10-K: Chart Industries Navigates Merger Transition Amidst Strong Backlog

Chart Industries reports increased 2025 sales and record backlog, driven by clean energy sectors, while managing a terminated Flowserve merger and pending Baker Hughes acquisition.

Summary

• Chart Industries is a global leader in process technologies and equipment for gas and liquid molecule handling, focusing on clean power, water, food, and industrials.
• Consolidated sales for 2025 increased to $4.264 billion, up from $4.160 billion in 2024.
• Total backlog reached a record $5,886.2 million as of December 31, 2025, a significant increase from $4,845.1 million in 2024.
• Consolidated orders for 2025 were $5,677.8 million, up from $5,006.8 million in 2024, primarily driven by strong activity in Specialty Products and Repair, Service & Leasing.
• The company terminated its merger agreement with Flowserve Corporation on July 28, 2025, incurring a $266 million termination payment, of which Baker Hughes paid $258 million.
• Chart Industries entered into a merger agreement with Baker Hughes Company on July 28, 2025, under which Chart will become a wholly-owned subsidiary of Baker Hughes, with closing expected in Q2 2026.
• Net income attributable to Chart Industries, Inc. from continuing operations decreased significantly to $42.3 million in 2025 from $222.0 million in 2024, largely due to the Flowserve termination fee.
• Operating income for 2025 was $358.4 million, down from $647.5 million in 2024, primarily impacted by the termination fee expense.
• Gross profit margin slightly improved to 33.7% in 2025 from 33.4% in 2024, with improvements in Cryo Tank Solutions and Heat Transfer Systems partially offset by other segments.
• Selling, general and administrative (SG&A) expenses increased by $71.7 million (13.1%) in 2025, mainly due to costs associated with the terminated and proposed mergers.
• The company reported an income tax benefit of $(10.4) million in 2025, compared to an expense of $78.6 million in 2024, influenced by state taxes, cross-border tax laws, and R&D credits.
• As of December 31, 2025, total indebtedness was $3,656.0 million.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a mixed report with significant short-term financial headwinds from the terminated merger, but strong underlying business momentum in key growth areas and a clear path to a strategic acquisition.

Positives

• Consolidated sales increased to $4.264 billion in 2025 from $4.160 billion in 2024, demonstrating revenue growth.
• Total backlog significantly increased to $5,886.2 million as of December 31, 2025, from $4,845.1 million in 2024, indicating strong future revenue potential.
• Consolidated orders grew to $5,677.8 million in 2025 from $5,006.8 million in 2024, reflecting robust demand.
• Specialty Products segment orders increased by $518.9 million, driven by growth in carbon capture, nuclear, HLNG, marine, space, mining, water treatment, and chemicals applications.
• Repair, Service & Leasing segment orders increased by $154.4 million, fueled by increased demand for retrofit, spares, and servicing.
• Heat Transfer Systems sales increased by $202.4 million, attributed to strong backlog execution in LNG projects, data centers, and traditional energy.
• Heat Transfer Systems gross profit margin improved by 620 basis points to 35.1% in 2025, indicating better productivity and mix.
• Overall gross profit margin slightly increased to 33.7% in 2025 from 33.4% in 2024.
• The company maintains a strong cybersecurity posture, reporting no material incidents in 2025 and aligning with the CMMC program.
• International defined benefit pension plans are overfunded by $10.4 million as of December 31, 2025.

Negatives

• Net income attributable to Chart Industries, Inc. from continuing operations significantly decreased to $42.3 million in 2025 from $222.0 million in 2024.
• Operating income decreased to $358.4 million in 2025 from $647.5 million in 2024, primarily due to the Flowserve termination fee.
• A $266.0 million termination fee expense was recorded in 2025 in connection with the terminated Flowserve merger agreement.
• Selling, general and administrative (SG&A) expenses increased by $71.7 million (13.1%) in 2025, partly due to merger-related costs.
• The Debt Paydown metric for the 2025 Short-Term Incentive (STI) Program did not achieve the threshold level, resulting in no payout for this metric.
• Overall STI payout for NEOs (excluding Ms. Evanko) was 20.8% of target, indicating underperformance against financial goals.
• Cryo Tank Solutions segment sales decreased by $13.7 million, mainly due to lower industrial gas sales in the United States.
• Specialty Products segment sales decreased by $15.9 million, driven by lower sales in HLNG, power generation, and hydrogen end markets.
• Repair, Service & Leasing segment sales decreased by $69.0 million, primarily due to non-repeating record field service work and a large aftermarket equipment order from 2024.
• Specialty Products gross profit decreased by $18.8 million due to lower sales and higher manufacturing costs, including start-up costs at the Theodore, Alabama facility.
• Repair, Service & Leasing gross profit margin decreased by 270 basis points to 44.3%.

Risks

• The markets served are subject to cyclical demand and vulnerable to economic downturns, which could harm business and make long-term performance difficult to project.
• The loss of, or significant reduction or delay in, purchases by the top ten customers (27% of 2025 consolidated sales) could materially reduce sales and profitability.
• Inability to successfully control costs and efficiently manage operations may lead to increased costs and reduced profitability.
• Dependence on the availability of certain key suppliers for raw materials and specialized components, with potential for shortages or delays.
• Inability to obtain sufficient pricing for products and services to meet profitability expectations, especially with inflationary pressures.
• Changes in U.S. trade policy, tariffs, and import/export regulations may have a material adverse effect on business.
• Exposure to economic, political, and other risks in different countries, as 58% of 2025 sales occurred in international markets.
• Goodwill and indefinite-lived intangible assets, totaling $3,724.0 million as of December 31, 2025, are subject to impairment testing, which could result in significant non-cash charges.
• The company's backlog is subject to modification, termination, or reduction of orders, which could negatively impact future sales.
• Potential liability for damages based on product liability and warranty claims due to the high pressures and low temperatures at which many products are used.
• Energy policies could change or expected changes could fail to materialize, adversely affecting business or prospects.
• Fluctuations in currency exchange or interest rates may adversely affect financial condition and operating results.
• Failure to successfully integrate acquired companies, such as Howden, or realize anticipated cost savings or commercial synergies.
• Failure to protect intellectual property and know-how could reduce competitive advantage and sales.
• Data privacy and data security considerations, including cyber-attacks, could impact business operations and reputation.
• Potential insolvency or financial distress of third parties (customers, suppliers) could lead to losses.
• Obligation to make expenditures to comply with environmental, health, and safety laws and emissions regulations, or incur additional liabilities.
• Adverse effects from violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-corruption laws.
• Operations could be impacted by the effects of severe weather.
• Subject to regulations governing the export of products, with potential for government scrutiny and penalties for violations.
• As a provider of products to the U.S. government, subject to federal rules, regulations, audits, and investigations.
• Tax rules are subject to change, and unanticipated changes in the effective tax rate could adversely affect future results (e.g., OECD Pillar 2).
• Obligation to make significant contributions to pension plans, some of which are underfunded, and a multi-employer plan.
• The departure of any key personnel, such as the former CEO, could materially and adversely affect the company.
• A public health crisis could cause disruptions to operations, similar to the effects of the Covid-19 pandemic.
• High leverage and future debt service obligations ($3,656.0 million total indebtedness as of December 31, 2025) could adversely affect business and ability to meet payment obligations.
• The terms of existing debt may limit the ability to finance future operations or engage in other business activities.
• The proposed merger with Baker Hughes is subject to the satisfaction of certain closing conditions, including government consents and approvals, some or all of which may not be satisfied or completed by the expected Q2 2026 closing.
• Uncertainties and restrictions on the conduct of business while the Baker Hughes merger is pending could have a material adverse effect.
• The company will continue to incur substantial transaction-related costs in connection with the Baker Hughes merger.
• The company and its directors and officers may be subject to lawsuits relating to the Baker Hughes merger.
• Provisions of the Baker Hughes Merger Agreement may deter alternative business combinations and could negatively impact the stock price if the agreement is terminated in certain circumstances, including a $250 million termination fee to Baker Hughes and potential reimbursement of the $258 million Flowserve termination payment.

Future Outlook

The merger with Baker Hughes Company is presently expected to close in the second quarter of 2026, subject to ongoing regulatory reviews in certain jurisdictions. Capital expenditures for 2026 are anticipated to be approximately $120.0 million. Management expects to satisfy cash requirements for ongoing business for the foreseeable future using cash generated by operations, existing cash balances, and available borrowings under credit facilities. The company continues to monitor macroeconomic developments and the impact of international monetary and trade policies.

Management Comments

• "Chart is a global leader in the design, engineering, and manufacturing of process technologies and equipment for gas and liquid molecule handling for the Nexus of Clean clean power, clean water, clean food, and clean industrials, regardless of molecule."
• "Chart is committed to excellence in environmental, social and corporate governance (ESG) issues both for its company as well as its customers."
• "With regulatory reviews still underway in certain jurisdictions, we presently expect closing [of the Baker Hughes merger] in the second quarter of 2026, understanding that the timing may evolve as those processes progress."
• "Management believes that continuing efforts by petroleum producing countries to better utilize stranded natural gas and associated gases which historically had been flared, present a promising source of demand."
• "Our proprietary IPSMR (Integrated Pre-cooled Single Mixed Refrigerant) and IPSMR+ liquefaction process technology offers lower capital expenditure requirements than competing processes measured on a per ton of LNG produced basis, along with very competitive operating costs."
• "Demand for many of our specialty applications are driven by an increasing focus on energy security, energy access, and energy/grid stability in addition to customer demand and government support for decarbonization."
• "Additionally, clean water scarcity, increasing demand for energy from applications such as artificial intelligence and data centers, population growth, and aging infrastructure, all drive demand for our specialty applications."
• "Demand for services provided by this segment is being driven by our substantial existing and growing install base, exceptional reputation for high-quality service, breadth of services offered and expanded geographic footprint."
• "Management anticipates we will be able to satisfy cash requirements for our ongoing business for the foreseeable future with cash generated by operations, existing cash balances and available borrowings under our credit facilities."

Industry Context

StockSavvy.ai notes that Chart Industries is strategically positioned within the growing "Nexus of Clean" markets, including LNG, hydrogen, biogas, and CO2 capture. The company's strong backlog and orders in Specialty Products and Heat Transfer Systems reflect increasing global demand for clean energy infrastructure and decarbonization technologies. The acquisition of Howden and the pending merger with Baker Hughes indicate a consolidation trend in the highly engineered process technology sector, aiming to enhance global leadership and expand solution portfolios. The focus on ESG initiatives aligns with broader industry and investor trends towards sustainable practices.

Comparison to Industry Standards

• The company's IPSMR and IPSMR+ liquefaction process technology offers lower capital expenditure requirements and competitive operating costs compared to competing processes on a per ton of LNG produced basis.
• In Cryo Tank Solutions, competitors tend to be regionally focused, while Chart supplies a broad range of systems worldwide.
• In Heat Transfer Systems, competition for specialized brazed aluminum heat exchangers includes a small number of global (European and Asian) manufacturers.
• Many of the Specialty Products markets have limited competition, suggesting a strong competitive position in niche clean energy applications.
• In Repair, Service & Leasing, competitors tend to be regionally focused, while Chart supplies a broader array of services worldwide.
• The company benchmarks its cybersecurity program externally against other industrial manufacturers in the B2B manufacturing industry to determine its risk profile through cybersecurity insurance tools.

Management Changes

Corporate Governance

Legal Proceedings

• Two lawsuits, McDaniels v. Chart Industries, Inc. et al. and Johnson v. Chart Industries, Inc. et al., were filed on September 11, 2025, by purported stockholders in the Supreme Court of the State of New York.
• The complaints allege that the Definitive Proxy Statement for the Baker Hughes merger is materially incomplete and misleading under New York law, seeking injunctive relief, damages, and costs.
• Chart also received demand letters from multiple stockholders threatening litigation and/or making other demands related to the merger, including for additional disclosures.
• To mitigate the risk of delaying the Special Meeting or the closing of the merger and to minimize litigation expense, Chart filed a Form 8-K on September 25, 2025, with Supplemental Disclosures, without admitting liability.
• The attorneys representing the stockholders who filed the complaints acknowledged that the Supplemental Disclosures mooted the claims and will seek a mootness fee.
• The complaints remain pending for the resolution of the forthcoming mootness fee demand.
• Management believes the allegations are without merit and the supplemental disclosures are immaterial, but resolution may involve payments to the stockholders' attorneys.

Related Party Transactions

• A Co-Investment Agreement was entered into on April 30, 2025, with certain affiliates of MSD Partners, L.P. (BDT&MSD) regarding Chart's 25% interest in Hydrogen Technology & Energy Corporation (HTEC).
• BDT&MSD holds a Put Option, allowing them to sell their HTEC common stock to Chart under specific conditions, including the third anniversary of the Effective Date, a Chart change of control, Chart distributions exceeding $900.0 million, Chart's leverage ratio exceeding certain thresholds, or a bankruptcy/credit default event.
• If the Put Option is exercised, Chart would pay BDT&MSD $323.0 million or $51.20 per share (Base Price), with the Base Price increasing at an annualized rate of 11.25% after the third anniversary.
• Chart holds a Call Option to purchase up to 85% of BDT&MSD's HTEC common stock after the third anniversary of the Effective Date, at a price ensuring BDT&MSD realizes the greater of a 12.75% internal rate of return or a 1.80x multiple on invested capital.
• The Co-Investment Agreement terminates automatically upon an initial public offering by HTEC.
• The fair value of these put and call options was not material as of December 31, 2025.

Stakeholder Impact

• Shareholders are directly impacted by the pending Baker Hughes merger, which offers a fixed cash consideration of $210.00 per share, limiting potential upside from future company performance. The $266 million termination fee for the Flowserve merger also represents a significant cost.
• Employees are affected by the CEO transition and the ongoing uncertainty surrounding the Baker Hughes merger, which could impact retention and future roles. The company emphasizes human capital management, including safety, talent development, and competitive compensation.
• Customers stand to benefit from Chart's continued global leadership in clean energy technologies and an expanded solution portfolio through the Baker Hughes merger, as well as its extensive service network.
• Suppliers may face potential supply chain disruptions due to macroeconomic conditions and Chart's reliance on a limited number of specialized suppliers. The merger could also lead to changes in supplier relationships.
• Creditors are impacted by the company's significant debt levels ($3,656.0 million) and future debt service obligations. The terms of existing debt impose restrictions on financial activities, which could affect the company's flexibility.
• Regulatory bodies are actively involved in the review and approval process for the Baker Hughes merger, and the company must maintain compliance with various environmental, health, safety, and tax regulations, including new OECD Pillar 2 guidance.

Next Steps

• Complete regulatory reviews for the Baker Hughes merger.
• Close the Baker Hughes merger in Q2 2026.
• Monitor developments related to OECD Pillar 2 tax guidance, effective for fiscal years beginning on or after January 1, 2026.
• Anticipate capital expenditures for 2026 to be approximately $120.0 million.
• Resolve pending lawsuits related to the Baker Hughes merger, including a mootness fee demand.
• Implement new accounting standards (ASU 2025-10, 2025-07, 2025-06, 2025-05, 2024-03) in future fiscal years.

Key Dates

Recommendation

The company is in a transitional phase with a pending acquisition by Baker Hughes, which offers a fixed cash consideration per share. While the underlying business shows strong growth in backlog and orders in clean energy sectors, the significant termination fee from the prior merger and the substantial drop in net income for 2025 introduce short-term financial headwinds and uncertainty. The fixed acquisition price limits upside for current shareholders, and the risks associated with the merger's completion and integration warrant a cautious "hold" stance for investors awaiting the finalization of the transaction.

Keywords

Clean Energy, LNG, Hydrogen, Carbon Capture, Industrial Gases, Process Technology, Cryogenics, Heat Transfer, Aftermarket Services, Mergers & Acquisitions, SEC Filing, 10-K, Financial Report, Corporate Governance, Risk Management, ESG, Baker Hughes, Flowserve