XML 38 R16.htm IDEA: XBRL DOCUMENT
v3.8.0.1

Business Combinations (Notes) | 12 Months Ended
--- | ---
Dec. 31, 2017
Business Combinations [Abstract] |
Business Combination Disclosure [Text Block] | Business Combinations Hudson Acquisition On September 20, 2017, the Company and Chart Sully Corporation, a wholly owned subsidiary of the Company (“Merger Sub”), completed the previously announced acquisition of Hudson pursuant to the terms of the Agreement and Plan of Merger, as amended (the “Merger Agreement”), by and between Chart, Merger Sub, Hudson and R/C Hudson Holdings, L.P., solely in its capacity as the Initial Holder Representative under the Merger Agreement. The acquisition was accomplished by the merger of Merger Sub with and into Hudson, with Hudson surviving the merger as a wholly owned subsidiary of the Company (the “Acquisition”). The acquisition purchase price was $419.5, net of cash acquired, including a net working capital adjustment amount of $6.0, and $3.5 in acquisition-related tax benefits acquired, as defined in the Merger Agreement. Approximately $300.0 of the purchase price was funded through borrowings under our senior secured revolving credit facility, and the remainder of the purchase price was funded with cash on hand. Hudson, which has operations in the United States, China and Italy and a joint venture in Mexico, designs, manufactures, sells and services products used in refining, heating, ventilation and air conditioning (HVAC), petrochemical, natural gas, power generation, industrial and commercial end markets. Hudson is a North American leader in air-cooled heat exchangers and a global leader in axial flow cooling fans. Hudson’s results of operations are included in our E&C segment since the date of the acquisition. As defined in our significant accounting policy for business combinations in Note 2, we preliminarily allocated the acquisition consideration to tangible and identifiable intangible assets acquired and liabilities assumed based on their preliminary estimated fair values as of the acquisition date. The preliminary fair value of the acquired tangible and identifiable intangible assets were determined based on inputs that are unobservable and significant to the overall fair value measurement. It is also based on estimates and assumptions made by management at the time of the acquisition. As such, this was classified as Level 3 fair value hierarchy measurements and disclosures. We estimated the preliminary fair value of acquired unpatented technology and trademarks and trade names using the relief from royalty method. The preliminary fair values of acquired customer backlog and customer relationships were estimated using the multi-period excess earnings method. Under both the relief from royalty and multi-period excess earnings methods, the fair value models incorporate estimates of future cash flows, estimates of allocations of certain assets and cash flows, estimates of future growth rates, and management’s judgment regarding the applicable discount rates to use to discount such estimates of cash flows. The estimated useful lives of identifiable finite-lived intangible assets range from 2 to 15 years. Hudson complements our E&C segment with the addition of its Fin-Fan® brand and other air cooled heat exchangers which broaden E&C’s end market diversity from primarily liquefied natural gas, industrial and natural gas to include HVAC, petrochemical and power generation. The addition of Hudson’s fans business, known by the Tuf-Lite® and Cofimco® brands, allows E&C to offer a broader technology solution for our customers. Management anticipates the combination of strong engineering cultures will continue to further develop full service solutions for our customers. The preliminary estimated goodwill was established due to the benefits outlined above, as well as the benefits derived from the anticipated synergies of Hudson integrating with Chart’s E&C segment. Goodwill recorded for the Hudson acquisition is not expected to be deductible for tax purposes. The acquisition consideration allocation below is preliminary, pending completion of the fair value analyses of acquired assets and liabilities as well as certain other analyses. The excess of the purchase price over the estimated fair values is assigned to goodwill. 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. Any such revisions or changes may be material. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed in the Hudson acquisition:
| December 31, 2017 |  | Adjustments |  | As Previously Reported September 30, 2017
Net assets acquired: |  |  |  |  |
Goodwill | $ | 238.3 |  |  | $ | 10.9 |  |  | $ | 227.4 |
Identifiable intangible assets | 211.0 |  |  | 9.0 |  |  | 202.0 |
Accounts receivable | 34.6 |  |  | — |  |  | 34.6 |
Property, plant and equipment | 29.4 |  |  | (1.2 | ) |  | 30.6 |
Inventories | 26.5 |  |  | 1.6 |  |  | 24.9 |
Other current assets (1) | 8.1 |  |  | (1.2 | ) |  | 9.3 |
Unbilled contract revenue | 4.9 |  |  | 0.3 |  |  | 4.6 |
Other assets | 2.9 |  |  | — |  |  | 2.9 |
Prepaid expenses | 0.9 |  |  | — |  |  | 0.9 |
Deferred tax liabilities | (87.6 | ) |  | (19.0 | ) |  | (68.6 | )
Accounts payable | (21.2 | ) |  | — |  |  | (21.2 | )
Customer advances and billings in excess of contract revenue | (17.4 | ) |  | (0.5 | ) |  | (16.9 | )
Accrued salaries, wages and benefits | (4.4 | ) |  | — |  |  | (4.4 | )
Other current liabilities | (3.8 | ) |  | 0.2 |  |  | (4.0 | )
Other long-term liabilities | (1.9 | ) |  | — |  |  | (1.9 | )
Current portion of warranty reserve | (0.8 | ) |  | — |  |  | (0.8 | )
Net assets acquired | $ | 419.5 |  |  | $ | 0.1 |  |  | $ | 419.4 |
_______________
(1) | Pursuant to the provisions of the Merger Agreement, Hudson deposited $2.3 into a Rabbi Trust which represents amounts payable to eligible parties under Long-Term Incentive Agreements. This balance is treated as restricted cash and restricted cash equivalents in the consolidated balance sheets and is classified as other current assets.
Information regarding identifiable intangible assets acquired in the Hudson acquisition is presented below:
| Weighted-average Estimated Useful Life |  | Preliminary Estimated Asset Fair Value
Finite-lived intangible assets: |  |  |
Customer relationships | 13 years |  | $ | 122.1 |
Unpatented technology | 10 years |  | 18.3 |
Customer backlog (1) | 2 years |  | 1.3 |
Total finite-lived intangible assets acquired | 12 years |  | 141.7 |
Indefinite-lived intangible assets: |  |  |
Trademarks and trade names |  |  | 69.3 |
Total identifiable intangible assets acquired |  |  | $ | 211.0 |
_______________
(1) | Customer backlog acquired is included in “Patents and other” in Note 6. Goodwill and Intangible Assets.
For the year ended December 31, 2017, net sales attributed to the acquired Hudson operations were $58.0. For the same period, Hudson contributed $6.4 to operating income which included $3.3 of intangible asset amortization expense. During the year ended December 31, 2017, we incurred $9.0 in acquisition related costs related to the Hudson acquisition which were recorded in Corporate selling, general and administrative expenses in the consolidated statements of operations. Unaudited Supplemental Pro Forma Information The following unaudited supplemental pro forma financial information is based on our historical consolidated financial statements and Hudson’s historical consolidated financial statements as adjusted to give effect to the September 20, 2017 acquisition of Hudson. The unaudited supplemental pro forma financial information for the periods presented gives effect to the acquisition as if it had occurred on January 1, 2016. The following adjustments are reflected in the unaudited pro forma financial table below:
• | the effect of decreased interest expense related to the repayment of the Hudson term loan and revolving credit facility, net of the additional borrowing on the Chart senior secured revolving credit facility,
•amortization of acquired intangible assets, •step-up depreciation of acquired property, plant and equipment, •inventory fair value step-up amortization expense,
• | nonrecurring acquisition-related expenses incurred by Hudson directly attributable to the Hudson acquisition of $16.5 was adjusted out of the pro forma net income attributable to the Company for the year ended December 31, 2017, and
• | nonrecurring acquisition-related expenses incurred by Chart directly related to the Hudson acquisition of $9.0 was adjusted out of the pro forma net income attributable to the Company for the year ended December 31, 2017.
This unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have resulted had the acquisition been in effect at the beginning of the periods presented. In addition, the unaudited pro forma results are not intended to be a projection of future results and do not reflect any operating efficiencies or cost savings that might be achievable. The following table presents pro forma sales, net income attributable to the Company, and net income attributable to the Company per common share data assuming Hudson was acquired at the beginning of the 2016 fiscal year, and assuming a 35% effective tax rate in both years:
| Year Ended December 31,
| 2017 |  | 2016
Pro forma sales | $ | 1,130.0 |  |  | $ | 1,029.0 |
Pro forma net income attributable to Chart Industries, Inc. | 16.8 |  |  | 17.1 |
Pro forma net income attributable to Chart Industries, Inc. per common share, basic | 0.55 |  |  | 0.56 |
Pro forma net income attributable to Chart Industries, Inc. per common share, diluted | 0.54 |  |  | 0.55 |
VCT Vogel GmbH Acquisition On August 31, 2017, Chart Germany GmbH, a wholly-owned subsidiary of the Company, acquired 100% of the equity interests of VCT Vogel GmbH (“VCT”) for a total purchase price of 3.6 million euros (equivalent to $4.2) less a hold back amount of 0.4 million euros (equivalent to $0.4) to be paid to the sellers over a two-year period. VCT, located in Gablingen, Germany, services and repairs cryogenic and other mobile gas tank equipment and trucks. VCT also designs, manufactures and sells truck mounted drive and control systems for the operation of cryogenic pumps on trailers, rigid trucks and containers. VCT’s results are included in our D&S segment from the date of acquisition. Additional information related to the VCT acquisition has not been presented because the impact on our consolidated results of operations and financial position is not material. Hetsco, Inc. Acquisition On January 13, 2017, we acquired 100% of the equity interests in Hetsco, Inc. from Global Power Equipment Group, Inc. for an estimated purchase price of $23.2, which was paid upon closing. The purchase price allocation reported at March 31, 2017 was preliminary and was based on provisional fair values. During the second quarter, we received revised third-party valuations, performed other analyses and recorded $0.4 in accounts receivable for post-closing adjustments, which resulted in an adjusted net purchase price of $22.8. No further post-closing adjustments are expected. The post-closing adjustments and revised fair values resulted in the following adjustments to the net assets acquired:
| December 31, 2017 |  | Adjustments |  | As Previously Reported March 31, 2017
Goodwill | $ | 8.8 |  |  | $ | (1.3 | ) |  | $ | 10.1 |
Identifiable intangible assets – customer relationships | 8.1 |  |  | 0.8 |  |  | 7.3 |
Other identifiable intangible assets | 1.2 |  |  | — |  |  | 1.2 |
Other net assets | 4.7 |  |  | 0.1 |  |  | 4.6 |
Net assets acquired | $ | 22.8 |  |  | $ | (0.4 | ) |  | $ | 23.2 |
The assets acquired and liabilities assumed were recorded at their estimated fair values as of the acquisition date. Hetsco, Inc. is headquartered in Franklin, Indiana and provides emergency, specialty welding and construction services to natural gas processing, petrochemical, and air gas separation industries. Hetsco’s results are included in our E&C segment from the date of acquisition. Pro-forma information related to the Hetsco, Inc. acquisition has not been presented because the impact on our consolidated results of operations and financial position is not material. Contingent Consideration The estimated fair value of contingent consideration relating to the 2015 D&S Thermax acquisition was $1.8 at the date of acquisition and was valued according to a discounted cash flow approach, which included assumptions regarding the probability of achieving certain earnings targets and a discount rate applied to the potential payments. Potential payments may be paid between January 1, 2018 and July 1, 2019 based on the attainment of certain earnings targets. The potential payments related to Thermax contingent consideration are between $0.0 and $11.3. Valuations are performed using Level 3 inputs as defined in the Fair Value Measurements note and are evaluated on a quarterly basis based on forecasted sales and earnings targets. Contingent consideration liabilities are classified as other current liabilities and other long-term liabilities in the consolidated balance sheets. Changes in fair value of contingent consideration, including accretion, are recorded as selling, general, and administrative expenses in the consolidated statements of operations. The following table represents the changes in contingent consideration liabilities by segment:
| Distribution & Storage |  | BioMedical |  | Total
Balance at January 1, 2015 | $ | — |  |  | $ | 1.1 |  |  | $ | 1.1 |
Fair value of contingent consideration at inception | 1.8 |  |  | — |  |  | 1.8 |
Decrease in fair value of contingent consideration liabilities | — |  |  | (0.5 | ) |  | (0.5 | )
Payment of contingent consideration | — |  |  | (0.6 | ) |  | (0.6 | )
Balance at December 31, 2015 | 1.8 |  |  | — |  |  | 1.8 |
Increase in fair value of contingent consideration liabilities | 0.1 |  |  | — |  |  | 0.1 |
Balance at December 31, 2016 | 1.9 |  |  | — |  |  | 1.9 |
Decrease in fair value of contingent consideration liabilities | (1.6 | ) |  | — |  |  | (1.6 | )
Balance at December 31, 2017 | $ | 0.3 |  |  | $ | — |  |  | $ | 0.3 |
For the year ended December 31, 2017, the fair value of contingent consideration decreased by $1.6, which was primarily driven by economic circumstances that significantly reduced the likelihood of achieving certain earnings targets for the duration of the remaining potential payout period.

X
- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
Name: | us-gaap_BusinessCombinationDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_BusinessCombinationsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration