Edgar Filing: CHART INDUSTRIES INC

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Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2009

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-11442

CHART INDUSTRIES, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware

34-1712937

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

One Infinity Corporate Centre Drive, Suite 300, Garfield Heights, Ohio 44125

(Address of Principal Executive Offices) (ZIP Code)

Registrant’s Telephone Number, Including Area Code: (440) 753-1490

NOT APPLICABLE

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

At July 30, 2009, there were 28,455,377 outstanding shares of the Company’s Common Stock, par value $0.01 per share.

CHART INDUSTRIES, INC.

INDEX


		Page
Part I. Financial Information

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets as of June 30, 2009 and December 31, 2008	3

	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2009 and 2008	4

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2009 and 2008	5

	Notes to Unaudited Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29

Item 4.	Controls and Procedures	29

Part II. Other Information

Item 1A.	Risk Factors	29

Item 4.	Submission of Matters to a Vote of Security Holders	29

Item 6.	Exhibits	30

Signatures		31

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements.

CHART INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)


	June 30, 2009		December 31, 2008
	(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	175,041	$	122,165
Short-term investments		30,317		32,264
Accounts receivable, net		66,644		91,698
Inventories, net		86,821		95,390
Unbilled contract revenue		29,927		38,505
Other current assets		19,764		25,003

Total Current Assets		408,514		405,025

Property, plant and equipment, net		105,788		102,372
Goodwill		263,744		261,509
Identifiable intangible assets, net		127,405		129,542
Other assets, net		11,406		10,979


TOTAL ASSETS	$	916,857	$	909,427


LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	41,457	$	45,392
Customer advances and billings in excess of contract revenue		63,175		96,433
Accrued expenses and other current liabilities		57,019		52,336

Total Current Liabilities		161,651		194,161

Long-term debt		243,175		243,175
Other long-term liabilities		64,467		66,639
Equity
Chart Industries’ shareholders’ equity:
Common stock, par value $.01 per share – 150,000,000 shares authorized, 28,450,370 and 28,397,821 shares issued and outstanding at June 30, 2009 and December 31, 2008, respectively		285		284
Additional paid-in capital		249,672		247,638
Retained earnings		186,707		149,469
Accumulated other comprehensive income		9,250		6,569

Total Chart Industries, Inc. shareholders’ equity		445,914		403,960
Noncontrolling interest		1,650		1,492

Total equity		447,564		405,452


TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	916,857	$	909,427

The balance sheet at December 31, 2008 has been derived from the audited financial statements at that date, but does not include all of the information and notes required by U.S. generally accepted accounting principles for complete financial statements.

See accompanying notes to these unaudited condensed consolidated financial statements. The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CHART INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(Dollars and shares in thousands, except per share amounts)


	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008

Sales	$	155,301		$	197,752		$	335,493		$	368,081
Cost of sales		99,378			133,752			216,904			252,140


Gross profit		55,923			64,000			118,589			115,941

Selling, general and administrative expenses		23,478			26,342			49,412			49,417
Amortization expense		2,616			2,825			5,267			5,483
Asset impairment charge		500			—			500			—

		26,594			29,167			55,179			54,900


Operating income		29,329			34,833			63,410			61,041

Other expenses (income):
Interest expense, net		3,968			4,529			7,810			9,274
Financing costs amortization		404			413			808			826
Foreign currency expense (income)		(988	)		(1,460	)		(307	)		(1,610	)

		3,384			3,482			8,311			8,490


Net income before income taxes		25,945			31,351			55,099			52,551

Income tax expense		8,180			9,192			17,742			15,765


Net income		17,765			22,159			37,357			36,786

Noncontrolling interest, net of taxes		(11	)		(33	)		119			(62	)


Net income attributable to Chart Industries, Inc.	$	17,776		$	22,192		$	37,238		$	36,848


Net income attributable to Chart Industries, Inc. per common share – basic	$	0.62		$	0.78		$	1.31		$	1.30


Net income attributable to Chart Industries, Inc. per common share – diluted	$	0.61		$	0.76		$	1.29		$	1.27


Weighted average number of common shares outstanding - basic		28,443			28,343			28,430			28,297


Weighted average number of common shares outstanding - diluted		29,014			29,100			28,840			29,029

See accompanying notes to these unaudited condensed consolidated financial statements. The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CHART INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in thousands)


	Six Months Ended June 30,
	2009			2008
OPERATING ACTIVITIES
Net income	$	37,357		$	36,786
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		10,538			10,178
Employee stock and stock option related compensation expense		1,648			2,369
Financing costs amortization		808			826
Other non-cash operating activities		760			(1,593	)
Increase (decrease) in cash resulting from changes in operating assets and liabilities:
Accounts receivable		25,457			1,801
Inventory		11,422			(18,254	)
Unbilled contract revenues and other current assets		14,359			(10,088	)
Accounts payable and other current liabilities		(9,652	)		(11,512	)
Customer advances and billings in excess of contract revenue		(33,810	)		16,711

Net Cash Provided By Operating Activities		58,887			27,224

INVESTING ACTIVITIES
Capital expenditures		(5,059	)		(6,383	)
Acquisition of businesses, net of cash acquired		(5,247	)		(18,828	)
Acquisition of minority interest and other assets		—			(616	)
Proceeds from maturities of short-term investments		2,035			—

Net Cash Used In Investing Activities		(8,271	)		(25,827	)

FINANCING ACTIVITIES
Proceeds from exercise of warrants and options		283			1,018
Tax benefit from exercise of stock options		104			1,154

Net Cash Provided By Financing Activities		387			2,172


Net increase in cash and cash equivalents		51,003			3,569
Effect of exchange rate changes on cash		1,873			4,797
Cash and cash equivalents at beginning of period		122,165			92,869

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	175,041		$	101,235

See accompanying notes to these unaudited condensed consolidated financial statements. The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – June 30, 2009

(Dollars and shares in thousands, except per share amounts)

NOTE A — Basis of Preparation

The accompanying unaudited condensed consolidated financial statements of Chart Industries, Inc. and its subsidiaries (the “Company” or “Chart”) have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for annual financial statements. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009. Further, in connection with preparation of the condensed consolidated financial statements and in accordance with Statement of Financial Accounting Standards No. 165, “Subsequent Events” (SFAS 165), which was adopted during the second quarter of 2009, the Company evaluated subsequent events after the balance sheet date of June 30, 2009 through July 30, 2009, the date these condensed consolidated financial statements were issued.

Principles of Consolidation: The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany accounts and transactions are eliminated in consolidation. Investments in affiliates where the Company’s ownership is between 20 percent and 50 percent, or where the Company does not have control, but has the ability to exercise significant influence over operations or financial policy, are accounted for under the equity method.

Use of Estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Nature of Operations: The Company is a leading global supplier of standard and custom-engineered products and systems serving a wide variety of low-temperature and cryogenic applications. The Company has developed an expertise in cryogenic systems and equipment, which operate at low temperatures sometimes approaching absolute zero. The majority of the Company’s products, including vacuum insulated containment vessels, heat exchangers, cold boxes and other cryogenic components, are used throughout the liquid-gas supply chain for the purification, liquefaction, distribution, storage and end-use of industrial gases and hydrocarbons. The Company has domestic operations located in seven states, including its principal executive offices located in Garfield Heights, Ohio, and an international presence in Australia, China, the Czech Republic, Germany and the United Kingdom.

Cash and Cash Equivalents: The Company considers all investments with an initial maturity of three months or less when purchased to be cash equivalents. The June 30, 2009 and December 31, 2008 balances include money market investments.

Short-Term Investments: The Company’s short term investments consist of highly liquid, variable rate instruments, which have stated maturities of greater than three months but not exceeding six months. These short term investments are recorded at cost which approximates fair value. The Company has determined that its investment securities are available and intended for use in current operations and, accordingly, have classified investment securities as current assets.

Inventories: Inventories are stated at the lower of cost or market with cost being determined by the first-in, first-out (“FIFO”) method. The components of inventory are as follows:


	June 30, 2009		December 31, 2008
Raw materials and supplies	$	29,902	$	32,378
Work in process		22,317		27,564
Finished goods		34,602		35,448

	$	86,821	$	95,390

Revenue Recognition: For the majority of the Company’s products, revenue is recognized when products are shipped, title has transferred and collection is reasonably assured. For these products, there is also persuasive evidence of an arrangement, and the selling price to the buyer is fixed or determinable. For brazed aluminum heat exchangers, cold boxes, vacuum-insulated pipe, liquefied natural gas fueling stations and engineered tanks, the Company uses the percentage of completion method of accounting. Earned revenue is based on the percentage that incurred costs to date bear to total estimated costs at completion after giving effect to the most current estimates. The cumulative impact of revisions in total cost estimates during the progress of work is reflected in the period in which these changes become known. Earned revenue reflects the original contract price adjusted for agreed upon claims and change orders, if any. Losses expected to be incurred on contracts in process, after consideration of estimated minimum recoveries from claims and change orders, are charged to operations as soon as such losses are known. Change orders resulting in additional revenue and profit are recognized

CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – June 30, 2009

(Dollars and shares in thousands, except per share amounts)

NOTE A — Basis of Preparation – Continued

upon approval by the customer based on the percentage that incurred costs to date bear to total estimated costs at completion. Certain contracts include incentive-fee arrangements. The incentive fees in such contracts can be based on a variety of factors but the most common are the achievement of target completion dates, target costs, and/or other performance criteria. Incentive fee revenue is not recognized until it is earned. Timing of amounts billed on contracts varies from contract to contract and could cause a significant variation in working capital requirements.

Product Warranties: The Company provides product warranties with varying terms and durations for the majority of its products. The Company records warranty expense in cost of sales. The changes in the Company’s consolidated warranty reserve during the three and six months ended June 30, 2009 and 2008 are as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
Beginning balance	$	8,559		$	5,614		$	8,636		$	5,731
Warranty expense		1,089			1,255			2,103			1,787
Warranty usage		(875	)		(700	)		(1,966	)		(1,349	)

Ending balance	$	8,773		$	6,169		$	8,773		$	6,169

Goodwill and Other Intangible Assets: In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets,” the Company does not amortize goodwill or other indefinite lived intangible assets, but reviews them at least annually, and on an interim basis if necessary, for impairment using a measurement date of October 1st. The Company amortizes intangible assets that have finite useful lives.

SFAS No. 142 requires that goodwill and other indefinite lived intangible assets be tested for impairment at the reporting unit level on an annual basis. Under SFAS No. 142, a company determines the fair value of any indefinite lived intangible assets, compares the fair value to its carrying value and records an impairment loss if the carrying value exceeds its fair value. Goodwill is tested utilizing a two-step approach. After recording any impairment losses for indefinite lived intangible assets, a company is required to determine the fair value of each reporting unit and compare the fair value to its carrying value, including goodwill, of such reporting unit (step one). If the fair value exceeds the carrying value, no impairment loss would be recognized. If the carrying value of the reporting unit exceeds its fair value, the goodwill of the reporting unit may be impaired. The amount of the impairment, if any, would then be measured (step two), which compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill.

The following table displays the gross carrying amount and accumulated amortization for all intangible assets.


		June 30, 2009					December 31, 2008
	Estimated Useful Life	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Finite-lived assets:
Unpatented technology	9 years	$	10,956	$	(4,645	)	$	10,808	$	(3,897	)
Patents	10 years		8,213		(3,628	)		8,297		(3,229	)
Product names	14 years		2,960		(786	)		2,580		(677	)
Non-compete agreements	3 years		3,474		(2,658	)		3,474		(2,445	)
Customer relations	13 years		106,075		(27,313	)		103,509		(23,450	)
Other	—		—		—			50		(30	)

		$	131,678	$	(39,030	)	$	128,718	$	(33,728	)


Indefinite-lived intangible assets:
Goodwill		$	263,744				$	261,509
Trademarks and trade names			34,757					34,552

		$	298,501				$	296,061

CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – June 30, 2009

(Dollars and shares in thousands, except per share amounts)

NOTE A — Basis of Preparation – Continued

Amortization expense for finite-lived intangible assets was $2,616 and $2,825 for the three months ended June 30, 2009 and 2008, respectively, and $5,267 and $5,483 for the six months ended June 30, 2009 and 2008, respectively. Amortization expense is estimated to be approximately $10,700 for 2009 and $10,000 for fiscal years 2010 through 2014.

Employee Stock Options: The Company records stock-based compensation according to SFAS No. 123(R) “Share-Based Payments”, which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values.

During the six months ended June 30, 2009, the Company granted 201 stock options and 164 performance share units. The stock options vest over a four year period and the performance share units vest at the end of three years based on the achievement of certain performance and market conditions.

Stock-based compensation expense was $803 and $1,215 for the three months ended June 30, 2009 and 2008, respectively, and $1,648 and $2,369 for the six months ended June 30, 2009 and 2008, respectively. As of June 30, 2009, the total stock-based compensation expected to be recognized over the weighted average period of approximately 2.0 years is $4,143.

Recently Issued Accounting Pronouncements: In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51”. SFAS No. 160 requires entities to report noncontrolling interests as a component of shareholders’ equity on the balance sheet. Additionally, it requires disclosure of consolidated net income attributable to the parent and to the noncontrolling interest on the face of the income statement. SFAS No. 160 was effective for the Company beginning January 1, 2009 and resulted in a $1,492 reclassification of noncontrolling interests from other long-term liabilities to shareholders’ equity on the December 31, 2008 consolidated balance sheet.

In March 2008, the FASB issued SFAS No. 161, “Disclosures About Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133.” SFAS No. 161 requires entities to provide greater transparency through enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedging items are accounted for under SFAS No. 133, and (c) how derivative instruments and related hedged items affect an entity’s financial position, results of operations and cash flows. The Company applied the provisions of SFAS No. 161 to its financial statement disclosures beginning in the first quarter of 2009.

In April 2008, the FASB issued FSP 142-3, “Determination of the Useful Life of Intangible Assets” (FSP 142-3). FSP 142-3 amends the factors to be considered in developing renewal and extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets.” FSP 142-3 is effective prospectively for intangible assets acquired or renewed after January 1, 2009. The Company does not expect the adoption of FSP 142-3 will have a material impact on its financial position or results of operations.

In December 2008, the FASB issued FSP No. 132(R)-1, “Employers’ Disclosures about Pensions and Other Postretirement Benefit Plan Assets.” FSP 132(R)-1 requires additional disclosures about plan assets, including employers’ investment strategies, major categories of assets, concentration of risk within plan assets, and valuation techniques used to measure the fair value of plan assets. The FSP is effective for fiscal years ending after December 15, 2009. Early application of the provisions of this FSP is permitted. The Company does not expect the adoption of FSP 132(R)-1 will have a material impact on its financial position or results of operations.

In May 2009, the FASB issued FAS No. 165, “Subsequent Events.” FAS No. 165 establishes the accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, that is, whether that date represents the date the financial statements were issued or were available to be issued. See Note A, “Basis of Preparation” for the related disclosures. The adoption of FAS No. 165 did not have a material impact on our financial statements.

In June 2009, the FASB issued SFAS 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162” (SFAS 168). SFAS 168 provides for the FASB Accounting Standards Codification (the “Codification”) to become the single source of authoritative, nongovernmental U.S. generally accepted accounting principles (GAAP). The Codification did not change GAAP but reorganizes the literature. SFAS 168 is effective for interim and annual periods ending after September 15, 2009.

NOTE B — Fair Value Measurements

Effective January 1, 2008, the Company adopted SFAS No. 157, except as it applied to the nonfinancial assets and nonfinancial liabilities subject to FSP No. 157-2. SFAS No. 157 clarifies the definition of fair value, prescribes methods for

CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – June 30, 2009

(Dollars and shares in thousands, except per share amounts)

NOTE B — Fair Value Measurements – Continued

measuring fair value, establishes a fair value hierarchy based on the inputs used to measure fair value, and expands disclosures about fair value measurements. The three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies, is:

Level 1 — Valuations based on quoted prices for identical assets and liabilities in active markets.

Level 2 — Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

The Company is exposed to foreign currency exchange risk as a result of transactions in currencies other than the functional currency of certain subsidiaries. The Company utilizes foreign currency forward purchase and sale contracts to manage the volatility associated with foreign currency purchases and certain intercompany transactions in the normal course of business. Contracts typically have maturities of less than one year. Principal currencies include the euro, British pound and Czech koruna. The Company’s foreign currency forward contracts do not qualify as hedges under the provisions of SFAS No. 133. Changes in their fair value are recorded in the consolidated statement of operations as foreign currency gains or losses.

At June 30, 2009, the fair value of the Company’s derivative liabilities representing foreign currency forward contracts was $529. These were recorded on the balance sheet as other current liabilities. The Company’s foreign currency forward contracts are not exchange traded instruments, however, they are valued based on observable inputs for similar instruments and, accordingly, are classifieds as level 2 inputs. As of June 30, 2009, the Company held foreign currency forward contracts with notional amounts of 10,500 euros, 892 Polish zlotys and $300 U.S. dollars. These contracts are at various exchange rates and expire at various dates through December 2009.

The Company does not enter into derivative instruments for trading or speculative purposes.

The fair value of the Company’s Term Loan is estimated based on the present value of the underlying cash flows discounted at the Company’s estimated borrowing rate. Under this method, the fair value of the Company’s Term Loan approximated its carrying value at June 30, 2009 and December 31, 2008. The fair value of the Subordinated Notes is estimated based on the present value of the underlying cash flows using the Subordinated Notes’ current effective rate of return. The fair value approximated $150,000 and $142,000 at June 30, 2009 and December 31, 2008, respectively.

NOTE C — Debt and Credit Arrangements

The Company has a senior secured credit facility (the “Senior Credit Facility”) and $163,175 of 9¹/8% senior subordinated notes (the “Subordinated Notes”) outstanding. The Senior Credit Facility consists of a $180,000 term loan facility (the “Term Loan”), $80,000 of which remains outstanding and a $115,000 revolving credit facility (the “Revolver”), of which $55,000 may be used for letters of credit extending beyond one year from their date of issuance. The Term Loan matures on October 17, 2012 and the Revolver matures on October 17, 2010. The Term Loan does not require any regular principal payments prior to the maturity date. The interest rate under the Senior Credit Facility is, at the Company’s option, the Alternative Base Rate (“ABR”) plus 1.0% or LIBOR plus 2.0% on the Term Loan and ABR plus 1.0% or LIBOR plus 2.0% on the Revolver. The applicable interest margin on the Revolver could increase based upon the leverage ratio calculated at each fiscal quarter end. In addition, the Company is required to pay an annual administrative fee of $100, a commitment fee of 0.375% on the unused Revolver balance, a letter of credit participation fee of 2.0% per annum on the letter of credit exposure and a letter of credit issuance fee of 0.25%. The obligations under the Senior Credit Facility are secured by substantially all of the assets of the Company and its U.S. subsidiaries and 65% of the capital stock of the Company’s first-tier non-U.S. subsidiaries.

The Subordinated Notes are due in 2015 with interest payable semi-annually on April 15th and October 15th. Any of the Subordinated Notes may be redeemed solely at the Company’s option beginning on October 15, 2010. The initial redemption price is 104.563% of the principal amount, plus accrued interest. Also, any of the notes may be redeemed solely at the Company’s option at any time prior to October 15, 2010, plus accrued interest and a “make-whole” premium. The Subordinated Notes are general unsecured obligations of the Company and are subordinated in right of payment to all existing and future senior debt of the Company, including the Senior Credit Facility, pari passu in right of payment with all future senior subordinated indebtedness of the Company, and senior in right of payment with any future indebtedness of the Company that expressly provides for its subordination to the Subordinated Notes. The Subordinated Notes are unconditionally guaranteed jointly and severally by substantially all of the Company’s U.S. subsidiaries. During September 2008, the Company purchased $6,825 in principal of its Subordinated Notes on the open market. The repurchased notes have been retired.

CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – June 30, 2009

(Dollars and shares in thousands, except per share amounts)

NOTE C — Debt and Credit Arrangements – Continued

The Senior Credit Facility agreement and provisions of the indenture governing the Subordinated Notes contain a number of customary covenants, including but not limited to restrictions on the Company’s ability to incur additional indebtedness, create liens or other encumbrances, sell assets, enter into sale and lease-back transactions, make certain payments, investments, loans, advances or guarantees, make acquisitions, engage in mergers or consolidations, pay dividends or distributions, and make capital expenditures. The Senior Credit Facility and indenture governing the Subordinated Notes also include financial covenants relating to leverage, interest coverage and fixed charge coverage ratios. The Company is in compliance with all covenants. As of June 30, 2009, there was $80,000 outstanding under the Term Loan, $163,175 outstanding under the Subordinated Notes and letters of credit and bank guarantees totaling $31,712 supported by the Revolver.

On October 5, 2008, Lehman Commercial Paper, Inc. (“LCPI”), a subsidiary of Lehman Brothers’ Holdings Inc. and a lender under the Revolver, filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code. LCPI provides $5,000 in commitments or approximately 4.3% of total commitments on the Revolver portion of the Senior Credit Facility. Representatives of LCPI have orally disclosed to the Company that they do not intend to honor their $5,000 in commitments; therefore, the total borrowing capacity under the Revolver portion of the Senior Credit Facility is effectively limited to $110,000.

Chart Ferox, a.s. (“Ferox”), a wholly-owned subsidiary of the Company based in the Czech Republic, maintains secured revolving credit facilities with borrowing capacity, including overdraft protection, of up to 150,000 Czech korunas (“CSK”), of which 110,000 is available only for letters of credit and bank guarantees. Under the revolving credit facilities, Ferox may make borrowings in CSK, Euros and U.S. dollars. Borrowings in CSK are at PRIBOR, borrowings in Euros are at EURIBOR and borrowings in U.S. dollars are at LIBOR, each with a fixed margin of 0.6 percent. Ferox is not required to pay a commitment fee to the lenders under the revolving credit facilities in respect to the unutilized commitments thereunder. Ferox must pay letter of credit and guarantee fees equal to 0.75% on the face amount of each guarantee. Ferox’s land and buildings and accounts receivable secure the revolving credit facilities. As of June 30, 2009, there were no borrowings outstanding under the Ferox revolving credit facilities. However, there were $6,271 of bank guarantees supported by the Ferox revolving credit facilities. Flow Instruments & Engineering GmbH (“Flow”), a wholly-owned subsidiary of Ferox, maintains two revolving lines of credit with 320 Euros in borrowing capacity. As of June 30, 2009, there were no borrowings outstanding under either line of credit.

NOTE D — Earnings per Share

The following table presents calculations of net income per share of common stock for the three and six months ended June 30, 2009 and 2008:


	Three Months Ended June 30,				Six Months Ended June 30,
	2009		2008		2009		2008
Net income attributable to Chart Industries, Inc.	$	17,776	$	22,192	$	37,238	$	36,848

Net income attributable to Chart Industries, Inc. per common share - basic	$	0.62	$	0.78	$	1.31	$	1.30

Net income attributable to Chart Industries, Inc. per common share - diluted	$	0.61	$	0.76	$	1.29	$	1.27

Weighted average number of common shares outstanding - basic		28,443		28,343		28,430		28,297

Incremental shares issuable upon assumed conversion and exercise of stock		571		757		410		732


Total shares - diluted		29,014		29,100		28,840		29,029

CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – June 30, 2009

(Dollars and shares in thousands, except per share amounts)

NOTE E — Comprehensive Income (Loss)

The components of accumulated other comprehensive income (loss) are as follows:


	June 30, 2009			December 31, 2008

Foreign currency translation adjustments	$	16,606		$	14,264
Pension liability adjustments, net of taxes		(7,356	)		(7,695	)

	$	9,250		$	6,569

The following is a summary of the components of total comprehensive income, net of related income taxes:


	Three Months Ended						Six Months Ended
	June 30, 2009			June 30, 2008			June 30, 2009		June 30, 2008
Net income	$	17,765		$	22,159		$	37,357	$	36,786
Other comprehensive income (loss):
Foreign currency translation (losses) gains		7,125			4,043			2,342		14,889
Defined benefit pension plan amortization of net loss		169			—			339		—

Comprehensive income		25,059			26,202			40,038		51,675
Less: Comprehensive (loss) income attributable to noncontrolling interest		(11	)		(33	)		119		(62	)

Comprehensive income attributable to Chart	$	25,070		$	26,235		$	39,919	$	51,737

NOTE F — Acquisitions

In May and June 2009, the Company completed the acquisition of the equity interests of Chengdu Golden Phoenix Liquid Nitrogen Container Company, Ltd. (“Golden Phoenix”) and substantially all of the assets of Tri-Thermal, Inc. for an aggregate of $12,700, of which $7,000 will be paid over future periods. The estimated fair values of the net assets acquired and goodwill at the dates of acquisition were $10,500 and $2,200, respectively. The purchase price allocation is preliminary. Tri-Thermal is located in Tulsa, Oklahoma and sells replacement parts for air cooled heat exchangers. Tri-Thermal’s results will be included in the Company’s Energy & Chemicals segment. Golden Phoenix manufactures liquid nitrogen aluminum storage containers used primarily in the animal breeding industry and is located in China. The results of Golden Phoenix will be included in the Company’s BioMedical segment.

In April 2008, Ferox acquired Flow, which is based in Germany, for 11,900 Euros, net of cash acquired. The fair value of the net assets acquired and goodwill at the date of acquisition was $5,400 and $14,800, respectively. Flow manufactures cryogenic flow meter systems for industrial gases and liquefied petroleum gas, distribution equipment for transport of CO₂ and other gases, and provides calibration services. Flow is included in the Company’s Distribution & Storage segment and added $6.8 million in sales in 2008.

In February 2008, the Company entered into a joint venture in Saudi Arabia with two other entities to form a company to manufacture air cooled heat exchangers. The contribution to the joint venture thus far has been $616 for a 34% share of the joint venture. The joint venture is accounted for under the equity method.

NOTE G — Restructuring Activities

The Company has initiated cost containment programs to appropriately align its cost structure with expected market conditions. The programs consist primarily of planned workforce reductions and the shutdown of its Denver, Colorado BioMedical facility.

For the three and six months ended June 30, 2009, the Company recorded $4,119 and $4,597, respectively, related to termination benefits primarily in the Distribution & Storage and BioMedical segments and the write-down to net realizable value of certain assets at the Denver, Colorado facility. These charges were recorded in cost of sales ($2,460), selling, general and administrative expenses ($1,637) and asset impairment charges ($500). As a result, the number of employees has been reduced by approximately 15% at June 30, 2009 compared with December 31, 2008 levels. Remaining costs associated with the Denver facility shutdown which are expected to be $500, will be incurred during the remaining six months of 2009.

CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – June 30, 2009

(Dollars and shares in thousands, except per share amounts)

NOTE G — Restructuring Activities – Continued

The following table sets forth a summary of the Company’s restructuring activities for the six months ended June 30, 2009.


	Energy & Chemicals			Distribution & Storage			BioMedical			Corporate			Total
Balance at January 1, 2009	$	—		$	—		$	—		$	—		$	—
Restructuring charges		284			2,521			1,509			283			4,597
Asset impairment		—			—			(500	)		—			(500	)
Cash payments		(34	)		(451	)		(175	)		(93	)		(753	)

Balance at June 30, 2009	$	250		$	2,070		$	834		$	190		$	3,344

NOTE H — Income Taxes

At June 30, 2009, the Company has recorded a $1,903 liability under FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48), for gross unrecognized tax benefits. This amount includes $1,565 of unrecognized tax benefits which, if ultimately recognized, will reduce the Company’s annual effective tax rate. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. At June 30, 2009, the Company had accrued approximately $168 for the payment of interest and penalties. There were no material adjustments to the recorded liability for unrecognized tax benefits during the second quarter of 2009.

NOTE I — Employee Benefit Plans

The Company has one defined benefit pension plan, which is frozen, that covers certain U.S. hourly and salary employees. The defined benefit plan provides benefits based primarily on the participants’ years of service and compensation.

The following table sets forth the components of net periodic pension expense (benefit) for the three and six months ended June 30, 2009 and 2008.


	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
Interest cost	$	599		$	571		$	1,198		$	1,142
Expected return on plan assets		(457	)		(734	)		(914	)		(1,468	)
Amortization of net loss		169			—			339			—

Total pension expense (benefit)	$	311		$	(163	)		$ 623		$	(326	)

NOTE J — Reporting Segments

The structure of the Company’s internal organization is divided into the following three reportable segments: Energy and Chemicals (“E&C”), Distribution and Storage (“D&S”) and BioMedical. The Company’s reportable segments are business units that are each managed separately because they manufacture, offer and distribute distinct products with different production processes and sales and marketing approaches. The E&C segment sells brazed aluminum and air-cooled heat exchangers, cold boxes and liquefied natural gas vacuum-insulated pipe to natural gas, petrochemical processing and industrial gas companies who use them for the liquefaction and separation of natural and industrial gases. The D&S segment sells cryogenic bulk storage systems, cryogenic packaged gas systems, cryogenic systems and components, beverage liquid CO₂ systems, cryogenic flow meter systems and cryogenic services to various companies for the storage and transportation of both industrial and natural gases. The BioMedical segment sells medical respiratory products, biological storage systems and other oxygen products. Due to the nature of the products that each segment sells, there are no intersegment sales. Corporate includes operating expenses for executive management, accounting, tax, treasury, human resources, information technology, legal, internal audit, risk management and stock-based compensation expenses that are not allocated to the reporting segments.

The Company evaluates performance and allocates resources based on operating income or loss from continuing operations before net interest expense, financing costs amortization expense, foreign currency gain or loss, income taxes and noncontrolling interest. The accounting policies of the reportable segments are described in the summary of significant accounting policies.

CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – June 30, 2009

(Dollars and shares in thousands, except per share amounts)

NOTE J — Reporting Segments – Continued

Information for the Company’s three reportable segments and its corporate headquarters is presented below:


	Three Months Ended June 30, 2009
	Energy & Chemicals		Distribution and Storage		BioMedical		Corporate			Total

Sales	$	70,792	$	63,316	$	21,193	$	—		$	155,301

Operating income (loss)		21,562		10,464		3,355		(6,052	)		29,329

	Six Months Ended June 30, 2009
	Energy & Chemicals		Distribution and Storage		BioMedical		Corporate			Total

Sales	$	161,172	$	132,745	$	41,576	$	—		$	335,493

Operating income (loss)		46,605		21,486		7,736		(12,417	)		63,410

	Three Months Ended June 30, 2008
	Energy & Chemicals		Distribution and Storage		BioMedical		Corporate			Total

Sales	$	78,197	$	93,164	$	26,391	$	—		$	197,752

Operating income (loss)		18,304		17,628		5,932		(7,031	)		34,833

	Six Months Ended June 30, 2008
	Energy & Chemicals		Distribution and Storage		BioMedical		Corporate			Total

Sales	$	152,065	$	167,508	$	48,508	$	—		$	368,081

Operating income (loss)		33,475		30,960		10,466		(13,860	)		61,041

CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – June 30, 2009

(Dollars and shares in thousands, except per share amounts)

NOTE K — Supplemental Guarantor Financial Information

The Company’s Subordinated Notes issued in October 2005 are guaranteed on a full, unconditional and joint and several basis by the following wholly owned subsidiaries: Chart Inc., CAIRE Inc., Chart Energy & Chemicals, Inc., Chart Cooler Service Company, Inc., Chart International Holdings, Inc., Chart Asia, Inc. and Chart International, Inc. The following subsidiaries are not guarantors of the notes:


Non-Guarantor Subsidiaries		Jurisdiction

Abahsain Specialized Industrial Co. Ltd. (34% owned)		Saudi Arabia
Changzhou CEM Cryo Equipment Co., Ltd.		China
Chart Asia Investment Company Ltd.		Hong Kong
Chart Australia Pty. Ltd.		Australia
Chart Biomedical Limited		United Kingdom
Chart Cryogenic Distribution Equipment (Changzhou) Co., Ltd. (50% owned)		China
Chart Cryogenic Engineering Systems (Changzhou) Co., Ltd.		China
Chart Cryogenic Equipment (Changzhou) Co., Ltd.		China
Chart Ferox a.s.		Czech Republic
Chart Ferox GmbH		Germany
Chengdu Golden Phoenix Liquid Nitrogen Container Company Ltd.		China
Flow Instruments & Engineering GmbH		Germany
GTC of Clarksville, LLC		Delaware
Lox Taiwan (11.25% owned)		Taiwan

The following supplemental condensed consolidating and combining financial information of the Issuer (Chart Industries, Inc.), Subsidiary Guarantors and Subsidiary Non-Guarantors presents statements of operations for the three and six months ended June 30, 2009 and 2008, balance sheets as of June 30, 2009 and December 31, 2008 and statements of cash flows for the six months ended June 30, 2009 and 2008.

CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – June 30, 2009

(Dollars and shares in thousands, except per share amounts)

CONDENSED CONSOLIDATING BALANCE SHEET

As of June 30, 2009


	Issuer			Subsidiary Guarantors		Subsidiary Non- Guarantors		Consolidating Adjustments			Total
ASSETS
Cash and cash equivalents	$	122,405		$	3,766	$	48,870	$	—		$	175,041
Short-term investments		30,317			—		—		—			30,317
Accounts receivable, net		—			47,419		19,225		—			66,644
Inventory, net		—			46,475		40,979		(633	)		86,821
Other current assets		8,770			32,748		8,173		—			49,691

Total current assets		161,492			130,408		117,247		(633	)		408,514
Property, plant and equipment, net		—			63,209		42,579		—			105,788
Goodwill		—			190,902		72,842		—			263,744
Intangible assets, net		—			119,246		8,159		—			127,405
Investments in affiliates		366,754			103,246		—		(469,649	)		351
Intercompany receivables		182,927			—		—		(182,927	)		—
Other assets		7,052			1,008		2,995		—			11,055

Total assets	$	718,225		$	608,019	$	243,822	$	(653,209	)	$	916,857

LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable and accruals	$	(12,112	)	$	142,406	$	31,373	$	(16	)	$	161,651

Total current liabilities		(12,112	)		142,406		31,373		(16	)		161,651
Long-term debt		243,175			—		—		—			243,175
Intercompany payables		—			81,904		101,290		(183,194	)		—
Other long-term liabilities		39,598			16,955		7,914		—			64,467

Total liabilities		270,661			241,265		140,577		(183,210	)		469,293
Common stock		285			—		—		—			285
Other stockholders’ equity		447,279			366,754		103,245		(469,999	)		447,279

Total stockholders’ equity		447,564			366,754		103,245		(469,999	)		447,564

Total liabilities and stockholders’ equity	$	718,225		$	608,019	$	243,822	$	(653,209	)	$	916,857

CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – June 30, 2009

(Dollars and shares in thousands, except per share amounts)

CONDENSED CONSOLIDATING BALANCE SHEET

As of December 31, 2008


	Issuer			Subsidiary Guarantors		Subsidiary Non- Guarantors		Consolidating Adjustments			Total
ASSETS
Cash and cash equivalents	$	84,428		$	2,540	$	35,197	$	—		$	122,165
Short-term investments		32,264			—		—		—			32,264
Accounts receivable, net		—			70,872		20,826		—			91,698
Inventory, net		—			52,350		43,855		(815	)		95,390
Other current assets		8,857			38,276		16,375		—			63,508

Total current assets		125,549			164,038		116,253		(815	)		405,025
Property, plant and equipment, net		—			63,823		38,549		—			102,372
Goodwill		—			189,791		71,718		—			261,509
Intangible assets, net		—			124,064		5,478		—			129,542
Investments in affiliates		201,709			86,447		—		(287,616	)		540
Intercompany receivables		327,049			—		—		(327,049	)		—
Other assets		7,860			966		1,613		—			10,439

Total assets	$	662,167		$	629,129	$	233,611	$	(615,480	)	$	909,427

LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable and accruals	$	(27,850	)	$	182,552	$	39,469	$	(10	)	$	194,161

Total current liabilities		(27,850	)		182,552		39,469		(10	)		194,161
Long-term debt		243,175			—		—		—			243,175
Intercompany payables		—			227,874		99,440		(327,314	)		—
Other long-term liabilities		41,390			16,994		8,255		—			66,639

Total liabilities		256,715			427,420		147,164		(327,324	)		503,975
Common stock		284			—		—		—			284
Other stockholders’ equity		405,168			201,709		86,447		(288,156	)		405,168

Total stockholders’ equity		405,452			201,709		86,447		(288,156	)		405,452

Total liabilities and stockholders’ equity	$	662,167		$	629,129	$	233,611	$	(615,480	)	$	909,427

CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – June 30, 2009

(Dollars and shares in thousands, except per share amounts)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

For the Three Months Ended June 30, 2009


	Issuer			Subsidiary Guarantors			Subsidiary Non- Guarantors			Consolidating Adjustments			Total
Net sales	$	—		$	117,454		$	38,572		$	(725	)	$	155,301
Cost of sales		—			71,305			28,765			(692	)		99,378

Gross profit		—			46,149			9,807			(33	)		55,923
Selling, general and administrative expenses		377			22,990			3,235			(8	)		26,594

Operating (loss) income		(377	)		23,159			6,572			(25	)		29,329
Interest expense, net		4,035			(8	)		(59	)		—			3,968
Other expense (income), net		404			149			(1,137	)		—			(584	)
Noncontrolling interest, net of tax		—			—			(11	)		—			(11	)

Income (loss) before income taxes and equity in net (income) loss of subsidiaries		(4,816	)		23,018			7,779			(25	)		25,956
Income tax (benefit) provision		(1,099	)		7,242			2,037			—			8,180
Equity in net (income) loss of subsidiaries		(21,493	)		(5,717	)		—			27,210			—

Net income (loss)	$	17,776		$	21,493		$	5,742		$	(27,235	)	$	17,776

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

For the Three Months Ended June 30, 2008


	Issuer			Subsidiary Guarantors			Subsidiary Non- Guarantors			Consolidating Adjustments			Total
Net sales	$	—		$	139,751		$	59,261		$	(1,260	)	$	197,752
Cost of sales		—			89,657			45,575			(1,480	)		133,752

Gross profit		—			50,094			13,686			220			64,000
Selling, general and administrative expenses		356			23,909			4,902			—			29,167

Operating income		(356	)		26,185			8,784			220			34,833
Interest expense		5,081			(12	)		(127	)		—			4,942
Other (income) expense, net		—			(320	)		(1,173	)		—			(1,493	)

Income (loss) before income taxes and equity in net (income) of subsidiaries		(5,437	)		26,517			10,084			220			31,384
Income tax (benefit) provision		(1,573	)		9,371			1,394			—			9,192
Equity in net (income) of subsidiaries		(26,056	)		(8,910	)		—			34,966			—

Net income	$	22,192		$	26,056		$	8,690		$	(34,746	)	$	22,192

CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – June 30, 2009

(Dollars and shares in thousands, except per share amounts)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

For the Six Months Ended June 30, 2009


	Issuer			Subsidiary Guarantors			Subsidiary Non- Guarantors			Consolidating Adjustments			Total
Net sales	$	—		$	257,927		$	79,138		$	(1,572	)	$	335,493
Cost of sales		—			157,633			61,025			(1,754	)		216,904

Gross profit		—			100,294			18,113			182			118,589
Selling, general and administrative expenses		752			47,666			6,761			—			55,179

Operating (loss) income		(752	)		52,628			11,352			182			63,410
Interest expense, net		7,998			(11	)		(177	)		—			7,810
Other expense (income), net		808			(156	)		(151	)		—			501
Noncontrolling interest, net of tax		—			—			119			—			119

Income (loss) before income taxes and equity in net (income) loss of subsidiaries		(9,558	)		52,795			11,561			182			54,980
Income tax (benefit) provision		(5,622	)		20,921			2,443			—			17,742
Equity in net (income) loss of subsidiaries		(41,174	)		(9,300	)		—			50,474			—

Net income (loss)	$	37,238		$	41,174		$	9,118		$	(50,292	)	$	37,238

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

For the Six Months Ended June 30, 2008


	Issuer			Subsidiary Guarantors			Subsidiary Non- Guarantors			Consolidating Adjustments			Total
Net sales	$	—		$	268,657		$	101,979		$	(2,555	)	$	368,081
Cost of sales		—			174,834			78,963			(1,657	)		252,140

Gross profit		—			93,823			23,016			(898	)		115,941
Selling, general and administrative expenses		709			46,227			7,964			—			54,900

Operating income		(709	)		47,596			15,052			(898	)		61,041
Interest expense		10,501			(52	)		(349	)		—			10,100
Other (income) expense, net		—			(596	)		(1,076	)		—			(1,672	)

Income (loss) before income taxes and equity in net (income) of subsidiaries		(11,210	)		48,244			16,477			(898	)		52,613
Income tax (benefit) provision		(3,363	)		16,582			2,546			—			15,765
Equity in net (income) of subsidiaries		(44,695	)		(13,033	)		—			57,728			—

Net income	$	36,848		$	44,695		$	13,931		$	(58,626	)	$	36,848

CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – June 30, 2009

(Dollars and shares in thousands, except per share amounts)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Six Months Ended June 30, 2009


	Issuer		Subsidiary Guarantors			Subsidiary Non- Guarantors			Consolidating Adjustments			Total
Cash flows from operating activities:
Net cash provided by (used in) operating activities	$	10,889	$	36,769		$	16,704		$	(5,475	)	$	58,887
Cash flows from investing activities:
Capital expenditures		—		(4,220	)		(839	)		—			(5,059	)
Acquisition of businesses, net of cash acquired		—		(5,772	)		525			—			(5,247	)
Other investing activities		2,035		—			—			—			2,035

Net cash used in investing activities		2,035		(9,992	)		(314	)		—			(8,271	)

Cash flows from financing activities:
Intercompany account changes		24,666		(25,549	)		(4,592	)		5,475			—
Other financing activities		387		—			—			—			387

Net cash (used in) provided by financing activities		25,053		(25,549	)		(4,592	)		5,475			387

Net increase (decrease) in cash and cash equivalents		37,977		1,228			11,798			—			51,003
Effect of exchange rate changes on cash		—		—			1,873			—			1,873
Cash and cash equivalents, beginning of period		84,428		2,540			35,197			—			122,165

Cash and cash equivalents, end of period	$	122,405	$	3,768		$	48,868		$	—		$	175,041

CHART INDUSTRIES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements – June 30, 2009

(Dollars and shares in thousands, except per share amounts)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Six Months Ended June 30, 2008


	Issuer			Subsidiary Guarantors			Subsidiary Non-Guarantors			Consolidating Adjustments			Total
Cash flows from operating activities:
Net cash (used in) provided by operating activities	$	(7,184	)	$	26,334		$	3,223		$	4,851		$	27,224
Cash flows from investing activities:
Capital expenditures		—			(3,012	)		(3,371	)		—			(6,383	)
Acquisition of business		—			—			(18,828	)		—			(18,828	)
Acquisition of minority interest and other assets		—			(616	)		—			—			(616	)

Net cash (used in) investing activities		—			(3,628	)		(22,199	)		—			(25,827	)
Cash flows from financing activities:
Other financing activities		2,172			—			—			—			2,172
Intercompany account changes		27,964			(25,966	)		2,853			(4,851	)		—

Net cash provided by (used in) financing activities		30,136			(25,966	)		2,853			(4,851	)		2,172

Net (decrease) increase in cash and cash equivalents		22,952			(3,260	)		(16,123	)		—			3,569
Effect of exchange rate changes		—			—			4,797			—			4,797
Cash and cash equivalents, beginning of period		49,184			4,595			39,090			—			92,869

Cash and cash equivalents, end of period	$	72,136		$	1,335		$	27,764		$	—		$	101,235

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

Chart Industries, Inc. (the “Company,” “Chart,” or “we”) is a leading independent global manufacturer of highly engineered equipment used in the production, storage and end-use of hydrocarbon and industrial gases. We supply engineered equipment used throughout the global liquid supply chain. The largest portion of end-use applications for our products is energy-related. We are a leading manufacturer of standard and engineered equipment primarily used for low temperature and cryogenic applications. We have developed an expertise in cryogenic systems and equipment, which operate at low temperatures sometimes approaching absolute zero (0 kelvin; -273° Centigrade; - 459° Fahrenheit). The majority of our products, including vacuum-insulated containment vessels, heat exchangers, cold boxes and other cryogenic components are used throughout the liquid gas supply chain for the purification, liquefaction, distribution, storage and end-use of hydrocarbon and industrial gases.

For the six months ended June 30, 2009, orders were $160.7 million and backlog has decreased to $224.6 million compared to $398.8 million at December 31, 2008. For the six months ended June 30, 2009, we experienced a decline in sales due to the continued global recession, while gross profit and operating income increased compared to the same period in 2008, largely as a result of improved project mix and cost performance in our E&C business segment. Sales for the six months ended June 30, 2009 were $335.5 million compared to sales of $368.1 million for the six months ended June 30, 2008, reflecting a decrease of $32.6 million, or 8.9%. Our gross profit for the six months ended June 30, 2009 was $118.6 million, or 35.3% of sales, as compared to $115.9 million, or 31.5% of sales, for the same period in 2008. In addition, our operating income for the six months ended June 30, 2009 was $63.4 million compared to $61.0 million for the same period in 2008. Our gross profit margin improvement was primarily due to the performance of our E&C segment.

The continuing global economic recession has impacted order volume and project timing due to a lack of financing and reduced energy and industrial production forecasted growth rates. Although our backlog provided strong first half 2009 earnings, the recent decline in order rates, backlog and continuing economic conditions will impact second half 2009 earnings. Nonetheless, based on current expectations, we believe that our cash flow from operations, existing cash and available borrowings under our senior secured credit facility (“Senior Credit Facility”) should be adequate to meet our working capital, capital expenditure, debt service and other operational funding requirements for the remainder of 2009 and into the foreseeable future.

Results of Operations for the Three Months Ended June 30, 2009 and 2008

The following table sets forth sales, gross profit, gross profit margin and operating income or loss for our three operating segments for the three and six months ended June 30, 2009 and 2008:


	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
Sales

Energy & Chemicals	$	70,792		$	78,197		$	161,172		$	152,065
Distribution & Storage		63,316			93,164			132,745			167,508
BioMedical		21,193			26,391			41,576			48,508

Total	$	155,301		$	197,752		$	335,493		$	368,081


Gross Profit

Energy & Chemicals	$	29,367		$	25,139		$	64,020		$	46,541
Distribution & Storage		19,354			28,720			39,339			50,678
BioMedical		7,202			10,141			15,230			18,722

Total	$	55,923		$	64,000		$	118,589		$	115,941


Gross Profit Margin

Energy & Chemicals		41.5	%		32.1	%		39.7	%		30.6	%
Distribution & Storage		30.6	%		30.8	%		29.6	%		30.3	%
BioMedical		34.0	%		38.4	%		36.6	%		38.6	%
Total		36.0	%		32.4	%		35.3	%		31.5	%

Operating Income

Energy & Chemicals	$	21,562		$	18,304		$	46,605		$	33,475
Distribution & Storage		10,464			17,628			21,486			30,960
BioMedical		3,355			5,932			7,736			10,466
Corporate		(6,052	)		(7,031	)		(12,417	)		(13,860	)

Total	$	29,329		$	34,833		$	63,410		$	61,041

Sales

Sales for the three months ended June 30, 2009 were $155.3 million compared to $197.8 million for the three months ended June 30, 2008, reflecting a decrease of $42.5 million, or 21.5%. E&C segment sales were $70.8 million for the three months ended June 30, 2009 compared with sales of $78.2 million for three months ended June 30, 2008, which reflected a decrease of $7.4 million or 9.5%. The decline in sales occurred in the systems product line due to the lack of new orders and the fact that a number of large projects are nearing completion. This decline was partially offset by increased sales in air cooled and brazed aluminum heat exchangers. D&S segment sales decreased $29.9 million, or 32.1%, to $63.3 million for the three months ended June 30, 2009 from $93.2 million for the three months ended June 30, 2008. The decrease was primarily due to lower prices and volume resulting from decreased demand in package gas systems throughout the global industrial gas market as a result of the current economic recession. In addition, D&S segment sales were negatively affected in the second quarter of 2009 by the weakening of the Euro and the Czech Koruna against the U.S. dollar as compared to exchange rates experienced during the same period in 2008. BioMedical segment sales for the three months ended June 30, 2009 were $21.2 million compared to $26.4 million for the same period in 2008, which reflected a decrease of $5.2 million, or 19.7%. Sales decreased $3.2 million in biological storage systems largely due to global economic factors in addition to slow infusion of cash from government stimulus plans. Medical respiratory product sales decreased $0.8 million reflecting lower volume in European markets. In April 2009, the Company made the decision to shut down its Denver, Colorado BioMedical facility and exit the MRI component product line, but the Company plans to transfer other Denver production to other Chart facilities. A charge of approximately $0.5 million is expected to be recognized during the remaining six months of 2009 as a result of the closure of the Denver facility.

Gross Profit and Margin

Gross profit for the three months ended June 30, 2009 was $55.9 million, or 36.0% of sales, versus $64.0 million, or 32.4% of sales, for the three months ended June 30, 2008 resulting in an $8.1 million decrease. E&C segment gross profit increased $4.3 million and its margin increased 9.4 percentage points, primarily due to improved project mix and project execution, including the revision of cost estimates as we near completion on a number of projects accounted for under percentage of completion accounting. The impact of these revisions improved E&C margins by approximately 5% during the quarter. In addition, order cancellation fees were also billed in accordance with contract terms providing additional margin improvement of approximately 1% in our brazed aluminum heat exchanger product line. These items were partially offset by a write off due to a customer payment default, which reduced E&C quarterly margins by approximately 2%. Gross profit for the D&S segment decreased $9.3 million, as margin declined 0.2 percentage points, for the three months ended June 30, 2009 as compared to the same period in 2008. Lower volume and restructuring charges related to workforce reductions, partially offset by lower material costs, contributed to the decline in gross profit. BioMedical gross profit decreased $2.9 million as margin declined 4.4 percentage points, for the three months ended June 30, 2009 as compared to the same period in 2008. The decrease was primarily due to lower sales volume for medical respiratory products and biological storage systems and restructuring charges related to workforce reduction initiatives.

Selling, General and Administrative Expenses (“SG&A”)

SG&A expenses for the three months ended June 30, 2009 were $23.5 million, or 15.1% of sales, compared to $26.3 million, or 13.3% of sales, for the three months ended June 30, 2008. SG&A expenses for the E&C segment were $6.9 million for the three months ended June 30, 2009 compared to $6.4 million for the three months ended June 30, 2008, an increase of $0.5 million. The increase for the E&C segment was primarily the result of increased sales commissions on higher margin projects during the quarter as compared to the same period in 2008. D&S segment SG&A expenses for the three months ended June 30, 2009 were $7.6 million compared to $9.6 million for the three months ended June 30, 2008, a decrease of $2.0 million. This decrease was primarily attributable to lower variable incentive compensation and travel and entertainment costs partially offset by restructuring charges related to workforce reduction initiatives. SG&A expenses for the BioMedical segment were $2.9 million for the three months ended June 30, 2009 and $3.3 million for the three months ended June 30, 2008. The decline was primarily attributable to lower variable incentive compensation and travel and entertainment costs partially offset by restructuring charges related to workforce reduction initiatives. Corporate SG&A expenses for the three months ended June 30, 2009 were $6.1 million compared to $7.0 million for the three months ended June 30, 2008. This decrease of $0.9 million was attributable to lower stock-based compensation expense, variable incentive compensation, travel and entertainment and outside consulting fees as a result of our cost reduction initiatives. The expense decline was partially offset by restructuring charges related to workforce reduction initiatives.

Asset Impairment Charge

An asset impairment charge of $0.5 million for the three months ended June 30, 2009 was the result of certain equipment at the BioMedical facility in Denver, Colorado being written down to its net realizable value as part of the facility shutdown.

Amortization Expense

Amortization expense for the three months ended June 30, 2009 was $2.6 million, or 1.6% of sales, compared to $2.8 million, or 1.4% of sales for the three months ended June 30, 2008. The decrease of $0.2 million results from certain intangible assets becoming fully amortized since the second quarter of 2008.

Operating Income

As a result of the foregoing, operating income for the three months ended June 30, 2009 was $29.3 million, or 18.9% of sales, a decrease of $5.5 million compared to operating income of $34.8 million, or 17.6% of sales, for the same period in 2008.

Net Interest Expense

Net interest expense for the three months ended June 30, 2009 and 2008 was $4.0 million and $4.5 million, respectively. The decrease in interest expense of $0.5 million for the three months ended June 30, 2009 compared to the same period in 2008 was primarily attributable to lower variable interest rates on the term loan portion of our Senior Credit Facility. Also contributing to the decrease in net interest expense was slightly lower interest expense on the senior subordinated notes (the “Subordinated Notes”) as a result of the repurchase of $6.8 million in outstanding Subordinated Notes during the third quarter of 2008.

Other Expense and Income

For the three months ended June 30, 2009, foreign currency gains were $1.0 million as compared to $1.5 million for the same period in 2008. The decrease in the currency gains occurred primarily in our Czech Republic subsidiary as the Czech Koruna was weaker against the Euro and U.S. dollar during the second quarter of 2009 as compared to the same period in the prior year.

Income Tax Expense

Income tax expense of $8.2 million and $9.2 million for the three months ended June 30, 2009 and 2008, respectively, represents taxes on both U.S. and foreign earnings at an effective income tax rate of 31.5% and 29.3%, respectively. The increase in the effective income tax rate was primarily due to an increase in domestic earnings, which are taxed at a higher rate as compared to foreign earnings and a decrease in the amount of foreign investment credits. In addition, during May 2008, the Internal Revenue Service completed an examination of the Company’s U.S. income tax returns for 2004 and 2005. As a result, the Company’s unrecognized tax benefits decreased resulting in an income tax benefit of $0.2 million which reduced the prior year quarter’s effective tax rate.

Net Income

As a result of the foregoing, reported net income for the three months ended June 30, 2009 and 2008 was $17.8 million and $22.2 million, respectively.

Results of Operations for the Six Months Ended June 30, 2009 and 2008

Sales

Sales for the six months ended June 30, 2009 were $335.5 million compared to $368.1 million for the six months ended June 30, 2008, reflecting a decrease of $32.6 million, or 8.9%. E&C segment sales were $161.2 million for the six months ended June 30, 2009 compared with sales of $152.1 million for the same period in 2008, which represented an increase of $9.1 million, or 6.0%. This increase in sales was primarily due to higher volume in air cooled heat exchangers. D&S segment sales decreased $34.8 million, or 20.8%, to $132.7 million for the six months ended June 30, 2009 from $167.5 million for the six months ended June 30, 2008. Bulk storage system sales decreased $9.1 million and package gas system sales decreased $25.7 million for the six months ended June 30, 2009 compared to the same period in 2008 due to lower prices and volume. In addition, D&S segment sales were negatively affected during the six months ended June 30, 2009 from the weakening of the Euro and the Czech Koruna against the U.S. dollar. BioMedical segment sales decreased $6.9 million, or 14.2%, to $41.6 million for the six months ended June 30, 2009 compared to $48.5 million for the six months ended June 30, 2008. Biological storage systems sales decreased $4.1 million as a result of lower volume in domestic and international markets. Medical respiratory product sales increased $0.4 million during the six months ended June 30, 2009. MRI and other product sales decreased $3.2 million largely due to lower MRI component product sales, which are being discontinued as part of the shutdown of the Denver, Colorado BioMedical facility which was announced during the second quarter of 2009.

Gross Profit and Margin

Gross profit for the six months ended June 30, 2009 was $118.6 million, or 35.3% of sales, versus $115.9 million, or 31.5% of sales, for the six months ended June 30, 2008 resulting in a $2.7 million increase. E&C segment gross profit increased $17.5 million, or 9.1 percentage points in the 2009 period compared to the 2008 period, primarily due to improved project mix and cost performance, including the revision of cost estimates as we near completion on a number of projects accounted for under percentage of completion accounting. The impact of these revisions improved E&C margins by approximately 2% during the six months ended June 30, 2009. In addition, order cancellation fees were also billed in accordance with contract terms providing additional margin improvement of approximately 1% in our brazed aluminum heat exchanger product line. These improvements were partially offset by a write off due to a customer payment default, which reduced margin by approximately 1% for the six months ended June 30, 2009. Gross profit for the D&S segment decreased $11.3 million, or 0.7 percentage points, for the six months ended June 30, 2009 compared to the same period in 2008 primarily due to lower volume and restructuring charges related to workforce reductions, partially offset by lower material costs. BioMedical gross profit decreased $3.5 million, or 2.0 percentage points, for the six months ended June 30, 2009 compared to the same period in 2008. The BioMedical gross profit margin decreased in 2009 primarily due to lower sales volume for biological storage systems and restructuring charges related to workforce reductions.

SG&A

SG&A expenses for the six months ended June 30, 2009 were $49.4 million, or 14.7% of sales, versus $49.4 million, or 13.4% of sales, for the six months ended June 30, 2008. SG&A expenses for the E&C segment were $15.6 million for the six months ended June 30, 2009 compared to $12.2 million for the six months ended June 30, 2008, an increase of $3.4 million. The increase for the E&C segment was primarily the result of variable incentive compensation expenses and sales commissions due to higher margin projects during 2009 as compared to the same period in 2008. D&S segment SG&A expenses for the six months ended June 30, 2009 were $15.3 million compared to $17.0 million for the six months ended June 30, 2008, a decrease of $1.7 million. This decrease was primarily attributable to lower outside marketing and consulting services as well as travel and entertainment costs partially offset by restructuring charges related to workforce reductions. SG&A expenses for the BioMedical segment were $6.1 million for the six months ended June 30, 2009, a decrease of $0.3 million compared to the six months ended June 30, 2008. The decline was largely due to lower variable incentive compensation and travel and entertainment costs partially offset by restructuring charges related to workforce reductions. Corporate SG&A expenses for the six months ended June 30, 2009 were $12.4 million compared to $13.8 million for the six months ended June 30, 2008. This decrease of $1.4 million was attributable to lower stock-based compensation costs, variable incentive compensation, travel and entertainment and outside consulting costs as a result of cost reduction initiatives. These were partially offset by restructuring charges related to workforce reductions.

Amortization Expense

Amortization expense for the six months ended June 30, 2009 was $5.3 million, or 1.6% of sales, compared to $5.5 million, or 1.5% of sales, for the six months ended June 30, 2008. The decrease of $0.2 million was due to certain intangible assets being fully amortized.

Asset impairment charge

An asset impairment charge of $0.5 million for the six months ended June 30, 2009 was the result of certain equipment at the BioMedical facility in Denver, Colorado being written down to its net realizable value as part of the facility shutdown.

Operating Income

As a result of the foregoing, operating income for the six months ended June 30, 2009 was $63.4 million, or 18.9% of sales, an increase of $2.4 million compared to operating income of $61.0 million, or 16.6% of sales, for the same period in 2008.

Net Interest Expense

Net interest expense for the six months ended June 30, 2009 and 2008 was $7.8 million and $9.3 million, respectively. This decrease in interest expense of $1.5 million for the six months ended June 30, 2009 compared to the same period in 2008 was primarily attributable to lower variable interest rates on the term loan portion of our Senior Credit Facility. Also contributing to the decrease in net interest expense was slightly lower interest expense on the Subordinated Notes as a result of the repurchase of $6.8 million in outstanding Subordinated Notes during the third quarter of 2008.

Other Expenses and Income

For the six months ended June 30, 2009, foreign currency gains were $0.3 million as compared to $1.6 million for the same period in 2008. The decrease in the currency gains occurred primarily in our Czech Republic subsidiary as the Czech Koruna has weakened against the Euro and U.S. dollar during the past year.

Income Tax Expense

Income tax expense of $17.7 million and $15.8 million for the six months ended June 30, 2009 and 2008, respectively, represents taxes on both domestic and foreign earnings at an annual effective income tax rate of 32.2% and 30.0%, respectively. The increase in the effective income tax rate was primarily due to an increase in domestic earnings, which are taxed at a higher rate as compared to foreign earnings and a decrease in the amount of foreign investment credits.

Net Income

As a result of the foregoing, net income for the six months ended June 30, 2009 and 2008 was $37.2 million and $36.8 million, respectively.

Liquidity and Capital Resources

Debt Instruments and Related Covenants

As of June 30, 2009, the Company had $80.0 million outstanding under the term loan portion of its Senior Credit Facility, $163.2 million outstanding under the Subordinated Notes and $31.7 million of letters of credit and bank guarantees supported by the revolving portion of the Senior Credit Facility. The Company is in compliance with all covenants, including its financial covenants, under the Senior Credit Facility and Subordinated Notes. Availability on the revolving portion of the Senior Credit Facility was $78.3 million at June 30, 2009.

On October 5, 2008, Lehman Commercial Paper Inc. (“LCPI”), a subsidiary of Lehman Brothers Holdings Inc. and a lender under the revolving portion of the Senior Credit Facility (“Revolver”), filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code. LCPI had provided $5.0 million in commitments, or approximately 4.3% of total commitments, on the Revolver. A representative of LCPI has orally disclosed to the Company that it will not honor its obligation under the Senior Credit Facility. Accordingly, the total borrowing capacity under the Revolver is effectively limited to $110.0 million. The loss of the $5.0 million in effective capacity does not have a material adverse effect on meeting the liquidity and capital resource needs of the Company.

Sources and Use of Cash

Cash provided by operations for the six months ended June 30, 2009 was $58.9 million compared with cash provided by operations of $27.2 million for the six months ended June 30, 2008. The increase in cash provided by operations in the 2009 period was primarily attributable to higher net income and a reduction in working capital.

Cash used in investing activities for the six months ended June 30, 2009 was $8.3 million compared to $25.8 million for the six months ended June 30, 2008. Capital expenditures for the six months ended June 30, 2009 were $5.0 million compared with $6.4 million for the six months ended June 30, 2008. For the six months ended June 30, 2009, $5.2 million of cash, net of cash acquired was used for two acquisitions: the equity interests of Chengdu Golden Phoenix Liquid Nitrogen Container Company, Ltd. (“Golden Phoenix”) and substantially all of the assets of Tri-Thermal, Inc. During the six months ended June 30, 2008, $18.8 million of cash, net of cash acquired, was used to purchase Flow Instruments & Engineering GmbH and $0.6 million was contributed to a joint venture in Saudi Arabia for the manufacture of air cooled heat exchangers. Also, for the six months ended June 30, 2009, certain short-term investments matured and the proceeds totaled $2.0 million.

For the six months ended June 30, 2009 and 2008, cash provided by financing activities was $0.4 million and $2.2 million, respectively, primarily from the exercise of stock options.

Cash Requirements

The Company does not anticipate any unusual cash requirements for working capital needs, but expects to use $10.0 to $12.0 million of cash for capital expenditures for the remaining six months of 2009. A portion of the capital expenditures are expected to be used for the new industrial gas equipment repair center that is being built in Reno, Nevada.

During 2009, the Company has and will continue to consider making acquisitions as part of its strategic growth initiatives and expects to fund these acquisitions with primarily cash or stock.

For the remaining six months of 2009, cash requirements for debt service are forecasted to be approximately $9.0 million for scheduled interest payments under our Senior Credit Facility and the Subordinated Notes. We are not required to make any scheduled principal payments during the remaining six months of 2009 under the Term Loan portion of the Senior Credit Facility or Subordinated Notes, but we may consider making voluntary principal payments on our Senior Credit Facility. We may also from time to time seek to purchase a portion of our Subordinated Notes outstanding through cash purchases on the open market, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements and our debt covenants. We are obligated to fund an additional $7.0 million of purchase price as a result of our second quarter 2009 acquisition activity, of which $3.0 million is owed during the remainder of 2009. The remaining amount is required to be funded during 2010. For the remainder of 2009, we expect to use approximately $14.0 million of cash for both U.S. and foreign income taxes and to contribute approximately $0.6 million of cash to our defined benefit pension plan to meet ERISA minimum funding requirements.

Orders and Backlog

We consider orders to be those for which we have received a firm signed purchase order or other written contractual commitment from the customer. Backlog is comprised of the portion of firm signed purchase orders or other written contractual commitments received from customers that the Company has not recognized as revenue under the percentage of completion method or based upon shipment. Backlog can be significantly affected by the timing of orders for large projects,

particularly in the E&C segment, and it is not necessarily indicative of future backlog levels or the rate at which backlog will be recognized as sales. Orders included in our backlog may include customary cancellation provisions under which the customer could cancel part or all of the order at times subject to the payment of certain costs and/or penalties. Backlog as of June 30, 2009 was $224.6 million compared to $307.5 million as of March 31, 2009.

The following table sets forth orders and backlog by segment for the periods indicated:


	Three Months Ended
	June 30, 2009		March 31, 2009
Orders

Energy & Chemicals	$	5,612	$	17,813
Distribution & Storage		43,569		52,064
BioMedical		22,198		19,403

Total	$	71,379	$	89,280


Backlog

Energy & Chemicals	$	128,052	$	193,276
Distribution & Storage		89,812		108,319
BioMedical		6,781		5,951

Total	$	224,645	$	307,546

E&C orders for the three months ended June 30, 2009 were $5.6 million compared to $17.8 million for the three months ended March 31, 2009. E&C backlog totaled $128.0 million at June 30, 2009 compared to $193.3 million at March 31, 2009. The decrease in orders of $12.2 million, or 68.5%, was primarily attributable to the continuing global economic recession. Some order cancellations continued during the second quarter and potential new project timing has been delayed due to lack of project financing. Additionally, order flow in the E&C segment is historically volatile due to project size and it is not unusual to see order intake fluctuate significantly quarter to quarter.

D&S orders for the three months ended June 30, 2009 were $43.6 million compared to $52.1 million for the three months ended March 31, 2009. D&S backlog totaled $89.8 million at June 30, 2009 compared to $108.3 million at March 31, 2009. The D&S segment has experienced a decline in orders of $8.5 million, or 16.3%, for the three months ended June 30, 2009 compared to the same period last year, in most product lines due to the global economic recession.

BioMedical orders for the three months ended June 30, 2009 were $22.2 million compared to $19.4 million for the three months ended March 31, 2009. BioMedical backlog at June 30, 2009 totaled $6.8 million compared to $5.9 million at March 31, 2009. The increase in orders of $2.8 million, or 14.4%, was primarily due to timing of medical respiratory orders.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements as defined in the Securities Act.

Application of Critical Accounting Policies

The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles. As such, some accounting policies have a significant impact on amounts reported in these unaudited condensed consolidated financial statements. A summary of those significant accounting policies can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008. In particular, judgment is used in areas such as revenue recognition for long-term contracts, determining the allowance for doubtful accounts, inventory valuation reserves, goodwill, indefinite lived intangibles, environmental remediation obligations, product warranty costs, debt covenants, pensions and deferred tax assets. There have been no significant changes in accounting policies since December 31, 2008.

Forward-Looking Statements

The Company is making this statement in order to satisfy the “safe harbor” provisions contained in the Private Securities Litigation Reform Act of 1995. This Quarterly Report on Form 10-Q includes “forward-looking statements.” These forward-looking statements include statements relating to our business. In some cases, forward-looking statements may be identified by terminology such as “may,” “will,” “should,” “expects,” “anticipates,” “believes,” “projects,” “forecasts,” “continue,” or the

negative of such terms or comparable terminology. Forward-looking statements contained herein or in other statements made by us are made based on management’s expectations and beliefs concerning future events impacting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed or implied by forward-looking statements. We believe that the following factors, among others (including those described under Item 1A “Risk Factors,” of our Annual Report on Form 10-K for the year ended December 31, 2008), could affect our future performance and the liquidity and value of our securities and cause our actual results to differ materially from those expressed or implied by forward-looking statements made by us or on our behalf:

•

the cyclicality of the markets which we serve and the vulnerability of those markets to economic downturns;

•

the impact of the recent global economic and financial crisis;

•

the loss of, or a significant reduction or delay in purchases by our largest customers;

•

the fluctuations in the price of oil and natural gas;

•

degradation of our backlog as a result of modification or termination of orders;

•

our reliance on the availability and performance of key supplies and services;

•

competition in our markets;

•

general economic, political, business and market risks associated with our global operations;

•

our ability to control our costs while maintaining customer relationships and core business resources;

•

our ability to successfully manage our planned operational expansions;

•

the loss of key employees;

•

the pricing and availability of raw materials and our ability to manage our fixed-price contract exposure, including exposure to fixed pricing in long-term customer contracts;

•

our ability to successfully acquire or integrate companies that provide complementary products or technologies;

•

the impairment of our goodwill and other indefinite-lived intangible assets;

•

fluctuations in foreign currency exchange rates and interest rates;

•

the cost of compliance with environmental, health and safety laws and responding to potential liabilities under these laws;

•

litigation and disputes involving us, including the extent of product liability, warranty, pension and severance claims asserted against us;

•

labor costs and disputes and the deterioration of our relations with our employees;

•

disruptions in our operations due to hurricanes or other severe weather;

•

the underfunded status of our pension plan;

•

our ability to continue our technical innovation in our product lines;

•

our ability to protect our intellectual property and know-how;

•

claims that our products or processes infringe intellectual property rights of others;

•

regulations governing the export of our products;

•

additional liabilities related to taxes;

•

risks associated with our indebtedness, leverage, debt service and liquidity; and

•

fluctuations in the price of our stock.

There may be other factors that may cause our actual results to differ materially from the forward-looking statements.

All forward-looking statements attributable to us or persons acting on our behalf apply only as of the date of this Quarterly Report and are expressly qualified in their entirety by the cautionary statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, as the same may be updated from time to time. We undertake no obligation to update or revise forward-looking statements to reflect events or circumstances that arise after the filing date of this document or to reflect the occurrence of unanticipated events.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

In the normal course of business, the Company’s operations are exposed to continuing fluctuations in foreign currency values and interest rates that can affect the cost of operating and financing. Accordingly, the Company addresses a portion of these risks through a program of risk management.

The Company’s primary interest rate risk exposure results from the various floating rate pricing mechanisms on the Senior Credit Facility. If interest rates were to increase 200 basis points (2 percent) from June 30, 2009 rates, and assuming no changes in debt from the June 30, 2009 levels, the additional annual expense would be approximately $1.6 million on a pre-tax basis.

The Company has assets, liabilities and cash flows in foreign currencies creating exposure to foreign currency exchange fluctuations in the normal course of business. Chart’s primary exchange rate exposure is with the euro, the British pound, the Czech koruna and the Chinese yuan. Monthly measurement, evaluation and forward exchange rate contracts are employed as methods to reduce this risk. The Company enters into foreign exchange forward contracts to hedge anticipated and firmly committed foreign currency transactions. Chart does not use derivative financial instruments for speculative or trading purposes. The terms of the contracts are generally one year or less. The Company held positions in foreign exchange forward contracts at June 30, 2009. See Note B – Fair Value Measurements for additional information.

Item 4.

Controls and Procedures

As of June 30, 2009, an evaluation was performed, under the supervision and with the participation of the Company’s management including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-15 under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation, such officers concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act (1) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms and (2) is accumulated and communicated to the Company’s management including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow for timely decisions regarding required disclosure.

There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1A.

Risk Factors

In addition to the other information set forth in this report, you should carefully consider the risk factors disclosed in Item 1A, “Risk Factors,” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

Item 4.

Submission of Matters to a Vote of Security Holders

The Company previously disclosed the results of the matters voted upon at its Annual Meeting of Stockholders held on May 19, 2009 (the “Annual Meeting”) in a Current Report on Form 8-K filed with the Securities and Exchange Commission on May 20, 2009. For the results of the voting at the Annual Meeting, please see the Company’s May 20, 2009 Form 8-K.

Item 6.

Exhibits

The following exhibits are filed with this report:


10.1		Chart Industries, Inc. 2009 Omnibus Equity Plan (incorporated by reference to Appendix A to the Company’s definitive proxy statement filed with the Securities and Exchange Commission on April 7, 2009 (File No. 001-11442)).

10.2		Chart Industries, Inc. 2009 Incentive Compensation Plan (incorporated by reference to Appendix B to the Company’s definitive proxy statement filed with the Securities and Exchange Commission on April 7, 2009 (File No. 001-11442)).

31.1		Rule 13a-14(a) Certification of Chief Executive Officer

31.2		Rule 13a-14(a) Certification of Chief Financial Officer

32.1		Section 1350 Certification of Chief Executive Officer

32.2		Section 1350 Certification of Chief Financial Officer

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		Chart Industries, Inc.
		(Registrant)

Date: July 30, 2009	By:	/s/ Michael F. Biehl
		Michael F. Biehl
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)
		(Duly Authorized Officer)

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