| Debt and Credit Arrangements | Debt and Credit Arrangements Summary of Outstanding Borrowings The following table represents the components of our borrowings: September 30, December 31, Senior secured revolving credit facility due October 2026 (1) (2) $ 580.8 $ 600.8 Convertible notes due November 2024: Principal amount 258.8 258.8 Unamortized debt issuance costs (2.1) (2.9) Convertible notes due November 2024, net of unamortized debt issuance costs 256.7 255.9 Total debt, net of unamortized debt issuance costs 837.5 856.7 Less: current maturities (3) 256.7 255.9 Long-term debt $ 580.8 $ 600.8 _______________ (1) As of September 30, 2022, there were $580.8 in borrowings outstanding under the senior secured revolving credit facility due October 2026 bearing an interest rate of 3.1% (2.1% as of December 31, 2021) and $75.1 in letters of credit and bank guarantees outstanding supported by the senior secured revolving credit facility due 2026. As of September 30, 2022, the senior secured revolving credit facility due 2026 had availability of $344.1. (2) A portion of borrowings outstanding under our senior secured revolving credit facility due 2026 are denominated in euros (“EUR Revolver Borrowings”). EUR Revolver Borrowings outstanding were euro 88.0 million (equivalent to $85.8) at September 30, 2022 and euro 78.0 million (equivalent to $88.3) at December 31, 2021. During the three months ended September 30, 2022 and 2021, we recognized an unrealized foreign currency gain of $5.7 and $2.4, respectively, and for the nine months ended September 30, 2022 and 2021 we recognized an unrealized foreign currency gain of $12.3 and $5.4 relative to the translation of the EUR Revolver Borrowings outstanding. This unrealized foreign currency gain is classified within foreign currency (gain) loss in the condensed consolidated statements of income for all periods presented. (3) Our convertible notes due November 2024, net of unamortized debt issuance costs, are included in current maturities for both periods presented. Senior Secured Revolving Credit Facility On October 18, 2021 we entered into the Fifth Amended and Restated Credit Agreement, which provides for a Senior Secured Revolving Credit Facility (the “SSRCF”). The SSRCF matures on October 19, 2026. • The SSRCF has a borrowing capacity of $1,000.0 and includes a $100.0 sub limit for letters of credit, a $250.0 sub limit for discretionary letters of credit and a $100.0 sub-limit for swingline loans. • We may, subject to the satisfaction of certain conditions, request increases in the revolving credit facility commitments in an aggregate principal amount of up to $500.0 or a lesser amount in integral multiples of $25.0 to the extent existing or new lenders agree to provide such increased or additional commitments, as applicable. • The SSRCF bears interest at a base rate plus an applicable margin determined on a leveraged-based scale which (before giving effect to the sustainability pricing adjustments described below) ranges from 25 to 125 basis points for base rate loans and 125 to 225 basis points for LIBOR loans. • The applicable margin described above is subject to further adjustments based on the reductions in the ratio between (i) the total greenhouse gas emissions, measured in metric tons CO2e, of Chart and its subsidiaries during such calendar year and (ii) the aggregate revenue, measured in U.S. Dollars, of Chart and its subsidiaries during such calendar year. These additional pricing adjustments range from an addition of 0.05% to a reduction of 0.025% in the applicable margin described above. • We are required to pay commitment fees on any unused commitments under the SSRCF which, before giving effect to the sustainability fee adjustments (as described below), is determined on a leverage-based sliding scale ranging from 20 to 35 basis points. • The commitment fees described above are also subject to sustainability fee adjustments based on the aforementioned ratio. The sustainability fee adjustments range from an addition of 0.01% to a reduction of 0.01%. • Interest and fees are payable on a quarterly basis (or if earlier, at the end of each interest period for LIBOR loans). Significant financial covenants for the SSRCF include financial maintenance covenants that, as of the last day of any fiscal quarter ending on and after September 30, 2021, (i) require the ratio of the amount of Chart and its subsidiaries’ consolidated total net indebtedness to consolidated EBITDA to be less than specified maximum ratio levels and (ii) require the ratio of the amount of Chart and its subsidiaries’ consolidated EBITDA to consolidated cash interest expense to be greater than a specified minimum ratio level. The SSRCF includes a number of other customary covenants including, but not limited to, restrictions on our 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 and engage in mergers or consolidations and pay dividends or distributions. At September 30, 2022, we were in compliance with all covenants. The SSRCF also contains customary events of default. If such an event of default occurs, the lenders thereunder would be entitled to take various actions, including the acceleration of amounts due and all actions permitted to be taken by a secured creditor. The SSRCF is guaranteed by Chart and substantially all of its U.S. subsidiaries, and secured by substantially all of the assets of Chart and its U.S. subsidiaries and 65% of the capital stock of our material non-U.S. subsidiaries (as defined by the Fifth Amended and Restated Credit Agreement) that are owned by U.S. subsidiaries. We recorded $9.1 in deferred debt issuance costs related to the SSRCF, which includes $6.1 in unamortized debt issuance costs from previous credit facilities. Deferred debt issuance costs related to the SSRCF are presented in other assets in the condensed consolidated balance sheets and are being amortized over the five-year term of the SSRCF. At September 30, 2022 and December 31, 2021, unamortized debt issuance costs associated with the SSRCF were $7.4 and $8.7, respectively. The following table summarizes interest expense and financing costs amortization related to the 2026 Credit Facilities and our previous senior secured revolving credit facility and term loan due June 2024: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Interest expense, senior secured revolving credit facility due October 2026 $ 6.4 $ — $ 14.7 $ — Interest expense, term loan due June 2024 — 1.3 — 2.4 Interest expense, senior secured revolving credit facility due June 2024 — 1.6 — 3.6 Total interest expense $ 6.4 $ 2.9 $ 14.7 $ 6.0 Financing costs amortization, senior secured revolving credit facility due October 2026 $ 0.5 $ — $ 1.4 $ — Financing costs amortization, senior secured revolving credit facility and term loan due June 2024 — 1.0 — 2.8 Total financing costs amortization $ 0.5 $ 1.0 $ 1.4 $ 2.8 2024 Convertible Notes On November 6, 2017, we issued 1.00% Convertible Senior Subordinated Notes due November 2024 (the “2024 Notes”) in the aggregate principal amount of $258.8, pursuant to an Indenture, dated as of such date (the “Indenture”). On December 31, 2020, we entered into the First Supplemental Indenture (the “Supplemental Indenture”) to the Indenture, between Chart and Wells Fargo Bank, National Association, as trustee, governing the 2024 Notes. Pursuant to the Supplemental Indenture, Chart irrevocably elected (i) to eliminate Chart’s option to elect Physical Settlement (as defined in the Indenture) on any conversion of 2024 Notes that occurs on or after the date of the Supplemental Indenture and (ii) that, with respect to any Combination Settlement (as defined in the Indenture) for a conversion of 2024 Notes, the Specified Dollar Amount (as defined in the Indenture) that will be settled in cash per $1,000 principal amount of the Notes shall be no lower than $1,000. The 2024 Notes bear interest at an annual rate of 1.00%, payable on May 15 and November 15 of each year, beginning on May 15, 2018, and will mature on November 15, 2024 unless earlier converted or repurchased. The 2024 Notes are senior subordinated unsecured obligations of the Company and are not guaranteed by any of our subsidiaries. The 2024 Notes are senior in right of payment to our future subordinated debt, equal in right of payment with the Company’s future senior subordinated debt and are subordinated in right of payment to our existing and future senior indebtedness, including indebtedness under our existing credit agreement. A conversion of the 2024 Notes may be settled in either (1) cash or (2) cash for the principal amount of the 2024 Notes and any combination of cash and shares for the excess settlement amount above the principal amount of the 2024 Notes, at our election (subject to, and in accordance with, the settlement provisions of the Indenture and Supplemental Indenture). The initial conversion rate for the 2024 Notes is 17.0285 shares of common stock (subject to adjustment as provided for in the Indenture) per $1,000 principal amount of the 2024 Notes, which is equal to an initial conversion price of approximately $58.725 per share, representing a conversion premium of approximately 35% above the closing price of our common stock of $43.50 per share on October 31, 2017. In addition, following certain corporate events that occur prior to the maturity date as described in the Indenture, we will pay a make-whole premium by increasing the conversion rate for a holder who elects to convert its 2024 Notes in connection with such a corporate event in certain circumstances. For purposes of calculating earnings per share, if the average market price of our common stock exceeds the applicable conversion price during the periods reported, shares contingently issuable under the 2024 Notes will have a dilutive effect with respect to our common stock. Since our closing common stock price of $184.35 at the end of the period exceeded the conversion price of $58.725, the if-converted value exceeded the principal amount of the 2024 Notes by approximately $553.5 at September 30, 2022. As described below, we entered into convertible note hedge transactions, which are expected to reduce the potential dilution with respect to our common stock upon conversion of the 2024 Notes. Holders of the 2024 Notes may convert their 2024 Notes at their option at any time prior to the close of business on the business day immediately preceding August 15, 2024 only under the following circumstances: (1) during any fiscal quarter commencing after December 31, 2017 (and only during such fiscal quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the applicable conversion price for the 2024 Notes on each applicable trading day; (2) during the five As of October 1, 2022, the 2024 Notes continue to be convertible at the option of the shareholders. This conversion right, which will remain available until December 31, 2022, was triggered since the closing price of our common stock was greater than or equal to $76.3425 (130% of the conversion price of the 2024 Notes) for at least 20 trading days during the last 30 trading days ending on September 30, 2022. Since the holders of the 2024 Notes could potentially convert their 2024 Notes at their option during the three month period subsequent to September 30, 2022, the $258.8 principal amount of the 2024 Notes was classified as a current liability in the unaudited condensed consolidated balance sheet at September 30, 2022. As of December 31, 2021, the 2024 Notes were convertible at the option of the holders, and the liability component of the 2024 Notes was classified as a current liability. We will reassess the convertibility of the 2024 Notes and the related balance sheet classification on a quarterly basis. There have been no conversions as of the date of this filing. The following table summarizes 1.0% contractual interest coupon and financing costs amortization associated with the 2024 Notes: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 2024 Notes, 1.0% contractual interest coupon $ 0.6 $ 0.6 $ 1.9 $ 1.9 2024 Notes, financing costs amortization (1) $ 0.2 $ 0.2 $ 0.7 $ 0.7 _______________ (1) We amortize debt issuance costs of $6.8 over the term of the 2024 Notes using the effective interest method. Convertible Note Hedge and Warrant Transactions Associated with the 2024 Notes In connection with the pricing of the 2024 Notes, we entered into convertible note hedge transactions (the “Note Hedge Transactions”) with certain parties, including the initial purchasers of the 2024 Notes (the “Option Counterparties”). The Note Hedge Transactions are expected generally to reduce the potential dilution upon any future conversion of the 2024 Notes. Payments for the Note Hedge Transactions totaled approximately $59.5 and were recorded as a reduction to additional paid-in capital in the December 31, 2017 consolidated balance sheet. We also entered into separate, privately negotiated warrant transactions (the “Warrant Transactions”) with the Option Counterparties to acquire up to 4.41 shares of our common stock. Proceeds received from the issuance of the Warrant Transactions totaled approximately $46.0 and were recorded as an addition to additional paid-in capital in the December 31, 2017 consolidated balance sheet. The strike price of the Warrant Transactions will initially be $71.775 per share (subject to adjustment), which is approximately 65% above the last reported sale price of our common stock on October 31, 2017. The Warrant Transactions could have a dilutive effect to our stockholders to the extent that the market price per share of our common stock, as measured under the terms of the Warrant Transactions, exceeds the applicable strike price of the warrants. The Note Hedge Transactions and Warrant Transactions effectively increased the conversion price of the 2024 Notes. The net cost of the Note Hedge Transactions and Warrant Transactions was approximately $13.5. Foreign Facilities In various markets where we do business, we have local credit facilities to meet local working capital demands, fund letters of credit and bank guarantees, and support other short-term cash requirements. The facilities generally have variable interest rates and are denominated in local currency but may, in some cases, facilitate borrowings in multiple currencies. We are permitted to borrow up to USD equivalent $88.9 under certain of our foreign facilities. As of September 30, 2022 and December 31, 2021 there were no borrowings outstanding under these facilities. Certain of our foreign facilities allow us to request bank guarantees and letters of credit. None of these facilities allow revolving credit borrowings. We have foreign letters of credit and bank guarantees that totaled USD equivalent $39.1 and $31.2 as of September 30, 2022 and December 31, 2021, respectively. Letters of Credit L.A. Turbine, a wholly-owned subsidiary of the Company, had $0.0 and $0.2 in deposits in a bank outside of the SSRCF to secure letters of credit as of September 30, 2022 and December 31, 2021, respectively. The deposits are treated as restricted cash and restricted cash equivalents in the unaudited condensed consolidated balance sheet at December 31, 2021. Derivatives and Hedging We utilize a combination of cross-currency swaps and foreign exchange collars (together the “Foreign Exchange Contracts”) as a net investment hedge of a portion of our investments in certain international subsidiaries that use the euro as their functional currency in order to reduce the volatility caused by changes in exchange rates. On April 1, 2022 we entered into a pay-fixed rate, receive-fixed rate cross-currency swap that provided for an exchange of principal on a notional amount of $110.2 swapped to euro 100.0 million on its March 31, 2025 maturity and receipt of U.S. dollar interest from our swap counterparties at a fixed rate of 1.8% per annum. We terminated this cross-currency swap on June 7, 2022, and a total settlement of $3.6 cash was received from the counterparties. The settlement amount, which represents the fair value of the contract at the time of termination, was recorded as a reduction in other assets during the second quarter of 2022 and remains classified in accumulated other comprehensive loss on the condensed consolidated balance sheet. On June 7, 2022, immediately following the termination of the aforementioned cross-currency swap, we entered into a pay-fixed rate, receive-fixed rate cross-currency swap that provides for an exchange of principal on a notional amount of $106.7 swapped to euro 100.0 million on its May 31, 2025 maturity and receipt of U.S. dollar interest from our swap counterparties at a fixed rate of 1.6% per annum. We terminated this cross-currency swap on July 8, 2022, and a total settlement of $4.0 cash was received from the counterparties. The settlement amount, which represents the fair value of the contract at the time of termination, was recorded as a reduction in other assets during the third quarter of 2022 and remains classified in accumulated other comprehensive loss on the condensed consolidated balance sheet. On July 8, 2022, immediately following the termination of the aforementioned cross-currency swap, we entered into a pay-fixed rate, receive-fixed rate cross-currency swap that provides for an exchange of principal on a notional amount of $101.6 swapped to euro 100.0 million on its June 30, 2025 maturity and receipt of U.S. dollar interest from our swap counterparties at a fixed rate of 1.8% per annum. We terminated this cross-currency swap on September 16, 2022, and a total settlement of $1.8 cash was received from the counterparties. The settlement amount, which represents the fair value of the contract at the time of termination, was recorded as a reduction in other assets during the third quarter of 2022 and remains classified in accumulated other comprehensive loss on the condensed consolidated balance sheet. On September 16, 2022, immediately following the termination of the aforementioned cross-currency swap, we entered into a pay-fixed rate, receive-fixed rate cross-currency swap that provides for an exchange of principal on a notional amount of $99.8 swapped to euro 100.0 million on its June 30, 2025 maturity and receipt of U.S. dollar interest from our swap counterparties at a fixed rate of 1.6% per annum (the “September 16 Swap”). Concurrent to entering into the September 16 Swap, we also entered into a separate zero cost foreign exchange collar contract (the “Collar Contract”) with the same counterparties, notional amount and expiration date as the September 16 Swap. Under the Collar Contract, we sold a put option with a lower strike price and purchased a call option with an upper strike price to manage final settlement of the September 16 Swap. Our Foreign Exchange Contracts are measured at fair value with changes in fair value recorded as foreign currency translation adjustments within accumulated other comprehensive loss. Our Foreign Exchange Contracts are entered into with major financial institutions in order to reduce credit risk and risk of nonperformance by third parties. We believe the credit risks with respect to the counterparties, and the foreign currency risks that would not be hedged if the counterparties fail to fulfill their obligations under the contract, are not material in view of our understanding of the financial strength of the counterparties. The Foreign Exchange Contracts are not exchange traded instruments and their fair value is determined using the cash flows of the contracts, discount rates to account for the passage of time, implied volatility, current foreign exchange market data and credit risk, which are all based on inputs readily available in public markets and categorized as Level 2 fair value hierarchy measurements. The following table represents the fair value of asset and liability derivatives and their respective locations on our condensed consolidated balance sheet as of September 30, 2022: Asset Derivatives Liability Derivatives Derivatives designated as net investment hedge Balance Sheet Location Fair Value Balance Sheet Location Fair Value Foreign Exchange Contracts (1) Other assets $ — Other long-term liabilities $ 0.5 The following table represents the net effect derivative instruments designated in hedging relationships had on accumulated other comprehensive loss on the condensed consolidated statements of income and comprehensive income: Unrealized gain recognized in accumulated other comprehensive loss on derivatives, net of taxes Three Months Ended September 30, Nine Months Ended September 30, Derivatives designated as net investment hedge 2022 2022 Foreign Exchange Contracts (1) (2) $ 2.9 $ 6.7 _______________ (1) Our designated derivative instruments are highly effective. As such, there were no gains or losses recognized immediately in income related to hedge ineffectiveness during the three and nine months ended September 30, 2022. (2) Represents foreign exchange swaps and foreign exchange options. The following table represents interest income, included within interest expense, net on the condensed consolidated statements of income related to amounts excluded from the assessment of hedge effectiveness for derivative instruments designated as net investment hedges: Amount of gain recognized in income on derivative (amount excluded from effectiveness testing) Three Months Ended September 30, Nine Months Ended September 30, Derivatives designated as net investment hedge 2022 2022 Foreign Exchange Contracts (1) (2) $ 0.4 $ 0.9 _______________ (1) Represents amount excluded from effectiveness testing. Our Foreign Exchange Contracts are designated with terms based on the spot rate of the euro. Future changes in the components related to the spot change on the notional will be recorded in other comprehensive income and remain there until the hedged subsidiaries are substantially liquidated. All coupon payments are classified in interest expense, net in the condensed consolidated statements of income, and the initial value of excluded components currently recorded in accumulated other comprehensive loss as a foreign currency translation adjustment are amortized to interest expense, net over the remaining term of the Foreign Exchange Contract. (2) Represents foreign exchange swaps and foreign exchange options. Fair Value Disclosures The fair value of the 2024 Notes was approximately 316% and 276% of their par value as of September 30, 2022 and December 31, 2021, respectively. The 2024 Notes are actively quoted instruments and, accordingly, the fair value of the 2024 Notes was determined using Level 1 inputs. |
