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Business Combinations | 3 Months Ended
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Mar. 31, 2018
Business Combinations [Abstract] |
Business Combinations | Business Combinations Skaff Acquisition On January 2, 2018, we acquired 100% of the equity interests of Skaff Cryogenics and Cryo-Lease, LLC (together “Skaff”) for an approximate purchase price of $12.5, net of cash acquired. The following table represents goodwill, certain intangible assets and other net assets acquired:
Goodwill | $ | 4.7 |
Property, plant and equipment | 4.2 |
Inventories, net | 1.6 |
Identifiable intangible assets | 1.7 |
Other net assets | 0.3 |
Net assets acquired | $ | 12.5 |
The assets acquired and liabilities assumed were recorded at their estimated fair values as of the acquisition date. The purchase price allocation is preliminary and is based on provisional fair values and subject to revision as we finalize third-party valuations and other analyses. Final determination of the fair values may result in further adjustments to the value of net assets acquired. Skaff provides quality repair service and re-manufacturing of cryogenic and liquefied natural gas storage tanks and trailers and also maintains a portfolio of cryogenic storage equipment that is leased to customers for temporary and permanent needs. Skaff is headquartered in Brentwood, New Hampshire and provides services and equipment to customers in North America. Skaff’s results are included in the D&S operating segment since the date of acquisition. Pro-forma information related to the Skaff acquisition has not been presented because the impact on our consolidated results of operations and financial position is not material. Hudson Acquisition On September 20, 2017, we completed the acquisition of Hudson. The acquisition purchase price was $419.5, net of cash acquired. 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. 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, primarily deferred tax liabilities and related accounts, 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. Such revisions or changes may be material. There was no change in the preliminary purchase price allocation during the three months ended March 31, 2018 from the amounts reported in our December 31, 2017 Annual Report on Form 10-K. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed in the Hudson acquisition:
Net assets acquired: |
Goodwill | $ | 238.3 |
Identifiable intangible assets | 211.0 |
Accounts receivable | 34.6 |
Property, plant and equipment | 29.4 |
Inventories | 26.5 |
Other current assets | 8.1 |
Unbilled contract revenue | 4.9 |
Other assets | 2.9 |
Prepaid expenses | 0.9 |
Deferred tax liabilities | (87.6 | )
Accounts payable | (21.2 | )
Customer advances and billings in excess of contract revenue | (17.4 | )
Accrued salaries, wages and benefits | (4.4 | )
Other current liabilities | (3.8 | )
Other long-term liabilities | (1.9 | )
Current portion of warranty reserve | (0.8 | )
Net assets acquired | $ | 419.5 |
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 | 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 |
During the three months ended March 31, 2018, net sales attributed to the acquired Hudson operations was $43.3. For the same period, Hudson contributed $4.2 to operating income which included $3.0 of intangible asset amortization expense. Supplemental Pro Forma Information The following 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 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 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, and •step-up depreciation of acquired property, plant and equipment This 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 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 loss attributable to the Company, and net loss attributable to the Company per common share data assuming Hudson was acquired before the beginning of the 2017 fiscal year, and assuming effective tax rates of 35% for the three months ended March 31, 2017:
Pro forma sales |  | $ | 251.9 |
Pro forma net loss attributable to Chart Industries, Inc. |  | (2.7 | )
Pro forma net loss attributable to Chart Industries, Inc. per common share, basic |  | $ | (0.09 | )
Pro forma net loss attributable to Chart Industries, Inc. per common share, diluted |  | $ | (0.09 | )
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). 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 since 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 a total purchase price of $22.8. The following table represents goodwill, certain intangible assets and other net assets acquired:
Goodwill | $ | 8.8 |
Identifiable intangible assets – customer relationships | 8.1 |
Other identifiable intangible assets | 1.2 |
Other net assets | 4.7 |
Net assets acquired | $ | 22.8 |
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 since 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 includes assumptions regarding the probability of achieving certain earnings targets and a discount rate applied to the potential payments. Potential payments may be paid between April 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 Note 8, “Fair Value Measurements” 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 unaudited condensed consolidated balance sheets. Changes in fair value of contingent consideration, including accretion, are recorded as selling, general, and administrative expenses in the unaudited condensed consolidated statements of operations and comprehensive income. The fair value of contingent consideration liabilities was insignificant at both March 31, 2018 and December 31, 2017.

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- 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
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