On March 17, 2023 we completed the Howden Acquisition pursuant to the previously disclosed Equity Purchase Agreement dated as of November 9, 2022. The acquisition purchase price was $4,387.4. We financed the purchase price for the Howden Acquisition with proceeds from borrowings under our Amended SSRCF, Amendment No. 3 Term Loan, common and preferred stock issuance and a private offering of Secured Notes and Unsecured Notes. See Note 9, “Debt and Credit Arrangements,” for more information.


Description
Cash consideration to seller	$	2,788.3
Howden's debt settled at close	1,529.0
Settlement of seller transaction costs	67.2
Funds held in escrow	20.4
Working capital adjustment	(17.5)
Total ASC 805 purchase price	$	4,387.4

Howden is a leading global provider of mission critical air and gas handling products providing service and support to customers around the world in highly diversified end markets and geographies. The combination of Chart and Howden is complementary and furthers our global leadership position in highly engineered process technologies and products serving the Nexus of Clean™ – clean power, clean water, clean food and clean industrials.

We estimated the preliminary fair value of acquired developed technology 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 incorporated 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 excess of the purchase price over the preliminary estimated fair values is assigned to goodwill. The preliminary estimated goodwill was established due to expected cost synergies, anticipated growth of new customers, and expansion of equipment portfolio and process technology offerings. Goodwill recorded for the Howden Acquisition is not expected to be deductible for tax purposes.

As additional information becomes available, we will 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 Howden Acquisition. Areas that are subject to change include evaluating income tax accounting considerations and finalizing the valuation of noncontrolling interest. Such revisions or changes may be significant.

The preliminary estimated fair values of the assets acquired and liabilities assumed disclosed in this note are inclusive of businesses identified to be sold as of the acquisition date. On June 12, 2023, we signed a definitive agreement to divest our Roots business, which we acquired as part of the Howden Acquisition. We have categorized the assets and liabilities of these discontinued operations on separate lines in the table below. Please refer to Note 2, “Discontinued Operations and Other Businesses Sold or to be Sold.


	Preliminary Estimated Fair Value
Net assets acquired:
Cash and cash equivalents	$	62.5
Restricted cash	2.6
Accounts receivable	427.4
Inventories	268.3
Unbilled contract revenue	167.3
Prepaid expenses	52.6
Other current assets	107.8
Assets held for sale	225.7
Property, plant and equipment	325.1
Identifiable intangible assets	2,442.5
Equity method investments	22.3
Other assets	168.2
Accounts payable	(369.5)
Customer advances and billings in excess of contract revenue	(263.7)
Accrued salaries, wages and benefits	(103.0)
Accrued income taxes	(50.9)
Current portion of warranty reserve	(32.1)
Current portion of long-term debt (1)	(1.4)
Other current liabilities	(91.0)
Liabilities held for sale	(43.9)
Long-term deferred tax liabilities	(670.8)
Operating lease liabilities	(52.3)
Finance lease liabilities	(8.1)
Accrued pension liabilities	(6.0)
Other long-term liabilities	(5.6)
Total identifiable net assets assumed	2,574.0
Noncontrolling interest (2)	(129.3)
Goodwill (3)	1,942.7
Net assets acquired	$	4,387.4

Assets acquired net of cash, cash equivalents and restricted cash	$	4,322.3

Estimated Useful Lives

Preliminary Estimated Asset Fair Value

Finite-lived intangible assets acquired:

Customer relationships

18 years

1,537.0

Backlog

3 years

134.0

Technology

5 to 14 years

297.0

Total finite-lived intangible assets acquired

1,968.0

Indefinite-lived intangible assets acquired:

Trade names

474.5

Total intangible assets acquired

2,442.5

Chart’s condensed consolidated financial statements include Howden’s sales and net income of $1,028.1 and $46.2, respectively, from date the of acquisition through September 30, 2023. We incurred $4.9 and $25.4 in transaction related costs during the fourth quarter of 2022 and the first quarter of 2023, respectively, related to the Howden Acquisition which were recorded in selling, general and administrative expenses on the condensed consolidated statements of operations and comprehensive income (loss). No interest expense is allocated to Howden’s net income for our period of ownership.

The following unaudited pro forma combined financial information for the three and nine months ended September 30, 2023 and 2022 gives effect to the Howden Acquisition, and the Roots divestiture, as if both occurred on January 1, 2022. The unaudited pro forma information is not necessarily indicative of the results of operations that actually would have occurred under the ownership and management of the Company. In addition, the unaudited pro forma information is not intended to be a projection of future results and does not reflect any operating efficiencies or cost savings that might be achievable.

•the effect of increased interest expense related to the repayment of the Howden term loans, senior notes and revolving credit facility net of the additional borrowing on the Chart senior secured revolving credit facility and senior secured and unsecured notes,

•nonrecurring acquisition-related expenses incurred by Howden prior to the close of and directly attributable to the Howden Acquisition were adjusted out of the pro forma net loss attributable to Chart Industries, Inc. from continuing operations for the periods presented, and

•nonrecurring acquisition-related expenses incurred by Chart and directly related to the Howden acquisition were adjusted out of the pro forma net loss attributable to Chart Industries, Inc. from continuing operations for the periods presented.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Pro forma sales from continuing operations	$	897.9	$	817.8	$	2,642.7	$	2,392.1
Pro forma net income (loss) attributable to Chart Industries, Inc. from continuing operations	9.4		(21.2)		(53.9)		(111.3)

On May 31, 2022, we acquired 100% of the equity interests of Fronti for approximately $20.6 in cash (subject to certain customary adjustments) or $20.4 net of $0.2 cash acquired. Fronti is a specialist in engineering, machining and welding for the cryogenic and gas industries, and also supplies new build pressure vessels and cold boxes, and performs repairs with certification to American Society of Mechanical Engineers (ASME) code. The 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 $14.4, $5.3 and $0.9, respectively (as previously reported $14.3, $5.3 and $1.0, respectively). The purchase price allocation and all required purchase accounting adjustments were finalized in the second quarter of 2023.

On May 16, 2022, we acquired 100% of the equity interests of CSC for approximately $3.8 in cash (subject to certain customary adjustments). CSC brings a strong service footprint in the Nordic region with many overlapping customers to Chart, allowing us to broaden our service and repair presence geographically. The purchase price allocation and all required purchase accounting adjustments were finalized in the second quarter of 2023.

As defined in Note 2, “Significant Accounting Policies” of our Annual Report on Form 10-K for the year ended December 31, 2022, 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.

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 for SES, which range between $0.0 and $25.0, are measured between the period commencing October 1, 2023 and ending on December 31, 2028 based on the attainment of certain earnings targets. The earn-out period for BIG ended December 31, 2022, and we disbursed payment during the second quarter of 2023.

In connection with the Howden acquisition, Chart assumed a deferred consideration liability of $1.2 and an earn-out provision of $1.7, in relation to Howden’s acquisition of Maintenance Partners NV (“MP”) on April 30, 2021. The earn-out period for MP ended April 30, 2023, and we disbursed payment during the first week of July 2023.

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, 2022 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 operations and comprehensive income (loss).


	SES		BIG		MP		Total
Balance at December 31, 2022	$	16.3	$	1.0	$	—	$	17.3
(Decrease) increase in fair value of contingent consideration liabilities (1) (2)	(9.3)		0.7		(0.2)		(8.8)
Acquired contingent consideration liabilities	—		—		2.9		2.9
Payment of contingent consideration	—		(1.7)		(2.7)		(4.4)
Balance at September 30, 2023	$	7.0	$	—	$	—	$	7.0

(1)For the three months ended September 30, 2023, the fair value of contingent consideration related to SES decreased by $2.3 (decreased $0.9 for the three months ended September 30, 2022). For the nine months ended September 30, 2023, the

fair value of contingent consideration related to SES decreased by $9.3 (decreased by $1.7 during the nine months ended September 30, 2022). The decrease in estimated fair value of contingent consideration related to SES during the current period was due to the lower probability of achieving technical milestones within the agreed upon time.

(2)There was no change in the fair value of contingent consideration related to BIG for the three months ended September 30, 2023 as the earn-out period ended December 31, 2022 and the entire liability was paid during the second quarter of 2023. For the three months ended September 30, 2022, the fair value of contingent consideration related to BIG decreased by $0.8. For the nine months ended September 30, 2023, the fair value of contingent consideration related to BIG increased by $0.7 (decreased by $1.0 during the nine months ended September 30, 2022).

In connection with the Earthly Labs acquisition, Chart will pay to the sellers a royalty on sales of carbon capture units 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 September 30, 2023 and December 31, 2022.