| Debt and Credit Arrangements | Debt and Credit Arrangements Summary of Outstanding Borrowings The following table represents the components of our borrowings: September 30, December 31, Senior secured revolving credit facility and term loan: Term loan due June 2024 (1) $ 103.1 $ 103.1 Senior secured revolving credit facility due June 2024 (2) (3) 440.1 123.5 Unamortized debt issuance costs (3.9) (5.0) Senior secured revolving credit facility and term loan, net of debt issuance costs 539.3 221.6 Convertible notes due November 2024: Principal amount 258.8 258.8 Unamortized discount (4) — (34.8) Unamortized debt issuance costs (3.0) (3.1) Convertible notes due November 2024, net of unamortized discount and debt issuance costs 255.8 220.9 Total debt, net of unamortized discount and debt issuance costs 795.1 442.5 Less: current maturities 255.7 220.9 Long-term debt $ 539.4 $ 221.6 _______________ (1) As of September 30, 2021, there were $103.1 in borrowings outstanding under the term loan due June 2024, which is due at maturity, bearing an interest rate of 2.3% (2.5% as of December 31, 2020). (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 September 30, 2021, there were $440.1 in borrowings outstanding under the senior secured revolving credit facility due 2024 bearing a weighted-average interest rate of 2.2% (2.1% as of December 31, 2020) and $26.9 in letters of credit and bank guarantees outstanding supported by the senior secured revolving credit facility due 2024. As of September 30, 2021, the senior secured revolving credit facility due 2024 had availability of $83.0. (3) A portion of borrowings outstanding under our senior secured revolving credit facility due 2024 are denominated in euros (“EUR Revolver Borrowings”). EUR Revolver Borrowings outstanding were 78.0 million euros (equivalent to $90.3) and 74.5 million euros (equivalent to $91.4) at September 30, 2021 and December 31, 2020, respectively. During the three and nine months ended September 30, 2021, we recognized an unrealized foreign currency gain of $2.4 and $5.4, respectively, relative to the translation of the EUR Revolver Borrowings outstanding during the reporting period. This unrealized foreign currency gain is classified as foreign currency (gain) loss and other in the condensed consolidated statements of income for the three and nine months ended September 30, 2021. (4) We derecognized the debt discount associated with the convertible notes due November 2024 upon adoption of ASU 2020-06 on January 1, 2021. Senior Secured Revolving Credit Facility and Term Loan At September 30, 2021, we had a senior secured revolving credit facility (the “SSRCF”) and a term loan (together, the “2024 Credit Facilities”), which originally consisted of the following: • The SSRCF had a borrowing capacity of $550.0. • The principal amount of the term loan was $450.0. • The 2024 Credit Facilities bear interest at a base rate margin determined on a leveraged-based scale which ranges from 25 to 150 basis points for alternative base rate loans and 125 to 250 basis points for LIBOR loans. • Interest and fees were payable on a quarterly basis (or if earlier, at the end of each interest period for LIBOR loans). Significant financial covenants for the 2024 Credit Facilities included financial maintenance covenants that, as of the last day of any fiscal quarter ending on and after June 30, 2019, (i) requires 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 ratio of the amount of Chart and its subsidiaries’ consolidated EBITDA to consolidated cash interest expense to be greater than a specified minimum ratio level. The 2024 Credit Facilities include a number of other customary covenants including, but not limited to, restrictions on 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. At September 30, 2021, we were in compliance with all covenants. The 2024 Credit Facilities also contain customary events of default. If such an event of default occurs, the 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 2024 Credit Facilities are guaranteed by Chart and substantially all of its U.S. subsidiaries and secured by substantially all of the assets of Chart and our U.S. subsidiaries and 65% of the capital stock of our material non-U.S. subsidiaries (as defined by the Fourth Amended and Restated Credit Agreement) that are owned by U.S. subsidiaries. On September 28, 2020 and April 20, 2020, we amended our 2024 Credit Facilities. The amendments, among other things, (i) reduce the LIBO Screen Rate (as defined in the Credit Agreement) floor by half, effectively reducing all interest payable by Chart (ii) provide Chart with further flexibility to complete divestitures at its discretion by changing the “catch-all” permitted divestiture basket from a small annual cap to a more substantial life-of the-facility cap, (iii) adjust the pricing grid in order to accommodate potentially higher leverage ratios, (iv) adjust factoring related definitions and other related provisions to provide Chart with greater flexibility to enter into such arrangements in the future, (v) incorporate a “cash hoarding” prevention covenant and (vi) incorporate 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 amendments. We recorded $1.9 in deferred debt issuance costs related to these amendments which are being amortized over the remaining term of the 2024 Credit Facilities. 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 September 30, 2021, associated with the term loan, which is being amortized over its five-year term beginning in July 2019. We paid $11.9 in deferred debt issuance costs related to the SSRCF. Deferred debt issuance costs are presented in other assets in the unaudited condensed consolidated balance sheets and are being amortized over the term of the SSRCF. At September 30, 2021, unamortized debt issuance costs associated with the SSRCF were $6.1. Subsequent Event – Fifth Amended and Restated Credit Agreement Subsequent to the end of the third quarter, on October 18, 2021, we entered into the Fifth Amended and Restated Credit Agreement (the “Amended Credit Agreement”), which provides for a senior secured revolving credit facility (the “Amended SSRCF”) in a principal amount of up to $1,000.0. The Amended SSRCF includes a $100.0 sublimit for letters of credit, a $250.0 sublimit for discretionary letters of credit and a $100.0 sublimit for swingline loans. Under the terms of the Amended Credit Agreement, we may, subject to the satisfaction of certain conditions, request increases in the revolving credit facility commitments in an aggregate principal amount of up to $500.0 or a lesser amount in integral multiples of $25.0 to the extent existing or new lenders agree to provide such increased or additional commitments, as applicable. The Amended SSRCF has five-year maturity. The Amended SSRCF bears interest, at our election, at a base rate plus an “applicable margin” (as described below) or LIBOR plus an applicable margin. Swingline loans bear interest at a base rate plus an applicable margin. The base rate, for any day, is a floating rate that is the greatest of the prime rate in effect on such day, the NYFRB rate (defined as the greater of the federal funds effective rate and the overnight bank funding rate) in effect on such day plus 50 basis points, and the adjusted LIBOR rate for a one-month interest period in dollars on such day plus 100 basis points. The “applicable margin” is determined on a leveraged-based sliding scale which, before giving effect to the sustainability pricing adjustments (as described below), ranges from 25 to 125 basis points for base rate loans and 125 to 225 basis points for LIBOR loans. We are required to pay commitment fees on any unused commitments under the Amended SSRCF which, before giving effect to the sustainability fee adjustments (as described below), is determined on a leverage-based sliding scale ranging from 20 to 35 basis points. Interest and fees are payable on a quarterly basis (or if earlier, at the end of each interest period with respect to any LIBOR loans). The applicable margin described in the immediately preceding paragraph is subject to further adjustments based on reductions in the ratio between (i) the total greenhouse gas emissions, measured in metric tons CO2e, of Chart and its subsidiaries during such calendar year and (ii) the aggregate revenue, measured in U.S. Dollars, of Chart and its subsidiaries during such calendar year. These additional pricing adjustments range from an addition of 0.05% to a reduction of 0.025% in the applicable margin described above. The commitment fees described in the immediately preceding paragraph are also subject to sustainability fee adjustments based on the aforementioned ratio. The sustainability fee adjustments range from an addition of 0.01% to a reduction of 0.01%. Significant financial covenants for the Amended SSRCF include financial maintenance covenants that, as of the last day of any fiscal quarter ending on and after September 30, 2021, (i) require the ratio of the amount of Chart’s and its subsidiaries’ consolidated total net indebtedness to consolidated EBITDA to be less than specified maximum ratio levels and (ii) require the ratio of the amount of Chart’s and its subsidiaries’ consolidated EBITDA to consolidated cash interest expense to be greater than a specified minimum ratio level. The Amended SSRCF includes a number of other customary covenants including, but not limited to, restrictions on 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. The Amended SSRCF also contains customary events of default. If such an event of default occurs, the 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 Amended SSRCF is guaranteed by Chart and substantially all of its U.S. subsidiaries, and secured by substantially all of the assets of Chart and its U.S. subsidiaries and 65% of the capital stock of our material non-U.S. subsidiaries (as defined in by the Amended SSRCF) that are owned by U.S. subsidiaries. The following table summarizes interest expense and financing costs amortization related to the 2024 Credit Facilities: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Interest expense, term loan due June 2024 $ 1.3 $ 3.4 $ 2.4 $ 11.6 Interest expense, senior secured revolving credit facility due June 2024 1.6 0.4 3.6 1.6 Interest expense, senior secured revolving credit facility and term loan due June 2024 $ 2.9 $ 3.8 $ 6.0 $ 13.2 Financing costs amortization, senior secured revolving credit facility and term loan due June 2024 $ 1.0 $ 0.9 $ 2.8 $ 2.6 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”). On December 31, 2020, we entered into the First Supplemental Indenture (the “Supplemental Indenture”) to the Indenture, between Chart and Wells Fargo Bank, National Association, as trustee, governing the 2024 Notes. Pursuant to the Supplemental Indenture, Chart irrevocably elected (i) to eliminate Chart’s option to elect Physical Settlement (as defined in the Indenture) on any conversion of 2024 Notes that occurs on or after the date of the Supplemental Indenture and (ii) that, with respect to any Combination Settlement (as defined in the Indenture) for a conversion of 2024 Notes, the Specified Dollar Amount (as defined in the Indenture) that will be settled in cash per $1,000 principal amount of the Notes shall be no lower than $1,000. The 2024 Notes bear 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. The 2024 Notes are senior subordinated unsecured obligations of the Company and 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. Prior to December 31, 2020, a conversion of the 2024 Notes could have been 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). After December 31, 2020, a conversion of the 2024 Notes may be settled in either (1) cash or (2) cash for the principal amount of the 2024 Notes and any combination of cash and shares for the excess settlement amount above the principal amount of the 2024 Notes, at our election (subject to, and in accordance with, the settlement provisions of the Indenture and Supplemental 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 is equal to an initial conversion price of approximately $58.725 per share, representing a 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 the 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 our closing common stock price of $191.11 at the end of the period exceeded the conversion price of $58.725, the if-converted value exceeded the principal amount of the 2024 Notes by approximately $583.4 at September 30, 2021. As described below, we entered into 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 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. As of October 1, 2021, the 2024 Notes continue to be convertible at the option of the shareholders. This conversion right, which will remain available until December 31, 2021, was triggered since the closing price of our common stock was greater than or equal to $76.3425 (130% of the conversion price of the 2024 Notes) for at least 20 trading days during the last 30 trading days ending on September 30, 2021. Since the holders of the 2024 Notes could potentially convert their 2024 Notes at their option during the three month period subsequent to September 30, 2021, the $258.8 principal amount of the 2024 Notes was classified as a current liability in the consolidated balance sheet at September 30, 2021. As of December 31, 2020, the 2024 Notes were convertible at the option of the holders, and the liability component of the 2024 Notes was classified as a current liability. We will reassess the convertibility of the 2024 Notes and the related balance sheet classification on a quarterly basis. There have been no conversions as of the date of this filing. Prior to the adoption of ASU 2020-06, 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, represented 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, represented 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 was being accreted to interest expense over the term of the 2024 Notes. After the adoption of ASU 2020-06, our convertible notes due November 2024 are no longer bifurcated into separate liability and equity components in our September 30, 2021 condensed consolidated balance sheet. Rather, the $258.8 principal amount of our convertible notes due November 2024 was classified as a liability only in our September 30, 2021 condensed consolidated balance sheet. Upon adoption of ASU 2020-06 and transition, we recorded an adjustment to the convertible notes liability component, equity component (additional paid-in-capital) and retained earnings. This adjustment was calculated based on the carrying amount of the convertible notes as if it had always been treated as a liability only. Refer to Note 1, “Basis of Preparation” for further discussion. Prior to the adoption of ASU 2020-06, we recorded $5.3 in deferred debt issuance costs associated with the 2024 Notes, which was 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. After the adoption of ASU 2020-06, we recorded an adjustment to the debt issuance costs contra liability and equity (additional paid-in-capital) components under the same premise, i.e. as if debt issuance costs had always been treated as a contra liability only. We amortize the adjusted unamortized debt issuance costs balance over the term of the 2024 Notes using the effective interest method. Refer to Note 1, “Basis of Preparation” for further discussion. Furthermore, interest expense related to the accretion of our convertible notes due November 2024 is no longer recognized. 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 September 30, Nine Months Ended September 30, 2021 2020 2021 2020 2024 Notes, interest accretion of convertible notes discount $ — $ 2.0 $ — $ 5.9 2024 Notes, 1.0% contractual interest coupon 0.6 0.6 1.9 1.9 2024 Notes, total interest expense $ 0.6 $ 2.6 $ 1.9 $ 7.8 2024 Notes, financing costs amortization $ 0.2 $ 0.2 $ 0.7 $ 0.6 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 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 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 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 additional paid-in capital in the December 31, 2017 consolidated balance sheet. The 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 dilutive effect to our stockholders to the extent that the market price per share of our common stock, as measured under the terms of the Warrant Transactions, exceeds the applicable strike price of the warrants. The Note Hedge Transactions and Warrant Transactions effectively increased the conversion price of the 2024 Notes. The net cost of the Note Hedge Transactions and Warrant Transactions was approximately $13.5. Foreign Facilities In various markets where we do business, we have local credit facilities to meet local working capital demands, fund letters of credit and bank guarantees, and 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. We are permitted to borrow up to USD equivalent $75.7 under certain of our foreign facilities. As of September 30, 2021 and December 31, 2020 there were none outstanding in USD equivalent in borrowings outstanding under these facilities. Certain of our foreign facilities allow us to request bank guarantees and letters of credit. None of these facilities allow revolving credit borrowings. We have foreign letters of credit and bank guarantees that totaled USD equivalent $39.4 and $47.7 as of September 30, 2021 and December 31, 2020, respectively. Letters of Credit L.A. Turbine, a wholly-owned subsidiary of the Company, had $0.2 in deposits in a bank outside of the SSRCF to secure letters of credit as of September 30, 2021. Chart Energy & Chemicals, Inc, a wholly-owned subsidiary of the Company, had $1.0 in deposits in a bank outside of the SSRCF to secure letters of credit as of December 31, 2020. The deposits are treated as restricted cash and restricted cash equivalents in the unaudited condensed consolidated balance sheets. Fair Value Disclosures The fair value of the 2024 Notes was approximately 333% and 210% of their par value as of September 30, 2021 and December 31, 2020, respectively. The 2024 Notes are actively quoted instruments and, accordingly, the fair value of the 2024 Notes was determined using Level 1 inputs. |
