# CHART INDUSTRIES INC (GTLS) FY 2022 MD&A Verbatim Item 7 Management's Discussion and Analysis from CHART INDUSTRIES INC's 10-K for fiscal year 2022. SEC filing source: https://www.sec.gov/Archives/edgar/data/892553/000089255323000043/gtls-20221231.htm Accession: 0000892553-23-000043 Filing date: 2023-02-24 Report date: 2022-12-31 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high Company profile: /company/GTLS/ All MD&A years: /company/GTLS/mda/ Previous year: /company/GTLS/mda/fy2021/ (FY 2021) Next year: /company/GTLS/mda/fy2023/ (FY 2023) Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion of our results of operations and financial condition should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements. Actual results may differ materially from those discussed below. See “Forward-Looking Statements” at the end of this discussion and Item 1A. “Risk Factors” for a discussion of the uncertainties, risks and assumptions associated with this discussion. Overview We are a leading independent global manufacturer of highly engineered cryogenic equipment servicing multiple applications in the industrial gas and clean energy markets. Our unique product portfolio is used in every phase of the liquid gas supply chain, including upfront engineering, service and repair. Being at the forefront of the clean energy transition, Chart is a leading provider of technology, equipment and services related to liquefied natural gas, hydrogen, biogas, CO2 Capture and water treatment, among other applications. We are committed to excellence in environmental, social and corporate governance (ESG) issues both for our company as well as our customers. With 29 global manufacturing locations from the United States to Asia, India and Europe, we maintain accountability and transparency to our team members, suppliers, customers and communities. Macroeconomic Impacts During 2022, we had record backlog, record sales, record gross profit and record operating income due to broad-based demand for our products, strong execution and continued pricing actions. The current conflict between Russia and Ukraine and the related sanctions imposed by countries against Russia as well as heightened tensions between the U.S and China are creating uncertainty in the global economy. While we do not have operations in Russia or Ukraine, we are unable to predict the impact these actions will have on the global economy or on our business, financial condition and results of operations. These events did not have a material adverse effect on our reported results for 2022, however we will continue to actively monitor in terms of their potential impact on our results of operations beyond 2022. Environmental, Social, Governance Chart is proud to be at the forefront of the clean energy transition as a leading provider of technology, equipment and services related to liquefied natural gas, hydrogen, biogas, carbon capture and water treatment, among other applications. We also captured clean power, clean water, clean food and clean industrials as our unique offering for the Nexus of CleanTM. This leadership position is possible not only because we have the broadest offering of clean innovative solutions for the various end markets we serve, but also because we are committed to global responsibility. Reporting our ESG performance is one of the ways we demonstrate accountability and transparency to our team members, suppliers, customers, shareholders and communities. Below are some highlights of our ESG efforts, and further information can be found in our third Annual Sustainability report with scorecard which was released in April 2022. We intend to release our fourth annual sustainability report in April 2023. •We reported a 0.52 Total Recordable Incident Rate (TRIR), a year-end record, for the year ended December 31, 2022, with emphasis on safety as our #1 priority and focus on all team members being empowered and authorized to stop work if they see an unsafe or potentially unsafe situation. •We measure progress through Sustainability Accounting Standards Board (SASB) and Task Force on Climate-Related Financial Disclosures (TCFD) indices, as well as contributing to the Global Reporting Initiative (GRI) and United Nations Sustainable Development Goals (SDGs). •We utilize Riskmethods analytics to proactively monitor our supply chain for proper governance in our supplier network including their climate targets and other ESG activities. •We have a Global ESG Committee, Global Safety Council, and Global Diversity & Inclusion Committee, all comprised of team member volunteers and engagement from our global locations. •Our Global ESG Committee has five sub-committees focused on energy management, zero waste, electrification, renewable energy and water management. •We have recently entered into a sustainability-linked banking agreement with covenants tied to our Green House Gas (“GHG”) emission reductions’ actual performance. •We have set a target to reduce our carbon intensity 30% by 2030 and have specific initiatives in place to help us meet this goal. In 2021, we made progress towards achieving our target by reducing GHG Intensity by almost 14% year-over-year. 28 •In terms of lowering our own emissions, we made plant improvements including energy efficient upgrades for various equipment, replacing diesel powered equipment with electric and installing LED lighting in office spaces. In 2021, Chart reduced Scope 2 emissions by 9.7%. •We are our helping customers to achieve their own sustainability targets in a number of different ways whether that’s through reducing the amount of plastic used in packaging to lowering greenhouse gas emissions by enabling the transition towards cleaner fuels. •We have an independent Board of Directors that is comprised of seven directors (four of our seven directors are female and four of our seven are diverse) and governed with a separate independent Chairwoman and CEO. •We hold quarterly reviews on ESG with our Board of Directors. •We link our executives and their direct reports short-term incentive payout (25% of the strategic and operational goals) to a metric driven, percentage-reduction ESG metric, and have done this for two years. •Our team volunteers in their communities with a focus on supporting children and families, ending hunger and improving health. We offer every team member worldwide one paid day off each year to volunteer in our communities, and we donated over $120,000 to charities in the communities we work in during the 2021 year. In 2021, Chart started matching employee donations up to $250 per employee per year to charitable organizations. •We have an employee relief fund for our own team members that need assistance. •Our team members raised over $30,000 in 2021 and $25,000 in 2022 to support women through Dress For Success. •In 2021, we received the following ESG-oriented recognition: ◦World LNG Award for Energy Transition 2021 Finalist ◦Gastech 2021 Emission Reduction Champion – Organization of the Year Award Winner ◦Gastech 2021 Organisation Championing Diversity & Inclusion Finalist ◦Gastech 2021 Engineering Partnership of the Year Finalist ◦S&P Global Platts Energy Awards Excellence in LNG Finalist (2021) ◦S&P Global Platts Energy Awards Corporate Social Responsibility (Diversified) Award Finalist (2021) •In 2022, we received the following ESG-oriented recognition: ◦S&P Global Platts Energy Awards 2022 “Energy Transition - LNG” Finalist ◦S&P Global Platts Energy Awards 2022 “Deal of the Year - Strategic” Finalist ◦2022 Frost & Sullivan Institute Enlightened Growth Leadership Award ◦goBeyondProfit’s 2022 “In Good Company Report - One of the Most Generous Companies in Georgia (USA)” 2022 Highlights Record order activity contributed to record ending total backlog of $2,338.1 million as of December 31, 2022 compared to $1,190.1 million as of December 31, 2021, representing an increase of $1,148.0 million or 96.5%, which reflects the broad-based demand we continue to see year-over-year across our product categories. The increase in backlog was largely driven by record orders for the year ended December 31, 2022 of $2,779.9 million compared to $1,676.1 million for the year ended December 31, 2021 representing an increase of $1,103.8 million or 65.9%. Record order intake in our Heat Transfer Systems segment of $1,417.6 million for 2022 compared to $312.0 million for 2021, was mainly driven by higher order intake for LNG including big and small-scale LNG, as well as floating LNG during 2022. Record order intake in our Repair, Service & Leasing segment of $218.9 million in 2022 compared to $180.6 million in 2021, was mainly driven by higher order intake within lifecycle services, aftermarket fans and our leasing business. Record orders in our Specialty Products segment for 2022 of $665.5 million compared to $648.6 million for 2021 were mainly driven by strong order intake for hydrogen and helium liquefaction, space, water treatment, carbon capture and other specialty applications. Heat Transfer Systems segment backlog totaled a record $1,300.1 million as of December 31, 2022 compared to $370.4 million as of December 31, 2021. Specialty Products segment backlog totaled a record $645.9 million as of December 31, 2022, compared to $438.2 million as of December 31, 2021. Cryo Tank Solutions segment backlog totaled $371.0 million as of December 31, 2022, also a record high. Consolidated sales increased to a record $1,612.4 million in 2022 from $1,317.7 million in 2021, representing an increase of $294.7 million or 22.4% (20.3% organically), mainly driven by growth in our Heat Transfer Systems segment on favorable sales in process systems related to big and small-scale LNG liquefaction and floating LNG, as well as gains within our Cryo Tank Solutions segment on favorable sales in storage equipment and mobile equipment, within our Repair, Service & Leasing segment on favorable sales in parts, repairs, and services, aftermarket fans, aftermarket air cooled heat exchangers and in our lifecycle business and within our Specialty Products segment on favorable sales in hydrogen and helium applications, water treatment, space applications, food & beverage applications and carbon capture. The consolidated sales increase was bolstered 29 by sales from acquisitions. Consolidated gross profit in 2022 increased by $83.2 million ($74.6 million organically) from $324.2 million to a record $407.4 million or 25.7% compared to 2021. Gross profit margin of 25.3% in 2022 increased from 24.6% in 2021. The increase in gross profit and gross profit margin for 2022 compared to 2021 demonstrates our progress in improvement in our margin profile as we continued to take further pricing and cost reduction actions. Consolidated SG&A expenses as a percentage of consolidated sales for 2022 decreased by 1.6% as compared to 2021 primarily due to the effect of cost reduction actions we took in 2022. Outlook As previously announced, in November of 2022 we signed a definitive agreement to acquire Howden, a leading global provider of mission critical air and gas handling products and services. The combination of Chart and Howden furthers our global leadership position in highly engineered process technologies and products serving the Nexus of CleanTM – clean power, clean water, clean food and clean industrials. We are currently pursuing divestitures of two significant product lines related to the combined business. While these proposed divestitures are at preliminary stages and there can be no assurances of the completion of these activities, we continue to target a completion of these within the next three to six months and continue to anticipate combined proceeds of approximately $500 million from these divestitures. We are reiterating our Chart standalone 2023 sales outlook range of $2.10 billion to $2.20 billion, which includes only big LNG projects that are in backlog as of December 31, 2022. We are confident in achieving this sales range, underpinned by five key themes: (1.) It is not unusual for project revenue to shift between months. We anticipate realizing pushed fourth quarter 2022 revenue in 2023 based on customer and project timing. (2.) Our outlook does not include any additional mid-size or large project orders between now and the end of the first half 2023, which could provide additional revenue in the second half of 2023. (3) Even though we are seeing early end market improvement in HLNG vehicle tank sales, our forecast for HLNG vehicle tanks is flat with 2022. (4.) We head into 2023 with record backlog of $2.34 billion. As of December 31, 2022, we had approximately 60% of the full year 2023 sales outlook already in backlog, which is meaningfully higher than in prior years. (5.) We have existing capacity to delivery on our backlog as well as any potential, high probability, new orders that could materialize throughout the year. Our guidance does not include the operational impact of the pending acquisition with Howden, which is expected to close within the next 45 days. We continue to invest in our automation, process improvement, and productivity activities across Chart, with total anticipated 2023 capital expenditures spend of $60 million to $65 million for our existing business. 30 Operating Results The following table sets forth the percentage relationship that each line item in our consolidated statements of income represents to sales for the years ended December 31, 2022, 2021 and 2020 (dollars in millions): [[GREPCENT_TABLE]] [["","2022","","2021","","2020"],["Sales","100.0","%","","100.0","%","","100.0","%"],["Cost of sales (1)","74.7","","","75.4","","","71.8"],["Gross profit","25.3","","","24.6","","","28.2"],["Selling, general and administrative expenses (2) - (4)","13.3","","","14.9","","","15.1"],["Amortization expense","2.6","","","3.0","","","3.9"],["Asset impairments (5)","\u2014","","","\u2014","","","1.4"],["Operating income","9.4","","","6.7","","","7.8"],["Acquisition related finance fees","2.3","","","\u2014","","","\u2014"],["Interest expense, net","1.8","","","0.8","","","1.5"],["Financing costs amortization (6)","0.2","","","0.6","","","0.4"],["Unrealized gain on investment in equity securities","(0.8)","","","(0.2)","","","(1.1)"],["Realized gain on investment in equity securities","\u2014","","","(0.2)","","","\u2014"],["Foreign currency loss","\u2014","","","0.1","","","0.1"],["Gain on bargain purchase","\u2014","","","\u2014","","","(0.4)"],["Other (income) expense","(0.1)","","","\u2014","","","0.2"],["Income tax expense, net","1.0","","","1.0","","","1.3"],["Net income from continuing operations","5.1","","","4.6","","","6.0"],["Income from discontinued operations, net of tax","(3.6)","","","\u2014","","","20.3"],["Net income","1.6","","","4.6","","","26.3"],["Income attributable to noncontrolling interests, net of taxes","0.1","","","0.1","","","0.1"],["Net income attributable to Chart Industries, Inc.","1.5","","","4.5","","","26.2"]] [[/GREPCENT_TABLE]]  _______________ (1)Cost of sales includes restructuring (credits)/costs of $(1.0), $2.6 and $5.7 for the years ended December 31, 2022, 2021 and 2020, respectively. (2)Selling, general and administrative expenses includes restructuring costs of $0.9 and $7.9 for the years ended December 31, 2021, and 2020, respectively. (3)Includes deal-related and integration costs of $17.6 for the year ended December 31, 2022. (4)Includes share-based compensation expense of $10.6, $11.2 and $8.6, representing 0.7%, 0.8% and 0.7% of sales, for the years ended December 31, 2022, 2021 and 2020, respectively. (5)Includes $16.0 impairment of our trademarks and trade names indefinite-lived intangible assets related to the AXC business in our Heat Transfer Systems segment for the year ended December 31, 2020. (6)In conjunction with the amendment of our credit facilities in 2021, we recognized charges of $4.1 in unamortized debt issuance cost write offs associated with previous credit facilities and new debt issuance costs, which are classified as financing costs amortization in our consolidated income statement for the year ended December 31, 2021. 31 Consolidated Results for the Years Ended December 31, 2022, 2021 and 2020 The following table includes key metrics used to evaluate our business and measure our performance and represents selected financial data for our operating segments for the years ended December 31, 2022, 2021 and 2020 (dollars in millions). Further detailed information regarding our operating segments is presented in Note 4, “Segment and Geographic Information,” of the consolidated financial statements included under Item 15 “Exhibits and Financial Statement Schedules” of this Annual Report on Form 10-K. Selected Segment Financial Information [[GREPCENT_TABLE]] [["","Year Ended December 31,"],["","2022","","2021","","2020"],["Sales"],["Cryo Tank Solutions","$","504.3","","","$","447.4","","","$","415.8"],["Heat Transfer Systems","462.7","","","262.7","","","369.8"],["Specialty Products","448.3","","","432.9","","","242.6"],["Repair, Service & Leasing","209.6","","","187.0","","","158.3"],["Intersegment eliminations","(12.5)","","","(12.3)","","","(9.4)"],["Consolidated","$","1,612.4","","","$","1,317.7","","","$","1,177.1"],["Gross Profit"],["Cryo Tank Solutions","$","98.7","","","$","93.5","","","$","99.5"],["Heat Transfer Systems","90.6","","","35.6","","","93.7"],["Specialty Products","138.6","","","145.5","","","84.3"],["Repair, Service & Leasing","79.5","","","49.6","","","54.6"],["Consolidated","$","407.4","","","$","324.2","","","$","332.1"],["Gross Profit Margin"],["Cryo Tank Solutions","19.6","%","","20.9","%","","23.9","%"],["Heat Transfer Systems","19.6","%","","13.6","%","","25.3","%"],["Specialty Products","30.9","%","","33.6","%","","34.7","%"],["Repair, Service & Leasing","37.9","%","","26.5","%","","34.5","%"],["Consolidated","25.3","%","","24.6","%","","28.2","%"],["SG&A Expenses"],["Cryo Tank Solutions","$","41.8","","","$","38.1","","","$","41.7"],["Heat Transfer Systems","24.0","","","28.1","","","36.6"],["Specialty Products","55.6","","","43.3","","","22.2"],["Repair, Service & Leasing","15.2","","","17.8","","","15.3"],["Corporate","77.9","","","69.5","","","62.4"],["Consolidated","$","214.5","","","$","196.8","","","$","178.2"],["SG&A Expenses (% of Sales)"],["Cryo Tank Solutions","8.3","%","","8.5","%","","10.0","%"],["Heat Transfer Systems","5.2","%","","10.7","%","","9.9","%"],["Specialty Products","12.4","%","","10.0","%","","9.2","%"],["Repair, Service & Leasing","7.3","%","","9.5","%","","9.7","%"],["Consolidated","13.3","%","","14.9","%","","15.1","%"],["Operating Income (Loss) (1)"],["Cryo Tank Solutions","$","54.0","","","$","52.9","","","$","52.5"],["Heat Transfer Systems (2)","51.7","","","(12.3)","","","11.2"],["Specialty Products","72.9","","","94.1","","","60.7"],["Repair, Service & Leasing","51.0","","","23.3","","","30.3"],["Corporate (3)","(78.1)","","","(69.5)","","","(62.5)"],["Consolidated","$","151.5","","","$","88.5","","","$","92.2"]] [[/GREPCENT_TABLE]] 32 [[GREPCENT_TABLE]] [["Operating Margin"],["Cryo Tank Solutions","10.7","%","","11.8","%","","12.6","%"],["Heat Transfer Systems","11.2","%","","(4.7)","%","","3.0","%"],["Specialty Products","16.3","%","","21.7","%","","25.0","%"],["Repair, Service & Leasing","24.3","%","","12.5","%","","19.1","%"],["Consolidated","9.4","%","","6.7","%","","7.8","%"]] [[/GREPCENT_TABLE]] _______________ (1)Restructuring (credits)/charges for the years ended: •December 31, 2022 were $(1.0) ($0.1 – Cryo Tank Solutions, $0.3 – Heat Transfer Systems and $(1.4) – Repair, Service & Leasing); •December 31, 2021 were $3.5 ($0.3 – Cryo Tank Solutions, $1.7 – Heat Transfer Systems, $1.5 – Repair, Service & Leasing); and •December 31, 2020 were $13.6 ($2.7 – Cryo Tank Solutions, $7.4 – Heat Transfer Systems, $0.7 – Specialty Products, $0.2 – Repair, Service & Leasing and $2.6 – Corporate). (2)Includes $16.0 impairment of our trademarks and trade names indefinite-lived intangible assets related to the AXC business in our Heat Transfer Systems segment for the year ended December 31, 2020. (3)Includes deal-related and integration costs of $17.6 for the year ended December 31, 2022. Results of Operations for the Years Ended December 31, 2022 and 2021 Sales in 2022 increased by $294.7 million ($258.6 million organically), from $1,317.7 million to a record $1,612.4 million, or 22.4%. This increase was primarily driven by growth in our Heat Transfer Systems segment on favorable sales in process systems related to big and small-scale LNG liquefaction and floating LNG, as well as gains within our Cryo Tank Solutions segment on favorable sales in storage equipment and mobile equipment, within our Repair, Service & Leasing segment on favorable sales in parts, repairs, and services, aftermarket fans, aftermarket air cooled heat exchangers and in our lifecycle business and within our Specialty Products segment on favorable sales in hydrogen and helium applications, water treatment, space applications, food & beverage applications and carbon capture. Gross profit in 2022 increased by $83.2 million ($74.6 million organically) from $324.2 million to $407.4 million or 25.7% compared to 2021. Gross profit margin of 25.3% in 2022 increased from 24.6% in 2021. The increase in gross profit and gross profit margin for 2022 compared to 2021 was primarily driven by product mix and pricing and cost reduction actions we took for all segments overall. Restructuring (credits)/costs recorded to cost of sales were $(1.0) million and $2.6 million for the years ended December 31, 2022 and 2021, respectively. Consolidated SG&A expenses increased by $17.7 million or 9.0% ($8.9 million organically) during 2022 compared to the same period in 2021 primarily driven by higher employee-related costs while consolidated SG&A expenses as a percentage of consolidated sales for 2022 decreased by 1.6% as compared to 2021 primarily due to the effect of cost reduction actions we took in 2022. Acquisition Related Finance Fees Acquisition related finance fees for the year ended December 31, 2022 were $37.0 million related to financing for our pending Acquisition of Howden. There were no acquisition related finance fees for the year ended December 31, 2021. Interest Expense, Net and Financing Costs Amortization Interest expense, net for the year ended December 31, 2022 and 2021 was $28.8 million and $10.7 million, respectively. The increase in interest expense, net, is primarily due to higher borrowings outstanding and higher average interest rates during 2022 on our senior secured revolving credit facility due October 2026, as compared to borrowings outstanding and average interest rates on our previous senior secured revolving credit facility and term loan due June 2024 during 2021 as well as borrowings related to our senior secured notes due 2030 and senior unsecured notes due 2031, which were issued on December 22, 2022. The increase was partially offset by interest income of $1.3 million from our cross-currency swaps entered into during 2022. Interest expense, net for the year ended December 31, 2022 included $4.0 million of 1.5% cash interest expense related to our convertible notes due November 2024. Interest expense, net for the year ended December 31, 2021 included $2.6 million of 1.0% cash interest expense related to our convertible notes due November 2024. Interest expense, net for the year ended December 31, 2022 and 2021 included $23.4 million and $9.0 million, respectively, in interest related to borrowings on our current senior secured revolving credit facility due 2026 and previous senior secured revolving credit facility and term loan 33 due 2024. Interest expense, net for the year ended December 31, 2022 related to borrowings on our senior secured notes due 2030 and senior unsecured notes due 2031 was $3.0 million and $1.3 million, respectively. For 2022 and 2021, financing costs amortization was $2.9 million and $8.3 million, respectively. The decrease of $5.4 million was primarily due to the amendment of our credit facilities during the fourth quarter of 2021 and the related write off of the unamortized deferred debt issuance costs associated with the senior secured revolving credit facility due June 2024 and the term loan due June 2024, respectively. In conjunction with the amendment of our credit facilities in the fourth quarter of 2021, we recorded charges to net income of $3.8 million of the unamortized deferred debt issuance costs associated with the senior secured revolving credit facility due 2024 and the term loan due June 2024 as well as $0.3 million in new debt issuance costs resulting in a total one-time charge to net income of $4.1 million. Unrealized Gain On Investments In Equity Securities During 2022, we recognized an unrealized gain on investments in equity securities of $13.1 million, which was driven by an unrealized gain of $23.3 million upon remeasurement of the Svante investment due to an observable price change in an orderly transaction for similar instruments of the same issuer and a $1.6 million unrealized gain on the mark-to-market adjustment of our investment in Stabilis, partially offset by a $11.8 million unrealized loss on the mark-to-market adjustment of our investment in McPhy. During 2021, we recognized an unrealized gain on investments in equity securities of $3.2 million, which was driven by an unrealized gain of $20.7 million upon remeasurement of the initial HTEC investment due to an observable price change in an orderly transaction for similar instruments of the same issuer and a $2.2 million unrealized gain on the mark-to-market adjustment of our investment in Stabilis, partially offset by a $19.7 million unrealized loss on the mark-to-market adjustment of our investment in McPhy. Foreign Currency (Gain) Loss For the year ended December 31, 2022, foreign currency gain was $0.8 million, and for the year ended December 31, 2021 foreign currency loss was $0.9 million. The variance between periods was primarily driven by fluctuations in the U.S dollar as compared to the euro and Chinese yuan. Income Tax Expense Income tax expense of $15.9 million and $13.5 million for the years ended December 31, 2022 and 2021, respectively, represents taxes on both U.S. and foreign earnings at a combined effective income tax rate of 16.1% and 18.2%, respectively. The effective income tax rate of 16.1% for the year ended December 31, 2022 differed from the U.S. federal statutory rate of 21% due primarily to tax benefits associated with the release of previously booked valuation allowances, research and development credits and share-based compensation offset by the effect of income earned by certain of our foreign entities being taxed at higher rates than the federal statutory rate. The effective income tax rate of 18.2% for the year ended December 31, 2021 differed from the U.S. federal statutory rate of 21% primarily due to tax benefits associated with share-based compensation and the release of previously booked valuation allowances offset by the effect of income earned by certain of our foreign entities being taxed at higher rates than the federal statutory rate as well as increases in our state taxes due to expansion in new jurisdictions. Net Income Attributable to Chart Industries, Inc. From Continuing Operations As a result of the foregoing, net income attributable to Chart Industries, Inc. from continuing operations was $81.6 million and $59.1 million for 2022 and 2021, respectively. Net income attributable to Chart common stockholders after discontinued operations was $22.6 million. Results of Operations for the Years Ended December 31, 2021 and 2020 Sales in 2021 increased by $140.6 million ($70.9 million organically), from $1,177.1 million to $1,317.7 million, or 11.9%. This increase was primarily driven by growth in our Specialty Products segment on favorable sales in hydrogen and helium applications, HLNG vehicle tanks, water treatment equipment sales and food & beverage applications, within our Cryo Tank Solutions segment on favorable sales in mobile equipment, engineered tanks and storage systems, and within our Repair, Service & Leasing segment on favorable sales in our leasing business. This increase was partially offset by softness in demand for midstream and upstream compression equipment and timing of sales recognized relative to Calcasieu Pass within our Heat Transfer Systems segment. Gross profit in 2021 decreased by $7.9 million ($32.6 million decrease organically) from $332.1 million to $324.2 million or 2.4% compared to 2020. Gross profit margin of 24.6% in 2021 decreased from 28.2% in 2020. The decrease in gross profit margin for 2021 compared to 2020 was primarily driven by macroeconomic conditions as our price increases lagged more than 34 the anticipated rapidly accelerating material prices and freight costs for all segments overall and Calcasieu Pass volume mix which drove higher margins in 2020 in our Heat Transfer Systems segment, partially offset by higher gross profit margins within certain recently acquired businesses. Restructuring costs recorded to cost of sales were $2.6 million and $5.7 million for the years ended December 31, 2021 and 2020, respectively. Consolidated SG&A expenses increased by $18.6 million, or 10.4% during 2021 compared to the same period in 2020 primarily driven by a ramp up in our Specialty Products business which drove higher SG&A expenses in the segment, SG&A expenses related to acquisitions and higher share-based compensation expense in Corporate, partially offset by lower SG&A expenses in our Heat Transfer Systems segment due to lower employee-related costs and in our Cryo Tank Solutions segment due to a $2.6 million gain on sale of a facility in China included in SG&A expenses for the year ended December 31, 2020. Furthermore, lower restructuring costs were recorded to consolidated SG&A expenses, which were $0.1 million and $2.4 million for the years ended December 31, 2021 and 2020, respectively. Asset Impairments We recorded an impairment loss of $16.0 million during 2020 relative to our $55.0 million trademarks and trade names indefinite-lived intangible asset of our AXC business (“AXC Intangible Asset”) in our Heat Transfer Systems segment. Industry-wide softness in demand for midstream and upstream compression equipment represented impairment indicators requiring us to re-evaluate the fair value of the AXC Intangible Asset. We determined the fair value of the AXC Intangible Asset under the relief-from-royalty method and conducted an impairment test as defined in the Critical Accounting Estimates section. We determined that the fair value of the AXC Intangible Asset was $39.0 million and impaired the AXC Intangible Asset by a value equal to the difference in the carrying amount and calculated fair value. Interest Expense, Net and Financing Costs Amortization Interest expense, net for the year ended December 31, 2021 and 2020 was $10.7 million and $17.7 million, respectively. The decrease in interest expense, net, is primarily due to lower borrowings outstanding on our term loan due June 2024 during 2021 as compared to 2020. Furthermore, we no longer recognize interest accretion of convertible notes discount due to a change in accounting principle adopted at the beginning of fiscal year 2021 whereas we recognized $8.0 million in interest accretion expense in 2020. For further information regarding the change in accounting principle, refer to Note 2, “Significant Accounting Policies” in this report. Interest expense, net for both the years ended December 31, 2021 and 2020 included $2.6 million of 1.0% cash interest and $9.0 million and $7.0 million in interest related to borrowings on our previous and current senior secured revolving credit facility, respectively. For 2021 and 2020, financing costs amortization was $8.3 million and $4.3 million, respectively. The increase of $4.0 million was primarily due to the amendment of our credit facilities during the fourth quarter of 2021 and the related write off of the unamortized deferred debt issuance costs associated with the senior secured revolving credit facility due June 2024 and the term loan due June 2024, respectively. In conjunction with the amendment of our credit facilities, we recorded charges to net income of $3.8 million of the unamortized deferred debt issuance costs associated with the senior secured revolving credit facility due 2024 and the term loan due June 2024 as well as $0.3 million in new debt issuance costs resulting in a total one-time charge to net income of $4.1 million. Unrealized Gain On Investments In Equity Securities During 2021, we recognized an unrealized gain on investments in equity securities of $3.2 million, which was driven by an unrealized gain of $20.7 million upon remeasurement of the initial HTEC investment due to an observable price change in an orderly transaction for similar instruments of the same issuer and a $2.2 million unrealized gain on the mark-to-market adjustment of our investment in Stabilis, partially offset by a $19.7 million unrealized loss on the mark-to-market adjustment of our investment in McPhy. During 2020, we recognized an unrealized gain of $17.0 million on the mark-to-market adjustment of our investment in McPhy, partially offset by a $2.9 million unrealized loss on the mark-to-market adjustment of our investment in Stabilis. Realized Gain on Investment In Equity Securities On December 14, 2021 we completed the acquisition of the remaining 85% of the shares of Earthly Labs. On the acquisition date, we recognized a gain of $2.6 million on the remeasurement of our initial 15% investment, which is recorded as realized gain on investment in equity securities in the consolidated statement of income for the year ended December 31, 2021. Foreign Currency (Gain) Loss Foreign currency losses were $0.9 million in both of the years ended December 31, 2021 and 2020. Foreign currency fluctuates due to exchange rate volatility, especially with respect to the euro and Chinese yuan. 35 Gain on Bargain Purchase As a result of the October 13, 2020 Alabama Trailers acquisition, we recorded a bargain purchase gain of $5.0 million for the year ended December 31, 2020. Income Tax Expense Income tax expense of $13.5 million and $14.9 million for the years ended December 31, 2021 and 2020, respectively, represents taxes on both U.S. and foreign earnings at a combined effective income tax rate of 18.2% and 17.5%, respectively. The effective income tax rate of 18.2% for the year ended December 31, 2021 differed from the U.S. federal statutory rate of 21% primarily due to tax benefits associated with share-based compensation and the release of previously booked valuation allowances offset by the effect of income earned by certain of our foreign entities being taxed at higher rates than the federal statutory rate as well as increases in our state taxes due to expansion into new jurisdictions. The effective income tax rate of 17.5% for the year ended December 31, 2020 differed from the U.S. federal statutory rate of 21% primarily due to tax benefits associated with share-based compensation and the Alabama Trailers bargain purchase gain offset by the effect of income earned by certain of our foreign entities being taxed at higher rates than the federal statutory rate as well as losses incurred by certain of our Chinese operations for which no benefit was recorded. Net Income Attributable to Chart Industries, Inc. From Continuing Operations As a result of the foregoing, net income attributable to Chart Industries, Inc. from continuing operations was $59.1 million and $68.9 million for 2021 and 2020, respectively. Discontinued Operations The financial results of our cryobiological products business are reflected in our consolidated financial statements as discontinued operations for the years ended December 31, 2022 and December 31, 2020 including the net out-of-pocket settlement amounts in connection with the PFC litigation, as described in Part I, Item 3. Legal Proceedings described herein. For further information, refer to Note 3, “Discontinued Operations.” 36 Segment Results for the Years Ended December 31, 2022, 2021 and 2020 Our reportable and operating segments include: Cryo Tank Solutions, Heat Transfer Systems, Specialty Products and Repair, Service & Leasing. Corporate includes operating expenses for executive management, accounting, tax, treasury, corporate development, human resources, information technology, investor relations, legal, internal audit, and risk management. Corporate support functions are not currently allocated to the segments. For further information, refer to Note 4, “Segment and Geographic Information” of our consolidated financial statements included under Item 15, “Exhibits and Financial Statement Schedules” of this Annual Report on Form 10-K. The following tables include key metrics used to evaluate our business and measure our performance and represents selected financial data for our operating segments for the years ended December 31, 2022, 2021 and 2020 (dollars in millions): Cryo Tank Solutions—Results of Operations for the Years Ended December 31, 2022 and 2021 [[GREPCENT_TABLE]] [["","Year Ended December 31,","","2022 vs. 2021"],["","2022","","2021","","Variance ($)","","Variance (%)"],["Sales","$","504.3","","","$","447.4","","","$","56.9","","","12.7","%"],["Gross Profit","98.7","","","93.5","","","5.2","","","5.6","%"],["Gross Profit Margin","19.6","%","","20.9","%"],["SG&A Expenses","$","41.8","","","$","38.1","","","$","3.7","","","9.7","%"],["SG&A Expenses (% of Sales)","8.3","%","","8.5","%"],["Operating Income","$","54.0","","","$","52.9","","","$","1.1","","","2.1","%"],["Operating Margin","10.7","%","","11.8","%"]] [[/GREPCENT_TABLE]] Cryo Tank Solutions segment sales increased by $56.9 million during 2022 as compared to 2021 to a record $504.3 million. As mentioned in the results of operations above, this increase was mainly driven by favorable sales in storage equipment in the U.S. and Europe and mobile equipment in the U.S. Cryo Tank Solutions segment gross profit increased by $5.2 million during 2022 as compared to 2021 primarily due to higher volume, while gross profit margin decreased by 130 basis points. The decrease in gross profit margin was mainly driven by higher material prices and higher labor costs due to macroeconomic conditions. Cryo Tank Solutions SG&A expenses increased during 2022 as compared to 2021 while SG&A expenses as a percentage of sales improved by 20 basis points. The increase in SG&A expenses was mainly due to higher employee-related costs. Cryo Tank Solutions—Results of Operations for the Years Ended December 31, 2021 and 2020 [[GREPCENT_TABLE]] [["","Year Ended December 31,","","2021 vs. 2020"],["","2021","","2020","","Variance ($)","","Variance (%)"],["Sales","$","447.4","","","$","415.8","","","$","31.6","","","7.6","%"],["Gross Profit","93.5","","","99.5","","","(6.0)","","","(6.0)","%"],["Gross Profit Margin","20.9","%","","23.9","%"],["SG&A Expenses","$","38.1","","","$","41.7","","","$","(3.6)","","","(8.6)","%"],["SG&A Expenses (% of Sales)","8.5","%","","10.0","%"],["Operating Income","$","52.9","","","$","52.5","","","$","0.4","","","0.8","%"],["Operating Margin","11.8","%","","12.6","%"]] [[/GREPCENT_TABLE]] Cryo Tank Solutions segment sales increased by $31.6 million during 2021 as compared to 2020. This increase was mainly driven by higher sales in mobile equipment, engineered tanks and storage systems with strong performance in China, India and Germany. Cryo Tank Solutions segment gross profit decreased by $6.0 million during 2021 as compared to 2020, and gross profit margin decreased by 300 basis points. The decrease in gross profit and gross profit margin was mainly driven by higher material prices and higher labor costs due to macroeconomic conditions. Cryo Tank Solutions segment SG&A expenses decreased during 2021 as compared to 2020. Furthermore, Cryo Tank Solutions segment SG&A expenses as a percentage of Cryo Tank Solutions segment sales improved by 150 basis points in 37 2021 as compared to 2020. Cryo Tank Solutions SG&A expenses for the year ended December 31, 2020 include a $2.6 million gain on sale of a facility in China. Additionally, restructuring expenses were $0.3 million in 2021 as compared to $2.3 million in 2020. Heat Transfer Systems—Results of Operations for the Years Ended December 31, 2022 and 2021 [[GREPCENT_TABLE]] [["","Year Ended December 31,","","2022 vs. 2021"],["","2022","","2021","","Variance ($)","","Variance (%)"],["Sales","$","462.7","","","$","262.7","","","$","200.0","","","76.1","%"],["Gross Profit","90.6","","","35.6","","","55.0","","","154.5","%"],["Gross Profit Margin","19.6","%","","13.6","%"],["SG&A Expenses","$","24.0","","","$","28.1","","","$","(4.1)","","","(14.6)","%"],["SG&A Expenses (% of Sales)","5.2","%","","10.7","%"],["Operating Income (Loss)","$","51.7","","","$","(12.3)","","","$","64.0","","","(520.3)","%"],["Operating Margin","11.2","%","","(4.7)","%"]] [[/GREPCENT_TABLE]] Heat Transfer Systems segment sales increased by $200.0 million during 2022 as compared to 2021 to a record $462.7 million. As previously mentioned in the results of operations section above, the increase was primarily driven by sales in small-scale, floating LNG and big LNG. Heat Transfer Systems segment gross profit increased by $55.0 million during 2022 as compared to 2021, and gross profit margin increased by 600 basis points. The increase in Heat Transfer Systems segment gross profit was primarily due to overall product and project volume mix. Heat Transfer Systems segment SG&A expenses decreased by $4.1 million during 2022 as compared to 2021 and SG&A expenses as a percentage of sales improved by 550 basis points. The decrease in SG&A expenses was mainly due to lower employee-related costs. Heat Transfer Systems—Results of Operations for the Years Ended December 31, 2021 and 2020 [[GREPCENT_TABLE]] [["","Year Ended December 31,","","2021 vs. 2020"],["","2021","","2020","","Variance ($)","","Variance (%)"],["Sales","$","262.7","","","$","369.8","","","$","(107.1)","","","(29.0)","%"],["Gross Profit","35.6","","","93.7","","","(58.1)","","","(62.0)","%"],["Gross Profit Margin","13.6","%","","25.3","%"],["SG&A Expenses","$","28.1","","","$","36.6","","","$","(8.5)","","","(23.2)","%"],["SG&A Expenses (% of Sales)","10.7","%","","9.9","%"],["Operating Income","$","(12.3)","","","$","11.2","","","$","(23.5)","","","(209.8)","%"],["Operating Margin","(4.7)","%","","3.0","%"]] [[/GREPCENT_TABLE]] Heat Transfer Systems segment sales decreased by $107.1 million during 2021 as compared to 2020. During 2021, we recognized $20.1 million in sales relative to Calcasieu Pass as compared to $97.7 million in 2020. The decrease was driven by industry-wide softness in demand for midstream and upstream compression equipment. Heat Transfer Systems segment gross profit decreased by $58.1 million during 2021 compared to 2020, and gross profit margin decreased by 1,170 basis points driven by lower volume, partially offset by lower restructuring costs. The decrease in Heat Transfer Systems segment gross profit was primarily due to overall product and project volume mix, including Calcasieu Pass, which drove higher gross profit margin in 2020. Heat Transfer Systems segment SG&A expenses decreased by $8.5 million during 2021 as compared to 2020 mainly due to lower restructuring costs and lower employee-related costs. Heat Transfer Systems operating income decreased by $23.5 million during 2021 as compared to 2020 due to industry-wide softness in demand for midstream and upstream compression equipment and overall product and project volume mix, including Calcasieu Pass. During 2020, we recorded an impairment loss of $16.0 million to our AXC Intangible Asset. 38 Specialty Products—Results of Operations for the Years Ended December 31, 2022 and 2021 [[GREPCENT_TABLE]] [["","Year Ended December 31,","","2022 vs. 2021"],["","2022","","2021","","Variance ($)","","Variance (%)"],["Sales","$","448.3","","","$","432.9","","","$","15.4","","","3.6","%"],["Gross Profit","138.6","","","145.5","","","(6.9)","","","(4.7)","%"],["Gross Profit Margin","30.9","%","","33.6","%"],["SG&A Expenses","$","55.6","","","$","43.3","","","$","12.3","","","28.4","%"],["SG&A Expenses (% of Sales)","12.4","%","","10.0","%"],["Operating Income","$","72.9","","","$","94.1","","","$","(21.2)","","","(22.5)","%"],["Operating Margin","16.3","%","","21.7","%"]] [[/GREPCENT_TABLE]] Specialty Products segment sales increased by $15.4 million during 2022 as compared to 2021 to a record $448.3 million. Similar to the comments previously mentioned in the results of operations section, the increase in Specialty Products sales was primarily driven by favorable sales in hydrogen and helium applications, water treatment, space applications, food & beverage applications and carbon capture. The sales increase was almost fully offset by a 79.2% decline in HLNG vehicle tank sales driven by higher natural gas prices and our customers’ availability of semiconductors due to macroeconomic conditions. Specialty Products segment gross profit decreased by $6.9 million during 2022 as compared to 2021, and gross profit margin decreased by 270 basis points largely due to stronger HLNG vehicle tank sales in 2021 as compared to 2022. The decrease in gross profit and the related margin was mainly driven by overall product and project volume mix. Specialty Products segment SG&A expenses increased by $12.3 million during 2022 as compared to 2021 primarily driven by ramp up in the business and acquisition additions. Specialty Products—Results of Operations for the Years Ended December 31, 2021 and 2020 [[GREPCENT_TABLE]] [["","Year Ended December 31,","","2021 vs. 2020"],["","2021","","2020","","Variance ($)","","Variance (%)"],["Sales","$","432.9","","","$","242.6","","","$","190.3","","","78.4","%"],["Gross Profit","145.5","","","84.3","","","61.2","","","72.6","%"],["Gross Profit Margin","33.6","%","","34.7","%"],["SG&A Expenses","$","43.3","","","$","22.2","","","$","21.1","","","95.0","%"],["SG&A Expenses (% of Sales)","10.0","%","","9.2","%"],["Operating Income","$","94.1","","","$","60.7","","","$","33.4","","","55.0","%"],["Operating Margin","21.7","%","","25.0","%"]] [[/GREPCENT_TABLE]] Specialty Products segment sales increased by $190.3 million ($126.6 million organically) during 2021 as compared to 2020 to $432.9 million. The increase in Specialty Products sales was primarily driven by favorable sales in hydrogen and helium applications, HLNG vehicle tanks, water treatment and food & beverage applications, each of which had double digit growth during 2021 as compared to 2020. This increase was bolstered by inorganic additions during 2021. The increase in sales for water treatment equipment sales primarily related to our acquisitions of BlueInGreen, LLC and AdEdge. Specialty Products segment gross profit increased by $61.2 million ($38.9 million organically) during 2021 as compared to 2020 primarily due to higher volume while gross profit margin decreased by 110 basis points. The decrease in gross profit margin was mainly driven by higher material prices and higher labor costs due to macroeconomic conditions. Specialty Products segment SG&A expenses increased by $21.1 million ($13.0 million organically) during 2021 as compared to 2020 primarily driven by ramp up in the business. Furthermore, Specialty Products segment SG&A expenses included $1.1 million relative to acquisition-related contingent consideration adjustments recognized during 2021. 39 Repair, Service & Leasing—Results of Operations for the Years Ended December 31, 2022 and 2021 [[GREPCENT_TABLE]] [["","Year Ended December 31,","","2022 vs. 2021"],["","2022","","2021","","Variance ($)","","Variance (%)"],["Sales","$","209.6","","","$","187.0","","","$","22.6","","","12.1","%"],["Gross Profit","79.5","","","49.6","","","29.9","","","60.3","%"],["Gross Profit Margin","37.9","%","","26.5","%"],["SG&A Expenses","$","15.2","","","$","17.8","","","$","(2.6)","","","(14.6)","%"],["SG&A Expenses (% of Sales)","7.3","%","","9.5","%"],["Operating Income","$","51.0","","","$","23.3","","","$","27.7","","","118.9","%"],["Operating Margin","24.3","%","","12.5","%"]] [[/GREPCENT_TABLE]] Repair, Service & Leasing segment sales increased by $22.6 million during 2022 as compared to 2021 to a record $209.6 million. Similar to the comments previously mentioned in the results of operations section, the increase was mainly driven by favorable sales in parts, repairs, and services, aftermarket fans, aftermarket air cooled heat exchangers and in our lifecycle business. Repair, Service & Leasing segment gross profit increased by $29.9 million during 2022 as compared to 2021 to a record $79.5 million, and gross profit margin increased by 1,140 basis points to a record 37.9%. The increase in gross profit and the related margin was driven by more high margin, short-lead time replacement equipment sales during 2022 as compared to 2021. Furthermore, during 2021 we incurred unfavorable material costs relative to our leasing business which we did not incur during 2022. Repair, Service & Leasing segment SG&A expenses decreased by $2.6 million during 2022 as compared to 2021. SG&A expenses as a percentage of sales improved by 220 basis points as a result of large aftermarket sales without incremental SG&A. Repair, Service & Leasing—Results of Operations for the Years Ended December 31, 2021 and 2020 [[GREPCENT_TABLE]] [["","Year Ended December 31,","","2021 vs. 2020"],["","2021","","2020","","Variance ($)","","Variance (%)"],["Sales","$","187.0","","","$","158.3","","","$","28.7","","","18.1","%"],["Gross Profit","49.6","","","54.6","","","(5.0)","","","(9.2)","%"],["Gross Profit Margin","26.5","%","","34.5","%"],["SG&A Expenses","$","17.8","","","$","15.3","","","$","2.5","","","16.3","%"],["SG&A Expenses (% of Sales)","9.5","%","","9.7","%"],["Operating Income","$","23.3","","","$","30.3","","","$","(7.0)","","","(23.1)","%"],["Operating Margin","12.5","%","","19.1","%"]] [[/GREPCENT_TABLE]] Repair, Service & Leasing segment sales increased by $28.7 million during 2021 as compared to 2020. The increase was mainly driven by favorable sales in our leasing business, partially offset by a decrease in sales within our full lifecycle services business. Repair, Service & Leasing segment gross profit decreased by $5.0 million during 2021 as compared to 2020, and gross profit margin decreased by 800 basis points. The decrease in gross profit margin was mainly driven by unfavorable material costs relative to our leasing business and fewer high margin, short-lead time replacement equipment sales in 2021 as compared to 2020. Repair, Service & Leasing segment SG&A expenses increased by $2.5 million during 2021 as compared to 2020. L.A. Turbine SG&A expenses of $2.4 million are included in Repair, Service & Leasing segment results since the July 1, 2021 acquisition date. Excluding L.A. Turbine, SG&A expenses remained relatively flat between years. Corporate Corporate SG&A expenses increased by $8.4 million during 2022 as compared to 2021 mainly due to higher employee-related costs. Corporate SG&A expenses increased by $7.1 million during 2021 as compared to 2020 mainly due to higher 40 share-based compensation expense, information technology costs and legal fees partially offset by lower employee-related costs. Orders and Backlog We consider orders to be those for which we have received a firm signed purchase order or other written contractual commitment from the customer. Backlog is comprised of the portion of firm signed purchase orders or other written contractual commitments from customers for which work has not been performed, or is partially completed, that we have not recognized as revenue and excludes unexercised contract options and potential orders. Our backlog as of December 31, 2022, 2021 and 2020 was $2,338.1 million, $1,190.1 million and $810.0 million, respectively. The tables below represent orders received and backlog by segment for the periods indicated (dollar amounts in millions): [[GREPCENT_TABLE]] [["","Year Ended December 31,"],["","2022","","2021","","2020"],["Orders"],["Cryo Tank Solutions","$","508.4","","","$","555.4","","","$","417.5"],["Heat Transfer Systems","1,417.6","","","312.0","","","331.1"],["Specialty Products","665.5","","","648.6","","","279.2"],["Repair, Service & Leasing","218.9","","","180.6","","","196.8"],["Intersegment eliminations","(30.5)","","","(20.5)","","","(14.5)"],["Consolidated","$","2,779.9","","","$","1,676.1","","","$","1,210.1"],["","As of December 31,"],["","2022","","2021","","2020"],["Backlog"],["Cryo Tank Solutions","$","371.0","","","$","346.8","","","$","222.6"],["Heat Transfer Systems","1,300.1","","","370.4","","","329.2"],["Specialty Products","645.9","","","438.2","","","199.7"],["Repair, Service & Leasing","57.0","","","56.5","","","63.1"],["Intersegment eliminations","(35.9)","","","(21.8)","","","(4.6)"],["Consolidated","$","2,338.1","","","$","1,190.1","","","$","810.0"]] [[/GREPCENT_TABLE]] Orders and Backlog for the Year Ended and As of December 31, 2022 Compared to the Year Ended and As of December 31, 2021 Cryo Tank Solutions segment orders for 2022 were $508.4 million, as compared to $555.4 million for 2021, a decrease of $47.0 million. This decrease was driven by lower order intake for mobile equipment and storage equipment due to timing shifts of customer orders. Cryo Tank Solutions segment backlog totaled $371.0 million as of December 31, 2022, a record high, compared to $346.8 million as of December 31, 2021, an increase of $24.2 million. Heat Transfer Systems segment orders for 2022 were a record $1,417.6 million compared to $312.0 million for 2021, an increase of $1,105.6 million mainly driven by higher order intake for LNG including big and small-scale LNG, as well as floating LNG. Heat Transfer Systems segment backlog totaled a record $1,300.1 million as of December 31, 2022 compared to $370.4 million as of December 31, 2021, an increase of $929.7 million. Specialty Products segment orders for 2022 were a record $665.5 million compared to $648.6 million for 2021, an increase of $16.9 million. Comparatively, during 2022 we recorded hydrogen and helium orders of $300.1 million that included four liquefaction orders totaling $194.4 million whereas during 2021 we recorded hydrogen and helium orders of $282.1 million that included four liquefaction orders totaling approximately $150.0 million. The increase in orders was also attributed to an increase in space, water treatment, carbon capture and other specialty applications partially offset by lower order intake for HLNG vehicle tanks driven by higher natural gas prices and our customers’ availability of semiconductors due to macroeconomic conditions. Specialty Products segment backlog totaled a record $645.9 million as of December 31, 2022, compared to $438.2 million as of December 31, 2021, an increase of $207.7 million. Repair, Service & Leasing segment orders for 2022 were a record $218.9 million compared to $180.6 million in 2021, an increase of $38.3 million. The increase was primarily driven by higher order intake within lifecycle services, aftermarket fans 41 and our leasing business. Repair, Service & Leasing segment backlog totaled $57.0 million as of December 31, 2022, compared to $56.5 million as of December 31, 2021, an increase of $0.5 million. Orders and Backlog for the Year Ended and As of December 31, 2021 Compared to the Year Ended and As of December 31, 2020 Cryo Tank Solutions segment orders for 2021 were $555.4 million, as compared to $417.5 million for 2020, an increase of $137.9 million. This increase was driven by favorable order intake for standard tanks and mobile equipment as a result of higher pre-order activity, especially in the second quarter of 2021, as customers anticipated higher prices in future periods. Cryo Tank Solutions segment backlog totaled $346.8 million as of December 31, 2021, compared to $222.6 million as of December 31, 2020, an increase of $124.2 million. Heat Transfer Systems segment orders for 2021 were $312.0 million (net of a $14.4 million change order) compared to $331.1 million for 2020, a decrease of $19.1 million mainly driven by softness in demand for natural gas compression equipment. Included in 2020 Heat Transfer Systems segment orders was a $70 million order for a downstream project (100% air cooled heat exchangers). Heat Transfer Systems segment backlog totaled $370.4 million as of December 31, 2021 compared to $329.2 million as of December 31, 2020, an increase of $41.2 million. Specialty Products segment orders for 2021 were $648.6 million ($494.0 million organically) compared to $279.2 million ($277.0 million organically) for 2020, an increase of $369.4 million ($217.0 million organically). This increase was mainly driven by strong orders in hydrogen and helium (liquefaction, distribution and storage), HLNG vehicle tanks, LNG regasification, laser applications and food & beverage applications. During 2021, we recorded four hydrogen/helium liquefaction orders totaling approximately $150 million, covering three different geographies and three different customers. The increase in orders was also attributed to an increase in food & beverage applications and favorable water treatment equipment solutions primarily related to our recent acquisitions of BlueInGreen, LLC and AdEdge. Specialty Products segment backlog totaled $438.2 million ($320.4 million organically) as of December 31, 2021, compared to $199.7 million ($191.5 million organically) as of December 31, 2020, an increase of $238.5 million ($128.9 million organically). Repair, Service & Leasing segment orders for 2021 were $180.6 million compared to $196.8 million for 2020, a decrease of $16.2 million. This decrease was primarily driven by fewer high margin, short-lead time replacement equipment orders in 2021 as compared to 2020 and significant orders for ISO containers for LNG applications received in 2020, partially offset by higher aftermarket fans and air cooled heat exchangers. Furthermore, orders in our leasing and spare parts businesses were fairly consistent between periods. Repair, Service & Leasing segment backlog totaled $56.5 million as of December 31, 2021, compared to $63.1 million as of December 31, 2020, a decrease of $6.6 million. Liquidity and Capital Resources In connection with the funding of the proposed Howden acquisition, we entered into a revised and expanded senior secured revolving credit facility and issued new senior secured notes due 2030 and senior unsecured notes due 2031. A description of these and our other debt instruments and related covenants are described in Note 10, “Debt and Credit Arrangements,” of our consolidated financial statements included under Item 15, “Exhibits and Financial Statement Schedules” of this Annual Report on Form 10-K. Sources and Uses of Cash Our cash and cash equivalents totaled $2,605.3 million, which includes $1,941.7 million of restricted cash as of December 31, 2022, an increase of $2,482.9 million from the balance at December 31, 2021. Our foreign subsidiaries held cash of approximately $66.7 million and $91.2 million at December 31, 2022 and 2021, respectively, to meet their liquidity needs. No material restrictions exist to accessing cash held by our foreign subsidiaries. We expect to meet our U.S. funding needs without repatriating non-U.S. cash and incurring incremental U.S. taxes. Cash equivalents are primarily invested in money market funds that invest in high quality, short-term instruments, such as U.S. government obligations, certificates of deposit, repurchase obligations, and commercial paper issued by corporations that have been highly rated by at least one nationally recognized rating organization, and in the case of cash equivalents in China, obligations of local banks. We believe that our existing cash and cash equivalents, funds available under our senior secured revolving credit facility due October 2026 or other financing alternatives, and cash provided by operations will be sufficient to meet our normal working capital needs, capital expenditures and investments for the foreseeable future. Years Ended December 31, 2022 and 2021 Cash provided by operating activities during 2022 was $80.8 million, an increase of $102.1 million from 2021, primarily due to an increase in operating cash provided by working capital, particularly within accounts payable and inventory. 42 Cash used in investing activities during 2022 was $101.6 million, as compared to cash used in investing activities of $361.2 million during 2021. During 2022, we paid $74.2 million for capital expenditures. We also used $25.8 million of cash for the acquisitions of Fronti Fabrications, Inc., CSC Cryogenic Service Center AB, 100% of a joint venture in AdEdge India and a final net working capital adjustment related to our 2021 acquisition of AdEdge. We used $9.9 million for investments in Hy24, Gold Hydrogen LLC and Avina Clean Hydrogen Inc., partially offset by $9.4 million cash received from settlements of our April 1, June 7 and July 8, 2022 cross-currency swaps. See below for discussion regarding the composition of cash provided by investing activities during 2021. Cash provided by financing activities during 2022 was $2,504.2 million compared to cash provided by financing activities of $381.9 million during 2021. During 2022, we borrowed $2,575.3 million on credit facilities, primarily related to senior secured notes due 2030, senior unsecured notes due 2031 and our senior secured revolving credit facility and repaid $1,128.2 million in borrowings on credit facilities using proceeds from equity offerings related to the pending Howden acquisition to pay down a portion of our senior secured revolving credit facility. Also during 2022, we received $675.1 million net proceeds from the issuance of common stock and $388.1 million net proceeds from the issuance of preferred stock, both related to the pending Howden acquisition. See below for discussion regarding the composition of cash provided by financing activities during 2021. Years Ended December 31, 2021 and 2020 Cash used in operating activities during 2021 was $21.3 million, a decrease of $194.0 million from 2020, primarily due to a decrease in operating cash provided by working capital, particularly within inventory, accounts receivable and unbilled contract revenue during 2021. Due to widespread supply chain and cost challenges, cash used for inventory was primarily driven by cost and availability of raw materials to ensure that we had sufficient stock to meet demand. We continually evaluate our supply chain and make strategic inventory purchases as appropriate. Cash used in investing activities during 2021 was $361.2 million, as compared to cash provided by investing activities of $185.0 million during 2020, which includes $316.7 million in cash provided by investing activities of discontinued operations primarily related to net cash proceeds of $317.5 million from the sale of our cryobiological products business in 2020. During 2021, we used $205.1 million of cash for the acquisitions of Cryogenic Gas Technologies, Inc., L.A. Turbine, AdEdge and Earthly Labs, net of cash acquired. We used $103.9 million for investments in Svante Inc., Transform Materials LLC, Cryomotive GmbH, Earthly Labs and an additional investment in HTEC Hydrogen Technology & Energy Corporation (“HTEC”). We also paid $52.7 million for capital expenditures. During 2020, we used $51.9 million of cash primarily for the acquisitions of Sustainable Energy Solutions, Inc. ($20.0 million) BlueInGreen, LLC ($20.0 million) and Alabama Trailers ($10.0 million), $50.8 million in investments in HTEC and McPhy (Euronext Paris: MCPHY – ISIN; FR0011742329) and paid $37.9 million for capital expenditures. Cash provided by financing activities during 2021 was $381.9 million compared to cash used in financing activities of $363.4 million during 2020. During 2021, we borrowed $1,361.1 million on credit facilities and repaid $873.6 million in borrowings on credit facilities primarily to fund the acquisitions and investments described in the paragraph above. Furthermore, during the fourth quarter of 2021, we refinanced our senior secured revolving credit facility which resulted in additional sources of cash of $482.0 million in U.S. dollar borrowings and 78 million euros (equivalent to $90.5 million) in euro borrowings. These sources of cash repaid principal and interest outstanding under our senior secured revolving credit facility prior to the amendment ($478.7 million in U.S. dollar borrowings and 78 million euros (equivalent to $90.5 million) in euro borrowings) plus upfront debt issuance costs. Total debt issuance costs paid during 2021 were $3.0 million. Also during 2021, we received $6.9 million in proceeds from stock option exercises and paid $6.4 million for common stock repurchases from share-based compensation plans to satisfy tax withholding obligations relating to the vesting or payment of equity awards. During 2020, we borrowed $215.0 million on credit facilities and repaid $223.1 million in borrowings on credit facilities. We repaid $344.1 million in borrowings on our term loan due June 2024 mainly with proceeds from the divestiture of our cryobiological products business. We used $19.3 million to repurchase shares of Chart common stock related to our share purchase program during 2020 (on March 11, 2021, the share repurchase program expired with no further repurchases). We also received $11.0 million in proceeds from stock option exercises during 2020. Cash Requirements We do not currently anticipate any unusual cash requirements for working capital needs for the year ending December 31, 2023 relating to our existing business. Management anticipates we will be able to satisfy cash requirements for our ongoing business for the foreseeable future with cash generated by operations, existing cash balances and available borrowings under our credit facilities. We expect capital expenditures for 2023 to be in the range of $60.0 million to $65.0 million. 43 Contractual Obligations Our known contractual obligations as of December 31, 2022 and cash requirements resulting from those obligations are as follows (dollar amounts in millions): [[GREPCENT_TABLE]] [["","Payments Due by Period"],["","Total","","Less Than 1 Year","","1 \u2013 3 Years","","3 \u2013 5 Years","","More Than 5 Years"],["Gross debt (1)","$","2,333.3","","","$","\u2014","","","$","258.8","","","$","104.5","","","$","1,970.0"],["Contractual coupon interest, convertible notes due November 2024","5.2","","","2.6","","","2.6","","","\u2014","","","\u2014"],["Contractual coupon interest, 7.500% senior secured notes due 2030","766.6","","","54.8","","","219.0","","","219.0","","","273.8"],["Contractual coupon interest, 9.500% senior unsecured notes due 2031","387.6","","","24.2","","","96.9","","","96.9","","","169.6"],["Operating leases","21.8","","","6.6","","","11.0","","","3.5","","","0.7"],["Purchase obligations","8.3","","","8.3","","","\u2014","","","\u2014","","","\u2014"],["Total contractual cash obligations","$","3,522.8","","","$","96.5","","","$","588.3","","","$","423.9","","","$","2,414.1"]] [[/GREPCENT_TABLE]]  _______________ (1)The $258.8 principal balance of the 2024 Notes will mature on November 15, 2024, yet the carrying amount of the 2024 Notes is treated as current for financial statement reporting purposes. The $104.5 principal balance on the senior secured revolving credit facility will mature on October 19, 2026. The $1,460.0 senior secured notes are due January 1, 2030, and the $510.0 senior unsecured notes are due January 1, 2031 (together, the “Notes”). Not included in the table above is a 49.1 million euros investment commitment for the Clean H2 Infra Fund as mentioned in Note 6, “Investments.” Funding is required when the fund manager issues a capital call, which shall not exceed 30% of our capital commitment in any rolling 12-month period. Also not included in the table above are contingent consideration arrangements from prior acquisitions with a potential payout range of $0.0 million to $31.0 million. Howden Acquisition: As previously discussed, in November 2022, we signed a definitive agreement to acquire Howden. We expect to finance the cash portion of the estimated $4.4 billion purchase price with a combination of debt including a senior secured term loan facility, proceeds from the Notes and cash and restricted cash on our balance sheet. For further discussion, refer to Note 10, “Debt and Credit Arrangements,” of our consolidated financial statements included under Item 15, “Exhibits and Financial Statement Schedules” of this Annual Report on Form 10-K. Our commercial commitments as of December 31, 2022, which include standby letters of credit and bank guarantees, represent potential cash requirements resulting from contingent events that require performance by us or our subsidiaries pursuant to funding commitments, and are as follows (dollar amounts in millions): [[GREPCENT_TABLE]] [["","Total","","Expiring in 2023","","Expiring in 2024 and beyond"],["Standby letters of credit","$","89.1","","","$","11.4","","","$","77.7"],["Bank guarantees","45.7","","","28.2","","","17.5"],["Total commercial commitments","$","134.8","","","$","39.6","","","$","95.2"]] [[/GREPCENT_TABLE]] Inventories, net Our inventories, net, balance was $357.9 million at December 31, 2022 compared to $321.5 million at December 31, 2021, representing an increase of $36.4 million (11.3%). This increase was primarily driven by growth in the business. Accrued Income Taxes Our accrued income taxes balance was $3.5 million at December 31, 2022 compared to $16.1 million at December 31, 2021, representing a decrease of $12.6 million (78.3)%. This decrease was primarily driven by tax payments made during 2022. 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 44 involved with environmental compliance, investigation, monitoring, and remediation activities at certain of our owned and formerly owned manufacturing facilities and at one owned facility that is leased to a third party, and, except for these continuing remediation efforts, believe we are currently in substantial compliance with all known environmental regulations. Management believes that any additional liability in excess of amounts accrued, which may result from the resolution of such matters, should not have a material adverse effect on our financial position, liquidity, cash flows or results of operations. We are occasionally subject to various legal claims related to performance under contracts, product liability, taxes, employment matters, environmental matters, intellectual property, and other matters, several of which claims assert substantial damages, in the ordinary course of our business. Based on our historical experience in litigating these claims, as well as our current assessment of the underlying merits of the claims and applicable insurance, if any, we believe the resolution of these legal claims will not have a material adverse effect on our financial position, liquidity, cash flows or results of operations. Future developments may, however, result in resolution of these legal claims in a way that could have a material adverse effect. See Item 1A. “Risk Factors” and Item 3, “Legal Proceedings” for further information. Foreign Operations During 2022, we had operations in Asia, Australia, India, Europe, and South America, which accounted for approximately 42% of consolidated sales and 27% of total assets at December 31, 2022. Functional currencies used by these operations include the U.S. dollar, Chinese yuan, the euro, the British pound, the Japanese yen and the Indian rupee. We are exposed to foreign currency exchange risk as a result of transactions by these subsidiaries in currencies other than their functional currencies, and from transactions by our domestic operations in currencies other than the U.S. dollar. The majority of these functional currencies and the other currencies in which we record transactions are fairly stable, although we experienced variability in the current year as more fully discussed in Item 7A. The use of these currencies, combined with the use of foreign currency forward purchase and sale contracts, has enabled us to be sheltered from significant gains or losses resulting from foreign currency transactions. This situation could change if these currencies experience significant fluctuations or the volume of forward contracts changes. Critical Accounting Estimates Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles and are based on the selection and application of significant accounting policies, which require management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates. Management believes the following are the more critical judgmental areas in the application of its accounting policies that affect its financial position and results of operations. Goodwill and Indefinite-Lived Intangible Assets: We evaluate goodwill and indefinite-lived intangible assets for impairment on an annual basis, as of October 1 or whenever events or changes in circumstances indicate that an evaluation should be completed. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include deterioration in general economic conditions, negative developments in equity and credit markets, a decline in stock price and market capitalization, adverse changes in the markets in which we operate, and a trend of negative or declining cash flows over multiple periods. The fair value that could be realized in an actual transaction may differ from that used to evaluate the impairment of goodwill. Goodwill is analyzed on a reporting unit basis. The reporting units are the same as our operating and reportable segments, which are as follows: Cryo Tank Solutions, Heat Transfer Systems, Specialty Products and Repair, Service & Leasing. To test goodwill for impairment, we first evaluate qualitative factors, such as macroeconomic conditions and our overall financial performance to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill (the “Step 0 Test”). If we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, the first step of the goodwill impairment test is not necessary. Otherwise, we would proceed to the first step of the goodwill impairment test. Alternatively, we may also bypass the Step 0 Test and proceed directly to the first step of the goodwill impairment test. Under the first step (“Step 1”), we estimate the fair value of our reporting units by considering income and market approaches to develop fair value estimates, which are weighted to arrive at a fair value estimate for each reporting unit. With respect to the income approach, a model has been developed to estimate the fair value of each reporting unit. This fair value model incorporates estimates of future cash flows, estimates of allocations of certain assets and cash flows among reporting units, estimates of future growth rates, and management’s judgment regarding the applicable discount rates to use to discount such estimates of cash flows. With respect to the market approach, a guideline company method is employed whereby pricing multiples are derived from companies with similar assets or businesses to estimate fair value of each reporting unit. If the fair value of the reporting unit exceeds the carrying amount of the net assets assigned to that reporting unit, then goodwill is not 45 impaired, and no further testing is required. However, if the fair value of the reporting unit is less than its carrying amount, the impairment charge is based on the excess of a reporting unit’s carrying amount over its fair value (i.e., we would measure the charge based on the result from Step 1). The assumptions and judgment used by management to estimate future cash flows, allocation of assets and cash flows among reporting units, estimates of future growth rates and selection of discount rates are subject to change due to the economic environment, including such factors as interest rates, expected market returns and volatility of markets served. Changes to the assumptions and estimates used throughout the steps described above may result in a significantly different estimate of the fair value of the reporting units, which could result in a different assessment of the recoverability of goodwill and result in future impairment charges. In order to assess the reasonableness of the calculated fair values of our reporting units, we also compare the sum of the reporting units’ fair values to our market capitalization and calculate an implied control premium (the excess of the sum of the reporting units’ fair values over the market capitalization). We evaluate the control premium by comparing it to control premiums of recent comparable transactions. If the implied control premium is not reasonable in light of this assessment, we reevaluate our fair value estimates of the reporting units by adjusting the discount rates and other assumptions as necessary. With respect to indefinite-lived intangible assets, we first evaluate relevant events and circumstances to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount. If, in weighing all relevant events and circumstances in totality, we determine that it is not more likely than not that an indefinite-lived intangible asset is impaired, no further action is necessary. Otherwise, we would determine the fair value of indefinite-lived intangible assets and perform a quantitative impairment assessment by comparing the indefinite-lived intangible asset’s fair value to its carrying amount. We may bypass such a qualitative assessment and proceed directly to the quantitative assessment. We estimate the fair value of our indefinite-lived assets using the income approach. This may include the relief from royalty method or use of a model similar to the one described above related to goodwill which estimates the future cash flows attributed to the indefinite-lived intangible asset and then discounting these cash flows back to a present value. Under the relief from royalty method, fair value is estimated by discounting the royalty savings, as well as any tax benefits related to ownership to a present value. The fair value from either approach is compared to the carrying value and an impairment is recorded if the fair value is determined to be less than the carrying value. Management’s estimates regarding future cash flows, selection of discount rates and estimated tax benefits are subject to change due to various economic factors and changes to the assumptions and estimates used throughout the steps described above and may result in a significantly different estimate of the fair value of indefinite-lived intangible assets which could result in a different assessment of the recoverability of these assets and result in future impairment charges. As of October 1, 2022 and 2021 (“annual assessment dates”) we elected to bypass the Step 0 test and based on our Step 1 test, we determined that the fair value of each of our reporting units was greater than its respective carrying value at each annual assessment date and, therefore, no further action was necessary. Furthermore, as of the annual assessment dates, we also elected to bypass the qualitative assessment for indefinite-lived intangible assets with the exception of our recently acquired trade names as of October 1, 2022 which includes Earthly Labs and Fronti Fabrications, Inc (together, the “recently acquired trade names”). Based on our qualitative assessment of the recently acquired trade names, we determined that it is not “more likely than not” that the fair value of each of the recently acquired trade names is less than its respective carrying amount. With one exception as discussed in the next paragraph, based on our quantitative assessments of all other trade names, we determined that the fair value of each of the indefinite-lived intangible assets was greater than its respective carrying value at each annual assessment date and, therefore, no further action was necessary. During 2020, in connection with the annual impairment process described above, Chart, with the assistance of an outside professional accounting firm, performed an impairment analysis with respect to our AXC Intangible Asset. As a result, we recorded an impairment loss of $16.0 million during 2020 relative to our AXC Intangible Asset in our Heat Transfer Systems segment. Long-Lived Assets: We monitor our property, plant and equipment, and finite-lived intangible assets for impairment indicators on an ongoing basis. If impairment indicators exist, assets are grouped and tested at the lowest level for which identifiable cash flows are available, and we perform the required analysis and record impairment charges if applicable. In conducting this analysis, we compare the undiscounted cash flows expected to be generated from the long-lived assets to the related net book values. If the undiscounted cash flows exceed the net book value, the long-lived assets are considered not to be impaired. If the net book value exceeds the undiscounted cash flows, an impairment loss is measured and recognized. An impairment loss is measured as the difference between the net book value and the fair value of the long-lived assets. Fair value is estimated from discounted future net cash flows (for assets held for use) or net realizable value (for assets held for sale). In assessing the recoverability of our long-lived assets, a significant amount of judgment is involved in estimating the future cash flows, discount rates and other factors necessary to determine the fair value of the respective assets. Key assumptions used in these estimates include industry and market conditions, costs to produce and projected revenue growth. If these estimates or the related assumptions change in the future, we may be required to record impairment charges for these assets in the period such 46 determination was made. We amortize intangible assets that have finite lives over their estimated useful lives. We had no long-lived asset impairments in the last three years. Business Combinations: We account for business combinations in accordance with Accounting Standards Codification (“ASC”) 805, “Business Combinations.” We recognize and measure identifiable assets acquired and liabilities assumed based on their estimated fair values. The excess of the consideration transferred over the fair value of the net assets acquired, including identifiable intangible assets, is assigned to goodwill. We estimate the fair value of identifiable intangible assets under income approaches where the fair value models incorporate estimates of future cash flows, estimates of allocations of certain assets and cash flows, estimates of future growth rates, and management’s judgment regarding the applicable discount rates to use to discount such estimates of cash flows. Assigning estimated fair values to the identifiable assets acquired and liabilities assumed requires the use of significant estimates, judgments, inputs and assumptions. Such assumptions are based in part on historical experience, industry and market conditions and information obtained from management of the acquired companies and are thus inherently uncertain. As additional information becomes available, we may further revise the preliminary acquisition consideration allocation during the remainder of the measurement period, which shall not exceed twelve months from the closing of the acquisition. Investments in Equity Securities Without a Readily Determinable Fair Value: Our investments in equity securities for which there is no readily determinable fair value are measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. As part of our assessment for impairment indicators, judgement is involved in considering significant deterioration in the earnings performance, credit rating, asset quality or overall business prospects of the investee as well as significant adverse changes in the external environment in which an investee operates, a significant adverse change in the general market condition of either the geographical area or the industry in which the investee operates or factors that raise significant concerns about the investee’s ability to continue as a going concern, such as negative cash flows from operations, working capital deficiencies, or noncompliance with statutory capital requirements or debt covenants. Furthermore, management must use reasonable efforts to identify an observable price change on a timely basis. Despite these efforts, we may not be able to obtain this information. If we determine that an investment is impaired, we shall measure the investment at fair value, which may involve a significant degree of judgement and subjectivity. Contingencies: On an ongoing basis, we assess the potential liabilities related to any lawsuits or claims brought against us. While it is typically very difficult to determine the timing and ultimate outcome of such actions, management uses its best judgment to determine if it is probable that we will incur an expense related to the settlement or final adjudication of such matters and whether a reasonable estimation of such probable loss, if any, can be made. In assessing probable losses, we take into consideration estimates of the amount of insurance recoveries, if any, which are recorded in other current assets when recoverability is probable. We accrue a liability when we believe a loss is probable and the amount of loss can be reasonably estimated. Due to the inherent uncertainties related to the eventual outcome of litigation and potential insurance recoveries, it is possible that certain matters may be resolved for amounts materially different from any provisions or disclosures that we have previously made. Revenue Recognition: Revenue is recognized when (or as) we satisfy performance obligations by transferring a promised good or service, an asset, to a customer. An asset is transferred to a customer when, or as, the customer obtains control over that asset. In most contracts, the transaction price includes both fixed and variable consideration. The variable consideration contained within our contracts with customers includes discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties and other similar items. When a contract includes variable consideration, we evaluate the estimate of the variable consideration to determine whether the estimate needs to be constrained; therefore, we include the variable consideration in the transaction price only to the extent that it is probable that a significant reversal of the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Variable consideration estimates are updated at each reporting date. For brazed aluminum heat exchangers, air cooled heat exchangers, cold boxes, liquefied natural gas fueling stations, engineered tanks, repair services, hydrogen solutions, water treatment systems and carbon capture systems, contracts contain language that transfers control to the customer over time. For these contracts, revenue is recognized as we satisfy the performance obligations by an allocation of the transaction price to the accounting period computed using input methods such as costs incurred. Selecting the method used to measure progress towards completion for our contracts requires judgment and is based on the nature of the products to be provided. Accounting for contracts using the costs incurred input method requires management judgment relative to assessing risks and their impact on the estimates of revenue and costs. Certain factors can impact these estimates including, but not limited to, the potential for incentives or penalties on performance, schedule delays, labor productivity, the complexity of work performed and the cost and availability of materials. Revisions to estimated cost to complete a project that result from inefficiencies in our performance that were not expected in the pricing of the contract are expensed in the period in which these inefficiencies become known. Contract modifications can change a contract’s scope, 47 price, or both. Approved contract modifications are accounted for as either a separate contract or as part of the existing contract depending on the nature of the modification which is subject to management’s judgment. Income Taxes: The Company and its U.S. subsidiaries file a consolidated federal income tax return. Deferred income taxes are provided for temporary differences between financial reporting and the consolidated tax return in accordance with the liability method. A valuation allowance is provided against net deferred tax assets when conditions indicate that it is more likely than not that the benefit related to such assets will not be realized. In the event that we change our determination as to the amount of deferred tax assets that can be realized, the valuation allowance will be adjusted with a corresponding impact to the provision for income taxes in the period in which such determination is made. Management must make assumptions, judgments and estimates to determine our deferred tax assets and liabilities, current provision for income taxes and valuation allowances. In making such assumptions we consider all available evidence including past operating results, estimates of future taxable income and the feasibility of tax planning strategies. We utilize a two-step approach for the recognition and measurement of uncertain tax positions. The first step is to evaluate the tax position and determine whether it is more likely than not that the position will be sustained upon examination by tax authorities. The second step is to measure the tax benefit as the largest amount that is more likely than not of being realized upon settlement. Our income tax positions are based on research and interpretations of the income tax laws and rulings in each of the jurisdictions in which we do business. Due to the subjectivity of interpretations of laws and rulings in each jurisdiction, the differences and interplay in tax laws between those jurisdictions, as well as the inherent uncertainty in estimating the final resolution of complex tax audit matters, management’s estimates of income tax liabilities may differ from actual payments or assessments. Resolution of uncertain tax positions could have a material adverse effect or materially benefit our results of operations in future periods depending on their ultimate resolution. We use an estimate of our annual effective tax rate at each interim reporting period based on the facts and circumstances available at that time, while the actual effective tax rate is calculated at year-end. In calculating these rates, significant judgment is involved regarding the application of global income tax laws and regulations and when projecting the jurisdictional mix of income. Additionally, interpretation of tax laws, court decisions or other guidance provided by taxing authorities influences our estimate of the effective income tax rates. As a result, our actual effective income tax rates and related income tax liabilities may differ materially from our estimated effective tax rates and related income tax liabilities. Any resulting differences are recorded in the period they become known. Recent Accounting Standards For disclosures regarding recent accounting standards, refer to Note 2, “Significant Accounting Policies,” of our consolidated financial statements included under Item 15, “Exhibits and Financial Statement Schedules” of this Annual Report on Form 10-K. Forward-Looking Statements We are making this statement in order to satisfy the “safe harbor” provisions contained in the Private Securities Litigation Reform Act of 1995. This Annual Report includes “forward-looking statements.” These forward-looking statements include statements relating to our business, including statements regarding completed and pending acquisitions and investments and related accretion or statements with respect to the use of proceeds or redeployment of capital from recent or planned divestitures, as well statements regarding revenues, cost synergies and efficiency savings, objectives, future orders, margins, segment sales mix, earnings or performance, liquidity and cash flow, inventory levels, capital expenditures, supply chain challenges, inflationary pressures including materials costs and pricing increases, business trends, clean energy market opportunities including addressable market and projected industry-wide investments, carbon and GHG emission targets, governmental initiatives, including executive orders and other information that is not historical in nature. In some cases, forward-looking statements may be identified by terminology such as “may,” “will”, “should,” “expects,” “anticipates,” “believes,” “projects,” “forecasts,” “outlook,” “guidance,” “target,” “continue” or the negative of such terms or comparable terminology. Forward-looking statements contained herein (including future cash contractual obligations, liquidity, cash flow, orders, results of operations, projected revenues, margins, capital expenditures, industry and business, trends, clean energy and other new market or expansion opportunities, cost synergies and savings objectives, and government initiatives among other matters) or in other statements made by us are made based on management’s expectations and beliefs concerning future events impacting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed or implied by forward-looking statements. The risk factors discussed in Item 1A. “Risk Factors” and the factors discussed in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” among others, could affect our future performance and liquidity 48 and value of our securities and could cause our actual results to differ materially from those expressed or implied by forward-looking statements made by us or on our behalf. These factors should not be construed as exhaustive and there may also be other risks that we are unable to predict at this time. All forward-looking statements included in this Annual Report are expressly qualified in their entirety by these cautionary statements. All forward-looking statements attributable to us or persons acting on our behalf apply only as of the date of this Annual Report and are expressly qualified in their entirety by the cautionary statements included in this Annual Report. We undertake no obligation to update or revise forward-looking statements which may be made to reflect events or circumstances that arise after the filing date of this document or to reflect the occurrence of unanticipated events, except as otherwise required by law. 49