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Business Combinations | 3 Months Ended
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Mar. 31, 2022
Business Combination and Asset Acquisition [Abstract] |
Business Combinations | Business Combinations Earthly Labs Inc. Acquisition On December 14, 2021, we acquired the remaining 85% of Earthly Labs (we previously held a 15% equity investment in Earthly Labs) for cash and stock for a previously disclosed estimated preliminary purchase price of $63.1. During the first three months of 2022, we decreased the value of the stock consideration by $1.2 to reflect the December 13, 2021 closing price of Chart common stock of $160.63 per share, which lowered the preliminary estimated purchase price to $61.9 or $58.4 net of $3.5 cash acquired. In connection with the Earthly Labs acquisition, Chart shall pay to the sellers a royalty on sales of a carbon capture unit for residential use launched for sale to the public by Chart, which has not yet been developed. Refer to the “Contingent Consideration” section below for further discussion. Earthly Labs is a leading provider of small-scale carbon capture systems offering an affordable, small footprint technology platform called “CiCi ®” to capture, recycle, reuse, track and sell CO2. Earthly Labs proprietary approach includes hardware, software and services to address half of all existing carbon dioxide emissions from industrial sources while converting molecules to value. The preliminary estimated fair value of the total net assets acquired include goodwill, identifiable intangible assets and other net liabilities at the date of acquisition in the amounts of $46.5, $27.0 and $3.5, respectively, (as previously reported: $47.2, $27.0 and $11.1, respectively). Amounts previously reported were preliminary and based on provisional fair values. During the first three months of 2022, we received and analyzed new information about certain assets acquired and subsequently adjusted their fair values accordingly. Intangible assets consists of unpatented technology, trade names, customer relationships and backlog. AdEdge Acquisition On August 27, 2021, we acquired 100% of the equity interests of AdEdge Holdings, LLC (“AdEdge”) for $37.5 in cash, net of $1.4 of cash acquired and a net working capital settlement of $0.8 finalized during the first quarter of 2022. AdEdge is a water treatment technology and solution provider specializing in the design, development, fabrication and supply of water treatment solutions, specialty medias, legacy and innovative technologies that remove a wide range of contaminants from water. The preliminary estimated fair value of the total net assets acquired include goodwill, identifiable intangible assets and other net assets at the date of acquisition in the amounts of $16.6, $18.2 and $4.1, respectively (as previously reported: $15.9, $18.2 and $4.8, respectively). During the first three months of 2022, we increased goodwill by $0.7, which included the $0.8 final net working capital adjustment mentioned above, partially offset by a $0.1 adjustment to other assets. L.A. Turbine Acquisition On July 1, 2021, we acquired 100% of the equity interests of L.A. Turbine (“LAT”) for approximately $76.6 in cash (subject to certain customary adjustments), net of $1.4 of cash acquired. LAT is a global leader in turboexpander design, engineering, manufacturing, assembly and testing process for new and aftermarket equipment, with significant in-house engineering expertise. The preliminary estimated useful lives of identifiable finite-lived intangible assets range from less than one year to 15 years. The excess of the purchase price over the estimated fair values is assigned to goodwill. LAT complements our Heat Transfer Systems and Specialty Products segments with the addition of its application-specific, highly engineered turboexpanders which further differentiates Chart’s end market diversity especially in hydrogen and helium liquefaction in addition to industrial gas, natural gas processing, power generation and petrochemical applications. Furthermore, LAT’s aftermarket business will further bolster our Repair, Service & Leasing segment. The addition of LAT’s turboexpanders new equipment and aftermarket businesses allows Chart 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 LAT integrating with our Heat Transfer Systems, Specialty Products and Repair, Service & Leasing segments. Goodwill recorded for the LAT acquisition is not expected to be deductible for tax purposes. The following table summarizes the preliminary estimated fair value of the assets acquired in the L.A. Turbine acquisition at the acquisition date:
Net assets acquired: |
Identifiable intangible assets | $ | 43.7 |
Goodwill (1) | 41.9 |
Other assets (1) | 4.8 |
Property, plant and equipment | 2.6 |
Cash and cash equivalents | 1.4 |
Liabilities | (16.4) |
Net assets acquired | $ | 78.0 |
_______________ (1)As previously reported in our Annual Report on Form 10-K for the year ended December 31, 2021, we reported goodwill and other assets of $42.1 and $4.6, respectively. During the first quarter of 2022, we recorded purchase price adjustments that decreased goodwill by $0.2 and increased other assets by $0.2. Information regarding preliminary estimated identifiable intangible assets acquired in the L.A. Turbine acquisition is presented below:
| Weighted-average Estimated Useful Life |  | Preliminary Estimated Asset Fair Value
Finite-lived intangible assets acquired: |  |  |
Unpatented technology | 14.5 years |  | $ | 33.4 |
Customer relationships | 14.5 years |  | 1.5 |
Backlog | 2.5 years |  | 0.7 |
Other identifiable intangible assets (1) | 3.4 years |  | 0.2 |
Total finite-lived intangible assets acquired | 14.2 years |  | 35.8 |
Indefinite-lived intangible assets acquired: |  |  |
Trademarks and trade names |  |  | 7.9 |
Total intangible assets acquired |  |  | $ | 43.7 |
_______________ (1)Other identifiable intangible assets is included in “Patents and other” in Note 6, “Goodwill and Intangible Assets.” Cryogenic Gas Technologies, Inc. Acquisition On February 16, 2021, we acquired 100% of the equity interests of Cryogenic Gas Technologies, Inc. (“Cryo Technologies”) for approximately $55.0 in cash (subject to certain customary adjustments), net of $0.6 cash acquired. Cryo Technologies is a global leader in custom engineered process systems to separate, purify, refrigerate, liquefy and distribute high value industrial gases such as hydrogen, helium, argon and hydrocarbons with design capabilities for cold boxes for hydrogen and helium use. The distribution systems Cryo Technologies supplies are located within the helium and hydrogen liquefaction facilities and are inclusive of trailer loading systems, which facilitates the first step in product distribution. During the first quarter of 2022 the Cryo Technologies purchase price allocation was finalized. The fair value of the total net assets acquired include goodwill, identifiable intangible assets and other net assets at the date of acquisition was $34.9, $19.5 and $1.2, respectively. Intangible assets consists of customer relationships, unpatented technology, trademarks and trade names, backlog and non-compete agreements. The purchase price allocations of Earthly Labs, AdEdge and LAT (the “acquisitions”) are preliminary and are 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. As defined in Note 2, “Significant Accounting Policies” of our Annual Report on Form 10-K for the year ended December 31, 2021, 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 was determined based on inputs that are unobservable and significant to the overall fair value measurement. The preliminary fair value is based on estimates and assumptions made by management at the time of the acquisition. As such, the acquisitions are classified as Level 3 fair value hierarchy measurements and disclosures. Contingent Consideration The fair value of contingent consideration was $16.9 for SES and $3.2 for BIG at the date of acquisitions and was valued according to a discounted cash flow approach, which included assumptions regarding the probability of achieving certain targets and a discount rate applied to the potential payments. Potential payments are measured between the period commencing April 1, 2022 and ending on December 31, 2028 based on the attainment of certain earnings targets. The potential payments related to both SES and BIG contingent consideration on a combined basis is between $0.0 and $31.0. The estimated fair value of contingent consideration related to SES decreased by $0.5 and increased by $0.7 for the three months ended March 31, 2022 and 2021, respectively. The estimated fair value of contingent consideration related to BIG decreased by $0.3 and increased by $0.1 for the three months ended March 31, 2022 and 2021, respectively. In connection with the Earthly Labs acquisition, Chart will pay to the sellers a royalty on sales of carbon capture unit for residential use launched for sale to the public by Chart in an amount equal to 4% of such sales. Potential royalty payments shall be paid to the sellers during the three year period following Chart’s launch of this product. This product has not yet been developed and as such, the fair value of the contingent consideration liability that arises from this arrangement was insignificant as of March 31, 2022 and December 31, 2021. Valuations are performed using Level 3 inputs as defined in Note 2, “Significant Accounting Policies” of our Annual Report on Form 10-K for the year ended December 31, 2021 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 condensed consolidated balance sheets. Changes in fair value of contingent consideration, including accretion, are recorded as selling, general, and administrative expenses in the condensed consolidated statements of income and comprehensive income. The following table represents the changes to our contingent consideration liabilities:
| SES |  | BIG |  | Total
Balance at December 31, 2021 | $ | 19.1 |  |  | $ | 2.1 |  |  | $ | 21.2 |
Decrease in fair value of contingent consideration liabilities | (0.5) |  |  | (0.3) |  |  | (0.8) |
Balance at March 31, 2022 | $ | 18.6 |  |  | $ | 1.8 |  |  | $ | 20.4 |

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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