Good morning and welcome to the Chart Industries, Inc. 2016 Second Quarter Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. As a reminder today's calling is being recorded. You should have already received the Company's earnings release that was issued earlier this morning if you have not received the release, you may access it by visiting Chart's website at www.chartindustries.com. A telephone replay of today's broadcast will be available following the conclusion of the call until Thursday, August 4. The replay information is contained in the Company's earnings release. Before we begin the Company would like to reminder you that statements made during this call that are not historical in fact are forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual events or results to differ materially from those expressed or implied in the forward-looking statements. For furthermore information about important factors that could cause actual results to differ materially from those expressed or imply in the forward-looking statements please refer to the information regarding forward-looking statements and Risk Factors included in the Company's earnings release and latest filings with the SEC. These filings are available through the Investor Relations section of the Company's website or through the SEC website www.sec.gov. The Company undertakes no obligation to update publicly or revise any forward-looking statements. I would now like to turn conference call over to Ken Webster, Chart Industries’ Vice President and CFO. You may begin your conference.

Thank you, Jonathan. Good morning everyone. I would like to thank all of you for joining us today. I would begin by giving you brief overview of our second quarter results and outlook for the remainder of 2016. Then Sam Thomas, Chairman and CEO, will provide comments on current market and order trends we see in each of our business segments. Sam will also introduce Bill Johnson, who as you know recently joined us as President and Chief Operating Officer and will provide a few comments as well. Net income for the second quarter of 2016 was $21.2 million or $0.68 per diluted share. This included severance cost from cost reduction initiatives and acquisition-related retention recorded in the quarter of approximately $2.1 million. Excluding these items, second quarter 2016 earnings would have been $0.72 per diluted share. This compares with net income of $17.2 million or $0.56 per diluted share for the second quarter of 2015. Second quarter of 2015 earnings would have been $0.60 per diluted share excluding the $0.04 per diluted share impact, facility shutdown and severance cost from cost reduction initiative and acquisition-related retention in that period. Sales for the quarter were $247.1 million, a decrease of 8.6% from the prior year quarter. This was due to a decline in our energy-related sales in our Energy & Chemicals or E&C business as customers continued to delay projects and competitive pressures remain challenging for the few new built E&C projects that are moving forward at this time. Our gross profit for the quarter was $87 million or 35.2% of sales compared with $74.9 million or 27.7% of sales the prior year quarter. Overall gross profit was up largely due to record E&C short lead-time replacement equipment opportunities which were supported by our new Lifecycle aftermarket service offering. Contract…

Thank you, Ken, and good morning everyone. During the quarter we had record short lead-time opportunities for replacement equipment and our natural gas processing and petrochemical market. The short lead-time opportunities are typically critical shutdown situations to our customers, which require us to respond immediately to supply replacement equipment. Although the timing of these events is not predictable, they are recurring in nature and are an important part of our business and service to customers, highlighting our unique capabilities and competitive strength. These projects were executed very successfully, aided by our newly established short Lifecycle aftermarket business, while providing customer equipment to meet customer replacement needs is something we’ve done for years. Chart Lifecycle brings additional skills and resources to fulfilling the time sensitive and challenging equipment needs to our customers and demanding operational context. We continue to see interest from our customers in a wide variety of service plan offered by that group. Overall order trends remain strong in our D&S business. Within our industrial business, we’re seeing opportunities in nice areas like hydrogen fuel cell and space launch industry. Within the U.S. and Europe, we are currently seeing the benefit and availability of LNG for power generation and marine application. As oil prices remain low and new capacity comes online, global oversupply of LNG, petrochemical feed stocks and natural gas liquids are hindering our E&C business as customers defer capital spending in the near term. Although there are number of large plants in the bidding pipeline, the timing of those, are difficult to predict, the curve estimates projecting late 2017 or early 2018 timeframe. Until government policy is defined and capacity overhangs are absorbed, we continue to struggle in China in terms of LNG adoption for vehicle fueling. Our managing team in China has done an excellent job…

Thank you, Sam, and good morning everyone. I’m very excited to be part of the Chart team’s Board meeting many of you over the coming months. Over the next few months I plan to learn more about the business and industries we participate in along with visiting our manufacturing facilities, better acquaint myself with our day-to-day operation and people. My primary focus will be to further increase operating efficiencies, improve working capital and development growth strategies. Despite the current energy market condition, Chart has demonstrated that it is well positioned to weather these headwinds as a result of diverse industries we participate in. Our growth opportunities are exciting. And I will be continuing to work with our teams on improving operational efficiencies, to improve the short-term results, create new paths for growth and better position us when the energy industry recovers. With that, I would now open it up for questions. Jonathan, please provide instructions for the participants to be able to ask questions.

[Operator Instructions]. Our first question comes from the line of Eric Stein from Craig-Hallum. Your question please.

Good morning, everyone. Maybe we can just start, the quick ship business and the Lifecycle, the after-market business, this quarter and that’s a fairly new initiative, this quarter, a huge up-tick in the short lead-time business. I mean should we view this quarter as it was really just, I mean, a lot of it was timing and you had a lot of projects hit in this quarter or maybe just how much did that Lifecycle after-market business have an impact in this quarter?

The opportunities were significant in the past quarter. There is no question that our Lifecycle initiatives and closer contact with customers of current and long-term customers are enhanced, these number of orders we received. It’s too early to say that this is something that we should expect on a quarter-on-quarter basis but certainly it has encouraged us that this is a good avenue for us to pursue to try and make the earnings stream from our Energy & Chemicals business are predictable.

Got it. And just to confirm, in the new guided range, I mean, is it, even though it is becoming a more regular part of your business, is it fair to say that you are not - there is no quick-ship business in guidance for the remainder of the year?

It would be a minimal component.

Okay. Good. Maybe just sticking with that, I mean can you just talk about, I know the market is extremely competitive right now. Maybe just talk about why you’re winning that business, I mean, maybe your competitive advantage is that, I know you’ve got the furnace and you can make larger cores but maybe some of the other things that make you a leader in a way you’re winning that business?

We’ve gone through a period where both natural gas processing plants and petrochemical plants have been run at very high capacity utilization. And we’re finding that many of those customers are interested in after-market services, life predictive maintenance or scheduled replacement of heat-exchangers that have been run in high reserve. And that’s really the avenue that we’re pursuing. Something relatively new but it’s also something because of the development work we’ve done, embraced the market exchangers. We’re a very attractive partner for these customers in making sure they have reliable operating plans.

Okay, got it. Maybe last one from me, just on guidance. I know you talked about that Magnolia, you’ve taken that out. China is still tough. I mean are there any other factors, going into that guidance range, because I know it implies that you are a little more cautious on the second half relative to what you were earlier in the year.

I think we’ve got an overall, besides the areas we’ve highlighted as being problem areas more orders. The general industrial marketplace is not overly exciting. However we are forecasting improved results, continuing to improve results in both our D&S business particularly in North America and Europe, and to a lesser extent China, and continued improving performance in our BioMedical business. So, it’s not all gum and glue, there are some good positives there. But we do feel strongly that at this part of the cycle its wise not to point our guidance too high.

Got it. Okay. Thanks a lot.

Thank you. Our next question comes from the line of Rob Brown from Lake Street Capital. Your question please.

Good morning.

Hi Rob.

Hi. I think you mentioned the LNG business was in the D&S segment was actually up in the quarter. Could you give that number again in terms of that growth-rate? And then the second part of that is what sort of the opportunity that’s driving that and where are you at in the development of that opportunity?

Rob I think we’re saying the growth rate was up in LNG over the prior quarter last year, same quarter. LNG as a part of D&S revenues has represented about 25% of D&S orders of sales. And that has remained pretty consistent here this year. But that was relative to the prior year quarter.

In terms of how we’re driving the opportunity, as you know our D&S business produces equipment for the distribution and storage of cryogenic liquids including LNG. And as LNG liquid has become more readily available, the completion of significant new capacity, both in Australia and the U.S., we’ve seen LNG become more freely traded particularly in Europe where because of the tax regime on diesel fuel and also environmental considerations associated with marine market, people are going ahead and investing in downstream distribution capabilities for LNG. So, while having an excess supply currently and forecasted for the next couple of years of LNG liquid. First hurts our E&C business, it benefits the distribution and storage segment as these distribution application move forward. And the things that we’re seeing right now are remote power generation and marine applications that we’re putting in infrastructure. We expect that would continue to grow.

Okay, good, great color. And then on the China, how much of the backlog is from China at this point?

We believe the D&S backlog which is a number here - it’s roughly $40 million.

Okay, great.

Thank you. Our next question comes from the line of Nicholas Chen from Alembic Global. Your question please.

Congrats on a nice quarter and thanks for taking my question. First question, can you guys just opine a little bit on your capital allocation priorities at the moment?

Priority number one is, generate cash. But in terms of capital allocation, we look at being prepared to make acquisitions, number one. And number two, to invest in our existing manufacturing, within our existing manufacturing footprint to give us technological capabilities in order to significantly improve our service levels in order to produce costs.

That’s great, very helpful. And then just finally, if you could discuss any sort of additional cost reductions you might be looking at, whether in the form of headcounts or more of closing facilities?

There is potential savings from closing [indiscernible] that had started up during growth opportunities, there is some additional headcount depending on where we trend. But we feel that it’s not appropriate to take dramatic actions on headcount at this point because we want to make sure that we continue the opportunity and capabilities that we have developed. But we are working hard at new growth opportunities and new ways to expand into adjacent business.

That's great. And then just in terms of the guidance, E&C margins look pretty weak for the second half of 2016. When should we see more normalized margins there?

Good question.

You’ll see more normalized margins within a few months after we start to see the backlog in E&C growth.

That’s helpful. Thanks so much, guys. I’ll jump back into the queue.

Thank you. Our next question comes from the line of Chase Jacobson from William Blair. Your question please.

Hi, good morning, Bill, welcome.

Good morning.

So, I just wanted to follow-up on that last answer, actually. So you talked about E&C margin, maybe normalizing when orders start getting better and backlog returns. Clearly, it’s tough to predict. But I mean, your market commentary kind of suggests maybe there are some opportunities out there. So, do you expect that the backlog starts to turn in E&C over the next couple of quarters?

I think it will take, I don’t think there will be significant improvement in E&C backlog, in the remaining quarters of 2016 unless we get a big order, which really is a tongue-n-cheek way of saying I have no idea.

Okay. And then Ken, can you just parse out the $31 million, how much of it was short lead-time items, how much of it was the closeout fees and was any of that in your guidance? Because I mean, if it’s related to project timing of what you were working on, I would imagine you had visibility into that?

Yes, I would respond to that. Just that roughly two thirds of that perhaps a bit more, perhaps as much as 80% was related to short lead-time items. There was however some of those items that had been in our guidance that just would come during the second half. And while we were successful in responding very quickly and moving them into the second quarter, it led us to tamper our second half projections where we’re in today.

Okay. And the closeout fees, how does that - how is that accounted for, I mean, just more of a general question. Does that come through as revenue equal to gross profit?

Yes.

Okay. And then last question on the chemical side, nice to see you guys got another ethylene award. What’s the outlook there? I know there are some more ethylene plants being planned. And how much more competitive is the - I thought the U.S. ethylene market in this wave versus the wave we saw a few years ago?

Well, at the sort of good part, these 50% of the last wave we experienced increased competition from both Japanese and European suppliers, largely due to the strength of the dollar but also the fact there was a low level of petrochemical activity worldwide except the U.S. I would expect that in the next wave we’ll see the same level of competition that we saw in the second half of the previous wave.

Okay. Thank you.

Thank you. Our next question comes from the line of Pavel Mochanov from Raymond James. Your question please.

Hi, thanks for taking the question. Back to Magnolia, the previous timetable that you guys laid out was kind of an FID, by the end of the year. And I realize it’s getting delayed by, is there any sense of what the timetable for getting that project sanctioned might look like or is it completely hazy?

We have based our guidance and commentary on public comments by the folks at Magnolia. So, I would defer to their comments to get more insight.

Okay, fair enough. On your backlog, what percentage or dollar value, do you still have related to petro China in your current backlog figure?

I’d the petro China backlog is minimal at this point as far as China backlog. And I think we referenced it’s about $40 million of D&S China backlog today. I would say the petro China is a small piece of that.

Okay.

I can give the further color that petro China current orders in backlog would be recent orders, number one and covered by deposits; so that they are orders that they’ve been performing to schedule on.

Okay. Appreciate the responses, guys. Thanks.

Thank you.

[Operator Instructions]. Our next question comes from the line of Walter Liptak from Seaport Global. Your question please.

Hi, thanks. I just wanted to ask a follow-up on the guidance and the Lifecycle business. I wonder why there was not more visibility into the back half.

Our visibility in the E&C business has typically been based on percent of completion and accounting on large project which have been in backlog, there is lesser band. And over the past couple of quarters our earnings with E&C because of the lack of larger long-term projects make us more dependent for orders that are received and turned into shipment within the quarter. Currently the backlog is soft. We’re delivering second half of the year, hence our conservative approach. We are investing in our Lifecycle business and it has promised opportunities but we also think it’s too early to get overly excited about it or try and predict it with certainty.

Okay. That makes sense. The contract expiration fees then, are we through most of those through this year or are there more coming up in the back half?

Pretty well all accounted for.

Okay. Great, thank you

Thank you. And this does conclude the question-and-answer session of today’s program. I’d like to hand the program back to Sam Thomas for any further remarks.

Thank you, Jonathan. In conclusion I’d like to say that we’re obviously very pleased with the results for the quarter. And a large number of Chart employees were extraordinarily for us to deliver the results and cash flow that we’ve achieved. We’ve got some real bright spots in our business, the improving quality of earnings in BioMed and market growth there; a strong performance of Distribution & Storage in North America and Europe. The improvement in LNG downstream opportunities for distribution and storage are highlight. Stabilization of our business in China is also a highlight. But we have to contrast that with the fact that as oil prices take another life down and we’ve really had no increased clarity on what year we need new LNG export facilities, before orders move forward. It’s hard for us to get overly enthusiastic about forecasting profit growth going forward. Having said that, we are working hard at alternative ways to deliver growth in sale and earnings and remain very confident in the future. So, thank you very much for participating today. Goodbye.

Thank you, ladies and gentlemen for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.