# CHART INDUSTRIES INC (GTLS) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from CHART INDUSTRIES INC's 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/892553/000089255325000039/gtls-20241231.htm
Accession: 0000892553-25-000039
Filing date: 2025-02-28
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/GTLS/
All MD&A years: /company/GTLS/mda/
Previous year: /company/GTLS/mda/fy2023/ (FY 2023)
Next year: /company/GTLS/mda/fy2025/ (FY 2025)

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

Chart Industries, Inc. is a global leader in the design, engineering, and manufacturing of process technologies and equipment for gas and liquid molecule handling for the Nexus of Clean™ - clean power, clean water, clean food, and clean industrials, regardless of molecule. The Company’s unique product and solution portfolio across stationary and rotating equipment is used in every phase of the liquid gas supply chain, including engineering, service and repair and from installation to preventive maintenance and digital monitoring. Chart is a leading provider of technology, equipment and services related to LNG, hydrogen, biogas and CO2 capture among other applications. Chart is committed to excellence in ESG issues both for its company as well as its customers. With 64 global manufacturing locations and over 50 service centers from the United States to Asia, Australia, India, Europe the Middle East, Africa and South America, we maintain accountability and transparency to our team members, suppliers, customers and communities.

On March 17, 2023, we completed the acquisition of Howden (the “Howden Acquisition”), a leading global provider of mission critical air and gas handling products and services, from affiliates of KPS Capital Partners, LP. Results from continuing operations include results of Howden from the date of acquisition and exclude Roots™ (“Roots”) business financial results for our entire ownership period of March 17, 2023 through the divestiture date, August 18, 2023. The financial information presented and discussion of results that follows is presented on a continuing operations basis unless stated otherwise.

Macroeconomic Impacts

Geopolitical instability continues to create uncertainty in the global economy, including the current conflict between Russia and Ukraine and the related sanctions imposed by countries against Russia, along with the heightened tensions between the United States and China. Moreover, unrest in the Middle East may impact our business and operations and has strained global supply chains, including those dependent on Red Sea shipping routes. Also, a substantial amount of uncertainty exists regarding the impact of international monetary and trade policies on our business and markets, including possible continued volatility in interest rates and inflation, as well as the unknown impact of recent or threatened changes to U.S. governmental trade policies, including tariffs on China, certain products, and potentially other countries, as well as the possible impact of any retaliatory tariffs on products from the United States. Additionally, geopolitical uncertainty regarding energy policies may affect the timing of certain projects. 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 2024. We continue to actively monitor the impact of these macroeconomic developments on our results of operations beyond 2024.

Environmental, Social, Governance

Chart is proud to be at the forefront of the energy transition as a leading provider of technology, equipment and services related to LNG, hydrogen & helium, biogas, carbon capture and water treatment, among other applications. We also have a unique offering for the Nexus of Clean™ – clean power, clean water, clean food and clean industrials. Reporting our ESG performance is one of the ways we demonstrate accountability and transparency to our team members, suppliers, customers, shareholders and communities. Further information can be found in our Annual Sustainability report which we expect to release in April 2025.

2024 Highlights

Comparisons included in the discussion that follows are for fiscal year 2024 versus fiscal year 2023. A discussion of changes from fiscal year 2022 to fiscal year 2023 and other financial information related to fiscal year 2022 is available in Part II. Item 7. Management’s Discussion and Analysis of Financial Conditional and Results of Operations, of our Annual Report on Form 10-K, for the fiscal year ended December 31, 2023, which was filed with the SEC on February 28, 2024.

Strong order activity contributed to ending total backlog of $4,845.1 million as of December 31, 2024 compared to $4,278.8 million as of December 31, 2023. We had consolidated orders of $5,006.8 million for the year ended December 31, 2024 compared to $4,140.2 million for the year ended December 31, 2023. The increase in orders versus the year ended

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December 31, 2023 was largely driven by strong order activity in Heat Transfer Systems, Specialty Products, and Repair, Service & Leasing.

Consolidated sales were $4,160.3 million in the year ended December 31, 2024 compared to $3,352.5 million in the year ended December 31, 2023 with growth in all four segments when removing any impact related to foreign currency fluctuations. Consolidated gross profit margin for the year ended December 31, 2024 of 33.4% increased from 31.0% for the year ended December 31, 2023. Operating margin for the year ended December 31, 2024 of 15.6% increased from 11.7% for the year ended December 31, 2023. The increases in gross profit margin and operating margin from the year ended December 31, 2023 were driven by our continued execution of commercial and cost synergies, improved mix of the business as well as improved selling, general and administrative expenses as a percentage of sales.

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, 2024 and 2023:

[[GREPCENT_TABLE]]
[["","2024","","2023"],["Sales","100.0","%","","100.0","%"],["Cost of sales","66.6","","","69.0"],["Gross profit","33.4","","","31.0"],["Selling, general and administrative expenses (1)","13.2","","","14.5"],["Amortization expense","4.7","","","4.9"],["Operating income","15.6","","","11.7"],["Acquisition related finance fees","\u2014","","","0.8"],["Interest expense, net","7.9","","","8.6"],["Other expense (income), net","\u2014","","","0.5"],["Income tax expense, net","1.9","","","0.1"],["Net income from continuing operations","5.7","","","1.7"],["Loss from discontinued operations, net of tax","(0.1)","","","\u2014"],["Net income","5.6","","","1.7"],["Less: Income attributable to noncontrolling interests of continuing operations, net of taxes","0.3","","","0.3"],["Net income attributable to Chart Industries, Inc.","5.3","","","1.4"]]
[[/GREPCENT_TABLE]]

 _______________

(1)Includes share-based compensation expense of $18.9 million and $12.6 million, representing 0.5% and 0.4% of sales, for the years ended December 31, 2024 and 2023.

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Consolidated Results for the Years Ended December 31, 2024 and 2023

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, 2024 and 2023 (dollar amounts in millions). Further detailed information regarding our operating segments is presented in Note 4, “Segment and Geographic Information,” of the consolidated financial statements included under Item 15 “Exhibits and Financial Statement Schedules” of this Annual Report on Form 10-K.

Selected Segment Financial Information

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","2023"],["Sales"],["Cryo Tank Solutions","$","637.9","","","$","640.8"],["Heat Transfer Systems","1,035.3","","","891.2"],["Specialty Products","1,114.3","","","819.9"],["Repair, Service & Leasing","1,372.7","","","1,029.2"],["Intersegment eliminations","0.1","","","(28.6)"],["Consolidated","$","4,160.3","","","$","3,352.5"],["Gross Profit"],["Cryo Tank Solutions","$","143.5","","","$","132.0"],["Heat Transfer Systems","299.0","","","246.8"],["Specialty Products","301.1","","","221.4"],["Repair, Service & Leasing","645.2","","","440.2"],["Consolidated","$","1,388.8","","","$","1,040.4"],["Gross Profit Margin"],["Cryo Tank Solutions","22.5","%","","20.6","%"],["Heat Transfer Systems","28.9","%","","27.7","%"],["Specialty Products","27.0","%","","27.0","%"],["Repair, Service & Leasing","47.0","%","","42.8","%"],["Consolidated","33.4","%","","31.0","%"],["SG&A Expenses"],["Cryo Tank Solutions","$","61.2","","","$","70.9"],["Heat Transfer Systems","45.6","","","54.1"],["Specialty Products","106.6","","","82.6"],["Repair, Service & Leasing","150.0","","","116.1"],["Corporate","184.0","","","162.6"],["Consolidated","$","547.4","","","$","486.3"],["SG&A Expenses (% of Sales)"],["Cryo Tank Solutions","9.6","%","","11.1","%"],["Heat Transfer Systems","4.4","%","","6.1","%"],["Specialty Products","9.6","%","","10.1","%"],["Repair, Service & Leasing","10.9","%","","11.3","%"],["Consolidated","13.2","%","","14.5","%"],["Operating Income (Loss)"],["Cryo Tank Solutions","$","74.6","","","$","54.5"],["Heat Transfer Systems","233.3","","","175.8"],["Specialty Products","173.1","","","119.7"],["Repair, Service & Leasing","350.5","","","203.3"],["Corporate","(184.0)","","","(162.6)"],["Consolidated","$","647.5","","","$","390.7"]]
[[/GREPCENT_TABLE]]

25

[[GREPCENT_TABLE]]
[["Operating Margin"],["Cryo Tank Solutions","11.7","%","","8.5","%"],["Heat Transfer Systems","22.5","%","","19.7","%"],["Specialty Products","15.5","%","","14.6","%"],["Repair, Service & Leasing","25.5","%","","19.8","%"],["Consolidated","15.6","%","","11.7","%"]]
[[/GREPCENT_TABLE]]

Results of Operations for the Years Ended December 31, 2024 and 2023

Sales in 2024 increased by $807.8 million from $3,352.5 million to $4,160.3 million, or 24.1%. When removing the negative foreign currency impacts of $27.1 million, all four segments’ sales increased year over year. This increase was driven largely by Howden results impacting the entire first quarter of 2024 versus a partial period in the first quarter of 2023, commercial synergies achieved in the Repair, Service & Leasing segment, strong execution of the backlog in Heat Transfer Systems as well as higher sales in Specialty Products.

Gross profit in 2024 increased by $348.4 million from $1,040.4 million to $1,388.8 million or 33.5% compared to 2023. The increase in gross profit was primarily driven by higher sales and improved margins, which were largely attributed to a higher mix of Repair, Service & Leasing sales along with improved productivity. Gross profit margin of 33.4% in 2024 increased from 31.0% in 2023. The increase in gross profit margin for 2024 compared to 2023 was primarily driven by a higher mix of aftermarket service & repair work and achievement of both cost and commercial synergies across all segments.

Consolidated SG&A expenses increased by $61.1 million or 12.6% during 2024 compared to 2023 largely driven by Howden results impacting the entire first quarter of 2024 versus a partial period in the first quarter of 2023 as well as higher information technology related integration costs. Restructuring costs recorded to SG&A were $12.5 million and $13.0 million. SG&A expenses as a percentage of consolidated sales for 2024 decreased by 1.3% as compared to 2023 primarily due to continued cost and commercial synergies achieved.

Operating income increased by $256.8 million or 65.7% from $390.7 million to $647.5 million compared to 2023, driven by a full year of Howden included in the results, the increase in sales, higher gross profit and associated gross profit margins. Operating margin increased from 11.7% in 2023 to 15.6% driven by cost reduction and productivity improvements as well as better leverage of the fixed cost structure of the business.

Acquisition Related Finance Fees

Acquisition related finance fees for the year ended December 31, 2023 were $26.1 million related to bridge loan financing for our acquisition of Howden, which did not recur in 2024.

Interest Expense, Net

The following table presents the components of interest expense, net (dollars in millions):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","2023"],["Interest expense term loans due March 2030","$","133.0","","","$","119.5"],["Interest expense senior secured notes due 2030","108.9","","","109.7"],["Interest expense senior unsecured notes due 2031","48.2","","","48.6"],["Interest expense senior secured revolving credit facility due April 2029","30.3","","","27.7"],["Interest expense convertible notes due November 2024","2.5","","","2.4"],["Financing costs amortization","19.1","","","17.2"],["Interest income","(11.2)","","","(26.4)"],["Capitalized interest","(6.3)","","","(4.6)"],["Discontinued operations interest expense, net","\u2014","","","(8.9)"],["Other","4.0","","","3.9"],["Interest expense, net","$","328.5","","","$","289.1"]]
[[/GREPCENT_TABLE]]

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The increase in interest expense, net, is primarily due to higher borrowings outstanding, specifically our term loans due March 2030, which were outstanding for a full twelve months in 2024 as compared to nine and a half months in 2023. Furthermore, interest expense, net for 2023, included $21.5 million in interest income earned from deposits of proceeds from the senior secured notes due 2030, senior unsecured notes due 2031, common stock and preferred stock offerings into interest bearing accounts until the consummation of the Howden Acquisition.

Other Expense (Income), Net

Other expense (income), net decreased by $17.0 million from $17.5 million in 2023 to $0.5 million in 2024. This decrease was mainly driven by a $25.1 million decrease in unrealized losses on our investments in equity securities and a $7.1 million decrease in losses on extinguishment of debt. This was partially offset by a $13.3 million increase in other expenses, primarily driven by a $7.8 million loss on sale of business in 2024 for customary closing working capital adjustments, which related to the sale of our American Fan and Cofimco businesses and occurred in the first quarter of 2024, compared to a $4.6 million net gain on sale of business in 2023, which related to the sale of our American Fan, Cryo Diffusion and Cofimco businesses.

During 2024, we recognized an unrealized gain on investments of $10.7 million, which was mainly driven by a fair value adjustment (an unrealized gain) based on an observable price change relative to our investment in Avina Clean Hydrogen Inc. of $11.2 million. During 2023, we recognized an unrealized loss on investments in equity securities of $14.4 million, which was primarily driven by an unrealized loss of $12.7 million on the mark-to-market adjustment of our investment in McPhy (Euronext Paris: MCPHY - ISIN; FR0011742329).

Income Tax Expense

Income tax expense of $78.6 million and $3.0 million for the years ended December 31, 2024 and 2023, respectively, represents taxes on both U.S. and foreign earnings at a combined effective income tax rate of 24.7% and 5.2%, respectively. The effective income tax rate of 24.7% for the year ended December 31, 2024 differed from the U.S. federal statutory rate of 21% due primarily to the effect of income earned by certain of our foreign entities being taxes at higher rates than the federal statutory rate and the build of valuation allowances against specific deferred tax assets offset by the benefits of U.S. taxation of international operations optimization, research and development tax credit benefits and favorable provision to return adjustments.

The effective income tax rate of 5.2% for the year ended December 31, 2023 differed from the U.S. federal statutory rate of 21% primarily due to tax benefits associated with the Howden integration, release of previously booked valuation allowances, research and developments credits and share-based compensation offset of income earned by certain of our foreign entities being taxed at higher rates than the federal statutory rate.

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 $222.0 million and $47.9 million for 2024 and 2023, respectively.

Discontinued Operations

The financial results of the Roots business are reflected in our consolidated financial statements as discontinued operations for the years ended December 31, 2024 and 2023. For further information, refer to Note 3, “Discontinued Operations and Other Businesses Sold” of our consolidated financial statements included under Item 15, “Exhibits and Financial Statement Schedules” of this Annual Report on Form 10-K.

27

Segment Results for the Years Ended December 31, 2024 and 2023

Our reportable and operating segments include: Cryo Tank Solutions, Heat Transfer Systems, Specialty Products and Repair, Service & Leasing. Corporate includes certain unallocated operating expenses for executive management, accounting, tax, treasury, corporate development, human resources, information technology, investor relations, legal, internal audit, and risk management. 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, 2024 and 2023 (dollar amounts in millions):

Cryo Tank Solutions—Results of Operations for the Years Ended December 31, 2024 and 2023

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","2024 vs. 2023"],["","2024","","2023","","Variance ($)","","Variance (%)"],["Sales","$","637.9","","","$","640.8","","","$","(2.9)","","","(0.5)","%"],["Gross Profit","143.5","","","132.0","","","11.5","","","8.7","%"],["Gross Profit Margin","22.5","%","","20.6","%"],["SG&A Expenses","$","61.2","","","$","70.9","","","$","(9.7)","","","(13.7)","%"],["SG&A Expenses (% of Sales)","9.6","%","","11.1","%"],["Operating Income","$","74.6","","","$","54.5","","","$","20.1","","","36.9","%"],["Operating Margin","11.7","%","","8.5","%"]]
[[/GREPCENT_TABLE]]

Cryo Tank Solutions segment sales decreased by $2.9 million during 2024 as compared to 2023 to $637.9 million. Cryo Tank Solutions sales were negatively impacted by foreign currency impacts of about $5.5 million.

Cryo Tank Solutions segment gross profit increased by $11.5 million during 2024 as compared to 2023 due to margin expansion in engineered tanks and our general industrial products.

Cryo Tank Solutions SG&A expenses decreased during 2024 as compared to 2023, and SG&A expenses as a percentage of sales improved by 150 basis points. The decrease in SG&A expenses in both absolute dollars and as a percentage of sales is due to improved resource utilization and realized synergies in both our cost structure and commercial activities.

Cryo Tank Solutions segment operating income improved $20.1 million or 36.9% and operating margin improved from 8.5% to 11.7% primarily as a result the improved gross margin generated in engineered tanks and general industrial products as well as the generation of comparable year over year sales while decreasing our SG&A expenses.

Heat Transfer Systems—Results of Operations for the Years Ended December 31, 2024 and 2023

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","2024 vs. 2023"],["","2024","","2023","","Variance ($)","","Variance (%)"],["Sales","$","1,035.3","","","$","891.2","","","$","144.1","","","16.2","%"],["Gross Profit","299.0","","","246.8","","","52.2","","","21.2","%"],["Gross Profit Margin","28.9","%","","27.7","%"],["SG&A Expenses","$","45.6","","","$","54.1","","","$","(8.5)","","","(15.7)","%"],["SG&A Expenses (% of Sales)","4.4","%","","6.1","%"],["Operating Income (Loss)","$","233.3","","","$","175.8","","","$","57.5","","","32.7","%"],["Operating Margin","22.5","%","","19.7","%"]]
[[/GREPCENT_TABLE]]

Heat Transfer Systems segment sales increased by $144.1 million to $1,035.3 million during 2024 as compared to 2023. Heat Transfer Systems sales were negatively impacted by foreign currency impacts of about $2.4 million. The increase in sales was driven primarily by increased sales in traditional energy and LNG.

Heat Transfer Systems segment gross profit increased by $52.2 million during 2024 as compared to 2023, and gross profit margin increased by 120 basis points. The increase in Heat Transfer Systems segment gross profit was primarily due to volume, and the increase in the related margin was mainly due to overall product and project volume mix.

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Heat Transfer Systems segment SG&A expenses decreased by $8.5 million during 2024 as compared to 2023, and SG&A expenses as a percentage of sales improved by 170 basis points. The decrease in SG&A expenses in both absolute dollars and as a percentage of sales is due to improved resource allocation and realized synergies in both our cost structure and commercial activities.

Heat Transfer Systems segment operating income improved $57.5 million or 32.7% and operating margin improved from 19.7% to 22.5% during 2024 as compared to 2023 through increased sales and gross margin improvement as well as improved leverage of the SG&A expenses.

Specialty Products—Results of Operations for the Years Ended December 31, 2024 and 2023

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","2024 vs. 2023"],["","2024","","2023","","Variance ($)","","Variance (%)"],["Sales","$","1,114.3","","","$","819.9","","","$","294.4","","","35.9","%"],["Gross Profit","301.1","","","221.4","","","79.7","","","36.0","%"],["Gross Profit Margin","27.0","%","","27.0","%"],["SG&A Expenses","106.6","","","$","82.6","","","$","24.0","","","29.1","%"],["SG&A Expenses (% of Sales)","9.6","%","","10.1","%"],["Operating Income","173.1","","","$","119.7","","","$","53.4","","","44.6","%"],["Operating Margin","15.5","%","","14.6","%"]]
[[/GREPCENT_TABLE]]

Specialty Products segment sales increased by $294.4 million to $1,114.3 million during 2024 as compared to 2023. Specialty Products segment sales were negatively impacted by foreign currency impacts of about $8.6 million. The increase in Specialty Products sales was driven by Howden results impacting the entire first quarter of 2024 versus a partial period in the first quarter of 2023 as well as the conversion of backlog related to hydrogen, mining, space, carbon capture and water treatment applications.

Specialty Products segment gross profit increased by $79.7 million during 2024 as compared to 2023 largely due to the additional sales while margin was flat. The flat margin is largely impacted by start up costs associated with the ramp up of the new facility addition in Theodore, Alabama.

Specialty Products segment SG&A expenses increased by $24.0 million during 2024 as compared to 2023 primarily driven by ownership of Howden for the entire period of 2024 versus a partial period in 2023 as well as increased sales.

Specialty Products segment operating income increased by $53.4 million during 2024 as compared to 2023 driven by higher sales and improved SG&A costs as a percentage of sales. This improvement also led to an increase in operating margin from 14.6% in 2023 to 15.5% in 2024.

Repair, Service & Leasing—Results of Operations for the Years Ended December 31, 2024 and 2023

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","2024 vs. 2023"],["","2024","","2023","","Variance ($)","","Variance (%)"],["Sales","$","1,372.7","","","$","1,029.2","","","$","343.5","","","33.4","%"],["Gross Profit","645.2","","","440.2","","","205.0","","","46.6","%"],["Gross Profit Margin","47.0","%","","42.8","%"],["SG&A Expenses","$","150.0","","","$","116.1","","","$","33.9","","","29.2","%"],["SG&A Expenses (% of Sales)","10.9","%","","11.3","%"],["Operating Income","$","350.5","","","$","203.3","","","$","147.2","","","72.4","%"],["Operating Margin","25.5","%","","19.8","%"]]
[[/GREPCENT_TABLE]]

Repair, Service & Leasing segment sales increased by $343.5 million to $1,372.7 million during 2024 as compared to 2023. Repair, Service & Leasing segment sales were negatively impacted by foreign currency impacts of about $10.6 million. The increase in Repair, Service & Leasing sales was driven by Howden results impacting the entire first quarter of 2024 versus a partial period in the first quarter of 2023 as well as increased field service work.

Repair, Service & Leasing segment gross profit increased by $205.0 million to $645.2 million during 2024 as compared to

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2023, and gross profit margin increased by 420 basis points to 47.0%. The increase in gross profit was largely driven by Howden results impacting the entire 2024 year versus part of 2023. The gross profit margin was impacted by synergies achieved as well as field service work that took place during the second and third quarters of 2024.

Repair, Service & Leasing segment SG&A expenses increased by $33.9 million during 2024 as compared to 2023. SG&A expenses as a percentage of sales improved by 40 basis points. The increase in SG&A expenses was largely driven by the ownership of Howden for all of 2024 versus part of 2023 as well as increased sales.

Repair, Service & Leasing segment operating income improved by $147.2 or 72.4% largely driven by the increased sales and improved gross profit. Additionally, the 40 basis point reduction in SG&A as a percentage of sales also contributed to the improved operating margin which increased from 19.8% in 2023 to 25.5% in 2024.

Corporate

Corporate SG&A expenses increased by $21.4 million during 2024 as compared to 2023 driven by a full year of Howden related costs in 2024 versus part of 2023, increased centralization of IT spend and ongoing integration activities.

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, 2024, and 2023 was $4,845.1 million and $4,278.8 million. Backlog is subject to foreign currency translation. During the year ended December 31, 2024, adjustments resulting from translation reduced backlog by $82.8 million.

The tables below represent orders received and backlog by segment for the periods indicated (dollar amounts in millions):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","2023"],["Orders"],["Cryo Tank Solutions","$","582.9","","","$","608.8"],["Heat Transfer Systems","1,467.7","","","1,114.2"],["Specialty Products","1,562.0","","","1,341.6"],["Repair, Service & Leasing","1,393.3","","","1,100.8"],["Intersegment eliminations","0.9","","","(25.2)"],["Consolidated","$","5,006.8","","","$","4,140.2"],["","As of December 31,"],["","2024","","2023"],["Backlog"],["Cryo Tank Solutions","$","290.3","","","$","361.9"],["Heat Transfer Systems","2,097.4","","","1,716.5"],["Specialty Products","1,888.1","","","1,631.1"],["Repair, Service & Leasing","577.1","","","587.9"],["Intersegment eliminations","(7.8)","","","(18.6)"],["Consolidated","$","4,845.1","","","$","4,278.8"]]
[[/GREPCENT_TABLE]]

Orders and Backlog for the Year Ended and As of December 31, 2024 Compared to the Year Ended and As of December 31, 2023

Cryo Tank Solutions segment orders for 2024 were $582.9 million, as compared to $608.8 million for 2023, a decrease of $25.9 million. Cryo Tank Solutions orders were negatively impacted by foreign currency fluctuations by about $7.1 million. The remaining decrease was primarily driven by two large rail car orders we received in 2023 that did not repeat in 2024. Cryo Tank Solutions segment backlog totaled $290.3 million as of December 31, 2024, compared to $361.9 million as of December 31, 2023, a decrease of $71.6 million.

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Heat Transfer Systems segment orders for 2024 were $1,467.7 million compared to $1,114.2 million for 2023, an increase of $353.5 million. The increase in orders across the segment was driven by increased orders for data centers as well as LNG including a large order in the fourth quarter for IPSMR® process technology and associated LNG equipment. Heat Transfer Systems segment backlog totaled a $2,097.4 million as of December 31, 2024 compared to $1,716.5 million as of December 31, 2023, an increase of $380.9 million.

Specialty Products segment orders for 2024 were $1,562.0 million compared to $1,341.6 million for 2023, an increase of $220.4 million. Specialty Products segment orders were negatively impacted by foreign currency fluctuations by about $16.3 million. The increase in orders was driven by increased orders in hydrogen, carbon capture, infrastructure, space and metals end markets. Specialty Products segment backlog totaled a $1,888.1 million as of December 31, 2024, compared to $1,631.1 million as of December 31, 2023, an increase of $257.0 million.

Repair, Service & Leasing segment orders for 2024 were $1,393.3 million compared to $1,100.8 million in 2023, an increase of $292.5 million. The increase was driven by the impacts of a full year of the Howden in 2024 versus a partial year in 2023 and growth in aftermarket repair and services. Repair, Service & Leasing segment backlog totaled $577.1 million as of December 31, 2024, compared to $587.9 million as of December 31, 2023, a decrease of $10.8 million.

Liquidity and Capital Resources

Our 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 $308.6 million as of December 31, 2024, which represents an increase of $120.3 million from the balance at December 31, 2023. Our foreign subsidiaries held cash of $281.6 million and $170.1 million at December 31, 2024 and 2023, respectively. No material restrictions exist to accessing cash held by our foreign subsidiaries. Cash equivalents are primarily invested in money market funds that invest in high quality, short-term instruments, such as U.S. government obligations, certificates of deposit, repurchase obligations, and commercial paper issued by corporations that have been highly rated by at least one nationally recognized rating organization, and in the case of cash equivalents in China, obligations of local banks. We believe that our existing cash and cash equivalents, funds available under our senior secured revolving credit facility due April 2029 or other financing alternatives, and cash provided by operations will be sufficient to meet our normal working capital needs, capital expenditures, debt repayments and investments for the foreseeable future.

Years Ended December 31, 2024 and 2023

Cash provided by operating activities during 2024 was $503.0 million, an increase of $335.8 million from 2023, primarily due to operating performance and cash management. This was partially offset by higher interest payments in 2024. Additionally, 2023 operating cash flows was impacted by the settlement of claims related to the Pacific Fertility Clinic lawsuits in the amount of $73.0 million.

Cash used in investing activities during 2024 and 2023 was $141.3 million and $3,990.1 million, respectively. During 2024 we used $120.8 million for capital expenditures and $13.1 million for investments, primarily Hy24. During 2023 we used $4,322.3 million of cash for the Howden Acquisition, $135.6 million for capital expenditures, and $11.6 million for investments, primarily Avina and Hylium Industries. In 2023 we also received proceeds, net of cash divested, of $474.8 million from the sale of our Roots, Cofimco, American Fan, and Cryo Diffusion businesses.

Cash used in financing activities during 2024 was $243.7 million compared to cash provided by financing activities of $1,412.5 million during 2023. During the year ended December 31, 2024, we borrowed $3,735.1 million and repaid $3,627.2 million on our revolving credit facility, we paid $258.7 million in cash to settle the outstanding principal amount of the convertible notes due November 2024 and repaid $50.0 million in term loans due March 2030. We additionally paid $27.2 million of dividends on our mandatory convertible preferred stock. In 2023, in connection with the Howden Acquisition, we borrowed incremental term loans in the aggregate principal amount of $1,534.8 million and borrowed incremental term loans in the aggregate principal amount of $250.0 million for general corporate purposes during 2023. On December 4, 2023, we voluntarily prepaid a portion of our term loans due March 2030 in the amount of $150.0 million. During 2023, we borrowed $1,895.1 million from revolving credit facilities and raised $11.7 million in proceeds for the issuance of common stock, primarily to fund the Howden Acquisition and repaid $1,901.2 million in borrowings on revolving credit facilities. A portion of debt repayments was funded with the proceeds from the previously mentioned divestitures. During 2023 we paid $136.2 million in debt issuance costs and paid $27.3 million of dividends on our mandatory convertible preferred stock. We also paid $12.2 million in dividend distributions to noncontrolling interest owners during 2023.

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Cash Requirements

We do not currently anticipate any unusual cash requirements for working capital needs for the year ending December 31, 2025 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 2025 to be approximately $110.0 million.

Contractual Obligations

Our material cash requirements from known contractual obligations include those related to debt and leases, refer to Note 10, “Debt and Credit Arrangements” and Note 19, “Leases”, respectively, within Item 15, “Exhibits and Financial Statement Schedules” of this Annual Report on Form 10-K for payments due by period. We also have contractual coupon interest related to our 7.500% senior secured notes due 2030 and 9.500% senior unsecured notes due 2031, which, as of December 31, 2024 totals $157.7 million for the next twelve months and $679.4 million thereafter. Purchase obligations arising from purchases of inventory and services are entered into with vendors in the normal course of business and are within our expected requirements for resource planning. We occasionally enter into firm purchase commitments to procure raw materials such as stainless steel, carbon steel and aluminum. As of December 31, 2024, firm purchase commitments were not material.

We have a Co-investment agreement with I Squared Capital (“ISQ”) which gives ISQ the right, but not the obligation, to require Chart to acquire all (and not less than all) of the shares of HTEC common stock acquired as part of ISQ’s investment (the “Put Option”). From and after May 1, 2025, ISQ shall have the right to exercise its Put Option. Following ISQ’s election to exercise its Put Option, Chart shall pay ISQ an amount equal to a purchase price of either (i) (x) $225.0 million if paid solely in cash or (y) $250.0 million if not paid solely in cash or (ii) three equal installments of $75.0 million under clause (x) or $83.3 million under clause (y) for a total combined purchase price of $225.0 million under clause (x) or $250.0 million under clause (y). The cumulative installment payments are owed no later than September 30, 2025 following ISQ’s election to exercise its Put Option. We have recently executed a Letter of Intent with a third party to assume and replace the Put Option and structure the revised Put Option similar to the existing Put Option set out in the September 2021 Co-Investment Agreement so that the Put Option would not be exercisable until 2028, subject to similar exercise conditions in the September 2021 Co-Investment Agreement. Should the Put Option be exercised in the future, we expect to fund the transaction with cash on hand and available borrowings under our credit facilities.

We have a 35.8 million euro investment commitment for the Clean H2 Infra Fund as mentioned in Note 6, “Investments” within Item 15, “Exhibits and Financial Statement Schedules” of this Annual Report on Form 10-K. Funding is required when the fund manager issues a capital call, which shall not exceed 30% of our capital commitment in any rolling 12-month period. We also have contingent consideration arrangements from prior acquisitions with a potential payout range of zero to $12.5 million.

Our commercial commitments as of December 31, 2024, 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):

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Contingencies

We are subject to federal, state, local, and foreign environmental laws and regulations concerning, among other matters, waste water effluents, air emissions, and handling and disposal of hazardous materials, such as cleaning fluids. We are involved with environmental compliance, investigation, monitoring, and remediation activities at certain of our owned and formerly owned manufacturing facilities, and, 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.

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Future developments may, however, result in resolution of these legal claims in a way that could have a material adverse effect. See Item 1A. “Risk Factors” and Item 3, “Legal Proceedings” for further information.

Foreign Operations

Our foreign operations accounted for 60.1% of 2024 consolidated sales and 51.3% of total property, plant and equipment at December 31, 2024. Functional currencies used by these operations include the Chinese yuan, the euro, the British pound, the South African rand, the Indian rupee, and the Canadian dollar. We are exposed to foreign currency exchange risk as a result of transactions by these subsidiaries in currencies other than their functional currencies, and from transactions by our domestic operations in currencies other than the U.S. dollar. The majority of these functional currencies and the other currencies in which we record transactions are fairly stable, although we experienced variability in the current year as more fully discussed in Item 7A. The use of these currencies, combined with the use of foreign currency forward purchase and sale contracts, has enabled us to be sheltered from significant gains or losses resulting from foreign currency transactions. This situation could change if these currencies experience significant fluctuations or the volume of forward contracts changes.

Critical Accounting Estimates

Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles and are based on the selection and application of significant accounting policies, which require management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates. There were no material changes to estimates or methodologies used to develop those estimates in 2024. 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.

We have elected to bypass the qualitative Step 0 Test and proceed directly to the first step (“Step 1”) of the goodwill impairment test. Under the first step, we estimate the fair value of our reporting units by considering income and market approaches to develop fair value estimates, which are weighted to arrive at a fair value estimate for each reporting unit. With respect to the income approach, a model has been developed to estimate the fair value of each reporting unit. This fair value model incorporates estimates of future cash flows, estimates of allocations of certain assets and cash flows among reporting units, estimates of future growth rates, and management’s judgment regarding the applicable discount rates to use to discount such estimates of cash flows. With respect to the market approach, a guideline company method is employed whereby pricing multiples are derived from companies with similar assets or businesses to estimate fair value of each reporting unit. If the fair value of the reporting unit exceeds the carrying amount of the net assets assigned to that reporting unit, then goodwill is not impaired, and no further testing is required. However, if the fair value of the reporting unit is less than its carrying amount, the impairment charge is based on the excess of a reporting unit’s carrying amount over its fair value (i.e., we would measure the charge based on the result from Step 1). The assumptions and judgment used by management to estimate future cash flows, allocation of assets and cash flows among reporting units, estimates of future growth rates and selection of discount rates are subject to change due to the economic environment, including such factors as interest rates, expected market returns and volatility of markets served. Changes to the assumptions and estimates used throughout the steps described above may result in a significantly different estimate of the fair value of the reporting units, which could result in a different assessment of the recoverability of goodwill and result in future impairment charges.

In order to assess the reasonableness of the calculated fair values of our reporting units, we also compare the sum of the reporting units’ fair values to our market capitalization and calculate an implied control premium (the excess of the sum of the reporting units’ fair values over the market capitalization). We evaluate the control premium by comparing it to control premiums of recent comparable transactions. If the implied control premium is not reasonable in light of this assessment, we reevaluate our fair value estimates of the reporting units by adjusting the discount rates and other assumptions as necessary.

As of October 1, 2024, 2023 and 2022 (“annual reporting unit assessment dates”) we elected to bypass the Step 0 test and based on our Step 1 test, we determined that the fair value of each of our reporting units was greater than its respective carrying value at each annual reporting unit assessment date. We continue to monitor for any potential indicators of impairment.

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With respect to indefinite-lived intangible assets, 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, 2024 and 2023, we elected to bypass the Step 0 test and based on our Step 1 test, we determined that the fair value of each of our indefinite-lived intangible assets was greater than its respective carrying value. We continue to monitor for any potential indicators of impairment.

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.

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 certain contracts, we are engaged to engineer and build highly-customized products and systems. In these circumstances, we produce an asset with no alternative use and have a right to payment for performance completed to date. For these contracts, revenue is recognized as we satisfy the performance obligations by an allocation of the transaction price to the accounting period computed using input methods such as costs incurred. Selecting the method used to measure progress towards completion for our contracts requires judgment and is based on the nature of the products to be provided. Accounting for contracts using the costs incurred input method requires management judgment relative to assessing risks and their impact on the estimates of revenue and costs. Certain factors can impact these estimates including, but not limited to, schedule delays, labor productivity, the complexity of work performed and the cost and availability of materials. Revisions to estimated cost to complete a project that result from inefficiencies in our performance that were not expected in the pricing of the contract are expensed in the period in which these inefficiencies become known. Contract modifications can change a contract’s scope, price, or both. Approved contract modifications are accounted for as either a separate contract or as part of the existing contract depending on the nature of the modification which is subject to management’s judgment.

Income Taxes: The Company and its U.S. subsidiaries file a consolidated federal income tax return. Deferred income taxes are provided for temporary differences between financial reporting and the consolidated tax return in accordance with the liability method. A valuation allowance is provided against net deferred tax assets when conditions indicate that it is more likely than not that the benefit related to such assets will not be realized. In the event that we change our determination as to the amount of deferred tax assets that can be realized, the valuation allowance will be adjusted with a corresponding impact to the provision for income taxes in the period in which such determination is made. Management must make assumptions, judgments and estimates to determine our deferred tax assets and liabilities, current provision for income taxes and valuation allowances. In making such assumptions we consider all available evidence including past operating results, estimates of future taxable income and the feasibility of tax planning strategies

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.

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Forward-Looking Statements

We are making this statement in order to satisfy the “safe harbor” provisions contained in the Private Securities Litigation Reform Act of 1995. This Annual Report includes “forward-looking statements.” These forward-looking statements include statements relating to our business, including statements regarding completed acquisitions and investments and related accretion or statements with respect to the use of proceeds or redeployment of capital from recent divestitures, as well statements regarding sales outlooks, revenues, cost and commercial synergies and efficiency savings, objectives, future orders, margins, segment sales mix, earnings or performance, liquidity and cash flow, repayment or settlement of maturing debt, 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 changes in governmental policies, 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, debt repayment, cash flow, orders, results of operations, projected revenues, margins, capital expenditures, industry and business, trends, clean energy and other new market or expansion opportunities, cost and commercial synergies and savings objectives, and government initiatives among other matters) or in other statements made by us are made based on management’s expectations and beliefs concerning future events impacting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed or implied by forward-looking statements.

The risk factors discussed in Item 1A. “Risk Factors” and the factors discussed in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” among others, could affect our future performance and liquidity and value of our securities and could cause our actual results to differ materially from those expressed or implied by forward-looking statements made by us or on our behalf. These factors should not be construed as exhaustive and there may also be other risks that we are unable to predict at this time. All forward-looking statements included in this Annual Report are expressly qualified in their entirety by these cautionary statements.

All forward-looking statements attributable to us or persons acting on our behalf apply only as of the date of this Annual Report and are expressly qualified in their entirety by the cautionary statements included in this Annual Report. We undertake no obligation to update or revise forward-looking statements which may be made to reflect events or circumstances that arise after the filing date of this document or to reflect the occurrence of unanticipated events, except as otherwise required by law.