Chart(US:GTLS)2025-07-29 21:26Part I. Financial Information Financial Statements This section presents Chart Industries, Inc.'s unaudited condensed consolidated financial statements for Q2 2025, including balance sheets, income, cash flow, and equity statements, alongside notes detailing a proposed merger with Baker Hughes and segment performance Condensed Consolidated Balance Sheet Highlights (As of June 30, 2025) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $9,719.0 M | $9,123.9 M | | Total Liabilities | $6,205.1 M | $6,128.7 M | | Total Equity | $3,513.9 M | $2,995.2 M | Condensed Consolidated Statement of Income Highlights (Three Months Ended June 30) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Sales | $1,082.3 M | $1,040.3 M | | Gross Profit | $363.5 M | $351.6 M | | Operating Income | $169.5 M | $167.8 M | | Net Income Attributable to Chart | $76.1 M | $58.6 M | | Diluted EPS | $1.53 | $1.10 | Condensed Consolidated Statement of Cash Flows Highlights (Six Months Ended June 30) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash Provided By Operating Activities | $85.9 M | $21.0 M | | Net Cash Used In Investing Activities | ($45.0 M) | ($95.6 M) | | Net Cash (Used In) Provided By Financing Activities | ($17.7 M) | $126.9 M | Note 1 — Basis of Preparation This note outlines the basis for interim financial statements and discloses the termination of a merger with Flowserve for a $266 million payment, and a new definitive merger agreement for Baker Hughes to acquire Chart for $210.00 per share in cash - Chart entered into a definitive merger agreement to be acquired by Baker Hughes for $210.00 per share in cash2527 - The company terminated its prior merger agreement with Flowserve Corporation on July 28, 20253637 - A termination payment of $266 million is payable to Flowserve, of which Baker Hughes will pay $258 million on Chart's behalf38 Note 2 — Reportable Segments The company operates four segments: Cryo Tank Solutions, Heat Transfer Systems, Specialty Products, and Repair, Service & Leasing, with North America as the largest market, and Heat Transfer Systems and Specialty Products showing Q2 2025 sales growth Segment Sales and Operating Income (Three Months Ended June 30, 2025) | Segment | Sales ($M) | Operating Income ($M) | | :--- | :--- | :--- | | Cryo Tank Solutions | 155.9 | 25.7 | | Heat Transfer Systems | 295.3 | 73.0 | | Specialty Products | 292.9 | 43.0 | | Repair, Service & Leasing | 338.2 | 78.9 | - Total assets of reportable segments increased to $3,431.1 million as of June 30, 2025, from $3,094.2 million at the end of 202453 Note 3 — Revenue Revenue recognized "over time" accounted for $841.0 million in Q2 2025, with unbilled contract revenue significantly increasing to $965.8 million, and 52% of the $5,536.5 million remaining performance obligations expected within 12 months - The company's remaining performance obligations (backlog) stood at $5,536.5 million as of June 30, 2025 Approximately 52% of this is expected to be recognized as revenue over the next 12 months57 - Contract assets, specifically unbilled contract revenue, increased to $965.8 million from $735.1 million at the end of 2024, driven by an increase in revenue recognized on an over time basis5556 Note 8 — Debt and Credit Arrangements As of June 30, 2025, total net debt was $3,668.7 million, including various notes and loans, with $752.1 million in unused revolving credit capacity, and the company remained compliant with all debt covenants Outstanding Borrowings (As of June 30, 2025) | Debt Component | Carrying Value ($M) | | :--- | :--- | | Senior secured and unsecured notes, net | 1,918.8 | | Senior secured revolving credit facility and term loan, net | 1,747.6 | | Other debt facilities | 2.3 | | Total debt, net | 3,668.7 | - As of June 30, 2025, the company had $752.1 million in unused borrowing capacity under its Senior Secured Revolving Credit Facility (SSRCF)81 - The company was in compliance with all debt covenants as of June 30, 202583 Management's Discussion and Analysis of Financial Condition and Results of Operations This section details management's analysis of financial performance, highlighting the proposed Baker Hughes merger, Q2 sales growth of 4.0% to $1,082.3 million, and a record backlog of $5,536.5 million driven by strong orders - Consolidated orders for Q2 2025 were $1,497.6 million, up from $1,164.7 million in Q2 2024, driven by Heat Transfer Systems, Specialty Products, and Repair, Service & Leasing138 - Total backlog reached $5,536.5 million as of June 30, 2025, compared to $4,426.0 million a year prior138 - Q2 2025 consolidated sales increased 4.0% YoY to $1,082.3 million, while gross profit margin slightly decreased to 33.6% from 33.8%139 Results of Operations Q2 2025 sales increased 4.0% YoY to $1,082.3 million, with gross profit up 3.4% to $363.5 million despite a slight margin dip, while six-month sales grew 4.7% to $2,083.8 million with improved gross margin and strong net income growth Financial Performance vs. Prior Year (Three Months Ended June 30) | Metric | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Sales | $1,082.3 M | $1,040.3 M | 4.0% | | Gross Profit | $363.5 M | $351.6 M | 3.4% | | Net Income Attributable to Chart | $76.1 M | $58.8 M | 29.4% | Financial Performance vs. Prior Year (Six Months Ended June 30) | Metric | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Sales | $2,083.8 M | $1,991.0 M | 4.7% | | Gross Profit | $703.3 M | $653.9 M | 7.6% | | Net Income Attributable to Chart | $127.6 M | $72.3 M | 76.5% | Segment Results In Q2 2025, Heat Transfer Systems led with 24.8% sales growth and expanded margins from LNG projects, Specialty Products sales grew 5.5% but margins declined, Cryo Tank Solutions sales fell 5.8% but margins improved, and Repair, Service & Leasing sales and margins decreased due to non-recurring record service work - Cryo Tank Solutions: Q2 sales decreased 5.8% YoY to $155.9M, but operating margin improved significantly to 16.5% from 9.7%166168 - Heat Transfer Systems: Q2 sales grew 24.8% YoY to $295.3M, with operating margin expanding to 24.7% from 19.1% due to strong execution on LNG projects174176177 - Repair, Service & Leasing: Q2 sales declined 6.2% YoY to $338.2M, and operating margin fell to 23.3% from 27.2% as record field service work from 2024 did not repeat190192193 Liquidity and Capital Resources The company's cash increased by $33.5 million to $344.0 million in H1 2025, with operating cash flow significantly improving to $85.9 million, and management deems existing resources sufficient despite potential merger-related termination fees - Cash provided by operating activities for the first six months of 2025 was $85.9 million, a substantial increase from $21.0 million in the same period of 2024201 - Cash used in investing activities decreased to $45.0 million from $95.6 million YoY, mainly due to lower capital expenditures ($44.0 million vs. $74.2 million)202 - Potential future cash requirements include an $8 million payment related to the Flowserve merger termination and other transaction costs for the proposed Baker Hughes merger207208 Orders and Backlog Q2 2025 orders surged to $1,497.6 million, driven by Specialty Products and Repair, Service & Leasing, boosting the total backlog to a record $5,536.5 million as of June 30, 2025 Orders and Backlog by Segment (As of June 30, 2025) | Segment | Q2 2025 Orders ($M) | Total Backlog ($M) | | :--- | :--- | :--- | | Cryo Tank Solutions | 157.0 | 317.6 | | Heat Transfer Systems | 271.2 | 2,013.5 | | Specialty Products | 663.3 | 2,403.6 | | Repair, Service & Leasing | 406.1 | 801.8 | | Consolidated | 1,497.6 | 5,536.5 | Quantitative and Qualitative Disclosures About Market Risk The company reports no material change in its market risk exposure since its Annual Report on Form 10-K for December 31, 2024 - There has been no material change in the company's market risk exposure since December 31, 2024220 Controls and Procedures Management, including the CEO and CFO, affirmed the effectiveness of disclosure controls and procedures as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025221 - No changes occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting222 Part II. Other Information Legal Proceedings The company is involved in various routine legal claims, but management anticipates their resolution will not materially impact its financial position, liquidity, cash flows, or operations - Management believes that the final resolution of various incidental legal claims will not have a material adverse effect on the company's financial position or results223 Risk Factors This section outlines new risks associated with the proposed Baker Hughes merger, including potential failure to complete the transaction, negative impacts from termination, transaction costs, business disruptions, and delays or adverse conditions from regulatory approvals - There is a risk that the merger with Baker Hughes may not occur if closing conditions, such as stockholder and regulatory approvals, are not met225 - The announcement and pendency of the merger could disrupt current plans, divert management attention, and harm business relationships228 - Obtaining necessary regulatory approvals could be delayed or impose unforeseen conditions, such as asset divestitures, that could affect the merger's completion229 Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, the company repurchased 1,786 shares at an average price of $166.53 solely for tax withholding on equity awards, while its $250.0 million share repurchase program remains suspended due to the pending Baker Hughes merger - A total of 1,786 shares were repurchased during Q2 2025 to satisfy tax withholding obligations from employee share-based compensation plans231 - The company's $250.0 million share repurchase program is suspended while the Merger Agreement with Baker Hughes is in effect231 Other Information No directors or officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the second quarter of 2025 - No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during the second quarter of 2025233 Exhibits This section lists the exhibits filed with the Form 10-Q, including the Co-Investment Agreement with MSD Partners, L.P. and various officer certifications - Key exhibits filed include the Co-Investment Agreement with MSD Partners, L.P. and CEO/CFO certifications236