE

(Former ~~Name, Former Address~~name, former address and ~~Former Fiscal Year,~~former fiscal year, if ~~Changed Since Last Report)~~changed since last report)

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	The NASDAQ Stock Market LLC
		(Nasdaq Global Select Market)

Indicate by check mark whether the ~~registrant~~registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),; and (2) has been subject to such filing requirements for the past 90 days. Yesx No ¨o

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this ~~Chapter)~~chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yesx No ¨o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	x		Accelerated filer	¨☐
Non-accelerated filer	¨	~~(Do not check if a smaller reporting company)~~ ☐	Smaller reporting company	¨☐
			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. ¨☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the ~~Exchange~~ Act). Yes ¨☐ No x

~~At October 23, 2017,~~

As of April 20, 2020, there were ~~30,771,074~~35,955,740 outstanding shares of the Company’s ~~Common Stock,~~common stock, par value $0.01 per share.

CHART INDUSTRIES, INC.

INDEX




Part I. Financial Information

Item 1. Financial Statements	Page

Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019	3

Condensed Consolidated Statements of ~~Operations~~Income and Comprehensive ~~Income~~Loss for the Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019	4

Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30, 2017~~ March 31, 2020 and ~~2016~~2019	5

~~Notes to Unaudited~~ Condensed Consolidated ~~Financial~~ Statements of Equity for the Three Months Ended March 31, 2020 and 2019	6

Notes to the Condensed Consolidated Financial Statements	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2625

Item 3. Quantitative and Qualitative Disclosures About Market Risk	3934

Item 4. Controls and Procedures	3935

Part II. Other Information

Item ~~1A. Risk Factors~~1. Legal Proceedings	4136

Item 1A. Risk Factors	36

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	4136

Item 4. Mine Safety Disclosures	4137

Item 6. Exhibits	4238

Signatures	4339

Table of Contents

PART I. FINANCIAL INFORMATION


Item 1.	Financial Statements

CHART INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Dollars in ~~thousands,~~millions, except per share amounts)


	September 30, 2017			December 31, 2016
	(Unaudited)						March 31, 2020			December 31, 2019
ASSETS
Current Assets
Cash and cash equivalents	$	124,658		$	281,959		$	89.3		$	119.0
Accounts receivable, less allowances of $10,349 and $10,217	195,785			142,762
Accounts receivable, less allowances of $8.2 and $8.8, respectively							195.1			202.6
Inventories, net	213,590			169,683			235.4			219.4
Unbilled contract revenue	41,378			26,736			88.5			86.1
Prepaid expenses	15,982			16,762			15.9			17.8
Other current assets	30,808			15,075			26.9			28.7
Total Current Assets	622,201			652,977			651.1			673.6
Property, plant, and equipment, net	293,145			251,049			399.3			404.6
Goodwill	457,481			217,970			841.2			844.9
Identifiable intangible assets, net	298,878			93,443			512.4			529.1
Investments							8.1			13.4
Other assets	21,318			17,643			10.9			15.8
TOTAL ASSETS	$	1,693,023		$	1,233,082		$	2,423.0		$	2,481.4

LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	109,939		$	79,953		$	120.3		$	125.0
Customer advances and billings in excess of contract revenue	100,696			74,702			124.3			127.8
Accrued salaries, wages, and benefits	45,237			41,746			28.8			41.5
Accrued income taxes							13.0			11.8
Current portion of warranty reserve	13,151			15,293			10.7			10.4
Short-term debt and current portion of long-term debt	244,330			6,487			12.9			16.3
Operating lease liabilities, current							5.4			6.3
Other current liabilities	37,102			43,353			42.7			39.2
Total Current Liabilities	550,455			261,534			358.1			378.3
Long-term debt	304,012			233,711			741.5			761.0
Long-term deferred tax liabilities	74,136			4,241			52.6			52.1
Long-term portion of warranty reserve	2,504			2,978
Accrued pension liabilities	10,896			14,362			10.0			10.2
Operating lease liabilities, non-current							26.6			27.8
Other long-term liabilities	18,612			17,579			19.3			19.6
Total Liabilities	960,615			534,405			1,208.1			1,249.0

Equity
Common stock, par value $0.01 per share – 150,000,000 shares authorized, 30,767,789 and 30,613,166 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively	308			306
Common stock, par value $0.01 per share – 150,000,000 shares authorized, 35,950,085 and 35,799,994 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively							0.4			0.4
Additional paid-in capital	404,502			395,843			766.0			762.8
Treasury stock; 760,782 shares at March 31, 2020							(19.3		)	—
Retained earnings	337,709			336,328			508.8			500.3
Accumulated other comprehensive loss	(12,712		)	(35,212		)	(45.8		)	(35.9		)
Total Chart Industries, Inc. Shareholders’ Equity	729,807			697,265			1,210.1			1,227.6
Noncontrolling interests	2,601			1,412			4.8			4.8
Total Equity	732,408			698,677			1,214.9			1,232.4
TOTAL LIABILITIES AND EQUITY	$	1,693,023		$	1,233,082		$	2,423.0		$	2,481.4

~~The balance sheet at~~ ~~December 31, 2016~~ has been derived from the audited financial statements at that date, but does not include all of the information and notes required by U.S. generally accepted accounting principles for complete financial statements.

See accompanying notes to these unaudited condensed consolidated financial statements.

CHART INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~INCOME AND COMPREHENSIVE ~~INCOME~~LOSS

(Dollars and shares in ~~thousands,~~millions, except per share amounts)

See accompanying notes to these unaudited condensed consolidated financial statements.

CHART INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in ~~thousands)~~millions)



	Three Months Ended March 31,
	2020			2019
OPERATING ACTIVITIES
Net income	$	8.5		$	1.0
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	23.9			16.0
Interest accretion of convertible notes discount	1.9			1.8
Employee share-based compensation expense	2.9			2.4
Financing costs amortization	1.0			0.4
Unrealized foreign currency transaction gain	—			(0.3		)
Unrealized loss on investment in equity securities	4.8			—
Other non-cash operating activities	3.2			2.5
Changes in assets and liabilities, net of acquisitions:
Accounts receivable	7.5			(12.2		)
Inventories	(16.1		)	(10.4		)
Unbilled contract revenues and other assets	8.4			(11.2		)
Accounts payable and other liabilities	(17.0		)	(20.7		)
Customer advances and billings in excess of contract revenue	(3.5		)	(2.5		)
Net Cash Provided By (Used In) Operating Activities	25.5			(33.2		)
INVESTING ACTIVITIES
Capital expenditures	(10.3		)	(5.9		)
Acquisition of businesses, net of cash acquired	—			(2.8		)
Government grants	0.1			(0.2		)
Net Cash Used In Investing Activities	(10.2		)	(8.9		)
FINANCING ACTIVITIES
Borrowings on revolving credit facilities	64.5			18.8
Repayments on revolving credit facilities	(84.7		)	(27.0		)
Repayments on term loan	(2.8		)	—
Proceeds from exercise of stock options	2.0			8.3
Common stock repurchases ⁽¹⁾	(19.3		)	—
Common stock repurchases from share-based compensation plans	(1.7		)	(2.7		)
Net Cash Used In Financing Activities	(42.0		)	(2.6		)
Effect of exchange rate changes on cash and cash equivalents	(3.0		)	(1.5		)
Net decrease in cash, cash equivalents, restricted cash, and restricted cash equivalents	(29.7		)	(46.2		)
Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period ⁽²⁾	120.0			119.1
CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND RESTRICTED CASH EQUIVALENTS AT END OF PERIOD ⁽²⁾	$	90.3		$	72.9

See accompanying notes to these unaudited condensed consolidated financial statements.

CHART INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

(Dollars in millions)



	Common Stock				Additional Paid-in Capital								Accumulated Other Comprehensive Loss			Non-controlling Interests
	Shares Outstanding		Amount		Additional Paid-in Capital			Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Loss			Non-controlling Interests		Total Equity
Balance at December 31, 2019	35.80		$	0.4	$	762.8		$	—		$	500.3	$	(35.9	)	$	4.8	$	1,232.4
Net income	—		—		—			—			8.5		—			—		8.5
Other comprehensive loss	—		—		—			—			—		(9.9		)	—		(9.9		)
Share-based compensation expense	—		—		2.9			—			—		—			—		2.9
Common stock issued from share-based compensation plans	0.16		—		2.0			—			—		—			—		2.0
Common stock repurchases ⁽¹⁾	—		—		—			(19.3		)	—		—			—		(19.3		)
Common stock repurchases from share-based compensation plans	(0.01	)	—		(1.7		)	—			—		—			—		(1.7		)
Balance at March 31, 2020	35.95		$	0.4	$	766.0		$	(19.3	)	$	508.8	$	(45.8	)	$	4.8	$	1,214.9



	Common Stock				Additional Paid-in Capital					Accumulated Other Comprehensive Loss			Non-controlling Interests
	Shares Outstanding		Amount		Additional Paid-in Capital			Retained Earnings		Accumulated Other Comprehensive Loss			Non-controlling Interests		Total Equity
Balance at December 31, 2018	31.36		$	0.3	$	460.2		$	453.9	$	(29.9	)	$	4.5	$	889.0
Net income	—		—		—			0.9		—			0.1		1.0
Other comprehensive (loss) income	—		—		—			—		(4.6		)	0.1		(4.5		)
Share-based compensation expense	—		—		2.4			—		—			—		2.4
Common stock issued from share-based compensation plans	0.41		—		8.3			—		—			—		8.3
Common stock repurchases from share-based compensation plans	(0.04	)	—		(2.7		)	—		—			—		(2.7		)
Balance at March 31, 2019	31.73		$	0.3	$	468.2		$	454.8	$	(34.5	)	$	4.7	$	893.5

See accompanying notes to these unaudited condensed consolidated financial statements.

Table of Contents

CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – ~~September 30, 2017~~March 31, 2020

(Dollars and shares in ~~thousands,~~millions, except per share amounts)

NOTE 1 — Basis of Preparation

The accompanying unaudited condensed consolidated financial statements of Chart Industries, Inc. and its consolidated subsidiaries ~~(the “Company”~~(herein referred to as the “Company,” “Chart,” “we,” “us,” or ~~“Chart”~~“our”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for annual financial statements. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in ~~the Company’s~~our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017.~~2020.

Nature of Operations: ~~Chart Industries, Inc. and its consolidated subsidiaries (herein referred to as the “Company,” “Chart,” or “we”), is~~We are a leading diversified global manufacturer of highly engineered equipment ~~for the industrial gas,~~servicing multiple market applications in energy and ~~biomedical industries. Chart’s equipment~~industrial gas. Our unique product portfolio is used throughout the liquid gas supply chain in the production, storage, distribution and ~~engineered systems are primarily used for low-temperature~~end-use of atmospheric, hydrocarbon, and cryogenic applications utilizing our expertise in cryogenic systems and equipment which operate at low temperatures sometimes approaching absolute zero (0 Kelvin; -273° Centigrade; -459° Fahrenheit). The Companyindustrial gases. Chart has domestic operations located across the United States ~~including principal executive offices located in Georgia,~~ and an international presence in Asia, Australia, Europe ~~Mexico~~ and ~~South America.~~the Americas.

Principles of Consolidation: The unaudited condensed consolidated financial statements include the accounts of ~~the Company~~Chart Industries, Inc. and its subsidiaries. Intercompany accounts and transactions are eliminated in consolidation.

~~Reclassifications:~~ Reclassifications: Certain ~~total assets by operating segments and restructuring activities as reported~~reclassifications have been made to prior year financial information in ~~2016 were reclassified~~the unaudited condensed consolidated financial statements in order to conform to the ~~2017 presentation within the notes to the condensed consolidated financial statements.~~reportable segments restructuring as further discussed in Note 2, “Reportable Segments.”

Use of Estimates: The preparation of financial statements in conformity with ~~U.S. generally accepted accounting principles~~GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. These estimates may also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions.

~~Cash, Cash Equivalents, Restricted Cash,~~ Furthermore, we considered the impact of the COVID-19 pandemic on the use of estimates and ~~Restricted Cash Equivalents:~~ ~~The Company considers~~assumptions used for financial reporting and determined that there was no adverse material impact to our results of operations for the first quarter of 2020. While our production is considered “essential” in all ~~investments with an initial maturity of three months or less when purchased to be cash equivalents. See the Debt~~locations we operate in, we have experienced, and ~~Credit Arrangements notefor additional information about restricted cash and restricted cash equivalents, which is included in other current assets and other assets~~may experience in the ~~accompanying condensed consolidated balance sheets.~~

~~Recently Issued Accounting Standards:~~ ~~In August 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-12, “Derivatives~~future, temporary facility closures while awaiting appropriate government approvals in certain jurisdictions. The COVID-19 outbreak could also disrupt our supply chain and ~~Hedging (Topic 815): Targeted Improvements~~materially adversely impact our ability to ~~Accounting~~secure supplies for Hedging Activities.” The ASU expands and enhances hedge accounting to become more closely aligned with an entity’s risk management activities through hedging strategies. The ASU provides changes to both the designation and measurement guidance for qualifying hedging relationshipsour facilities, which could materially adversely affect our operations. There may also be long-term effects on our customers in and the ~~presentation~~economies of ~~hedge~~affected countries. As a result of these uncertainties, actual results could differ from those estimates and assumptions. If the economy or markets in which we operate remain weak or deteriorate further, our business, financial condition and results of operations may be materially and adversely impacted.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law in the ~~financial statements~~United States. The CARES Act, among other things, includes modifications to net operating loss carryforwards provisions and ~~creates more transparency~~the net interest expense deduction, and ~~better understandability around~~deferment of social security tax payments. We are currently evaluating the provisions of the CARES Act and how ~~economic results are presented in the financial statements. In addition, the new guidance makes~~ certain targeted improvements to ease the application of accounting guidance relative to hedge effectiveness. The guidance will be applied prospectively for annual periods and interim periods beginning after December 15, 2018. Early adoption is permitted. The Company is currently assessing the effect that the ASU will have on the Company’selections may impact our financial position, results of operations, and ~~disclosures.~~disclosures if elected.

Share Repurchase Program: On March 11, 2020, our Board of Directors authorized a share repurchase program for up to $75 million of the Company’s common stock over the next twelve months through various means, including open market transactions, block purchases, privately negotiated transactions or otherwise in accordance with applicable federal securities laws, including Rule 10b-18 and Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. During the three months ended March 31, 2020, we repurchased 0.76 shares of our common stock at an average price of $25.40 per share. We suspended the program on March 20, 2020 in light of uncertainty resulting from the COVID-19 pandemic and the desire to conserve cash resources. As of March 31, 2020, we had approximately $55.7 available for additional repurchases under the share repurchase program.

Recently Issued Accounting Standards (Not Yet Adopted): In ~~May 2017,~~January 2020, the FASB issued ASU ~~2017-09, “Compensation – Stock Compensation~~2020-01, “Investments - Equity Securities (Topic ~~718): Scope~~321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815).” This ASU clarifies the interactions between the measurement alternative in Topic 321, the equity method of ~~Modification Accounting.” The FASB issued~~accounting in Topic 323 and the application of guidance ~~to provide clarity as to when modification~~for certain forward contracts and purchased options that upon settlement or exercise would be accounted for under the equity method of accounting ~~should be applied when there~~in Topic 815. This guidance is a change to the terms or conditions of a share-based payment award in order to prevent diversity in practice. The ASU requires modification accounting to be applied unless all of the following conditions exist: (1) the fair value (or calculated value or intrinsic value, if such measurement is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such measurement is used) of the original award before the original award is modified; if the modification does not affect any of the inputs to the valuation, the entity is not required to estimate the value immediately before and after the modification; (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award before it was modified; and (3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award before it was modified. The guidance will be applied prospectivelyeffective for ~~annual periods and interim periods beginning~~fiscal years ending

Table of Contents

CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – ~~September 30, 2017~~March 31, 2020

(Dollars and shares in ~~thousands,~~millions, except per share amounts) – Continued

after December 15, ~~2017.~~2020. Early adoption is permitted. ~~The Company is~~We are currently assessing the effect that ~~the~~this ASU will have on ~~the Company’s~~our financial position, results of operations, and disclosures.

Recently Adopted Accounting Standards: In ~~March 2017,~~August 2018, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-15, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” This ASU ~~2017-07, “Compensation – Retirement Benefits (Topic 715): Improving~~clarifies the ~~Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” The new~~accounting treatment for implementation costs for cloud computing arrangements (hosting arrangements) that is a service contract. This guidance requires companies with sponsored defined benefit pension and/or other postretirement benefit plans to present the service cost component of net periodic benefit cost in the same income statement line item as other compensation costs. The other components of net periodic benefit cost will be presented separately and not included in operating income. In addition, only service costs are eligible to be capitalized as an asset. The standard will beis effective for fiscal years beginning after December 15, ~~2017,~~2019, including interim periods within ~~those years, and the~~that fiscal year. We adopted this guidance ~~will generally be applied retrospectively, whereas the capitalization~~effective January 1, 2020. The adoption of ~~the service cost component will be applied prospectively. Early adoption is permitted with all of the amendments adopted in the same period. If an entity early adopts the~~this guidance ~~in an interim period, any adjustments must be reflected as of the beginning of the fiscal year that includes that interim period. The Company is currently assessing the effect that the ASU will~~did not have ~~on the Company’s~~a material impact our financial position, results of operations ~~and~~or disclosures.

In ~~January 2017,~~August 2018, the FASB issued ASU ~~2017-04, “Intangibles~~2018-14, “Compensation – ~~Goodwill~~Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans.” This ASU adds, modifies and ~~Other (Topic 350): Simplifying the Test~~clarifies several disclosure requirements for ~~Goodwill Impairment.” The new~~employers that sponsor defined benefit pension or other postretirement plans. This guidance eliminates the requirement to calculate the implied fair value of goodwill (Step 2 of the current guidance’s goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on current guidance’s Step 1). The guidance will be applied prospectivelyis effective for ~~annual and interim impairment tests beginning~~fiscal years ending after December 15, ~~2019. Early adoption is permitted for annual and interim goodwill impairment testing dates after~~2020. We early adopted this guidance effective January 1, ~~2017.~~2020. The adoption of this ~~ASU would~~guidance did not ~~materially~~have a significant impact ~~the Company’s condensed consolidated financial statements unless Step 1 of the~~on our first quarter 2020 interim disclosures and are not expected to have a significant impact on our annual ~~goodwill impairment test fails.~~disclosures.

In August ~~2016,~~2018, the FASB issued ASU ~~2016-15, “Statement~~2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.” This ASU adds, modifies and removes several disclosure requirements relative to the three levels of ~~Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.~~inputs used to measure fair value in accordance with Topic 820, “Fair Value Measurement.” ~~The FASB issued the update to clarify how entities should classify certain cash receipts and cash payments on the statement of cash flows. The new~~This guidance ~~also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. The standard will be~~is effective for fiscal years beginning after December 15, ~~2017,~~2019, including interim periods within ~~those years, and the~~that fiscal year. We adopted this guidance ~~will generally be applied retrospectively. Early~~effective January 1, 2020. The adoption ~~is permitted with all~~ of ~~the amendments adopted in the same period. If an entity early adopts the~~this guidance ~~in an interim period, any adjustments must be reflected as~~did not impact our financial position, results of the beginning of the fiscal year that includes that interim period. The Company is currently assessing the effect that the ASU will have on the Company’s condensed consolidated statements of cash flows.operations or disclosures.

In ~~February~~June 2016, the FASB issued ASU ~~2016-02, “Leases~~2016-13, “Financial Instruments—Credit Losses (Topic ~~842).” The FASB~~326): Measurement of Credit Losses on Financial Instruments” and subsequently issued additional guidance that modified ASU 2016-13. ASU 2016-13 and the ~~update to require the recognition of lease assets and lease liabilities on the balance sheet of lessees.~~subsequent modifications are identified as Accounting Standards Codification (“ASC”) 326. The standard ~~will be~~requires an entity to change its accounting approach in determining impairment of certain financial instruments, including trade receivables, from an “incurred loss” to a “current expected credit loss” model. The standard is effective for fiscal years beginning after December 15, ~~2018,~~2019, including interim periods within such fiscal years. We adopted this guidance effective January 1, 2020. The ASU requires a modified retrospective transition method with the option to elect a package of practical expedients. Early adoption is permitted. The Company expects adoption to increase the assets and liabilities recorded on its condensed consolidated balance sheet and increase the level of disclosures related to leases. The Company also expects that adoption of this guidance did not have a material impact our financial position, results of operations or disclosures. We maintain an allowance for doubtful accounts to provide for the ~~new standard~~estimated amount of receivables that will ~~require changes to its~~not be collected as discussed in significant accounting policies in our Annual Report on Form 10-K for the year ended December 31, 2019. In addition, we estimate expected credit losses based on historical loss information then adjust the estimates based on current, reasonable and supportable forecast economic conditions.

NOTE 2 — Reportable Segments

As reported in our Annual Report on Form 10-K for the year ended December 31, 2019, the structure of our internal ~~controls to support recognition~~organization is divided into the following reportable segments, which are also our operating segments: Distribution and ~~disclosure requirements under~~Storage Eastern Hemisphere (“D&S East”), Distribution and Storage Western Hemisphere (“D&S West”), Energy & Chemicals Cryogenics (“E&C Cryogenics”), and Energy & Chemicals FinFans (“E&C FinFans”).

Our D&S East segment has principal operations in Europe and Asia and primarily serves the ~~new standard. The Company is currently assessing the effect that the ASU will have on the Company’s condensed consolidated financial statements.~~

~~In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”~~geographic regions of Europe, Middle East and subsequently issued additional guidance that modified ASU 2014-09. ASU 2014-09 and the subsequent modifications are identified as “Accounting Standards Codification (“ASC”) 606.” ASC 606 replaces existing revenue recognition rules with a comprehensive revenue measurement and recognition standard and provides for expanded disclosure requirements. The update requires entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASC 606 applies to all contracts with customers except those that are within the scope of other topicsAsia. Our D&S West segment has principal operations in the ~~FASB ASC. ASC 606 becomes effective for fiscal years beginning after December 15, 2017. The Company plans to adopt ASC 606 as of January 1, 2018~~United States and ~~has developed an implementation plan to adopt ASC 606 using~~Latin America and primarily serves the ~~modified retrospective approach through a cumulative adjustment to retained earnings.~~

~~As part of the implementation plan, the Company has identified its revenue streams~~Americas geographic region. Our D&S West segment also includes cryobiological storage manufacturing and isdistribution operations in the ~~process of performing contract reviews to assess~~U.S., Europe and Asia, which serve customers around the ~~impact of ASC 606 on its results of operations. The Company expects to complete the contract reviews~~world. E&C Cryogenics supplies critical engineered equipment and systems used in the ~~near future. While the Company continues to assess all impacts~~separation, liquefaction, and purification of ~~the~~hydrocarbon and industrial gases that span gas-to-liquid applications. The E&C FinFans segment is focused on our unique and broad product offering and capabilities in air cooled heat exchangers (“ACHX”) and fans. Corporate includes operating expenses for executive management, accounting, ~~change, the Company~~tax, treasury, corporate development, human resources, information technology, investor relations, legal, internal audit, and risk management. Corporate support functions are not currently ~~believes that the most significant impact will relate~~allocated to the ~~timing~~segments. All prior period amounts presented in the tables below have been reclassified based on our current reportable segments.

We evaluate performance and allocate resources based on operating income as determined in our consolidated statements of ~~revenue recognition. The Company expects the majority of~~income and comprehensive loss.

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CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – ~~September 30, 2017~~March 31, 2020

(Dollars and shares in ~~thousands,~~millions, except per share amounts) – Continued

revenue that has historically been recognized when products are shipped, title has transferred and collection is reasonably assured will meet the criteria for using point-in-time revenue recognition. The Company also expects that the majority of the revenue that has historically been recognized using the percentage of completion method of accounting will meet the criteria for over time revenue recognition. At this time, the Company has identified the following impacts related to timing of revenue recognition:Segment Financial Information



	Three Months Ended March 31, 2020
	D&S East		D&S West		E&C Cryogenics		E&C FinFans		Intersegment Eliminations			Corporate			Consolidated
Sales to external customers	$	70.0	$	111.6	$	62.2	$	80.7	$	(3.4	)	$	—		$	321.1
Depreciation and amortization expense	3.6		3.0		3.8		13.1		—			0.4			23.9
Operating income (loss) ^{(1) (2)}	6.9		26.5		8.7		1.1		—			(19.7		)	23.5
Capital expenditures	5.1		1.7		1.0		0.5		—			2.0			10.3

Certain operations that have historically recognized revenue at a point-in-time will be required to change to the over time revenue recognition model as certain contracts contain language that meets the over time criteria established in ASC 606.

The Company is in the process of quantifying the above changes but does not expect them to be material to its consolidated financial statements. The Company expects adoption to increase the level of disclosures related to revenue recognition. In addition, the Company is in the process of identifying appropriate changes to its accounting policies, information technology systems, business processes, and internal control over financial reporting to support recognition under the new standard. The Company plans to complete the design of any necessary changes to its business processes, controls and systems and implement the changes over the remainder of 2017.

~~Recently Adopted Accounting Standards:~~ In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.” The FASB issued the update to clarify how restricted cash or restricted cash equivalents should be presented in the statement of cash flows. The Company early adopted the amendments provided in ASU 2016-18 effective January 1, 2017 as reflected in these condensed consolidated financial statements to provide financial statement users with more transparent disclosure about restricted cash and restricted cash equivalents. The amendments were applied using a retrospective transition method to each period presented. Prior periods were not restated as the impact of adoption of ASU 2016-18 was not material to prior periods. The cash, cash equivalents, restricted cash, and restricted cash equivalents balance included $8,785 of restricted cash and restricted cash equivalents at September 30, 2017. Restricted cash and restricted cash equivalents are included in other current assets and other assets in the accompanying condensed consolidated balance sheet at September 30, 2017.

In March 2016, the FASB issued ASU 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” The FASB issued the update to change certain aspects of accounting for share-based payments to employees. The update eliminated additional paid-in-capital pools and requires all income tax effects of awards to be recognized in the statements of operations when the awards vest or settle. The Company prospectively recognized the excess income tax effects of awards as income tax expense or benefit in the condensed statements of operations and has elected to continue to estimate the number of share-based awards expected to vest rather than electing to account for forfeitures as they occur. In addition, the Company prospectively recognized the excess tax benefits along with other income tax cash flows as an operating activity in the condensed consolidated statements of cash flows. The Company adopted this guidance effective January 1, 2017. The adoption of the guidance did not have a material impact on the Company’s condensed consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory.” The amendments require an entity to measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The Company adopted this guidance prospectively for the fiscal year beginning January 1, 2017. The adoption of the guidance did not have a material impact on the Company’s condensed consolidated financial statements.



	Three Months Ended March 31, 2019
	D&S East			D&S West		E&C Cryogenics			E&C FinFans		Intersegment Eliminations			Corporate			Consolidated
Sales to external customers	$	68.7		$	118.0	$	35.1		$	70.5	$	(3.0	)	$	—		$	289.3
Depreciation and amortization expense	4.2			2.9		4.5			4.1		—			0.3			16.0
Operating income (loss) ^{(1) (2)}	(2.3		)	25.6		(10.7		)	9.4		(1.1		)	(16.3		)	4.6
Capital expenditures	1.0			1.2		2.7			0.5		—			0.5			5.9

$0.9 for the three months ended March 31, 2019.

Product Sales Information



	Three Months Ended March 31, 2020
	D&S East		D&S West		E&C Cryogenics		E&C FinFans		Intersegment Eliminations			Consolidated
Natural gas processing (including petrochemical) and industrial gas applications	$	—	$	—	$	21.6	$	62.0	$	(0.3	)	$	83.3
Liquefied natural gas (LNG) applications	19.7		18.9		33.3		8.6		(1.1		)	79.4
HVAC, power and refining applications	—		—		7.3		10.1		(0.1		)	17.3
Bulk industrial gas applications	39.0		32.4		—		—		(0.9		)	70.5
Packaged gas industrial applications	11.1		41.1		—		—		(0.9		)	51.3
Cryobiological storage	0.2		19.2		—		—		(0.1		)	19.3
Total	$	70.0	$	111.6	$	62.2	$	80.7	$	(3.4	)	$	321.1

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CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – ~~September 30, 2017~~March 31, 2020

(Dollars and shares in ~~thousands,~~millions, except per share amounts) – Continued

~~NOTE 2 — Inventories~~

In January 2017, the Company prospectively adopted the guidance per ASU 2015-11, “Simplifying the Measurement of Inventory.” The Company previously measured its inventory at the lower of cost or market with cost being determined by the first-in, first-out (“FIFO”) method. Based on the new guidance, the Company measures its inventory at the lower of cost or net realizable value with net realizable value being the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The adoption of the guidance did not have a material impact on the Company’s condensed consolidated financial statements.

~~The following table summarizes the components of inventory:~~



	Three Months Ended March 31, 2019
	D&S East		D&S West		E&C Cryogenics		E&C FinFans		Intersegment Eliminations			Consolidated
Natural gas processing (including petrochemical) and industrial gas applications	$	—	$	—	$	25.9	$	51.5	$	—		$	77.4
Liquefied natural gas (LNG) applications	12.1		22.1		4.2		10.4		—			48.8
HVAC, power and refining applications	—		—		5.0		8.6		—			13.6
Bulk industrial gas applications	40.2		37.8		—		—		(0.3		)	77.7
Packaged gas industrial applications	16.4		36.1		—		—		(1.0		)	51.5
Cryobiological storage	—		22.0		—		—		(1.7		)	20.3
Total	$	68.7	$	118.0	$	35.1	$	70.5	$	(3.0	)	$	289.3

September 30,
2017 December 31,
2016
Raw materials and supplies $ 98,226
$ 65,719
Work in process 37,047
31,576
Finished goods 78,317
72,388
Total inventories, net $ 213,590
$ 169,683



Total Assets	March 31, 2020		December 31, 2019
D&S East	$	511.9	$	528.6
D&S West	423.3		414.9
E&C Cryogenics	428.1		430.3
E&C FinFans	1,032.3		1,028.0
Corporate	27.4		79.6
Total	$	2,423.0	$	2,481.4

~~The allowances for excess and obsolete inventory was $8,525 and $10,069 at September 30, 2017 and December 31, 2016, respectively.~~

NOTE 3 — ~~Goodwill and Intangible Assets~~Revenue

~~Goodwill~~Disaggregation of Revenue

The following table represents a disaggregation of revenue by timing of revenue along with the ~~changes in goodwill by segment:~~reportable segment for each category:

Energy &
Chemicals
Distribution & Storage BioMedical Total
Balance at December 31, 2016 $ 27,873
$ 165,520
$ 24,577
$ 217,970
Foreign currency translation adjustments and other —
2,214
(104 ) 2,110
Goodwill acquired during the year 236,246
1,155
—
237,401
Balance at September 30, 2017 $ 264,119
$ 168,889
$ 24,473
$ 457,481

Accumulated goodwill impairment loss at September 30, 2017 and December 31, 2016 $ 64,603
$ —
$ 131,243
$ 195,846



	Three Months Ended March 31, 2020
	D&S East		D&S West		E&C Cryogenics		E&C FinFans		Intersegment Eliminations			Consolidated
Point in time	$	59.1	$	102.4	$	—	$	21.2	$	(2.7	)	$	180.0
Over time	10.9		9.2		62.2		59.5		(0.7		)	141.1
Total	$	70.0	$	111.6	$	62.2	$	80.7	$	(3.4	)	$	321.1



	Three Months Ended March 31, 2019
	D&S East		D&S West		E&C Cryogenics		E&C FinFans		Intersegment Eliminations			Consolidated
Point in time	$	63.9	$	107.4	$	0.2	$	18.8	$	(3.0	)	$	187.3
Over time	4.8		10.6		34.9		51.7		—			102.0
Total	$	68.7	$	118.0	$	35.1	$	70.5	$	(3.0	)	$	289.3

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CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – ~~September 30, 2017~~March 31, 2020

(Dollars and shares in ~~thousands,~~millions, except per share amounts) – Continued

Refer to Note 2, “Reportable Segments,” for a table of revenue disaggregated by product application along with the reportable segment for each category.

Contract Balances

The following table represents changes in our contract assets and contract liabilities balances:



	March 31, 2020		December 31, 2019		Year-to-date Change ($)			Year-to-date Change (%)
Contract assets
Accounts receivable, net of allowances	$	195.1	$	202.6	$	(7.5	)	(3.7	)%
Unbilled contract revenue	88.5		86.1		2.4			2.8	%

Contract liabilities
Customer advances and billings in excess of contract revenue	$	124.3	$	127.8	$	(3.5	)	(2.7	)%
Long-term deferred revenue	0.7		0.8		(0.1		)	(12.5	)%

Revenue recognized for the three months ended March 31, 2020 and 2019, that was included in the contract liabilities balance at the beginning of each year was $17.1 and $37.0, respectively. The amount of revenue recognized during the three months ended March 31, 2020 from performance obligations satisfied or partially satisfied in previous periods as a result of changes in the estimates of variable consideration related to long-term contracts, was not significant.

Remaining Performance Obligations

Remaining performance obligations represent the transaction price of firm signed purchase orders or other written contractual commitments from customers for which work has not been performed, or is partially completed, and excludes unexercised contract options and potential orders. As of March 31, 2020, the estimated revenue expected to be recognized in the future related to remaining performance obligations was $732.5. We expect to recognize revenue on approximately 84% of the remaining performance obligations over the next 12 months and with the remaining over the next few years thereafter.

NOTE 4 — Investments

The following table summarizes the components of investments:



	March 31, 2020		December 31, 2019
Investment in equity securities	$	2.1	$	6.9
Equity investments	6.0		6.5
Total investments	$	8.1	$	13.4

Investment in equity securities

During the third quarter of 2019, we made an investment in Stabilis Energy, Inc. (“Stabilis”) by converting $7.0 of a note receivable from Stabilis into an investment in their company stock. As of March 31, 2020, the value of the investment was $2.1, which reflects a $4.8 unrealized loss upon conversion and subsequent mark-to-market. Gains and losses for this investment in equity securities were recorded in unrealized loss on investment in equity securities on the consolidated statement of income and comprehensive loss during the three months ended March 31, 2020.

We categorize our financial assets and liabilities that are recorded at fair value into a hierarchy based on whether the inputs to valuation techniques are observable to unobservable. Level 2 inputs represent other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. The Stabilis investment is measured at fair value on the condensed consolidated balance sheet as of March 31, 2020 using Level 2 inputs.

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CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – March 31, 2020

(Dollars and shares in millions, except per share amounts) – Continued

Equity method accounting investments

Our equity investments accounted for under the equity method of accounting include a 50% ownership interest in a joint venture with Hudson Products de Mexico S.A. de CV which totaled $2.9 at March 31, 2020 and December 31, 2019. This investment is operated and managed by our joint venture partner and as such, we do not have control over the joint venture and therefore is not consolidated. Our equity in earnings from this investment were not material for both the three months ended March 31, 2020 and 2019. Additionally, we have a 25% ownership interest in Liberty LNG which we invested in during the third quarter of 2019 which totaled $2.7 and $3.3 at March 31, 2020 and December 31, 2019, respectively.Earnings for the three months ended March 31, 2020 were not material.

NOTE5 — Leases

As of March 31, 2020, operating right-of-use (“ROU”) assets and lease liabilities were $31.9 and $32.0 ($5.4 of which was current), respectively. The weighted-average remaining term for lease contracts was 6.5 years at March 31, 2020, with maturity dates ranging from May 2020 to February 2029. The weighted-average discount rate was 4.7% at March 31, 2020.

We incurred $3.1 and $2.0 of rental expense under operating leases for the quarters ended March 31, 2020 and 2019, respectively. Certain operating leases contain rent escalation clauses and lease concessions that require additional rental payments in the later years of the term. Rent expense for these types of leases is recognized on a straight-line basis over the minimum lease term. Adjustments for straight-line rental expense for the respective periods was not material and as such, the majority of expense recognized was reflected in cash used in operating activities for the respective periods. This expense consisted primarily of payments for base rent on building and equipment leases. Payments related to short-term lease costs and taxes and variable service charges on leased properties were immaterial. In addition, we have the right, but no obligation, to renew certain leases for various renewal terms.

The following table summarizes future minimum lease payments for non-cancelable operating leases as of March 31, 2020:



2020	$	6.0
2021	6.5
2022	6.1
2023	5.5
2024	5.3
Thereafter ⁽¹⁾	7.9
Total future minimum lease payments	$	37.3

_______________


⁽¹⁾	As of March 31, 2020, future minimum lease payments for non-cancelable operating leases for period subsequent to 2024 relate to 7 leased facilities.

NOTE 6 — Inventories

The following table summarizes the components of inventory:



	March 31, 2020		December 31, 2019
Raw materials and supplies	$	111.6	$	104.0
Work in process	56.9		47.5
Finished goods	66.9		67.9
Total inventories, net	$	235.4	$	219.4

The allowance for excess and obsolete inventory balance at March 31, 2020 and December 31, 2019 was $10.2 and $10.8, respectively.

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CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – March 31, 2020

(Dollars and shares in millions, except per share amounts) – Continued

NOTE 7 — Goodwill and Intangible Assets

Goodwill

The following table represents the changes in goodwill by segment:



	D&S East			D&S West		E&C Cryogenics			E&C FinFans			Consolidated
Balance at December 31, 2019	$	117.0		$	152.1	$	176.2		$	399.6		$	844.9
Foreign currency translation adjustments	(2.4		)	—		(1.0		)	(0.3		)	(3.7		)
Balance at March 31, 2020	$	114.6		$	152.1	$	175.2		$	399.3		$	841.2

Accumulated goodwill impairment loss at March 31, 2020 and December 31, 2019	$	—		$	82.5	$	40.9		$	23.7		$	147.1

Intangible Assets

The following table displays the gross carrying amount and accumulated amortization for finite-lived intangible assets and indefinite-lived intangible assets (exclusive of goodwill)^{(1) (2)}:



		March 31, 2020					December 31, 2019
	Weighted-average Estimated Useful Life	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Finite-lived intangible assets:
Customer relationships	13 years	$	379.1	$	(121.7	)	$	380.3	$	(115.0	)
Unpatented technology	10 years	89.0		(15.0		)	90.1		(13.0		)
Patents and other	2 years	20.9		(14.7		)	20.9		(9.8		)
Trademarks and trade names	14 years	2.7		(1.4		)	2.4		(1.2		)
Land use rights	50 years	11.8		(1.5		)	12.0		(1.5		)
Total finite-lived intangible assets	13 years	503.5		(154.3		)	505.7		(140.5		)
Indefinite-lived intangible assets:
Trademarks and trade names		163.2		—			163.9		—
Total intangible assets		$	666.7	$	(154.3	)	$	669.6	$	(140.5	)

September 30, 2017 December 31, 2016
Weighted-average Estimated Useful Life
Gross
Carrying
Amount

Accumulated
Amortization

Gross
Carrying
Amount

Accumulated
Amortization
Finite-lived intangible assets:
Customer relationships 12 years $ 233,208
$ (83,596 ) $ 119,320
$ (81,614 )
Unpatented technology 12 years 27,686
(3,836 ) 8,186
(3,132 )
Land use rights 50 years 13,222
(1,097 ) 12,650
(860 )
Trademarks and trade names 14 years 5,517
(2,767 ) 4,918
(2,198 )
Patents and other 6 years 2,878
(502 ) 1,235
(695 )
Total finite-lived intangible assets 14 years $ 282,511
$ (91,798 ) $ 146,309
$ (88,499 )
Indefinite-lived intangible assets:
Trademarks and trade names $ 108,165
—
$ 35,633
—
Total intangible assets $ 390,676
$ (91,798 ) $ 181,942
$ (88,499 )

_______________


⁽¹⁾	Amounts include the impact of foreign currency translation. Fully amortized or impaired amounts are written off.


⁽²⁾	~~The Company amortizes certain identifiable intangible assets primarily on a straight-line basis over their estimated useful lives, which range from one to 50 years.~~

~~Expense~~Amortization expense for intangible assets subject to amortization was ~~$3,240~~$14.0 and ~~$2,912~~$7.2 for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016, respectively, and $9,301 and $9,156 for the nine months ended September 30, 2017 and 2016,~~2019, respectively. ~~The Company estimates future~~We estimate amortization expense ~~for its current finite-lived intangible assets~~to be recognized during the next five years as follows:



For the Year Ending December 31,
2020	$	48.5
2021	35.5
2022	35.4
2023	35.1
2024	34.3

For the Year Ending December 31,
2017 $ 15,700
2018 24,400
2019 24,100
2020 22,200
2021 16,100

Government Grants

~~The Company~~We received ~~$407 in~~certain government grants ~~during the first nine months of 2017. The government grants are~~ related to ~~property, plant, and equipment and~~ land use rights ~~related to~~for capacity expansion in ~~China. The grants~~China (“China Government Grants”). China Government Grants are generally recorded in other current liabilities and other long-term liabilities in the unaudited condensed consolidated balance sheets and generally recognized into income over the useful life of the associated assets (10 to 50 years).

~~Government grants at September 30, 2017 and December 31, 2016 are as follows:~~

September 30,
2017 December 31,
2016
Current $ 481
$ 446
Long-term 8,378
8,153
Total government grants $ 8,859
$ 8,599

1013

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CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – ~~September 30, 2017~~March 31, 2020

(Dollars and shares in ~~thousands,~~millions, except per share amounts) – Continued

China Government Grants are presented in our unaudited condensed consolidated balance sheets as follows:



	March 31, 2020		December 31, 2019
Current	$	0.5	$	0.5
Long-term	7.0		7.2
Total China Government Grants	$	7.5	$	7.7

We also received government grants from certain local jurisdictions within the United States, which are recorded in other assets in the unaudited condensed consolidated balance sheets and were not significant for the periods presented.

NOTE 48 — Debt and Credit Arrangements

Summary of Outstanding Borrowings

The following table represents the components of ~~the Company’s~~our borrowings:



	March 31, 2020			December 31, 2019
Senior secured revolving credit facility and term loan:
Term loan due June 2024 ⁽¹⁾	$	444.4		$	447.2
Senior secured revolving credit facility due June 2024 ⁽²⁾	100.1			119.0
Unamortized debt issuance costs	(5.2		)	(5.5		)
Senior secured revolving credit facility and term loan, net of debt issuance costs	539.3			560.7

Convertible notes due November 2024:
Principal amount	$	258.8		$	258.8
Unamortized discount	(40.8		)	(42.8		)
Unamortized debt issuance costs	(3.6		)	(3.8		)
Convertible notes due November 2024, net of unamortized discount and debt issuance costs	214.4			212.2

Foreign facilities	0.7			4.4

Total debt, net of unamortized discount and debt issuance costs	754.4			777.3
Less: current maturities	12.0			15.7
Less: current portion of unamortized debt issuance costs	0.9			0.6
Long-term debt	$	741.5		$	761.0

September 30,
2017 December 31,
2016
Convertible notes, due August 2018, effective interest rate of 7.9% $ 238,142
$ 228,115
Senior secured revolving credit facility, due October 2019, effective interest rate of 4.0% 300,000
—
Foreign facilities 10,792
13,208
Total debt 548,934
241,323
Unamortized debt issuance costs (592 ) (1,125 )
Total debt, net of unamortized debt issuance costs 548,342
240,198
Less: current maturities ⁽¹⁾
(244,330 ) (6,487 )
Long-term debt $ 304,012
$ 233,711

_______________


⁽¹⁾	As of March 31, 2020, there were $444.4 in borrowings outstanding under the term loan bearing an interest rate of 3.05%. The term loan is repayable annually in quarterly installments of 2.5% of the loan amount over the first two years, 5.0% for the third year, 7.5% for the fourth year and 10.0% for the fifth and final year.

⁽²⁾

The senior secured revolving credit facility due 2024 includes $100.0 sub limit for letters of credit, a $250.0 sub limit for discretionary letters of credit and $50.0 sub limit for swingline loans. As of March 31, 2020, there were $100.1 in borrowings outstanding under the senior secured revolving credit facility due 2024 bearing a weighted-average interest rate of 2.29% and $64.7 in letters of credit and bank guarantees outstanding supported by the senior secured revolving credit facility due 2024. As of March 31, 2020, the senior secured revolving credit facility due 2024 had availability of $385.2.

~~(1)Current maturities includes $238,142 current convertible notes at September 30, 2017.~~Senior Secured Revolving Credit Facility and Term Loan

~~Convertible Notes~~

The outstanding aggregate principal amount of the Company’s 2.0% Convertible Senior Subordinated Notes due August 1, 2018 (the “Convertible Notes”) is $250,000. The Convertible Notes bear interest at a fixed rate of 2.0% per year, payable semiannually in arrears on February 1 and August 1 of each year, and will mature on August 1, 2018. The effective interest rate at issuance was 7.9%.

The Convertible Notes are senior subordinated unsecured obligations of the Company and are not guaranteed by any of the Company’s subsidiaries. The Convertible Notes are senior in right of payment to the Company’s future subordinated debt, equal in right of payment with the Company’s future senior subordinated debt, and are subordinated in right of payment to the Company’s existing and future senior indebtedness, including indebtedness under the Company’s existing credit agreement.

~~In connection with the issuance of the Convertible Notes, the Company~~On June 14, 2019, we entered into ~~privately-negotiated convertible note hedge~~the Fourth Amended and ~~capped call transactions with affiliates of certain of~~Restated Credit Agreement, which includes a senior secured revolving credit facility (the “SSRCF”) and a term loan (together, the ~~underwriters (the “Option Counterparties”~~“2024 Credit Facilities”). The convertible note hedge and capped call transactions relate to, collectively, 3,622 shares, which represents the number of shares of the Company’s common stock underlying the Convertible Notes, subject to anti-dilution adjustments substantially similar to those applicable to the Convertible Notes. These convertible note hedge and capped call transactions are expected to reduce the potential dilution with respect to the Company’s common stock upon conversion of the Convertible Notes and/or reduce the Company’s exposure to potential cash or stock payments that may be required upon conversion of the Convertible Notes, except, in the case of the capped call transactions, to the extent that the market price per share of the Company’s common stock exceeds the cap price of the capped call transactions. The Company also entered into separate warrant transactions with the Option Counterparties initially relating to the number of shares of the Company’s common stock underlying the convertible note hedge transactions, subject to customary anti-dilution adjustments. The warrant transactions will have a dilutive effect with respect to the Company’s common stock to the extent that the price per share of the Company’s common stock exceeds the strike price of the warrants unless the Company elects, subject to certain conditions, to settle the warrants in cash. These warrants were exercisable as of the issuance date of the Convertible Notes. The cap price of the capped call transactions and the strike price of the warrant transactions was initially $84.96 per share. Proceeds received from the issuance of the warrants totaled approximately $48,848 and were recorded as an addition to additional paid-in-capital. The net cost of the convertible note hedge and capped call transactions, taking into account the proceeds from the issuance of the warrants, was approximately $17,638.2024 Credit Facilities mature on June 14, 2024.

In accordance with ASC 815, contracts are initially classified as equity if (1) the contract requires physical settlement or net-share settlement, or (2) the contract gives the entity a choice of net-cash settlement in its own shares (physical settlement or net-share settlement). The Company concluded that the settlement terms of the convertible note hedge, capped call, and warrant transactions permit net-share settlement. As such, the convertible note hedge, capped call, and warrant transactions were recorded in equity.

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CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – ~~September 30, 2017~~March 31, 2020

(Dollars and shares in ~~thousands,~~millions, except per share amounts) – Continued

Upon issuance of the Convertible Notes, the Company bifurcated the $250,000 principal balance of the Convertible Notes into a liability component of $170,885, which was recorded as long-term debt, and an equity component of $79,115, which was initially recorded as additional paid-in-capital. The liability component was recognized at the present value of its associated cash flows using a 7.9% straight-debt rate which represented the Company’s interest rate for similar debt instruments at that time without a conversion feature and is being accreted to interest expense over the term of the Convertible Notes. At September 30, 2017 and December 31, 2016, the carrying amount of the liability component was $238,142 (less debt issuance costs of $592) and $228,115 (less debt issuance costs of $1,125), respectively, and the unamortized debt discount of the Convertible Notes was $11,858 and $21,885, respectively.

For the three months ended September 30, 2017 and 2016, interest expense for the Convertible Notes was $4,658 and $4,400, respectively, which included $3,408 and $3,150 of non-cash interest accretion expense related to the carrying amount of the Convertible Notes, respectively, and $1,250 of cash interest for both periods. For the nine months ended September 30, 2017 and 2016, interest expense for the Convertible Notes was $13,777 and $13,018, respectively, which included $10,027 and $9,268 of non-cash interest accretion expense related to the carrying amount of the Convertible Notes, respectively, and $3,750 of 2.0% cash interest for both periods. In accordance with ASC 470-20, which requires issuers to separately account for the liability and equity components of convertible debt instruments that may be settled in cash upon conversion, the Company allocated debt issuance costs to the liability and equity components in proportion to their allocated value. Debt issuance costs were $7,277, with $2,303 recorded as a reduction in additional paid-in-capital. The remaining balance of $4,974 is being amortized over the term of the Convertible Notes. For the three months ended September 30, 2017 and 2016, total expense associated with the amortization of these debt issuance costs was $178 for both periods. For the nine months ended September 30, 2017 and 2016, total expense associated with the amortization of these debt issuance costs was $533 for both periods.

Prior to May 1, 2018, the Convertible Notes will be convertible at the option of the holders thereof only under the following circumstances: (1) during any fiscal quarter commencing after September 30, 2011 (and only during such fiscal quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the applicable conversion price (currently $69.03) for the Convertible Notes on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “Measurement Period”) in which, as determined following a request by a holder of Convertible Notes as provided in the bond indenture (the “Indenture”), the trading price per $1,000 principal amount of Convertible Notes for each trading day of such Measurement Period was less than 97% of the product of the last reported sale price of the Company’s common stock and the applicable conversion rate for the Convertible Notes on each such trading day; or (3) upon the occurrence of specified corporate events pursuant to the terms of the Indenture. On or after May 1, 2018, until the close of business on the second scheduled trading day immediately preceding the maturity date of the Convertible Notes, holders of the Convertible Notes may convert their Convertible Notes at any time, regardless of the foregoing circumstances. Upon conversion, the Company will pay cash up to the aggregate principal amount of the Convertible Notes to be converted and pay or deliver, as the case may be, cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock, at the Company’s election, in respect of the remainder, if any, of the Company’s conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted. It is the Company’s intention to settle any excess conversion value in shares of the Company’s common stock.

The ~~conversion rate on the Convertible Notes will be subject to adjustment upon the occurrence~~SSRCF has a borrowing capacity of ~~certain events, but will not be adjusted for any accrued and unpaid interest. In addition, following the occurrence~~$550.0.

The term loan has a borrowing capacity of a make-whole fundamental change, the Company will, in certain circumstances, increase the conversion rate for a holder that converts its Convertible Notes in connection with such make-whole fundamental change. $450.0.

The Company may not redeem the Convertible Notes prior to maturity. If the Company undergoes a fundamental change, subject to certain conditions, holders may require the Company to purchase the Convertible Notes in whole or in part for cash2024 Credit Facilities bear interest at a ~~fundamental change purchase price equal~~base rate margin determined on a leveraged-based scale which ranges from 25 to ~~100% of the principal amount of the Convertible Notes~~125 basis points for alternative base rate loans and 125 to ~~be purchased, plus accrued~~225 basis points for LIBOR loans.

Interest and unpaid interest, if any, to, but excluding, the fundamental change purchase date. For purposes of calculating earnings per share, if the average market price of the Company’s common stock exceeds the applicable conversion price during the periods reported, shares contingently issuable under the Convertible Notes will have a dilutive effect with respect to the Company’s common stock.

~~The Company reassesses the convertibility of the Convertible Notes and the related balance sheet classification~~fees are payable on a quarterly ~~basis. The Convertible Notes are classified as current liabilities~~basis (or if earlier, at ~~September 30, 2017 as their maturity is within 12 months of the balance sheet date. At~~ the end of the third quarter of 2017, events for early conversion were not met, and thus the Convertible Notes were not convertible as of and for the fiscal quarter beginning October 1, 2017. There have been no conversions as of the date of this filing.

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~~CHART INDUSTRIES, INC. AND SUBSIDIARIES~~

~~Notes to Unaudited Condensed Consolidated Financial Statements – September 30, 2017~~

~~(Dollars and shares in thousands, except per share amounts) – Continued~~

~~Senior Secured Revolving Credit Facility~~

The Company has a five-year $450,000 senior secured revolving credit facility (the “SSRCF”) which matures on October 29, 2019. The SSRCF includes a $25,000 sub-limit for the issuance of swingline loans and a $100,000 sub-limit to be used for letters of credit. There is a foreign currency limit of $100,000 under the SSRCF which can be used for foreign currency denominated letters of credit and borrowings in a foreign currency, in each case in currencies agreed upon with the lenders. In addition, the facility permits borrowings up to $100,000 made by the Company’s wholly-owned subsidiaries, Chart Industries Luxembourg S.à. r.l. (“Chart Luxembourg”) and Chart Asia Investment Company Limited (“Chart Asia”). The SSRCF also includes an expansion option permitting the Company to add up to an aggregate $200,000 in term loans or revolving credit commitments from its lenders.

The Company recorded $2,869 in deferred debt issuance costs associated with the SSRCF which are being amortized over the five-year term of the SSRCF. This balance is recorded in other assets in the condensed consolidated balance sheets. For the three months ended September 30, 2017 and 2016, total expense associated with the amortization of these debt issuance costs was $143 for both periods. For the nine months ended September 30, 2017 and 2016, the related financing costs amortization was $430 for both periods.

Revolving loans under the SSRCF bear interest, at the applicable Borrower’s election, at either LIBOR or the greatest of (a) the JPMorgan prime rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%, or (c) the Adjusted LIBOR Rate (as defined in the SSRCF) for the relative interest period on such day (or if such day is not a business day, the immediately preceding business day) plus 1% (the “Adjusted Base Rate”), plus a margin that varies with the Company’s leverage ratio. In addition, the Company is required to pay a commitment fee of between 0.25% and 0.40% of the unused revolver balance and a letter of credit participation fee equal to the daily aggregate letter of credit exposure at the rate per annum equal to the Applicable Margin for ~~Eurocurrency Revolving Facility Borrowings (ranging from 1.5% to 2.75%, depending on the leverage ratio calculated at each fiscal quarter end)~~LIBOR loans). ~~A fronting fee must be paid on each letter of credit that is issued equal to 0.125% per annum of the stated dollar amount of the letter of credit.~~

Significant financial covenants for the ~~SSRCF~~2024 Credit Facilities include ~~a minimum liquidity requirement equal to~~financial maintenance covenants that, as of the ~~principal~~last day of any fiscal quarter ending on and after June 30, 2019, (i) require the ratio of the amount of Chart and its subsidiaries’ consolidated total net indebtedness to consolidated EBITDA to be less than specified maximum ratio levels and (ii) require the ~~Convertible Notes outstanding six months prior to the maturity date~~ratio of the ~~Convertible Notes~~amount of Chart and ~~when holders of the Convertible Notes have the option~~its subsidiaries’ consolidated EBITDA to ~~require the Company~~consolidated cash interest expense to ~~repurchase the Convertible Notes,~~be greater than a ~~maximum leverage~~specified minimum ratio ~~of 3.25 and a minimum interest coverage to EBITDA ratio of 3.0.~~level. The required leverage ratio can be relaxed on up to two occasions, upon notification to the lenders, to 3.75 for up to four consecutive fiscal quarters, for acquisitions and plant expansions of $100,000 or greater. The SSRCF contains2024 Credit Facilities include a number of other customary covenants including, but not limited to, restrictions on ~~the Company’s~~our ability to incur additional indebtedness, create liens or other encumbrances, sell assets, enter into sale and lease-back transactions, make certain payments, investments, loans, advances or guarantees, make acquisitions and engage in mergers or consolidations and pay dividends or distributions. On September 19, 2017, the Company entered into an amendment (“Amendment No. 2”) to its SSRCF to exclude the acquisition of RCHPH Holdings, Inc. (“Hudson”) (see Business Combinations footnote) from the pro forma leverage ratio requirement of the SSRCF. Concurrently with Amendment No. 2, the Company has exercised its right under the SSRCF to elect an increase in the maximum permissible leverage ratio thereunder to 3.75 for the four fiscal-quarter period ending September 30, 2018. At ~~September 30, 2017, the Company was~~March 31, 2020, we were in compliance with all covenants.

AsThe 2024 Credit Facilities also contain customary events of ~~September 30, 2017, there were $300,000 in borrowings outstanding under~~default. If such an event of default occurs, the ~~SSRCF (“SSRCF Debt”), bearing interest at 4.00%.~~lenders thereunder would be entitled to take various actions, including the acceleration of amounts due and all actions permitted to be taken by a secured creditor. The Company borrowed against this facility to fund the acquisition of Hudson. For both the three and nine months ended September 30, 2017, interest expense for the SSRCF Debt was $333. The Company had $44,828 in letters of credit and bank guarantees supported by the SSRCF, which had availability of $105,172 at September 30, 2017. The obligations under the SSRCF2024 Credit Facilities are guaranteed by ~~the Company~~Chart and substantially all of its U.S. subsidiaries and secured by substantially all of the assets of ~~the Company~~Chart and ~~its~~our U.S. subsidiaries and 65% of the capital stock of ~~the Company’s~~our material non-U.S. subsidiaries (as defined by the ~~SSRCF)~~Fourth Amended and Restated Credit Agreement) that are owned by U.S. subsidiaries.

Subsequent to the end of the first quarter of 2020, on April 20, 2020, we amended our 2024 Credit Facilities. The amendment, among other things, (i) adjusts the pricing grid in order to accommodate potentially higher leverage ratios, (ii) adjusts factoring related definitions and other related provisions to provide Chart with greater flexibility to enter into such arrangements in the future, (iii) incorporates a “cash hoarding” prevention covenant and (iv) incorporates various amendments to reflect interest rate floor and other changes to the Loan Syndications and Trading Association and Loan Market Association market standards for credit agreements. The terms and conditions under the 2024 Credit Facilities are otherwise substantially the same as those prior to the amendment.

We recorded $6.1 in deferred debt issuance costs in conjunction with the 2024 Credit Facilities, which is included in long-term debt in the unaudited condensed consolidated balance sheet at March 31, 2020, associated with the term loan, which is being amortized over its five-year term beginning in July 2019.

We paid $7.5 in deferred debt issuance costs related to the SSCRF and included $2.5 of the unamortized debt issuance costs from the previous senior secured revolving credit facility, which are presented in other assets in the unaudited condensed consolidated balance sheet at March 31, 2020 and are being amortized over the five-year term of the SSRCF. At March 31, 2020, unamortized debt issuance costs associated with the SSRCF were $8.5.

The following table summarizes interest expense and financing costs amortization related to the 2024 Credit Facilities and our previous senior secured revolving credit facility:



	Three Months Ended March 31,
	2020		2019
Interest expense, term loan due June 2024	$	4.2	$	—
Interest expense, senior secured revolving credit facility	0.6		3.2
Interest expense, senior secured revolving credit facility and term loan due June 2024	$	4.8	$	3.2

Financing costs amortization, senior secured revolving credit facility and term loan due 2024	$	0.8	$	0.2

2024 Convertible Notes

On November 6, 2017, we issued 1.00% Convertible Senior Subordinated Notes due November 2024 (the “2024 Notes”) in the aggregate principal amount of $258.8, pursuant to an Indenture, dated as of such date (the “Indenture”). The 2024 Notes bear

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CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – ~~September 30, 2017~~March 31, 2020

(Dollars and shares in ~~thousands,~~millions, except per share amounts) – Continued

~~Foreign Facilities – China~~interest at an annual rate of 1.00%, payable on May 15 and November 15 of each year, beginning on May 15, 2018, and will mature on November 15, 2024 unless earlier converted or repurchased.

~~Chart Cryogenic Engineering Systems (Changzhou) Company Limited (“CCESC”) and Chart Biomedical (Chengdu) Co. Ltd. (“Chengdu”), wholly-owned subsidiaries~~The 2024 Notes are senior subordinated unsecured obligations of the Company and ~~Chart Cryogenic Distribution Equipment (Changzhou) Company Limited (“CCDEC”), a joint venture~~are not guaranteed by any of our subsidiaries. The 2024 Notes are senior in right of payment to our future subordinated debt, equal in right of payment with the Company’s future senior subordinated debt and are subordinated in right of payment to our existing and future senior indebtedness, including indebtedness under our existing credit agreement.

A conversion of the ~~Company, maintain joint banking facilities (the “China Facilities”)~~2024 Notes may be settled in cash, shares of our common stock or a combination of cash and shares of our common stock, at our election (subject to, and in accordance with, the settlement provisions of the Indenture). The initial conversion rate for the 2024 Notes is 17.0285 shares of common stock (subject to adjustment as provided for in the Indenture) per $1,000 principal amount of the 2024 Notes, which ~~include~~is equal to an initial conversion price of approximately $58.725 per share, representing a ~~revolving facility with 50.0 million Chinese yuan (equivalent~~conversion premium of approximately 35% above the closing price of our common stock of $43.50 per share on October 31, 2017. In addition, following certain corporate events that occur prior to ~~$7,534) in borrowing capacity which can be utilized for either revolving loans, bonds/guarantees, or bank draft acceptances. Any borrowings made by CCESC, CCDEC or Chengdu under~~ the China Facilities are guaranteed by the Company. At September 30, 2017, there were no borrowings outstanding under the revolving facility, but CCESC and CCDEC had 2.6 million Chinese yuan (equivalent to $386), and 0.5 million Chinese yuan (equivalent to $78) in bank guarantees, respectively.

CCDEC maintains an unsecured credit facility whereby CCDEC may borrow up to 30.0 million Chinese yuan (equivalent to $4,520) for working capital purposes. At September 30, 2017, there was 15.0 million Chinese yuan (equivalent to $2,260) outstanding under this facility, bearing interest at 4.35%. CCDEC was negotiating new terms of this facility including a new maturity date as described in the Indenture, we will pay a make-whole premium by increasing the conversion rate for a holder who elects to convert its 2024 Notes in connection with such a corporate event in certain circumstances. For purposes of calculating earnings per share, if the average market price of our common stock exceeds the applicable conversion price during the periods reported, shares contingently issuable under the 2024 Notes will have a dilutive effect with respect to our common stock. Since the conversion price of $58.725 exceeded our closing common stock price of $28.98 at the end of the ~~third quarter~~period, the if-converted value did not exceed the principal amount of ~~2017.~~

~~CCESC~~the 2024 at March 31, 2020. As described below, we entered into ~~a term loan~~convertible note hedge transactions, which are expected to reduce the potential dilution with respect to our common stock upon conversion of the 2024 Notes.

Holders of the 2024 Notes may convert their 2024 Notes at their option at any time prior to the close of business on the business day immediately preceding August 15, 2024 only under the following circumstances: (1) during any fiscal quarter commencing after December 31, 2017 (and only during such fiscal quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the applicable conversion price for the 2024 Notes on each applicable trading day; (2) during the five business day period after any 10 consecutive trading day period (the “measurement period”) in which the “trading price” (as defined in the Indenture) per one thousand U.S. dollar principal amount of Notes for each trading day of such measurement period was less than 97% of the product of the last reported sale price of our common stock and the applicable conversion rate for the 2024 Notes on each such trading day; or (3) upon the occurrence of specified corporate events described in the Indenture.

On or after August 15, 2024 until the close of business on the second scheduled trading day immediately preceding November 15, 2024, holders may convert their 2024 Notes at the option of the holder regardless of the foregoing circumstances. Upon conversion, we may settle the conversion by paying or delivering either shares of our common stock, solely cash, or a combination of cash and shares of our common stock, at our election. It is our intention to settle the principal amount of the 2024 Notes in cash and excess conversion value in shares of our common stock.

We reassess the convertibility of the 2024 Notes and the related balance sheet classification on a quarterly basis. As of March 31, 2020, events for early conversion were not met, and thus the 2024 Notes were not convertible as of and for the fiscal quarter beginning April 1, 2020. There have been no conversions as of ~~2016.~~the date of this filing.

We allocated the gross proceeds of the 2024 Notes between the liability and equity components of the 2024 Notes. The initial liability component of $200.1, which was recorded as long-term debt, represents the fair value of similar debt instruments that have no conversion rights. The initial equity component of $58.7, which was recorded as additional paid-in capital, represents the debt discount and was calculated as the difference between the fair value of the liability component and gross proceeds of the 2024 Notes. The liability component was recognized at the present value of its associated cash flows using a 4.8% straight-debt rate and is being accreted to interest expense over the term ~~loan is secured by~~of the 2024 Notes.

We recorded $5.3 in deferred debt issuance costs associated with the 2024 Notes, which are being amortized over the term of the 2024 Notes using the effective interest method. We also recorded $1.5 in equity issuance costs, which was recorded as a reduction to additional paid-in capital.

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CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – March 31, 2020

(Dollars and shares in millions, except per share amounts) – Continued

The following table summarizes interest accretion of the 2024 Notes discount, 1.0% contractual interest coupon and financing costs amortization associated with the 2024 Notes:



	Three Months Ended March 31,
	2020		2019
2024 Notes, interest accretion of convertible notes discount	$	1.9	$	1.8
2024 Notes, 1.0% contractual interest coupon	0.6		0.6
2024 Notes, total interest expense	$	2.5	$	2.4

2024 Notes, financing costs amortization	$	0.2	$	0.2

Convertible Note Hedge and Warrant Transactions Associated with the 2024 Notes

In connection with the pricing of the 2024 Notes, we entered into convertible note hedge transactions (the “Note Hedge Transactions”) with certain ~~CCESC land use rights~~parties, including the initial purchasers of the 2024 Notes (the “Option Counterparties”). The Note Hedge Transactions are expected generally to reduce the potential dilution upon any future conversion of the 2024 Notes. Payments for the Note Hedge Transactions totaled approximately $59.5 and ~~allows for~~were recorded as a reduction to additional paid-in capital in the December 31, 2017 consolidated balance sheet.

We also entered into separate, privately negotiated warrant transactions (the “Warrant Transactions”) with the Option Counterparties to acquire up to ~~86.6 million Chinese yuan (equivalent~~4.41 shares of our common stock. Proceeds received from the issuance of the Warrant Transactions totaled approximately $46.0 and were recorded as an addition to ~~$13,052)~~additional paid-in capital in ~~borrowings.~~the December 31, 2017 consolidated balance sheet. The ~~loan has~~strike price of the Warrant Transactions will initially be $71.775 per share (subject to adjustment), which is approximately 65% above the last reported sale price of our common stock on October 31, 2017. The Warrant Transactions could have a ~~term~~dilutive effect to our stockholders to the extent that the market price per share of ~~eight years with semi-annual installment payments~~our common stock, as measured under the terms of ~~at least 10.0 million Chinese yuan~~the Warrant Transactions, exceeds the applicable strike price of the warrants.

The Note Hedge Transactions and ~~a final maturity date~~Warrant Transactions effectively increased the conversion price of ~~May 26, 2024. At September 30, 2017, there~~the 2024 Notes. The net cost of the Note Hedge Transactions and Warrant Transactions was ~~56.6 million Chinese yuan (equivalent to $8,532) outstanding on this loan, bearing interest at 5.39%.~~approximately $13.5.

Foreign Facilities ~~– Europe~~

~~Chart Ferox, a.s. (“Ferox”), a wholly-owned subsidiary of the Company, maintains a secured credit facility with capacity of up to 125.0 million Czech koruna (equivalent to $5,680) and two secured~~In various markets where we do business, we have local credit facilities ~~with capacity~~to meet local working capital demands, fund letters of ~~up to 5.6 million euros (equivalent to $6,585). All three facilities allow Ferox to request~~credit and bank guarantees, and ~~letters~~support other short-term cash requirements. The facilities generally have variable interest rates and are denominated in local currency but may, in some cases, facilitate borrowings in multiple currencies. As of ~~credit. None~~March 31, 2020 and December 31, 2019, respectively, we had USD equivalent $0.7 and $4.4 in borrowing outstanding under these facilitates, with additional capacity of ~~these facilities allow revolving credit borrowings. Under two of the facilities, Ferox must pay letter~~USD equivalent $20.8 and $23.1, respectively. The Company has foreign letters of credit and guarantee fees equal to 0.70% per annum on the face amount of each guarantee or letter of credit, and under one facility, Ferox must pay the letter of credit and guarantee fees equal to 0.50%. Ferox’s land, buildings, and cash collateral secure the credit facilities. As of September 30, 2017, there were bank guarantees ~~of 147.1 million Czech koruna (equivalent to $6,683) supported by the Ferox credit facilities.~~

~~Chart Luxembourg maintains an overdraft facility with $5,000 in borrowing capacity. There were no borrowings under the Chart Luxembourg facility~~totaling USD equivalent $34.9 and $12.6 as of ~~September 30, 2017.~~March 31, 2020 and December 31, 2019, respectively. The weighted-average interest rate on these borrowings was 1.4% and 1.3% as of March 31, 2020 and December 31, 2019, respectively.

Letters of Credit

Chart Energy & Chemicals, Inc. ~~(“Chart E&C”)~~, a wholly-owned subsidiary of the Company, ~~has $6,442~~had $1.0 in deposits in a bank outside of the SSRCF to secure letters of credit. The deposits are treated as restricted cash and restricted cash equivalents in the unaudited condensed consolidated balance sheets ($~~5,445 in other current assets and $997~~1.0 in other assets at ~~September 30, 2017)~~both March 31, 2020 and December 31, 2019).

Fair Value Disclosures

The fair value of the ~~Convertible~~2024 Notes was approximately ~~99% of their par value~~78% and ~~approximately 96%~~132% of their par value as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, respectively. The ~~Convertible~~2024 Notes are actively quoted instruments and, accordingly, the fair value of the ~~Convertible~~2024 Notes was determined using Level 1 inputs as defined in the Fair Value Measurements note. The fair value of the SSRCF Debt as of September 30, 2017 was estimated based on the present value of the underlying cash flows discounted using market interest rates. Under this method, the fair value of the SSRCF Debt approximated its carrying amount as of September 30, 2017. The Company’s SSRCF Debt was valued using observable inputs and, accordingly, the valuation is performed using Level 2 inputs as defined in the Fair Value Measurements note.inputs.

~~NOTE 5 — Derivative Financial Instruments~~

The Company utilizes certain derivative financial instruments to enhance its ability to manage foreign currency risk that exists as part of ongoing business operations. Derivative instruments are entered into for periods consistent with related underlying exposures and do not constitute positions independent of those exposures. The Company does not enter into contracts for speculative purposes, nor is it a party to any leveraged derivative instrument. The Company is exposed to foreign currency exchange risk as a result of transactions in currencies other than the functional currency of certain subsidiaries. The Company utilizes foreign currency forward purchase and sale contracts to manage the volatility associated with foreign currency purchases and certain intercompany transactions in the normal course of business. Contracts typically have maturities of less than one year. Principal currencies include the U.S. dollar, the euro, the Japanese yen, the Czech koruna, the Australian dollar, the British pound, the

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CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – ~~September 30, 2017~~March 31, 2020

(Dollars and shares in ~~thousands,~~millions, except per share amounts) – Continued

Canadian dollar, and the Chinese yuan. The Company’s foreign currency forward contracts do not qualify as hedges as defined by accounting guidance. Foreign currency forward contracts are measured at fair value and recorded on the condensed consolidated balance sheets as other current assets or liabilities and reported as financial assets and liabilities in the Fair Value Measurements note. Changes in their fair value are recorded in the condensed consolidated statements of operations and comprehensive income as foreign currency gains or losses. The Company’s foreign currency forward contracts are not exchange traded instruments and, accordingly, the valuation is performed using Level 2 inputs as defined in the Fair Value Measurements note. Gains or losses on settled or expired contracts are recorded in the condensed consolidated statements of operations and comprehensive income as foreign currency gains or losses.

The changes in fair value with respect to the Company’s foreign currency forward contracts generated a net gain of $65 and a net loss of $32 for the three months ended September 30, 2017 and 2016, respectively. The changes in fair value with respect to the Company’s foreign currency forward contracts generated a net gain of $267 and a net loss of $130 for the nine months ended September 30, 2017 and 2016, respectively.

NOTE 69 — Product Warranties

~~The Company provides~~We provide product warranties with varying terms and durations for the majority of ~~its~~our products. ~~The Company estimates its~~We estimate our warranty reserve by considering historical and projected warranty claims, historical and projected cost-per-claim, and knowledge of specific product issues that are outside ~~its~~our typical experience. ~~The Company records~~We record warranty expense in cost of sales in the unaudited condensed consolidated statements of ~~operations.~~income and comprehensive loss. Product warranty claims not expected to occur within one year are ~~recorded~~included as part of other long-term liabilities in the ~~long-term portion of the warranty reserve in the~~unaudited condensed consolidated balance sheets.

The following table represents changes in ~~the Company’s~~our consolidated warranty reserve:



Balance at December 31, 2019	$	11.7
Issued – warranty expense	1.3
Warranty usage	(1.1		)
Balance at March 31, 2020	$	11.9

Balance at December 31, 2016 $ 18,271
Issued – warranty expense 5,510
Acquired – warranty reserve 858
Change in estimate – warranty expense 282
Warranty usage (9,266 )
Balance at September 30, 2017 $ 15,655

NOTE 710 — Business Combinations

~~Hudson~~Air-X-Changers Acquisition

On ~~September 20, 2017, the Company and Chart Sully Corporation, a wholly owned subsidiary of the Company (“Merger Sub”),~~July 1, 2019, we completed the ~~previously announced~~ acquisition of ~~Hudson~~AXC pursuant to the ~~terms~~previously disclosed Asset Purchase Agreement dated as of ~~the Agreement and Plan of Merger, as amended~~May 8, 2019 (the “Merger Agreement”), by and between Chart, Merger Sub, Hudson and R/C Hudson Holdings, L.P., solely in its capacity as the Initial Holder Representative under the Merger Agreement. The acquisition was accomplished by the merger of Merger Sub with and into Hudson, with Hudson surviving the merger as a wholly owned subsidiary of the Company (the “Acquisition”“AXC acquisition”). The ~~preliminary estimated Acquisition~~ purchase price for AXC was ~~$419,394, net of cash acquired,~~$599.7, including ~~an estimated net working capital adjustment amount of $5,894, and $3,500 in acquisition-related tax benefits acquired, as defined in the Merger Agreement. The total~~post-closing purchase price ~~is subject~~adjustments with respect to ~~further adjustments. Approximately $300,000~~working capital. We paid $592.0 of the purchase price at closing and the final working capital adjustment of $7.7 was ~~funded through~~paid during the third quarter of 2019. We financed the purchase price for the AXC acquisition with proceeds from borrowings under the ~~Company’s senior secured revolving credit facility,~~2024 Credit Facilities and a public offering of Chart’s common stock in 2019. See Note 8, “Debt and Credit Arrangements” and Note 11 “Accumulated Other Comprehensive Loss” for more information.

AXC is a leading supplier of custom engineered and manufactured ACHX for the ~~remainder of the purchase price was funded with cash on hand.~~

~~Hudson, which has operations~~natural gas compression and processing industry and refining and petrochemical industry. The ACHX offered by AXC is used in conditioning natural gas during recovery, compression and transportation from underground reserves through major pipeline distribution channels. In addition to natural gas compression and processing, AXC’s products are also used in the ~~United States, China~~turbine lube oil cooling, landfill gas compression and ~~Italy and a joint venture in Mexico, designs, manufactures, sells and services products used in refining, heating, ventilation and air conditioning (HVAC), petrochemical, natural gas,~~liquids cooling industries. AXC’s end markets include process industries, power generation ~~industrial~~ and ~~commercial end markets.~~refineries. AXC was combined with Chart’s Hudson Products and Chart Cooler Service businesses from the prior E&C segment to create a new segment called E&C FinFans. The E&C FinFans segment is ~~a North American leader~~focused on our unique and broad product offering and capabilities in ~~air-cooled heat exchangers~~ACHX and ~~a global leader~~fans.

As defined in ~~axial flow cooling fans. Hudson’s results of operations are included~~our significant policies for fair value measurements in ~~the Company’s Energy & Chemicals (“E&C”) segment since the date of the acquisition.~~

~~The Company~~Note 1, we preliminarily allocated the acquisition consideration to tangible and identifiable intangible assets acquired and liabilities assumed based on their preliminary estimated fair values as of the acquisition date. The preliminary fair value of the acquired tangible and identifiable intangible assets were determined based on inputs that are unobservable and significant to the overall fair value measurement. It is also based on estimates and assumptions made by management at the time of the acquisition. As such, this was classified as Level 3 fair value hierarchy measurements and disclosures.

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~~CHART INDUSTRIES, INC. AND SUBSIDIARIES~~

~~Notes to Unaudited Condensed Consolidated Financial Statements – September 30, 2017~~

~~(Dollars and shares in thousands, except per share amounts) – Continued~~

~~The Company~~We estimated the preliminary fair value of acquired unpatented technology and trademarks and trade names using the relief from royalty method. The preliminary fair values of acquired customer backlog and customer relationships were estimated using the multi-period excess earnings method. Under both the relief from royalty and multi-period excess earnings methods, the fair value models ~~incorporate~~incorporated estimates of future cash flows, estimates of allocations of certain assets and cash flows, estimates of future growth rates, and management’s judgment regarding the applicable discount rates to use to discount such estimates of cash flows. The preliminary estimated useful lives of identifiable finite-lived intangible assets range from ~~two~~one to 1214 years.

Hudson complements Chart’s E&C segment with the addition of its Fin-Fan® brand and other air cooled heat exchangers which broaden E&C’s end market diversity from primarily liquefied natural gas, industrial and natural gas to include HVAC, petrochemical and power generation. The addition of Hudson’s fans business, known by the Tuf-Lite® and Cofimco® brands, allows E&C to offer a broader technology solution for Chart’s customers. Management anticipates the combination of strong engineering cultures will continue to further develop full service solutions for Chart’s customers. The preliminary estimated goodwill was established due to the benefits outlined above, as well as the benefits derived from the anticipated synergies of Hudson integrating with Chart’s E&C segment. Goodwill recorded for the Hudson acquisition is not expected to be deductible for tax purposes.

~~The acquisition consideration allocation below is preliminary, pending completion of the fair value analyses of acquired assets and liabilities as well as certain other analyses.~~ The excess of the purchase price over the estimated fair values is assigned to goodwill. The preliminary estimated goodwill was established due to benefits including the combination of strong engineering and manufacturing cultures which will continue to further develop full service solutions for our worldwide customer base, as well as the benefits derived from the anticipated synergies of AXC integrating with our E&C FinFans segment. Goodwill recorded for the AXC acquisition is expected to be deductible for tax purposes.

The acquisition consideration allocation below has been updated based on this valuation but remains preliminary. As additional information becomes available, ~~the Company~~we may further revise the preliminary acquisition consideration allocation during the

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CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – March 31, 2020

(Dollars and shares in millions, except per share amounts) – Continued

remainder of the measurement period, which shall not exceed twelve months from the closing of the acquisition. ~~Any~~We do not believe such revisions or changes ~~may~~will be material.

The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed in the ~~Hudson acquisition:~~AXC acquisition as of the acquisition date:



	Preliminary Estimated Fair Value
Net assets acquired:
Identifiable intangible assets	$	256.4
Goodwill	287.5
Property, plant and equipment	34.2
Other assets	53.1
Liabilities	(31.5		)
Net assets acquired	$	599.7

Information regarding preliminary identifiable intangible assets acquired in the AXC acquisition is presented below:

Net assets acquired:
Goodwill $ 227,397
Identifiable intangible assets 202,000
Accounts receivable 34,669
Property, plant and equipment 30,590
Inventories 24,900
Other current assets ⁽¹⁾
9,359
Unbilled contract revenue 4,589
Other assets 2,876
Prepaid expenses 873
Deferred tax liabilities (68,559 )
Accounts payable (21,246 )
Customer advances and billings in excess of contract revenue (16,928 )
Accrued salaries, wages and benefits (4,442 )
Other current liabilities (3,984 )
Other long-term liabilities (1,861 )
Current portion of warranty reserve (839 )
Net assets acquired $ 419,394



	Weighted-average Estimated Useful Life	Preliminary Estimated Asset Fair Value
Finite-lived intangible assets:
Customer relationships	14.0 years	$	139.1
Unpatented technology	10.0 years	42.1
Backlog ⁽¹⁾	1.0 year	19.2
Other identifiable intangible assets ⁽¹⁾	4.0 years	1.0
Total finite-lived intangible assets acquired	11.0 years	201.4
Indefinite-lived intangible assets:
Trademarks and trade names		55.0
Total identifiable intangible assets acquired		$	256.4

_______________


⁽¹⁾	Pursuant to the provisions of the Merger Agreement, Hudson deposited $2,343 into a Rabbi Trust which represents amounts payable to eligible parties under Long-Term Incentive Agreements. This balance is treated as restricted cashBacklog and ~~restricted cash equivalents in the condensed consolidated balance sheets and is classified as~~ other ~~current assets.~~

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~~CHART INDUSTRIES, INC. AND SUBSIDIARIES~~

~~Notes to Unaudited Condensed Consolidated Financial Statements – September 30, 2017~~

~~(Dollars and shares in thousands, except per share amounts) – Continued~~

~~Information regarding identifiable intangible assets acquired in the Hudson acquisition is presented below:~~

Weighted-average Estimated Useful Life Preliminary Estimated Asset Fair Value
Finite-lived intangible assets:
Customer relationships 10 years $ 109,200
Unpatented technology 12 years 19,200
Customer backlog ⁽¹⁾
2 years 1,200
Total finite-lived intangible assets acquired 10 years 129,600
Indefinite-lived intangible assets:
Trademarks and trade names 72,400
Total identifiable intangible assets acquired $ 202,000

~~_______________~~


⁽¹⁾	~~Customer backlog acquired is~~identifiable intangible assets are included in “Patents and other” in ~~the Goodwill~~Note 7. “Goodwill and Intangible ~~Assets note.~~Assets.”

For the period September 20, 2017 to September 30, 2017, net sales attributed to the acquired Hudson operations was $6,089. For the same period, Hudson contributed $1,202 to operating income which included $372 of intangible asset amortization expense. During the three and nine months ended September 30, 2017, the Company incurred $7,254 and $8,130, respectively, in acquisition related costs related to the Hudson acquisition which were recorded in selling, general and administrative expenses in the condensed consolidated statements of operations.

Unaudited Supplemental Pro Forma Information

The following unaudited supplemental pro forma financial information is based on ~~the Company’s~~our historical ~~condensed~~ consolidated financial statements and ~~Hudson’s~~AXC’s historical ~~condensed~~ consolidated financial statements as adjusted to give effect to the ~~September 20, 2017 acquisition of Hudson.~~July 1, 2019 AXC acquisition. The unaudited supplemental pro forma financial information for the periods presented gives effect to the acquisition as if it had occurred on January 1, ~~2016.~~2019.

The following adjustments are reflected in the pro forma financial table below:

~~the effect of decreased interest expense~~Adjustment for depreciation related to the ~~repayment~~step-up in basis of the ~~Hudson term loan and revolving credit facility, net of the additional borrowing on the Chart senior secured revolving credit facility,~~

•~~amortization of acquired intangible assets,~~

•~~step-up depreciation of~~ acquired property, plant and equipment and change in estimated useful lives.

•~~inventory fair value step-up~~Adjustment for amortization ~~expense,~~of acquired intangible assets.

~~nonrecurring acquisition-related expenses directly attributable to the Hudson acquisition of $15,917 and $16,529 were adjusted out of the pro forma net income attributable to Chart Industries, Inc.~~Adjustment for the ~~three and nine months ended September 30, 2017, respectively, and~~

~~nonrecurring acquisition-related expenses incurred by Chart directly related~~change from last in, first out (LIFO) to ~~the Hudson acquisition of $7,254 and $8,130, were adjusted out of the pro forma net income attributable to Chart Industries, Inc.~~weighted-average cost for the ~~three~~acquired inventory and ~~nine months ended September 30, 2017, respectively.~~ the associated reduction of cost of sales.

Adjustment to reflect an increase in interest expense resulting from interest on the term loan under the 2024 Credit Facilities to finance the AXC acquisition and amortization of related debt issuance costs.

Adjustment to reflect the change in the estimated income tax rate for federal and state purposes.

Adjustment to reflect the increase in weighted-average shares in connection with the equity issuance.

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CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – March 31, 2020

(Dollars and shares in millions, except per share amounts) – Continued

This unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have resulted had the acquisition been in effect at the beginning of the periods presented. In addition, the unaudited pro forma results are not intended to be a projection of future results and do not reflect any operating efficiencies or cost savings that might be achievable.

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~~CHART INDUSTRIES, INC. AND SUBSIDIARIES~~

~~Notes to Unaudited Condensed Consolidated Financial Statements – September 30, 2017~~

~~(Dollars and shares in thousands, except per share amounts) – Continued~~

The following table presents pro forma sales, net income attributable to Chart Industries, Inc., and net income attributable to Chart Industries, Inc. per common share data assuming ~~Hudson~~AXC was acquired at the beginning of the ~~2016~~2019 fiscal year:



	Three Months Ended
	March 31, 2019
Pro forma sales	$	365.5
Pro forma net income attributable to Chart Industries, Inc.	5.9

Pro forma net income attributable to Chart Industries, Inc. per common share, basic	$	0.17
Pro forma net income attributable to Chart Industries, Inc. per common share, diluted	0.16

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Pro forma sales $ 282,432
$ 241,725
$ 824,066
$ 777,671
Pro forma net income attributable to Chart Industries, Inc. 5,673
15,434
7,090
36,341

Pro forma net income attributable to Chart Industries, Inc. per common share, basic $ 0.18
$ 0.50
$ 0.23
$ 1.19
Pro forma net income attributable to Chart Industries, Inc. per common share, diluted $ 0.18
$ 0.50
$ 0.23
$ 1.17

~~VCT Vogel GmbH Acquisition~~NOTE 11 — Accumulated Other Comprehensive Loss

~~On August 31, 2017, Chart Germany GmbH, a wholly-owned subsidiary~~The components of the Company, acquired 100% of the equity interests of VCT Vogel GmbH (“VCT”) for an estimated purchase price of 3.5 million euros (equivalent to $4,139), subject to a working capital adjustment. VCT, located in Gablingen, Germany, services and repairs cryogenic andaccumulated other mobile gas tank equipment and trucks. VCT also designs, manufactures and sells truck mounted drive and control systems for the operation of cryogenic pumps on trailers, rigid trucks and containers. VCT’s resultscomprehensive loss are ~~included in the Company’s Distribution & Storage (“D&S”) segment from the date of acquisition.~~

~~Additional information related to the VCT acquisition has not been presented because the impact on the Company’s consolidated results of operations and financial position is not material.~~

~~Hetsco, Inc. Acquisition~~

On January 13, 2017, the Company acquired 100% of the equity interests in Hetsco, Inc. from Global Power Equipment Group, Inc. for an estimated purchase price of $23,162, which was paid upon closing. The purchase price allocation reported at March 31, 2017 was preliminary and was based on provisional fair values. During the second quarter, the Company received revised third-party valuations, performed other analyses and recorded $380 in accounts receivable for post-closing adjustments, which resulted in an adjusted net purchase price of $22,782. No adjustments were made during the third quarter of 2017. The post-closing adjustments and revised fair values resulted in the following adjustments to the net assets acquired:as follows:

September 30, 2017 Adjustments
As Previously Reported
March 31, 2017
Goodwill $ 8,849
$ (1,271 ) $ 10,120
Identifiable intangible assets – customer relationships 8,090
810
7,280
Other identifiable intangible assets 1,150
30
1,120
Other net assets 4,693
51
4,642
Net assets acquired $ 22,782
$ (380 ) $ 23,162

~~The assets acquired and liabilities assumed were recorded at their estimated fair values as of the acquisition date.~~

Hetsco, Inc. is headquartered in Franklin, Indiana and provides emergency, specialty welding and construction services to natural gas processing, petrochemical, and air gas separation industries. Hetsco’s results are included in the Company’s E&C segment from the date of acquisition.

~~Pro-forma information related to the Hetsco, Inc. acquisition has not been presented because the impact on the Company’s consolidated results of operations and financial position is not material.~~

~~Contingent Consideration~~

The estimated fair value of contingent consideration relating to the 2015 D&S Thermax acquisition was $1,800 at the date of acquisition and was valued according to a discounted cash flow approach, which includes assumptions regarding the probability of achieving certain earnings targets and a discount rate applied to the potential payments. Potential payments may be paid between



	Foreign currency translation adjustments			Pension liability adjustments, net of taxes			Accumulated other comprehensive loss
Balance at December 31, 2019	$	(25.0	)	$	(10.9	)	$	(35.9	)
Other comprehensive loss	(10.2		)	—			(10.2		)
Amounts reclassified from accumulated other comprehensive loss, net of income taxes	—			0.3			0.3
Net current-period other comprehensive (loss) income, net of taxes	(10.2		)	0.3			(9.9		)
Balance at March 31, 2020	$	(35.2	)	$	(10.6	)	$	(45.8	)



	Foreign currency translation adjustments			Pension liability adjustments, net of taxes			Accumulated other comprehensive loss
Balance at December 31, 2018	$	(17.5	)	$	(12.4	)	$	(29.9	)
Other comprehensive loss	(4.9		)	—			(4.9		)
Amounts reclassified from accumulated other comprehensive loss, net of income taxes	—			0.3			0.3
Net current-period other comprehensive (loss) income, net of taxes	(4.9		)	0.3			(4.6		)
Balance at March 31, 2019	$	(22.4	)	$	(12.1	)	$	(34.5	)

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CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – ~~September 30, 2017~~March 31, 2020

(Dollars and shares in ~~thousands,~~millions, except per share amounts) – Continued

~~October 1, 2017 and July 1, 2019 based on the attainment of certain earnings targets. The potential payments related to Thermax contingent consideration are between $0 and $11,288.~~

Valuations are performed using Level 3 inputs as defined in the Fair Value Measurements note and are evaluated on a quarterly basis based on forecasted sales and earnings targets. Contingent consideration liabilities are classified as other current liabilities and other long-term liabilities in the condensed consolidated balance sheets. Changes in fair value of contingent consideration, including accretion, are recorded as selling, general, and administrative expenses in the condensed consolidated statements of operations and comprehensive income.

~~The following table represents the changes in contingent consideration liabilities:~~

Balance at December 31, 2016 $ 1,923
Decrease in fair value of contingent consideration liabilities (1,622 )
Balance at September 30, 2017 $ 301

For the nine months ended September 30, 2017, the fair value of contingent consideration decreased by $1,622, which was primarily driven by economic circumstances that significantly reduced the likelihood of achieving certain earnings targets for the duration of the remaining potential payout period. There was no change in contingent consideration for the three months ended September 30, 2017. For the three and nine months ended September 30, 2016, the fair value of contingent consideration increased by $75 and $122, respectively.

NOTE ~~8 — Fair Value Measurements~~

The Company measures its financial assets and liabilities at fair value on a recurring basis using a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies. The three levels of inputs used to measure fair value are as follows:

~~Level 1~~ ~~— Valuations based on quoted prices for identical assets and liabilities in active markets.~~

~~Level 2~~ — Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

~~Level 3~~ — Valuations based on unobservable inputs reflect the Company’s assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

~~Financial assets and liabilities measured at fair value on a recurring basis and presented in the Company’s condensed consolidated balance sheets are as follows:~~

September 30, 2017
Total Level 2 Level 3
Foreign currency forward contracts $ 20
$ 20
$ —
Total financial assets $ 20
$ 20
$ —

Foreign currency forward contracts $ 170
$ 170
$ —
Contingent consideration liabilities 301
—
301
Total financial liabilities $ 471
$ 170
$ 301

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~~CHART INDUSTRIES, INC. AND SUBSIDIARIES~~

~~Notes to Unaudited Condensed Consolidated Financial Statements – September 30, 2017~~

~~(Dollars and shares in thousands, except per share amounts) – Continued~~

December 31, 2016
Total Level 2 Level 3
Foreign currency forward contracts $ 39
$ 39
$ —
Total financial assets $ 39
$ 39
$ —

Foreign currency forward contracts $ 92
$ 92
$ —
Contingent consideration liabilities 1,923
—
1,923
Total financial liabilities $ 2,015
$ 92
$ 1,923

Refer to the Derivative Financial Instruments note for further information regarding derivative financial instruments and the Business Combinations note for further information regarding contingent consideration liabilities.

~~NOTE 9 — Accumulated Other Comprehensive Loss~~

~~The following tables represent changes in accumulated other comprehensive loss by component:~~

Foreign currency translation adjustments Pension liability adjustments, net of taxes Accumulated other comprehensive loss
Balance at June 30, 2017 $ (10,784 ) $ (10,108 ) $ (20,892 )
Other comprehensive income 6,657
—
6,657
Amounts reclassified from accumulated other comprehensive loss, net of income taxes of $109 ^{(1) (3)}
1,322
201
1,523
Net current-period other comprehensive income, net of taxes 7,979
201
8,180
Balance at September 30, 2017 $ (2,805 ) $ (9,907 ) $ (12,712 )

Foreign currency translation adjustments Pension liability adjustments, net of taxes Accumulated other comprehensive loss
Balance at June 30, 2016 $ (12,506 ) $ (11,892 ) $ (24,398 )
Other comprehensive income 21
—
21
Amounts reclassified from accumulated other comprehensive loss, net of income taxes of $135 ⁽¹⁾
—
250
250
Net current-period other comprehensive income, net of taxes 21
250
271
Balance at September 30, 2016 $ (12,485 ) $ (11,642 ) $ (24,127 )

Foreign currency translation adjustments Pension liability adjustments, net of taxes Accumulated other comprehensive loss
Balance at December 31, 2016 $ (24,701 ) $ (10,511 ) $ (35,212 )
Other comprehensive income 20,574
—
20,574
Amounts reclassified from accumulated other comprehensive loss, net of income taxes of $326 ^{(2) (3)}
1,322
604
1,926
Net current-period other comprehensive income, net of taxes 21,896
604
22,500
Balance at September 30, 2017 $ (2,805 ) $ (9,907 ) $ (12,712 )

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~~CHART INDUSTRIES, INC. AND SUBSIDIARIES~~

~~Notes to Unaudited Condensed Consolidated Financial Statements – September 30, 2017~~

~~(Dollars and shares in thousands, except per share amounts) – Continued~~

Foreign currency translation adjustments Pension liability adjustments, net of taxes Accumulated other comprehensive loss
Balance at December 31, 2015 $ (12,513 ) $ (12,391 ) $ (24,904 )
Other comprehensive income 28
—
28
Amounts reclassified from accumulated other comprehensive loss, net of income taxes of $404 ⁽²⁾
—
749
749
Net current-period other comprehensive income, net of taxes 28
749
777
Balance at September 30, 2016 $ (12,485 ) $ (11,642 ) $ (24,127 )

~~_______________~~

⁽¹⁾

Amounts reclassified from accumulated other comprehensive loss were expensed and included in cost of sales ($122 and $152) and selling, general, and administrative expenses ($188 and $233) for the three months ended September 30, 2017 and 2016, respectively, in the condensed consolidated statements of operations and comprehensive income. The components in accumulated other comprehensive loss are included in the computation of net periodic pension expense as reported in the Employee Benefit Plans note.

⁽²⁾

Amounts reclassified from accumulated other comprehensive loss were expensed and included in cost of sales ($366 and $454) and selling, general, and administrative expenses ($564 and $699) for the nine months ended September 30, 2017 and 2016, respectively, in the condensed consolidated statements of operations and comprehensive income. The components in accumulated other comprehensive loss are included in the computation of net periodic pension expense as reported in the Employee Benefit Plans note.


⁽³⁾	For the three and nine months ended September 30, 2017, $1,322 was reclassified from accumulated other comprehensive loss to foreign currency loss in the condensed consolidated statements of operations and comprehensive income related to certain intercompany transactions.

~~NOTE 10~~12 — Earnings Per Share

The following table presents calculations of net ~~income~~earnings per share of common stock:



	Three Months Ended March 31,
	2020		2019
Net income attributable to Chart Industries, Inc.	$	8.5	$	0.9

Net income attributable to Chart Industries, Inc. per common share:
Basic	$	0.24	$	0.03
Diluted	$	0.24	$	0.03

Weighted average number of common shares outstanding – basic	35.77		31.57
Incremental shares issuable upon assumed conversion and exercise of share-based awards	0.24		0.55
Incremental shares issuable due to dilutive effect of convertible notes	—		1.20
Incremental shares issuable due to dilutive effect of warrants	—		0.49
Weighted average number of common shares outstanding – diluted	36.01		33.81

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Net income attributable to Chart Industries, Inc. $ 1,510
$ 15,025
$ 1,381
$ 31,527
Net income attributable to Chart Industries, Inc. per common share:
Basic $ 0.05
$ 0.49
$ 0.04
$ 1.03
Diluted $ 0.05
$ 0.48
$ 0.04
$ 1.02

Weighted average number of common shares outstanding — basic 30,755
30,585
30,726
30,578
Incremental shares issuable upon assumed conversion and exercise of share-based awards 556
479
562
362
Weighted average number of common shares outstanding — diluted 31,311
31,064
31,288
30,940

Diluted earnings per share does not reflect the following potential common shares as the effect would be anti-dilutive:


	Three Months Ended September 30,		Nine Months Ended September 30,		Three Months Ended March 31,
	2017	2016	2017	2016	2020	2019
Share-based awards	636	555	676	750	0.50	0.14
Convertible note hedge and capped call transactions ⁽¹⁾					—	1.20
Warrants	3,368	3,368	3,368	3,368	4.41	—
Total anti-dilutive securities	4,004	3,923	4,044	4,118	4.91	1.34

NOTE 13 — Income Taxes

Income tax expense of $1.7 for the three months ended March 31, 2020 and income tax benefit of $2.0 for the three months ended March 31, 2019, represents taxes on both U.S. and foreign earnings at a combined effective income tax rate of 16.7% and 200.0%, respectively.

The effective income tax rate of 16.7% for the three months ended March 31, 2020 differed from the U.S. federal statutory rate of 21% primarily due to excess tax benefits associated with stock compensation, partially offset by the effect of income earned by certain of our foreign entities being taxed at higher rates than the U.S. federal statutory rate and losses incurred by certain of our Chinese operations for which no benefit was recorded. We expect our 2020 full year effective income tax rate to be approximately 20%.

As of March 31, 2020 and December 31, 2019, we had a liability for gross unrecognized tax benefits of $2.5 and $2.4, respectively. This amount includes $1.8 of unrecognized tax benefits as of both March 31, 2020 and December 31, 2019, which, if ultimately recognized, would reduce our annual effective income tax rate. We recognize interest and penalties related to uncertain tax positions in income tax expense. These amounts were not significant for the periods presented.

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CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – ~~September 30, 2017~~March 31, 2020

(Dollars and shares in ~~thousands,~~millions, except per share amounts) – Continued

NOTE 1114 — ~~Income Taxes~~Share-based Compensation

~~The Company recorded income tax expense of $1,907 and $1,764 in~~During the three months ended September 30, 2017 and 2016, respectively. The Company recorded income tax expense of $2,346 and $12,829 in the nine months ended September 30, 2017 and 2016, respectively. The effective income tax rate of 47.5% and 48.6% for the three and nine months ended September 30, 2017 differed from the U.S. federal statutory rate of 35% primarily due to losses incurred by certain of the Company’s Chinese operations for which no benefit was recorded, partially offset by foreign exchange losses realized upon the receipt of previously taxed income, and the effect of income earned by certain of the Company’s international entities operating in lower taxed jurisdictions. The third quarter 2017 effective income tax rate was also impacted by transaction costs incurred with the acquisition of Hudson, a portion of which were non-deductible for U.S. federal income tax purposes. The effective income tax rate of 11.4% and 31.0% for the three and nine months ended September 30, 2016 differed from the U.S. federal statutory rate of 35% primarily due to an insurance settlement for breaches of representations and warranties that resulted in an adjustment to our purchase price of Airsep shares for tax purposes and offset by losses incurred by certain of the Company’s Chinese operations for which no benefit was recorded.

~~As of both September 30, 2017 and December~~March 31, 2016, the Company has a liability for gross unrecognized tax benefits of $710. This amount includes $535 of unrecognized tax benefits as of September 30, 2017, which, if ultimately recognized, would reduce the Company’s annual effective income tax rate. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. The Company accrued approximately $89 and $86 for the payment of interest and penalties as of September 30, 2017 and December 31, 2016, respectively.

~~NOTE 12 — Employee Benefit Plans~~

The Company has a frozen defined benefit pension plan that covers certain U.S. hourly and salaried employees. The defined benefit plan provides benefits based primarily on the participants’ years of service and compensation.

~~The components of net periodic pension expense are as follows~~:

Three Months Ended September 30, Nine Months Ended September 30,
2017
2016 2017 2016
Interest cost $ 543
$ 572
$ 1,627
$ 1,714
Expected return on plan assets (698 ) (698 ) (2,094 ) (2,092 )
Amortization of net loss 310
385
930
1,153
Total net periodic pension expense $ 155
$ 259
$ 463
$ 775

The Company’s funding policy is to contribute at least the minimum funding amounts required by law. The Company contributed $3,000 to its defined benefit pension plan in the third quarter of 2017, and based upon current actuarial estimates, the Company does not expect to contribute to its defined benefit pension plan again until 2018.

~~NOTE 13 — Share-based Compensation~~

~~During the nine months ended September 30, 2017, the Company~~2020, we granted ~~324~~0.11 stock options, ~~153~~0.08 restricted stock units, ~~7 shares of restricted stock,~~ and 220.04 performance units. The total fair value of awards granted to employees during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 was ~~$13,246.~~$11.0. In addition, our non-employee directors received 13 stock awards with a total fair value of ~~$487.~~$0.2. During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, participants in ~~the Company’s~~our stock option plans exercised options to purchase 430.09 shares of ~~the Company’s~~our common stock, while 800.03 stock options were ~~forfeited and 22 stock options expired.~~forfeited.

Stock options generally ~~vest ratably over~~have a four-year graded vesting period. Restricted stock and restricted stock units generally vest ratably over a three-year period. Performance units generally vest at the end of a three-year performance period based on the ~~achievement~~attainment of certain pre-determined performance ~~conditions. Leveraged restricted share units generally vest on the third anniversary of the grant date.~~condition targets. During the ~~nine~~three months ended ~~September 30, 2017, 129 shares of~~March 31, 2020, 0.09 restricted stock and restricted stock units vested while 250.01 restricted stock units were forfeited. Also, during the nine months ended September 30, 2017, 22 performance units vested while 8 performance units were forfeited. Additionally, during the nine months ended September 30, 2017, 6 leveraged restricted share units vested.

Share-based compensation expense was ~~$1,569~~$2.9 and ~~$1,826~~$2.4 for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016, respectively. Share-based compensation expense was $9,555 and $9,014 for the nine months ended September 30, 2017 and 2016,~~2019, respectively. Share-based compensation expense is included in selling, general, and administrative expenses in the unaudited condensed consolidated statements of income and comprehensive loss. As of March 31, 2020, total share-based compensation of $15.9 is expected to be recognized over the weighted-average period of approximately 2.4 years.

NOTE 15 — Commitments and Contingencies

We are subject to federal, state, local, and foreign environmental laws and regulations concerning, among other matters, waste water effluents, air emissions, and handling and disposal of hazardous materials, such as cleaning fluids. We are involved with environmental compliance, investigation, monitoring, and remediation activities at certain of our owned and formerly owned manufacturing facilities and at one owned facility that is leased to a third party, and, except for these continuing remediation efforts, believes we are currently in substantial compliance with all known environmental regulations. At March 31, 2020 and December 31, 2019, we had undiscounted accrued environmental reserves of $0.4 and $0.6, respectively. We accrue for certain environmental remediation-related activities for which commitments or remediation plans have been developed and for which costs can be reasonably estimated. These estimates are determined based upon currently available facts and circumstances regarding each facility. Actual costs incurred may vary from these estimates due to the inherent uncertainties involved. Future expenditures relating to these environmental remediation efforts are expected to be made over the next seven years as ongoing costs of remediation programs.

Although we believe we have adequately provided for the cost of all known environmental conditions, the applicable regulatory agencies could insist upon different and more costly remediation than those we believe are adequate or required by existing law or third parties may seek to impose environmental liabilities on us. We believe that any additional liability in excess of amounts accrued which may result from the resolution of such matters will not have a material adverse effect on our financial position, liquidity, cash flows or results of operations.

Stainless Steel Cryobiological Tank Legal Proceedings

During the second quarter of 2018, Chart was named in lawsuits (including a class action lawsuit filed in the U.S. District Court for the Northern District of California) filed against Chart and other defendants with respect to the alleged failure of a stainless steel cryobiological storage tank (model MVE 808AF-GB) at the Pacific Fertility Center in San Francisco, California. We continue to evaluate the merits of such claims in light of the information available to date regarding use, maintenance and operation of the tank that was sold to the Pacific Fertility Center through an independent distributor and which has been out of our control for six years prior to the alleged failure. Accordingly, an accrual related to any damages that may result from the lawsuits has not been recorded because a potential loss is not currently probable or estimable.

We have asserted various defenses against the claims in the lawsuits, including a defense that since manufacture, we were not in any way involved with the installation, ongoing maintenance or monitoring of the tank or related fertility center cryogenic systems at any time since the initial delivery of the tank.

Aluminum Cryobiological Tank Legal Proceeding

Chart has been named in a purported class action lawsuit filed in the Ontario Superior Court of Justice against the Company and other defendants with respect to the alleged failure of an aluminum cryobiological storage tank (model FNL XC 47/11-6 W/

Table of Contents

CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – ~~September 30, 2017~~March 31, 2020

(Dollars and shares in ~~thousands,~~millions, except per share amounts) – Continued

~~consolidated statements~~11) at The Toronto Institute for Reproductive Medicine in Etobicoke, Ontario. We have confirmed that the tank in question was part of the aluminum cryobiological tank recall commenced on April 23, 2018. As of March 31, 2020, a settlement was reached by the parties in the lawsuit with no material effect on the Company’s financial position, results of operations ~~and comprehensive income. As of September 30, 2017, total share-based compensation of $7,298 is expected~~or cash flows.

We are occasionally subject to ~~be recognized over the weighted-average period of approximately 2.2 years.~~

On May 25, 2017, the Company held its annual meeting of stockholders. At the annual meeting, the Company’s stockholders approved the Chart Industries, Inc. 2017 Omnibus Equity Plan (the “2017 Omnibus Equity Plan”). As described in the Company’s definitive proxy statement for the annual meeting, the Company’s directors, officers and employees (including its principal executive officer, principal financial officervarious legal claims related to performance under contracts, product liability, taxes, employment matters, environmental matters, intellectual property, and other ~~“named executive officers”) are eligible~~matters incidental to ~~be granted awards under~~ the ~~2017 Omnibus Equity Plan.~~normal course of our business. Based on our historical experience in litigating these claims, as well as our current assessment of the underlying merits of the claims and applicable insurance, if any, management believes that the final resolution of these matters will not have a material adverse effect on our financial position, liquidity, cash flows, or results of operations. Future developments may, however, result in resolution of these legal claims in a way that could have a material adverse effect.

NOTE 1416 — Restructuring Activities

The Company has implemented a number of cost reduction or avoidance actions, including headcount reductions and facility closures and relocations primarily relating to the consolidation of certain of our facilities in China, the Buffalo BioMedical respiratory consolidation, and relocation of the corporate headquarters. The Buffalo Biomedical respiratory facility consolidation into Ball Ground, Georgia, was completed duringDuring the first quarter of ~~2017. The E&C Wuxi, China facility consolidation was completed during the second quarter~~2020, we implemented certain cost reduction actions across all segments and corporate to appropriately size our workforce with demand as well as eliminate redundant work. Costs were primarily related to headcount reductions. These actions resulted in total restructuring costs of ~~2017, and the D&S China facility consolidation is expected to be~~$5.2, consisting of mainly employee severance costs. These restructuring activities were substantially completed by the end of ~~2017. Our corporate headquarters move from Garfield Heights, Ohio~~the first quarter 2020. We are closely monitoring our end markets and order rates and will continue to ~~Ball Ground, Georgia (which was official effective October 26, 2017) was substantially completed during~~take appropriate and timely actions as necessary.

Restructuring charges of $7.4 in the ~~third~~first quarter of ~~2017,~~2019 were related to the timing of recognizing costs related to facility consolidations and a streamlining of the ~~Company’s Garfield Heights headquarters lease commitment ends December 31, 2017.~~commercial activities surrounding our Lifecycle business in E&C Cryogenics and E&C FinFans, geographic realignment of our manufacturing capacity in D&S East, as well as departmental restructuring, including headcount reductions.

The following table is a summary of the severance and other restructuring costs, which included employee-related costs, facility rent and exit costs, relocation, recruiting, travel and other, for the three months ended March 31, 2020 and ~~nine months ended September 30, 2017 and 2016:~~2019:



	Three Months Ended March 31,
	2020		2019
Severance:
Cost of sales	$	2.3	$	0.5
Selling, general, and administrative expenses	2.9		1.0
Total severance costs	5.2		1.5
Other restructuring:
Cost of sales	—		5.0
Selling, general, and administrative expenses	—		0.9
Total other restructuring costs	—		5.9

Total restructuring costs	$	5.2	$	7.4

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Severance:
Cost of sales $ 52
$ 159
$ 731
$ 3,501
Selling, general, and administrative expenses 920
43
2,767
2,382
Total severance costs $ 972
$ 202
$ 3,498
$ 5,883
Other restructuring:
Cost of sales $ 278
$ —
$ 4,072
$ —
Selling, general, and administrative expenses 1,499
103
4,847
420
Total other restructuring costs $ 1,777
$ 103
$ 8,919
$ 420

Total restructuring costs $ 2,749
$ 305
$ 12,417
$ 6,303

The Company is closely monitoring its end markets and order rates and will continue to take appropriate and timely actions as necessary. The Company currently expects additional restructuring costs in the remaining three months of 2017 to be approximately $1,530 ($1,000 - D&S, $310 - BioMedical, and $220 - Corporate), but further actions may be required based on future business conditions.

The following tables summarize ~~the Company’s~~our restructuring activities for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016:~~2019:

Three Months Ended September 30, 2017
Energy & Chemicals Distribution & Storage BioMedical Corporate Total
Balance as of June 30, 2017 $ —
$ 1,865
$ 847
$ 1,493
$ 4,205
Restructuring costs 162
648
516
1,423
2,749
Cash payments (157 ) (1,381 ) (803 ) (1,480 ) (3,821 )
Acquired restructuring reserve 194
—
—
—
194
Balance as of September 30, 2017 $ 199
$ 1,132
$ 560
$ 1,436
$ 3,327



	Three Months Ended March 31, 2020
	D&S East			D&S West			E&C Cryogenics			E&C FinFans			Corporate		Consolidated
Balance at December 31, 2019	$	0.4		$	0.1		$	0.2		$	—		$	0.2	$	0.9
Restructuring costs	1.0			0.8			0.4			2.4			0.6		5.2
Cash payments and other	(0.7		)	(0.1		)	(0.1		)	(2.4		)	—		(3.3		)
Balance at March 31, 2020	$	0.7		$	0.8		$	0.5		$	—		$	0.8	$	2.8

Table of Contents

CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – ~~September 30, 2017~~March 31, 2020

(Dollars and shares in ~~thousands,~~millions, except per share amounts) – Continued



	Three Months Ended March 31, 2019
	D&S East			D&S West		E&C Cryogenics			E&C FinFans			Corporate			Consolidated
Balance at December 31, 2018	$	0.8		$	—	$	—		$	—		$	0.1		$	0.9
Restructuring costs	2.4			0.3		3.4			1.1			0.2			7.4
Property, plant and equipment impairment	(1.9		)	—		(3.2		)	—			—			(5.1		)
Cash payments and other	(0.5		)	—		0.5			(1.1		)	(0.2		)	(1.3		)
Balance at March 31, 2019	$	0.8		$	0.3	$	0.7		$	—		$	0.1		$	1.9

Three Months Ended September 30, 2016
Energy & Chemicals Distribution & Storage BioMedical Corporate Total
Balance as of June 30, 2016 $ 544
$ 4,796
$ 368
$ 276
$ 5,984
Restructuring costs 159
118
—
28
305
Cash payments (267 ) (1,160 ) (168 ) (219 ) (1,814 )
Balance as of September 30, 2016 $ 436
$ 3,754
$ 200
$ 85
$ 4,475

NOTE 17 — Subsequent Event

Nine Months Ended September 30, 2017
Energy & Chemicals Distribution & Storage BioMedical Corporate Total
Balance as of December 31, 2016 $ 127
$ 2,864
$ 1,308
$ 3,025
$ 7,324
Restructuring costs 2,245
1,085
4,527
4,560
12,417
Cash payments (2,367 ) (2,817 ) (5,275 ) (6,149 ) (16,608 )
Acquired restructuring reserve 194
—
—
—
194
Balance as of September 30, 2017 $ 199
$ 1,132
$ 560
$ 1,436
$ 3,327
On April 20, 2020, we amended our 2024 Credit Facilities. The amendment, among other things, (i) adjusts the pricing grid in order to accommodate potentially higher leverage ratios, (ii) adjusts factoring related definitions and other related provisions to provide Chart with greater flexibility to enter into such arrangements in the future, (iii) incorporates a “cash hoarding” prevention covenant and (iv) incorporates various amendments to reflect interest rate floor and other changes to the Loan Syndications and Trading Association and Loan Market Association market standards for credit agreements. The terms and conditions under our 2024 Credit Facilities are otherwise substantially the same as those prior to the amendment. Refer to Note 8, “Debt and Credit Arrangements” for further information.

Nine Months Ended September 30, 2016
Energy & Chemicals Distribution & Storage BioMedical Corporate Total
Balance as of December 31, 2015 $ 1,106
$ 3,446
$ 430
$ 850
$ 5,832
Restructuring costs 821
3,929
521
1,032
6,303
Cash payments (1,491 ) (3,621 ) (751 ) (1,797 ) (7,660 )
Balance as of September 30, 2016 $ 436
$ 3,754
$ 200
$ 85
$ 4,475

Table of Contents

~~CHART INDUSTRIES, INC. AND SUBSIDIARIES~~

~~Notes to Unaudited Condensed Consolidated Financial Statements – September 30, 2017~~

~~(Dollars and shares in thousands, except per share amounts) – Continued~~

~~NOTE 15 — Reportable Segments~~

The structure of the Company’s internal organization is divided into the following reportable segments, which are also the Company’s operating segments: E&C, D&S, and BioMedical. Corporate includes operating expenses for executive management, accounting, tax, treasury, human resources, information technology, legal, internal audit, and risk management.

~~The following table represents information for the Company’s reportable segments and its corporate function:~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Sales
Energy & Chemicals⁽¹⁾
$ 46,588
$ 23,711
$ 126,473
$ 122,865
Distribution & Storage 139,281
126,646
390,057
363,743
BioMedical 54,662
53,573
166,309
158,174
Consolidated $ 240,531
$ 203,930
$ 682,839
$ 644,782
Operating Income (Loss) ^{(1) (2) (3) (4)}

Energy & Chemicals $ 329
$ (5,736 ) $ (2,420 ) $ 14,190
Distribution & Storage 21,016
14,715
49,186
37,550
BioMedical 9,539
20,916
24,387
38,120
Corporate⁽⁴⁾
(20,436 ) (9,831 ) (50,523 ) (34,820 )
Consolidated $ 10,448
$ 20,064
$ 20,630
$ 55,040

~~The following table represents total assets for the Company’s reportable segments and its corporate function:~~

September 30, 2017 December 31, 2016
Total Assets
Energy & Chemicals ⁽¹⁾
$ 782,553
$ 172,494
Distribution & Storage 679,350
631,715
BioMedical 165,195
166,940
Corporate 65,925
261,933
Consolidated $ 1,693,023
$ 1,233,082

The following discussion of our results of operations and financial condition should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements. Actual results may differ materially from those discussed below. See “Forward-Looking Statements” at the end of this discussion and Item 1A. “Risk Factors” for a discussion of the uncertainties, risks and assumptions associated with this discussion.

~~Chart Industries, Inc. and its consolidated subsidiaries (the “Company,” “Chart,” “we,” “us,” or “our”) is~~We are a leading diversified global manufacturer of highly engineered equipment ~~for the industrial gas,~~servicing multiple market applications in energy and ~~biomedical industries.~~industrial gas. Our equipment and engineered systems are primarily used for low-temperature and cryogenic applications utilizing our expertise in cryogenic systems and equipment which operate at low temperatures sometimes approaching absolute zero (0 Kelvin; -273° Centigrade; -459° Fahrenheit).

~~Third Quarter~~The financial information presented and ~~Year-to-date 2017 Highlights~~discussion of results that follows is presented on a continuing operations basis.

~~Our consolidated~~COVID-19 Update

While the recent outbreak of the coronavirus (COVID-19) did not have a material adverse effect on our reported results for the ~~third~~first quarter ~~2017 were highlighted by sales~~ of ~~$240.5 million, and operating income of $10.4 million, inclusive~~2020, we are actively monitoring the impact of the ~~in quarter acquisitions. Gross profit~~COVID-19 outbreak on our results of operations for the third quarter of 2017 was $70.4 million, or 29.3% of sales, which was unfavorably impacted by $0.3 million of restructuring costs. Energy & Chemicals (“E&C”) gross margin improved sequentially from 13.3% in the second quarter of ~~2017~~2020 and beyond. The extent to ~~18.6%~~which our operations will be impacted by the outbreak will largely depend on future developments, which are highly uncertain and cannot be accurately predicted, including new information which may emerge concerning the severity of the outbreak and actions by government authorities to contain the outbreak or treat its impact, among other things.

All Chart manufacturing locations globally have been deemed essential business by each local and federal government and therefore continue to operate under this status, although we lost a total of 40 production days in the ~~third~~first quarter across our locations, with 26 of those days in our Chinese facilities in late January and early February as we either waited for the approval of our essential status or there was a mandatory government shutdown as in China. As the safety of our team members is our top priority, we have instituted additional precautions while we continue to produce our products not just for critical care medical applications but also for energy infrastructure. During March 2020, we increased production on specific medical oxygen related products by over 65% in the United States and 50% in the Czech Republic. Known order activity for our medical oxygen products used in hospital applications increased 34% in the first quarter 2020 when compared to the first quarter of ~~2017,~~2019 and increased 29% when compared to the fourth quarter of 2019. The regional breakdown compared to the first quarter of 2019 is:

Additionally, orders for our cryobiological product line, which is used for storage and transport of vaccinations, cell therapy and biological inventory increased by 14% to $20.8 million in the first quarter of 2020 when compared to the first quarter of 2019. April 2020 month to date demand for critical care products has increased. Month to date through April 20, 2020, we received more medical oxygen kit orders in the United States than in the entire first quarter of 2020, and total medical oxygen specific demand is already at 39% of the first quarter levels. We expect this COVID-19 related demand to return to “pre-COVID-19” levels later in 2020.

In terms of macro drivers, we continue to see long-term strength in medium and long-term fundamentals of our markets, in particular the transition to clean energy and the need for infrastructure associated with that. We received orders with 120 new customers in the first quarter of 2020. Eighty-four of these new customers were outside of North America which continues to demonstrate the continued long-term fundamental global clean energy transition.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law in the United States. The CARES Act, among other things, includes ~~260 basis points~~modifications to net operating loss carryforwards provisions and the net interest expense deduction, and deferment of social security tax payments. We are currently evaluating the provisions of the CARES Act and how certain elections may impact our financial position, results of operations, and disclosures if elected.

First Quarter 2020 Highlights

Orders for medical oxygen critical care products increased by 34% over the first quarter 2019, and we increased associated production by over 50% to meet continued demand for liquid oxygen for COVID-19 patients. We booked a $29.5 million order for a propane dehydrogenation plant in February 2020.

Ending backlog as of March 31, 2020 was $732.5 million compared to $733.8 million as of March 31, 2019, while backlog only decreased by 3.9% from the ~~inclusion~~record high of $762.3 million as of December 31, 2019. Backlog of $732.5 million is flat to first quarter of 2019, which included $135 million of Venture Global Calcasieu Pass big LNG orders. As of the ~~results~~end of ~~RCHPH Holdings, Inc.~~the first quarter 2020, there was $93 million of Calcasieu Pass backlog remaining. Excluding Calcasieu Pass, backlog increased 6.8% current quarter over prior year quarter. In our Distribution and Storage Western Hemisphere (“~~Hudson”~~D&S West”)~~. The strength~~ segment, first quarter 2020 backlog of $150.9 million is the highest in ~~gross margin~~the history of the business; up 18.7% over the first quarter of 2019 and 2.6% over the fourth quarter 2019. Distribution and Storage Eastern Hemisphere (“D&S East”) segment backlog of $221.0 million is the highest for that segment since the first quarter of 2015, aside from fourth quarter of 2019, which included a significant portion of PetroChina LNG related backlog that subsequently was cancelled. Also worth noting is that we have not had any material cancellations in our backlog year to date in any segment.

First quarter 2020 sales of $321.1 million increased 11.0% from the first quarter of 2019 (decreased 1.1% organically), driven ~~in part~~ by ~~restructuring~~sales of $34.9 million from our Air-X-Changers (“AXC”) business and ~~additional~~higher sales from our systems and brazed aluminum heat exchangers within our Energy & Chemicals Cryogenics (“E&C Cryogenics”) segment as we started to execute on big LNG ~~(“Liquefied Natural Gas”) FEED projects. Distribution & Storage (“D&S”) third~~orders.

First quarter 2020 gross margin as a percent of sales of ~~29.1% sequentially~~28.5% increased ~~340 basis points over~~from 23.2% in the ~~second~~first quarter of ~~2017. Continued improvement in D&S cost structure~~2019 and increased from reductions in force taken this year combined with D&S European operational improvements contributed to the sequential increase. BioMedical third quarter gross margin as a percent of sales of 38.7% increased sequentially by 150 basis points, from 37.2%25.0% in the ~~second~~fourth quarter of ~~2017. This reflects~~2019. The increase current quarter over prior year quarter was primarily driven by our E&C Cryogenics and our D&S East segments.

Chart’s business is structurally very different during this anticipated downturn than the ~~reduced cost structure from~~last downturn in the ~~completion~~2014 to 2016 timeframe. The composition of the ~~Buffalo, New York respiratory facility consolidation.~~

~~Market~~portfolio of products we offer, the acquisition and ~~order activity continues to increase year~~divestiture activities that have resulted in a much more diverse and geographically broad company and our cost reduction efforts to date ~~with $258.0 million in orders received~~set us up for continued earnings and cash flow through an anticipated downturn. Additionally, in the ~~quarter, inclusive~~2014 to 2016 timeframe, we had virtually no aftermarket, service and repair revenue, while these now account for over 13% of ~~$3.8~~total Chart revenue. In the prior cycle, we were heavily reliant on one Big LNG project. We now think of Big LNG as “icing on the cake” and have line of sight to growth in many of our base businesses across the cycle. Finally, we have a much more diversified, global footprint which accesses applications and projects that previously were not economical. A year and a half ago we sold into 21 countries. We now work on projects and sell into over 70 countries.

Yet even with these changes, there remains a high amount of uncertainty surrounding the potential business impacts from COVID-19. While we have not yet seen a meaningful impact on total bookings, although a shift from Energy & Chemicals FinFans (“E&C FinFans”) to D&S West and D&S East is expected, we are withdrawing our prior 2020 full year guidance until we have more clarity on the duration and severity of the situation. While we think it is prudent holding off on issuing new guidance until the situation stabilizes, we can provide the following data points for 2020:

~~On September 20, 2017, we closed on the acquisition of Hudson. The estimated purchase price is $419.4 million and Hudson’s results of operations are included~~revenue in our E&C Cryogenics segment ~~since that date. On August 31, 2017 we closed the acquisition of VCT Vogel (“VCT”). The estimated purchase price is $4.1 million, and VCT’s results~~in 2020.

~~Our 2017~~we manufacture that can be used in these applications were 21% of total Chart revenue for the full year outlook reflects continued tempered energy prices related to core LNG E&C business, year-to-date order growth in our segments and the impact of current year acquisitions (Hetsco, Inc., Hudson, and VCT). We continue to anticipate that the forecasted global supply/demand LNG gas balance will be reached in 2022-2023, thereby driving LNG export facility orders in late 2018 / early 2019. A majority of upcoming projects for U.S. LNG export have transitioned from utilizing traditional single train base load plants to multi-train mid-scale projects, with a modular approach to achieve baseload capacities. This is important to us because multi-train mid-scale may use Chart’s patented IPSMR technology as well as our brazed aluminum heat exchanger and cold boxes as the main liquefaction heat exchanger technology.

~~We expect full~~expenditures are flexible, and we will continue to assess the spend as the year ~~restructuring costs to total $13.9 million of which $12.4 million has been incurred~~progresses. At this time, we anticipate capital expenditures spend will be in the ~~nine months ended September 30, 2017. The remaining restructuring costs relate~~$25 million to the corporate office relocation from Garfield Heights, Ohio to Ball Ground, Georgia and consolidation of certain facilities in China. We expect the 2017 restructuring actions to provide annualized run rate savings of $15$30 million ~~beginning with the first full year of savings in 2018.~~range.

Consolidated Results for the Three Months Ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, and ~~June 30, 2017~~December 31, 2019

The following table includes key metrics used to evaluate our business and measure our performance and represents selected financial data for our operating segments for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 and ~~June 30, 2017.~~December 31, 2019 (dollars in millions). Financial data for the three months ended ~~June 30, 2017~~December 31, 2019 has been included to provide additional information regarding our business trends on a sequential quarter ~~basis (dollars in thousands):~~basis.

Selected Financial Information

Three Months Ended
Current Quarter vs.
Prior Year Quarter

Current Quarter vs.
Prior Sequential Quarter
September 30, 2017 September 30, 2016 June 30, 2017
Variance
($)

Variance
(%)

Variance
($)

Variance
(%)
Sales
Energy & Chemicals $ 46,588
$ 23,711
$ 40,018
$ 22,877
96.5 % $ 6,570
16.4 %
Distribution & Storage 139,281
126,646
137,518
12,635
10.0 % 1,763
1.3 %
BioMedical 54,662
53,573
60,677
1,089
2.0 % (6,015 ) (9.9 )%
Consolidated $ 240,531
$ 203,930
$ 238,213
$ 36,601
17.9 % $ 2,318
1.0 %
Gross Profit
Energy & Chemicals $ 8,682
$ 1,803
$ 5,327
$ 6,879
381.5 % $ 3,355
63.0 %
Distribution & Storage 40,542
33,429
35,327
7,113
21.3 % 5,215
14.8 %
BioMedical 21,178
34,391
22,561
(13,213 ) (38.4 )% (1,383 ) (6.1 )%
Consolidated $ 70,402
$ 69,623
$ 63,215
$ 779
1.1 % $ 7,187
11.4 %
Gross Profit Margin
Energy & Chemicals 18.6 % 7.6 % 13.3 %
Distribution & Storage 29.1 % 26.4 % 25.7 %
BioMedical 38.7 % 64.2 % 37.2 %
Consolidated 29.3 % 34.1 % 26.5 %
SG&A Expenses
Energy & Chemicals $ 7,394
$ 7,050
$ 7,414
$ 344
4.9 % $ (20 ) (0.3 )%
Distribution & Storage 18,587
15,978
16,924
2,609
16.3 % 1,663
9.8 %
BioMedical 10,918
12,601
11,874
(1,683 ) (13.4 )% (956 ) (8.1 )%
Corporate 19,815
9,801
13,993
10,014
102.2 % 5,822
41.6 %
Consolidated $ 56,714
$ 45,430
$ 50,205
$ 11,284
24.8 % $ 6,509
13.0 %
SG&A Expenses (% of Sales)
Energy & Chemicals 15.9 % 29.7 % 18.5 %
Distribution & Storage 13.3 % 12.6 % 12.3 %
BioMedical 20.0 % 23.5 % 19.6 %
Consolidated 23.6 % 22.3 % 21.1 %
Operating Income (Loss) ^{(1) (2)}

Energy & Chemicals $ 329
$ (5,736 ) $ (2,568 ) $ 6,065
(105.7 )% $ 2,897
(112.8 )%
Distribution & Storage 21,016
14,715
16,577
6,301
42.8 % 4,439
26.8 %
BioMedical 9,539
20,916
9,848
(11,377 ) (54.4 )% (309 ) (3.1 )%
Corporate ⁽³⁾
(20,436 ) (9,831 ) (13,922 ) (10,605 ) 107.9 % (6,514 ) 46.8 %
Consolidated $ 10,448
$ 20,064
$ 9,935
$ (9,616 ) (47.9 )% $ 513
5.2 %
Operating Margin (Loss)
Energy & Chemicals 0.7 % (24.2 )% (6.4 )%
Distribution & Storage 15.1 % 11.6 % 12.1 %
BioMedical 17.5 % 39.0 % 16.2 %
Consolidated 4.3 % 9.8 % 4.2 %



	Three Months Ended									Current Quarter vs. Prior Year Quarter					Current Quarter vs. Prior Sequential Quarter
	March 31, 2020			March 31, 2019			December 31, 2019			Variance ($)			Variance (%)		Variance ($)			Variance (%)
Sales
D&S East	$	70.0		$	68.7		$	76.6		$	1.3		1.9	%	$	(6.6	)	(8.6	)%
D&S West	111.6			118.0			116.9			(6.4		)	(5.4	)%	(5.3		)	(4.5	)%
E&C Cryogenics	62.2			35.1			58.9			27.1			77.2	%	3.3			5.6	%
E&C FinFans	80.7			70.5			89.7			10.2			14.5	%	(9.0		)	(10.0	)%
Intersegment eliminations	(3.4		)	(3.0		)	0.3			(0.4		)	13.3	%	(3.7		)	(1,233.3	)%
Consolidated	$	321.1		$	289.3		$	342.4		$	31.8		11.0	%	$	(21.3	)	(6.2	)%

Gross Profit
D&S East	$	17.1		$	8.9		$	8.5		$	8.2		92.1	%	$	8.6		101.2	%
D&S West	38.7			40.0			38.7			(1.3		)	(3.3	)%	—			—	%
E&C Cryogenics	16.1			0.1			15.2			16.0			16,000.0	%	0.9			5.9	%
E&C FinFans	19.5			19.2			23.1			0.3			1.6	%	(3.6		)	(15.6	)%
Intersegment eliminations	—			(1.1		)	0.2			1.1			100.0	%	(0.2		)	(100.0	)%
Consolidated	$	91.4		$	67.1		$	85.7		$	24.3		36.2	%	$	5.7		6.7	%

Gross Profit Margin
D&S East	24.4		%	13.0		%	11.1		%
D&S West	34.7		%	33.9		%	33.1		%
E&C Cryogenics	25.9		%	0.3		%	25.8		%
E&C FinFans	24.2		%	27.2		%	25.8		%
Consolidated	28.5		%	23.2		%	25.0		%

SG&A Expenses
D&S East	$	9.4		$	9.9		$	8.2		$	(0.5	)	(5.1	)%	$	1.2		14.6	%
D&S West	11.0			13.3			10.7			(2.3		)	(17.3	)%	0.3			2.8	%
E&C Cryogenics	6.5			9.0			6.1			(2.5		)	(27.8	)%	0.4			6.6	%
E&C FinFans	7.3			6.8			9.0			0.5			7.4	%	(1.7		)	(18.9	)%
Corporate	19.7			16.3			19.1			3.4			20.9	%	0.6			3.1	%
Consolidated	$	53.9		$	55.3		$	53.1		$	(1.4	)	(2.5	)%	$	0.8		1.5	%

SG&A Expenses (% of Sales)
D&S East	13.4		%	14.4		%	10.7		%
D&S West	9.9		%	11.3		%	9.2		%
E&C Cryogenics	10.5		%	25.6		%	10.4		%
E&C FinFans	9.0		%	9.6		%	10.0		%
Consolidated	16.8		%	19.1		%	15.5		%

⁽¹⁾~~Restructuring costs for the three months ended:~~

~~September 30, 2016 were $0.3 million ($0.2 million - E&C and $0.1 million - D&S)~~

~~June 30, 2017 were $5.0 million ($1.6 million - E&C, $0.3 million - D&S, $1.4 million - BioMedical, and $1.7 million - Corporate)~~



	Three Months Ended									Current Quarter vs. Prior Year Quarter					Current Quarter vs. Prior Sequential Quarter
	March 31, 2020			March 31, 2019			December 31, 2019			Variance ($)			Variance (%)		Variance ($)			Variance (%)
Operating Income (Loss) ⁽¹⁾
D&S East	$	6.9		$	(2.3	)	$	(0.2	)	$	9.2		100.0	%	$	7.1		100.0	%
D&S West	26.5			25.6			26.8			0.9			3.5	%	(0.3		)	(1.1	)%
E&C Cryogenics	8.7			(10.7		)	8.7			19.4			100.0	%	—			—	%
E&C FinFans	1.1			9.4			4.6			(8.3		)	(88.3	)%	(3.5		)	(76.1	)%
Corporate ⁽²⁾	(19.7		)	(16.3		)	(19.0		)	(3.4		)	20.9	%	(0.7		)	3.7	%
Intersegment eliminations	—			(1.1		)	0.2			1.1			100.0	%	(0.2		)	(100.0	)%
Consolidated	$	23.5		$	4.6		$	21.1		$	18.9		410.9	%	$	2.4		11.4	%

Operating Margin
D&S East	9.9		%	(3.3		)%	(0.3		)%
D&S West	23.7		%	21.7		%	22.9		%
E&C Cryogenics	14.0		%	(30.5		)%	14.8		%
E&C FinFans	1.4		%	13.3		%	5.1		%
Consolidated	7.3		%	1.6		%	6.2		%

Includes ~~acquisition-related expenses~~transaction-related costs of ~~$7.4~~$0.9 million and ~~$1.0~~$0.6 million for the three months ended ~~September 30, 2017~~March 31, 2019, and ~~June 30, 2017,~~December 31, 2019, respectively.

Results of Operations for the Three Months Ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, and ~~June 30, 2017~~December 31, 2019

Sales infor the ~~third~~first quarter of ~~2017~~2020 compared to the same quarter in ~~2016~~2019 increased ~~$36.6~~$31.8 million, from ~~$203.9~~$289.3 million to ~~$240.5~~$321.1 million, or ~~17.9%~~11.0% (decreased 1.1% organically), ~~with increases across all segments. The largest increases were~~driven by sales of $34.9 million from AXC. AXC sales of $34.9 million are included in our E&C ~~$22.9 million or 96.5%, and D&S, $12.6 million or 10.0%. E&C’s Lifecycle business, which includes results from the Hetsco acquisition, added $11.4 million in incremental sales to E&C during~~FinFans segment for the three months ended ~~September 30, 2017,~~March 31, 2020. Excluding the impact of AXC, sales decreased slightly, which was primarily driven by the softness in demand for midstream and upstream compression equipment within our E~~&C’s Hudson acquisition added $6.1 million~~&C FinFans segment, partially offset by an increase in ~~incremental~~big LNG sales towithin our E&C Cryogenics segment.

Gross profit increased during the ~~period~~first quarter of ~~ownership from September 20, 2017 through September 30, 2017.~~2020 compared to the first quarter of 2019 by $24.3 million or 36.2% (increased 28.9% organically), primarily driven by cost reductions in 2019. Gross profit as a percentage of sales increased both on a sequential quarter and quarter over prior year quarter basis on a consolidated basis and within three of our four operating segments: D&S ~~saw~~East, D&S West and E&C Cryogenics. Furthermore, in the first quarter of 2020, our E&C FinFans segment’s gross profit as a percentage of E&C FinFans segment sales, excluding AXC’s gross profit of $4.9 million, was 31.9% as compared to 27.2% in the first quarter of 2019, which is an improvement ~~in all regions~~of 4.7 percentage points on a quarter over prior year quarter basis.

Selling, general and administrative (“SG&A”) expenses decreased by $1.4 million ($3.9 million organically), or 2.5% (7.1% organically), during the ~~three months ended September 30, 2017 as~~first quarter of 2020 compared to the same quarter in ~~2016, with~~2019 due to lower employee-related expenses.

During the ~~largest increase in China, driven by stronger LNG-related product sales. Sequentially over the second~~first quarter of 2017, the overall sales increase of $2.3 million was largely driven by sales incrementally added by the Hudson acquisition. This increase was partially offset by decreased sales in cryobiological applications within the BioMedical segment.

~~Gross profit increased during the third quarter of 2017 compared~~2020, we implemented certain cost reduction actions across all segments and corporate to ~~the third quarter of 2016 by $0.8 million. Gross profit in the third quarter of 2016 included $15.1 million~~appropriately size our workforce with demand as well as eliminate redundant work. Costs were primarily related to ~~the impact~~headcount reductions. These actions resulted in total restructuring costs of an insurance recovery received by the BioMedical segment for breaches of representations and warranties related to warranty costs for certain product lines acquired from AirSep Corporation (“AirSep”) in 2012. The increase is primarily due to gross profit added from the Hetsco and Hudson acquisitions in our E&C segment. Gross profit further increased as a result of higher volume at better margins in the D&S segment. Excluding the impact of the insurance recovery, BioMedical’s gross profit was up compared to the prior year on slightly higher sales. Sequentially over the second quarter of 2017, the increase in gross profit of $7.2$5.2 million, ~~or 11.4%, was mainly driven by the E&C segment’s incremental margin from the Hudson acquisition and the D&S segment, where favorable product mix drove margins higher.~~

SG&A expenses increased by $11.3 million, or 24.8%, during the third quarter of 2017 compared to the third quarter of 2016. During the third quarter of 2017, Corporate incurred $7.3 million of expenses associated with the Hudson acquisition. Sequentially over the second quarter of 2017, the SG&A expenses increase was primarily driven by acquisition-related expenses associated with the Hudson acquisition and restructuring.

Restructuring costs were related to the previously announced corporate office relocation, the Buffalo BioMedical respiratory consolidation to our Ball Ground, Georgia facilities and our Wuxi, China facility consolidation. Restructuring costs were $2.7 million in the third quarter of 2017 andwhich were recorded in cost of ~~goods sold~~sales ($~~0.3~~2.3 million) and SG&A ($~~2.4~~2.9 million)~~. Restructuring~~ and consisted of mainly employee severance costs. These restructuring activities were substantially completed by the end of the first quarter 2020. We anticipate these restructuring actions will result in incremental annualized savings of $45 million. During the first quarter of 2019, we implemented certain cost reduction or avoidance actions, including facility closures and relocations. These actions were primarily related to the consolidation of certain of our facilities within our E&C Cryogenics and E&C FinFans segments, streamlining commercial activities within our Lifecycle business, geographic

realignment of manufacturing capacity in D&S East, as well as departmental restructuring, including headcount reductions. These actions resulted in property, plant and equipment disposals and severance costs ~~were $0.3~~of $7.4 million in the ~~third~~first quarter of ~~2016 and were recorded primarily in SG&A. Restructuring costs were $5.0 million in the second quarter of 2017 and~~2019, which were recorded in cost of ~~goods sold~~sales ($~~2.0~~5.5 million) and SG&A ($~~3.0~~1.9 million).

Interest Expense, Net and Financing Costs Amortization

Net interest expense for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 was ~~$4.8~~$7.2 million and ~~$4.3~~$5.3 million, respectively. Interest expense for the three months ended ~~September 30, 2017~~March 31, 2020 included ~~$1.3~~$0.6 million of ~~2.0%~~1.0% cash interest ~~$3.4~~and $1.9 million of non-cash interest accretion expense related to the carrying value of the ~~Convertible Notes,~~convertible notes due 2024, and ~~$0.3~~$4.8 million in interest related to borrowings on our senior secured revolving credit facility and term loan. Financing costs amortization was $1.0 million for first quarter of 2020 as compared to $0.4 million for the ~~Hudson acquisition.~~ first quarter of 2019.

Foreign Currency Loss (Gain)

For ~~each of~~ the three months ended ~~September 30, 2017 and 2016, financing costs amortization~~March 31, 2020 foreign currency loss was $0.3 ~~million.~~

~~Income Tax Expense~~

~~Income tax expense of $1.9 million and $1.8~~$0.1 million for the three months ended ~~September 30, 2017~~March 31, 2019.

Unrealized Loss On Investment In Equity Securities

Unrealized loss on investment in equity securities was $4.8 million as compared to zero for the three months ended March 31, 2019. As of March 31, 2020, the value of our investment Stabilis Energy, Inc. was $2.1 million, which reflects a $4.8 million unrealized loss upon conversion and ~~2016, respectively,~~subsequent mark-to-market during the first quarter of 2020.

Income Tax Expense (Benefit)

Income tax expense (benefit) of $1.7 million and $(2.0) million for three months ended March 31, 2020 and 2019 and represents taxes on both U.S. and foreign earnings at a combined effective income tax rate of ~~47.5%~~16.7% and ~~11.4%~~200.0%, respectively. The effective income tax rate of ~~47.5%~~16.7% for the ~~third quarter~~three months ended March 31, 2020 differed from the U.S. federal statutory rate of ~~2017 was~~21% primarily due to income taxes on certain foreign entities earnings being taxed at higher rates than the U.S. federal statutory rate ~~of 35% primarily due to losses incurred by~~and certain ~~of our~~ Chinese operations losses for which no ~~tax~~ benefit was recorded, partially offset by tax benefits associated with share-based compensation.

The effective income tax rate of 200.0% for the three months ended March 31, 2019 differed from the U.S. federal statutory rate of 21% primarily due to the effect of income earned by certain of our ~~international~~foreign entities ~~operating in lower~~being taxed ~~jurisdictions. The third quarter 2017 effective income tax rate was also impacted by transaction costs incurred with~~at higher rates than the acquisition of Hudson, a portion of which were non-deductible for U.S. federal income tax purposes. The effective income tax rate of 11.4% for the three months ended September 30, 2016 differed from the U.S. federal statutory rate ~~of 35% primarily due to the insurance settlement for breaches of representations and warranties that resulted in an adjustment to our purchase price of Airsep shares for tax purposes and was offset by~~as well as losses incurred by certain of our Chinese operations for which no benefit was recorded.

As a result of the foregoing, net income attributable to ~~the Company~~Chart for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 was ~~$1.5~~$8.5 million and ~~$15.0~~$1.0 million, respectively.

~~Consolidated Results for the Nine Months Ended September 30, 2017 and 2016~~

The following table includes key metrics used to evaluate our business and measure our performance and represents selected financial data for our operating segments for the nine months ended September 30, 2017 and 2016 (dollars in thousands):

~~Selected Financial Information~~

Nine Months Ended Current Year-to-date vs.
Prior Year-to-date Period
September 30, 2017 September 30, 2016
Variance
($)

Variance
(%)
Sales
Energy & Chemicals $ 126,473
$ 122,865
$ 3,608
2.9 %
Distribution & Storage 390,057
363,743
26,314
7.2 %
BioMedical 166,309
158,174
8,135
5.1 %
Consolidated $ 682,839
$ 644,782
$ 38,057
5.9 %
Gross Profit
Energy & Chemicals $ 22,434
$ 39,147
$ (16,713 ) (42.7 )%
Distribution & Storage 106,417
96,074
10,343
10.8 %
BioMedical 60,426
74,054
(13,628 ) (18.4 )%
Consolidated $ 189,277
$ 209,275
$ (19,998 ) (9.6 )%
Gross Profit Margin
Energy & Chemicals 17.7 % 31.9 %
Distribution & Storage 27.3 % 26.4 %
BioMedical 36.3 % 46.8 %
Consolidated 27.7 % 32.5 %
SG&A Expenses
Energy & Chemicals $ 22,610
$ 23,295
$ (685 ) (2.9 )%
Distribution & Storage 53,269
52,517
752
1.4 %
BioMedical 33,609
33,288
321
1.0 %
Corporate 49,858
34,762
15,096
43.4 %
Consolidated $ 159,346
$ 143,862
$ 15,484
10.8 %
SG&A Expenses (% of Sales)
Energy & Chemicals 17.9 % 19.0 %
Distribution & Storage 13.7 % 14.4 %
BioMedical 20.2 % 21.0 %
Consolidated 23.3 % 22.3 %
Operating (Loss) Income ^{(1) (2)}

Energy & Chemicals $ (2,420 ) $ 14,190
$ (16,610 ) (117.1 )%
Distribution & Storage 49,186
37,550
11,636
31.0 %
BioMedical 24,387
38,120
(13,733 ) (36.0 )%
Corporate ⁽³⁾
(50,523 ) (34,820 ) (15,703 ) 45.1 %
Consolidated $ 20,630
$ 55,040
$ (34,410 ) (62.5 )%
Operating (Loss) Margin
Energy & Chemicals (1.9 )% 11.5 %
Distribution & Storage 12.6 % 10.3 %
BioMedical 14.7 % 24.1 %
Consolidated 3.0 % 8.5 %

⁽¹⁾~~Restructuring costs for the nine months ended:~~

~~Results of Operations for the Nine Months Ended September 30, 2017 and 2016~~

Sales in the nine months ended September 30, 2017 increased in all segments compared to the nine months ended September 30, 2016, by $38.1 million or 5.9%, primarily driven by stronger sales in D&S as a result of increased sales in bulk and packaged gas industrial applications, especially in the U.S and China. E&C sales include $37.6 million of incremental sales from Lifecycle, which includes the Hetsco acquisition, and the Hudson acquisition which added $6.1 million in incremental sales to E&C during the period of ownership from September 20, 2017 through September 30, 2017. E&C segment sales in 2016 included several short-lead time replacement equipment sales and contract expiration fees.

Gross profit decreased $20.0 million, and the related margin decreased from 32.5% to 27.7% during the first nine months of 2017 compared to the first nine months of 2016. The prior year included several high margin short-lead time replacement equipment sales and contract expiration fees in our E&C segment that did not recur in 2017 as well as the BioMedical insurance recovery for breaches of representations and warranties related to warranty costs for certain product lines acquired from AirSep in 2012. For the nine months ended September 30, 2016, this reduced BioMedical’s cost of sales by $15.1 million and added 9.6% to the year-to-date gross margin.

SG&A expenses increased by $15.5 million during the first nine months of 2017 compared to the first nine months of 2016. During the first nine months of 2017, Corporate incurred $8.6 million in acquisition-related costs, of which $8.1 million related to the Hudson acquisition. Restructuring expenses increased $6.1 million as further discussed below.

Restructuring costs of $12.4 million for the first nine months of 2017 were recorded in cost of goods sold ($4.8 million) and SG&A ($7.6 million) as a result of our cost reduction and operating efficiency initiatives primarily related to the corporate office relocation, the Buffalo BioMedical respiratory consolidation to our Ball Ground, Georgia facilities and our China facilities consolidation. Restructuring costs of $6.3 million for the first nine months of 2016 were recorded in cost of goods sold ($3.5 million) and SG&A ($2.8 million).

~~Interest Expense, Net and Financing Costs Amortization~~

Net interest expense for the nine months ended September 30, 2017 and 2016 was $13.0 million and $12.6 million, respectively. Interest expense for the nine months ended September 30, 2017 included $3.8 million of 2.0% cash interest, $10.0 million of non-cash interest accretion expense related to the carrying value of the Convertible Notes and $0.3 million in interest related to borrowings on our senior secured revolving credit facility for the Hudson acquisition. For each of the nine months ended September 30, 2017 and 2016, financing costs amortization was $1.0 million.

~~Income Tax Expense~~

Income tax expense of $2.3 million and $12.8 million for the nine months ended September 30, 2017 and 2016, respectively, represents taxes on both U.S. and foreign earnings at a combined effective income tax rate of 48.6% and 31.0%, respectively. The effective income tax rate of 48.6% for the nine months ended September 30, 2017 was higher than the U.S. federal statutory rate of 35% primarily due to losses incurred by certain of the Company’s Chinese operations for which no benefit was recorded, partially offset by foreign exchange losses realized upon the receipt of previously taxed income and the effect of income earned by certain of the Company’s international entities operating in lower taxed jurisdictions. During the nine months ended September 30, 2017, the effective income tax rate was also impacted by transaction costs incurred with the acquisition of Hudson, a portion of which were non-deductible for U.S. federal income tax purposes. The effective income tax rate of 31.0% for the nine months ended September 30, 2016 differed from the U.S. federal statutory rate of 35% primarily due to the insurance settlement for breaches of representations and warranties that resulted in an adjustment to our purchase price of Airsep shares for tax purposes and offset by losses incurred by certain of our Chinese operations for which no benefit was recorded.

~~As a result of the foregoing, net income attributable to the Company for the nine months ended September 30, 2017 and 2016 was $1.4 million and $31.5 million, respectively.~~

~~The structure of the Company’s internal organization is divided into the following~~Our reportable and operational segments ~~which are also the Company’s operating segments:~~include: D&S East, D&S West, E&C ~~D&S,~~Cryogenics, and ~~BioMedical.~~E&C FinFans. Corporate includes operating expenses for executive management, accounting, tax, treasury, corporate development, human resources, information technology, investor relations, legal, internal audit, and risk management. Corporate support functions are not currently allocated to the segments. For further information, refer to Note 2, “Reportable Segments” note of our ~~Reportable Segments note to our~~unaudited condensed consolidated financial statements included ~~elsewhere~~under Item 1, “Financial Statements” in this report.

The following tables include key metrics used to evaluate our business and measure our performance and represents selected financial data for our operating segments for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 (dollars in ~~thousands)~~millions):

~~Energy & Chemicals~~D&S East

Results for the Three Months Ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019

For the ~~third~~first quarter of ~~2017, E&C~~2020, D&S East segment sales increased as compared to the same quarter in ~~2016. E&C’s Lifecycle business, which includes results from~~2019. Sales of trailers and engineered systems and tanks in Europe were favorable offset by lower sales in China due to COVID-19 related temporary shutdowns.

During the Hetsco acquisition, added $11.4 million in incremental sales to E&C during the three months ended September 30, 2017, and E&C’s Hudson acquisition added $6.1 million in incremental sales to E&C during the period of ownership from September 20, 2017 through September 30, 2017. Overall, the increase in sales was driven primarily by a continued increase in activity in the Natural Gas Liquids (“NGL”) and Petrochemical applications, while lower energy prices continued to have an impact on LNG related opportunities within the E&C segment.

~~For the third~~first quarter of ~~2017, E&C~~2020, D&S East segment gross profit increased by $8.2 million as compared to the same quarter in 2019, and the related margin percentage increased by 11.4 percentage points. This increase in gross profit was mainly attributable to higher volume and costs related to the closing of our China brazed aluminum heat exchanger facility that drove higher restructuring costs in the first quarter of 2019. The increase in the related margin percentage was primarily driven by favorable product mix in Europe and favorable foreign currency exchange rates.

D&S East segment SG&A expenses decreased to $9.4 million for the first quarter of 2020 as compared to $9.9 million for the same quarter in 2019, primarily due to lower employee-related expenses.

Results for the Three Months Ended March 31, 2020 and 2019



	Three Months Ended						Current Quarter vs. Prior Year Quarter
	March 31, 2020			March 31, 2019			Variance ($)			Variance (%)
Sales	$	111.6		$	118.0		$	(6.4	)	(5.4	)%
Gross Profit	38.7			40.0			(1.3		)	(3.3	)%
Gross Profit Margin	34.7		%	33.9		%
SG&A Expenses	$	11.0		$	13.3		$	(2.3	)	(17.3	)%
SG&A Expenses (% of Sales)	9.9		%	11.3		%
Operating Income	$	26.5		$	25.6		$	0.9		3.5	%
Operating Margin	23.7		%	21.7		%

D&S West segment sales decreased during the first quarter of 2020 as compared to the same quarter in 2019 primarily due to the timing of revenue recognition relative to certain of our LNG products, partially offset by an increase in our packaged gas products, specifically oxygen-related packaged gas tanks.

D&S West segment gross profit decreased slightly during the first quarter of 2020 as compared to the same quarter in 2019 primarily due to lower volume, while the related margin improvement was primarily driven by our parts and repairs services, packaged gas and standard tank products. Given the uncertainty around the length of the COVID-19 impacts, we have seen customers look at further utilizing their existing inventory and in turn, our aftermarket, service and repair business has picked up with D&S West parts, repair and service revenue up nearly 11% as compared to the first quarter 2019.

D&S West segment SG&A expenses decreased during the first quarter of 2020 as compared to the same quarter in 2019 primarily due to lower employee related costs partially offset by higher restructuring costs.

Results for the Three Months Ended March 31, 2020 and 2019



	Three Months Ended						Current Quarter vs. Prior Year Quarter
	March 31, 2020			March 31, 2019			Variance ($)			Variance (%)
Sales	$	62.2		$	35.1		$	27.1		77.2	%
Gross Profit	16.1			0.1			16.0			16,000.0	%
Gross Profit Margin	25.9		%	0.3		%
SG&A Expenses	$	6.5		$	9.0		$	(2.5	)	(27.8	)%
SG&A Expenses (% of Sales)	10.5		%	25.6		%
Operating Income (Loss)	$	8.7		$	(10.7	)	$	19.4		100.0	%
Operating Margin	14.0		%	(30.5		)%

For the first quarter of 2020, E&C Cryogenics segment sales increased as compared to the same quarter in ~~2016 primarily due to an~~2019. The increase in ~~high margin short lead-time replacement equipment projects~~sales is primarily related to revenue contributions from big LNG, including Venture Global’s Calcasieu Pass LNG export terminal project, our Lifecycle business and ~~improved productivity driven by~~petrochemical applications.

For the ~~volume increase in the NGL and Petrochemical applications.~~

~~E&C segment SG&A expenses increased slightly during the third~~first quarter of ~~2017~~2020, E&C Cryogenics segment gross profit increased by $16.0 million as compared to the same quarter in ~~2016 primarily~~2019. The increase in gross profit was mainly driven by ~~incremental~~higher volume which the related margin improvement was primarily due higher margin work from Big LNG and lower restructuring costs.

E&C Cryogenics segment SG&A expenses ~~from~~decreased during the ~~Hetsco~~first quarter of 2020 as compared the same quarter in 2019 primarily due to lower employee-related costs and ~~Hudson acquisitions.~~lower restructuring costs.

Results for the ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019

For the first ~~nine months~~quarter of ~~2017,~~2020, E&C FinFans segment sales increased as compared to the same ~~period~~quarter in ~~2016. The increase was~~2019 primarily ~~driven~~due to the AXC acquisition. Excluding the impact of AXC, sales decreased by ~~our Lifecycle business, which includes the Hetsco acquisition, which contributed $39.8~~$24.7 million mainly due to a softness in ~~sales during~~demand for midstream and upstream compression equipment.



	Nine Months Ended September 30,
	2017			2016
OPERATING ACTIVITIES
Net income	$	2,486		$	28,575
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	28,659			28,605
Asset impairments	—			1,217
Interest accretion of convertible notes discount	10,027			9,268
Employee share-based compensation expense	9,555			9,014
Financing costs amortization	963			963
Unrealized foreign currency transaction loss	215			318
Other non-cash operating activities	975			(390		)
Changes in assets and liabilities, net of acquisitions:
Accounts receivable	(10,311		)	55,706
Inventory	(19,264		)	16,246
Unbilled contract revenues and other assets	(8,431		)	38,721
Accounts payable and other liabilities	(4,824		)	(43,393		)
Customer advances and billings in excess of contract revenue	7,487			1,742
Net Cash Provided By Operating Activities	17,537			146,592
INVESTING ACTIVITIES
Capital expenditures	(23,407		)	(13,411		)
Proceeds from sale of assets	925			—
Government grants	407			1,055
Acquisition of businesses, net of cash acquired	(446,004		)	(1,383		)
Net Cash Used In Investing Activities	(468,079		)	(13,739		)
FINANCING ACTIVITIES
Borrowings on revolving credit facilities	302,176			3,820
Repayments on revolving credit facilities	(5,097		)	(6,061		)
Borrowings on term loan	—			13,167
Repayments on term loan	—			(1,508		)
Proceeds from exercise of options	1,057			26
Excess tax benefits from share-based compensation	—			54
Common stock repurchases	(1,954		)	(658		)
Net Cash Provided By Financing Activities	296,182			8,840
Effect of exchange rate changes on cash	4,854			1,875
Net (decrease) increase in cash, cash equivalents, restricted cash, and restricted cash equivalents	(149,506		)	143,568
Cash, cash equivalents, restricted cash, and restricted cash equivalents at beginning of period	282,949			123,708
CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND RESTRICTED CASH EQUIVALENTS AT END OF PERIOD⁽¹⁾	$	133,443		$	267,276


⁽¹⁾	~~Refer to~~Includes $19.3 in shares repurchased through our share repurchase program.


⁽²⁾	Includes restricted cash and restricted cash equivalents of $1.0 in other assets for each of the ~~Debt and Credit Arrangements and Business Combinations notes for~~periods presented. For further information regarding restricted cash and restricted cash equivalents ~~balances.~~balances, refer to Note 8, “Debt and Credit Arrangements.”


⁽¹⁾	Includes $19.3 in shares repurchased through our share repurchase program.


⁽²⁾	Corporate includes transaction-related costs of: (includes costs associated with business development and other one-time transactions)



	Energy & Chemicals		Distribution & Storage		BioMedical			Total
Balance at December 31, 2016	$	27,873	$	165,520	$	24,577		$	217,970
Foreign currency translation adjustments and other	—		2,214		(104		)	2,110
Goodwill acquired during the year	236,246		1,155		—			237,401
Balance at September 30, 2017	$	264,119	$	168,889	$	24,473		$	457,481

Accumulated goodwill impairment loss at September 30, 2017 and December 31, 2016	$	64,603	$	—	$	131,243		$	195,846



		September 30, 2017					December 31, 2016
	Weighted-average Estimated Useful Life	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Finite-lived intangible assets:
Customer relationships	12 years	$	233,208	$	(83,596	)	$	119,320	$	(81,614	)
Unpatented technology	12 years	27,686		(3,836		)	8,186		(3,132		)
Land use rights	50 years	13,222		(1,097		)	12,650		(860		)
Trademarks and trade names	14 years	5,517		(2,767		)	4,918		(2,198		)
Patents and other	6 years	2,878		(502		)	1,235		(695		)
Total finite-lived intangible assets	14 years	$	282,511	$	(91,798	)	$	146,309	$	(88,499	)
Indefinite-lived intangible assets:
Trademarks and trade names		$	108,165	—			$	35,633	—
Total intangible assets		$	390,676	$	(91,798	)	$	181,942	$	(88,499	)



For the Year Ending December 31,
2017	$	15,700
2018	24,400
2019	24,100
2020	22,200
2021	16,100



	September 30, 2017			December 31, 2016
Convertible notes, due August 2018, effective interest rate of 7.9%	$	238,142		$	228,115
Senior secured revolving credit facility, due October 2019, effective interest rate of 4.0%	300,000			—
Foreign facilities	10,792			13,208
Total debt	548,934			241,323
Unamortized debt issuance costs	(592		)	(1,125		)
Total debt, net of unamortized debt issuance costs	548,342			240,198
Less: current maturities ⁽¹⁾	(244,330		)	(6,487		)
Long-term debt	$	304,012		$	233,711



Balance at December 31, 2016	$	18,271
Issued – warranty expense	5,510
Acquired – warranty reserve	858
Change in estimate – warranty expense	282
Warranty usage	(9,266		)
Balance at September 30, 2017	$	15,655



Net assets acquired:
Goodwill	$	227,397
Identifiable intangible assets	202,000
Accounts receivable	34,669
Property, plant and equipment	30,590
Inventories	24,900
Other current assets ⁽¹⁾	9,359
Unbilled contract revenue	4,589
Other assets	2,876
Prepaid expenses	873
Deferred tax liabilities	(68,559		)
Accounts payable	(21,246		)
Customer advances and billings in excess of contract revenue	(16,928		)
Accrued salaries, wages and benefits	(4,442		)
Other current liabilities	(3,984		)
Other long-term liabilities	(1,861		)
Current portion of warranty reserve	(839		)
Net assets acquired	$	419,394



	September 30, 2017		Adjustments			As Previously Reported March 31, 2017
Goodwill	$	8,849	$	(1,271	)	$	10,120
Identifiable intangible assets – customer relationships	8,090		810			7,280
Other identifiable intangible assets	1,150		30			1,120
Other net assets	4,693		51			4,642
Net assets acquired	$	22,782	$	(380	)	$	23,162



Balance at December 31, 2016	$	1,923
Decrease in fair value of contingent consideration liabilities	(1,622		)
Balance at September 30, 2017	$	301



	September 30, 2017
	Total		Level 2		Level 3
Foreign currency forward contracts	$	20	$	20	$	—
Total financial assets	$	20	$	20	$	—

Foreign currency forward contracts	$	170	$	170	$	—
Contingent consideration liabilities	301		—		301
Total financial liabilities	$	471	$	170	$	301


⁽¹⁾	The convertible note hedge offsets any dilution upon actual conversion of the 2024 Notes up to a common stock price of $71.775 per share. For further information, refer to Note 8, “Debt and Credit Arrangements.”



	Three Months Ended September 30, 2017
	Energy & Chemicals			Distribution & Storage			BioMedical			Corporate			Total
Balance as of June 30, 2017	$	—		$	1,865		$	847		$	1,493		$	4,205
Restructuring costs	162			648			516			1,423			2,749
Cash payments	(157		)	(1,381		)	(803		)	(1,480		)	(3,821		)
Acquired restructuring reserve	194			—			—			—			194
Balance as of September 30, 2017	$	199		$	1,132		$	560		$	1,436		$	3,327



	Three Months Ended September 30, 2016
	Energy & Chemicals			Distribution & Storage			BioMedical			Corporate			Total
Balance as of June 30, 2016	$	544		$	4,796		$	368		$	276		$	5,984
Restructuring costs	159			118			—			28			305
Cash payments	(267		)	(1,160		)	(168		)	(219		)	(1,814		)
Balance as of September 30, 2016	$	436		$	3,754		$	200		$	85		$	4,475



	Nine Months Ended September 30, 2017
	Energy & Chemicals			Distribution & Storage			BioMedical			Corporate			Total
Balance as of December 31, 2016	$	127		$	2,864		$	1,308		$	3,025		$	7,324
Restructuring costs	2,245			1,085			4,527			4,560			12,417
Cash payments	(2,367		)	(2,817		)	(5,275		)	(6,149		)	(16,608		)
Acquired restructuring reserve	194			—			—			—			194
Balance as of September 30, 2017	$	199		$	1,132		$	560		$	1,436		$	3,327



	Nine Months Ended September 30, 2016
	Energy & Chemicals			Distribution & Storage			BioMedical			Corporate			Total
Balance as of December 31, 2015	$	1,106		$	3,446		$	430		$	850		$	5,832
Restructuring costs	821			3,929			521			1,032			6,303
Cash payments	(1,491		)	(3,621		)	(751		)	(1,797		)	(7,660		)
Balance as of September 30, 2016	$	436		$	3,754		$	200		$	85		$	4,475


⁽¹⁾	~~Includes results from the Hudson and Hetsco acquisitions, which are included in the Company’s E&C segment. Refer to the Business Combinations note for further details.~~


⁽³⁾	Includes restructuring costs of $2,749 and $305 for the three months ended September 30, 2017 and 2016, respectively, and $12,417 and $6,303 for the nine months ended September 30, 2017 and 2016 respectively.


⁽⁴⁾	~~Includes acquisition-related costs of $7,445 and $8,587 for the three and nine months ended September 30, 2017, respectively.~~


⁽¹⁾	~~Includes assets acquired from the Hudson and Hetsco acquisitions, which are included in the Company’s E&C segment. Refer to the Business Combinations note for further details.~~


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations


⁽³⁾⁽²⁾	Includes ~~acquisition-related expenses~~transaction-related costs of ~~$7.4~~$0.9 million and ~~$1.0~~$0.6 million for the three months ended ~~September 30, 2017~~March 31, 2019, and ~~June 30, 2017,~~December 31, 2019, respectively.



	Nine Months Ended						Current Year-to-date vs. Prior Year-to-date Period
	September 30, 2017			September 30, 2016			Variance ($)			Variance (%)
Sales
Energy & Chemicals	$	126,473		$	122,865		$	3,608		2.9	%
Distribution & Storage	390,057			363,743			26,314			7.2	%
BioMedical	166,309			158,174			8,135			5.1	%
Consolidated	$	682,839		$	644,782		$	38,057		5.9	%
Gross Profit
Energy & Chemicals	$	22,434		$	39,147		$	(16,713	)	(42.7	)%
Distribution & Storage	106,417			96,074			10,343			10.8	%
BioMedical	60,426			74,054			(13,628		)	(18.4	)%
Consolidated	$	189,277		$	209,275		$	(19,998	)	(9.6	)%
Gross Profit Margin
Energy & Chemicals	17.7		%	31.9		%
Distribution & Storage	27.3		%	26.4		%
BioMedical	36.3		%	46.8		%
Consolidated	27.7		%	32.5		%
SG&A Expenses
Energy & Chemicals	$	22,610		$	23,295		$	(685	)	(2.9	)%
Distribution & Storage	53,269			52,517			752			1.4	%
BioMedical	33,609			33,288			321			1.0	%
Corporate	49,858			34,762			15,096			43.4	%
Consolidated	$	159,346		$	143,862		$	15,484		10.8	%
SG&A Expenses (% of Sales)
Energy & Chemicals	17.9		%	19.0		%
Distribution & Storage	13.7		%	14.4		%
BioMedical	20.2		%	21.0		%
Consolidated	23.3		%	22.3		%
Operating (Loss) Income ^{(1) (2)}
Energy & Chemicals	$	(2,420	)	$	14,190		$	(16,610	)	(117.1	)%
Distribution & Storage	49,186			37,550			11,636			31.0	%
BioMedical	24,387			38,120			(13,733		)	(36.0	)%
Corporate ⁽³⁾	(50,523		)	(34,820		)	(15,703		)	45.1	%
Consolidated	$	20,630		$	55,040		$	(34,410	)	(62.5	)%
Operating (Loss) Margin
Energy & Chemicals	(1.9		)%	11.5		%
Distribution & Storage	12.6		%	10.3		%
BioMedical	14.7		%	24.1		%
Consolidated	3.0		%	8.5		%


⁽³⁾	~~Includes acquisition-related expenses of $8.6 million for the nine months ended September 30, 2017.~~



	Three Months Ended
	September 30, 2017		September 30, 2016		June 30, 2017
Orders
Energy & Chemicals	$	65,939	$	27,889	$	64,630
Distribution & Storage	134,145		121,010		134,037
BioMedical	57,870		52,347		53,924
Total	$	257,954	$	201,246	$	252,591



	Three Months Ended
	March 31, 2020			March 31, 2019		December 31, 2019
Orders
D&S East	$	70.4		$	83.2	$	91.9
D&S West	117.9			114.1		138.4
E&C Cryogenics	51.2			194.6		54.4
E&C FinFans	69.1			69.3		58.8
Intersegment eliminations	(4.3		)	—		—
Consolidated	$	304.3		$	461.2	$	343.5



	As of
	September 30, 2017		September 30, 2016		June 30, 2017
Backlog
Energy & Chemicals	$	234,605	$	113,482	$	122,749
Distribution & Storage	222,966		246,197		224,993
BioMedical	23,171		24,751		19,434
Total	$	480,742	$	384,430	$	367,176


Item 3.	Quantitative and Qualitative Disclosures About Market Risk