Good morning, and welcome to Chart Industries Inc. 2018 Fourth Quarter and Full Year Conference Call. [Operator Instructions]. The company's supplemental presentation 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, February 21, 2019. The replay information is contained in the company's press release. Before we begin, the company would like to remind you that the 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. 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.www.sec.gov. The company undertakes no obligation to update publicly or revise any forward statements. I would now like to turn the conference call over to Jill Evanko, Chart Industries' CEO.

Thank you, sir. Happy Valentine's Day, and thank you for joining us to walk through our 2018 fourth quarter and full year results. 2018 was a year of strategic portfolio reallocation with the sale of the CAIRE oxygen-related business and the purchases of VRV and Skaff Cryogenics. Today you will hear about how the strategic reallocation of capital, combined with the strength of orders in 2018, tailwinds in our markets and focused efforts on margin expansion will deliver a strong 2019. Additionally, we are excited about the recent forward progress from both FERC and LNG terminal operators that continues to add confidence to our expectation for possible large LNG orders in 2019. Before we begin, I would like to introduce our new Chief Financial Officer, Jeff Lass, who joined Chart on January 14. We are pleased to have Jeff's strong operational background in addition to his financial expertise. Jeff, welcome aboard and please share a bit about your background.

Thank you, Jill. I'm very excited to join the Chart team. My background and experience in both general management and CFO roles spanning public and private equity companies will further support the company's vision around customer orientation, operational excellence and profitable growth. Most recently, I served as Vice President of Operations and Chief Financial Officer of Cognitive Scale. Prior to that, I was CFO of Dover Fueling Solutions., a business that was acquired from Riverstone Holdings and previously owned by General Electric in their oil and gas segment. Earlier in my career, I held leadership roles at Dresser, Applied Materials and Pricewaterhouse. I look forward to working closely with Jill and to building on our college football rivalry between her cherished Notre Dame Fighting Irish and my University of Texas Longhorns.

Well since I lost the ball game bet and Jeff is getting up to speed, I will now talk for the rest of this call. But you will get the chance to see and hear a lot from Jeff as he will be joining me on the road over the coming weeks and months. Returning to the 2018 results and outlook for 2019, I will now walk through the presentation released this morning. First, I would like to provide commentary around the orders and sales activity for the fourth quarter and full year 2018 as well as our views on our end markets. During the fourth quarter, we closed on the acquisition of VRV on November 15 and on the sales of CAIRE Medical on December 20. The sale of CAIRE generated a $34.3 million gain net of taxes. With these 2 strategic deals complete, our 2018 results are stated on a continuing operations basis, as shown on Slide 2. Orders in the fourth quarter and full year continue to reflect strength, driven by global activity related to the liquefaction, transport and storage of natural gas. Fourth quarter orders of $273.3 million included $11.2 million of orders from VRV during our 6-week period of ownership. This is a 10% increase over the fourth quarter of 2017 or 6% excluding VRV. All 3 segments' fourth quarter orders grew organically over the fourth quarter of 2017. Full year 2018 orders were $1.14 billion, a 33% increase over 2017 or 12% organically. The full year of 2018 set order records in many aspects of our business. Packaged Gas orders of $281 million were the highest in our history. Packaged Gas is a leading indicator for the Distribution & Storage business, which lends further confidence to your full year 2019 outlook. Additionally, 2018 was…

[Operator Instructions]. Our first comes from the line of Martin Malloy with Johnson Rice.

I was wondering if you could maybe take a moment and talk about your IPSMR technology and the interest that you're seeing and I'm not sure certification is the right word, but the process that it is going through perhaps with some customers to get certified.

Absolutely. So IPSMR, which was introduced about two years ago to the market, has had a lot of validation anywhere from our customers, meaning the EPCs to the operators themselves to major international oil and gas companies. The process itself, it is patented and trademarked. We have the process running in the Fortis Plant in British Columbia, which is where many of our customers go through or intend to go through to see the process running. It has been validated by more than 1 major international oil companies. We're not able to share the names of these companies, but that's both for their own potential use on projects as well as for us to utilize the study and validation to use with our customers. So we've gone through years of engineering work with both the EPCs and our end users, and it's being accepted. Right now the focus is on modular mid-scale, meaning 0.5 million to 1.5 million ton per annum trains. And we're obviously, continuing to refine that to make the process more efficient.

Okay. And then, appreciate your comments about the Brazed Aluminum Heat Exchanger capacity. Could you maybe talk about the capacity within D&S on some of the items that you mentioned that you could see pretty strong growth in, in terms of LNG trailers and storage units and where you are in terms of metafiction capacity and being able to meet that demand? And also, I'm sorry if I missed it, but the competitive landscape in India when you look at that market on the D&S side?

Certainly. So the first half of your question relates to the D&S capacity. With the addition of VRV, that has been a big help to us from a capacity standpoint. What it's allowed us to do in the first couple of months is really look at where we have overlapping products in D&S from the Chart side and on a legacy basis in the VRV side and looking at how we optimize where what is made. That's really between our European facilities in India, France and our legacy facility in the Czech Republic. So we're in very good shape from a capacity standpoint in Europe to serve those markets that are growing. As I commented on in the capital section, we are in the process right now of determining whether we're going to add an additional LNG vehicle tank line over -- in one of VRV facilities in Italy, which will allow us to continue to meet the growing -- high-level growing demand on over-the-road trucking. We expected to make that decision here in the coming weeks as we finalize some of the longer-term agreements with our customers. With respect to the Indian market, this is an interesting market. As I mentioned, when we closed on the VRV deal, this isn't a market that we could not penetrate very well organically. We had tried to do that before. So having manufacturing, in particular, in a location like Chennai is a big advantage for us to serve that market as LNG infrastructure is built out. The other primary D&S competitor, in India, is INOX. INOX recently filled CVA in the fourth quarter, which was their U.S. small manufacturing location in Texas. The reason for doing that was -- we understand was related to them focusing Indian manufacturing to serve the global market. So we do see competition there. It is a much less price-competitive market than China for us, and we see certain dynamics that we're able to serve not only the Indian market with our manufacturing there but also the Middle East and some parts of Europe so that we have some cost advantages coming out of owning that facility.

Our next question comes from the line of Eric Stine with Craig-Hallum.

So maybe just starting with VRV, and you talked about that initial award in India, and I think a few in the Middle East. But more broadly, and maybe more specific to Europe, just talk about some of the pull-through that you're seeing or starting to see whether that's in vehicle tanks or other parts of the business, and maybe how that's changed for pipeline.

Yes. So let me answer the question on the two sides of the business. So On the D&S side, where we have over -- have had overlapping products, traditionally, would go head-to-head with VRV, we've now seen more collaboration from the customers around enjoying a broader set of products. And as I mentioned, we had the first joint VRV in Chart award where there is certainty technologies that VRV had, or even just a preference from the customer. So we're really seeing a more active early-day cross-selling on the D&S side of things. That is something that we're spending a lot of time with our significant industrial gas customers to articulate what the broader offering we have from a technology perspective is. But it's being better received than I had anticipated on D&S side. Where we're seeing even more cross-selling and pull-through opportunities is in the energy side of the business. And just to give everybody a level set coming out of the close of the deal, when we purchased the business, we understood that this is a breech lock heat exchanger and shell and tube heat exchanger on E&C side of the business. But what we underestimated was the desire of the customers, in particular, in Europe to have pull-through on our air cooled heat exchangers and our fans, which we manufacture currently in the States. So early days, we've seen a high level of interest from the customers that historically would just buy the breach lock, shell and tube heat exchangers from VRV, now they're seeing that they can pull other energy products through. So we're seeing, I would say, millions of dollars of opportunities in the E&C side of the business. In particular, we have a pipeline right now, a quote activity, just for the fourth quarter of €32 million -- for the first quarter of the €32 million on the E&C side of the business. So we're pretty excited about the pull-through that I think was underestimated as we closed on that deal.

Got it. Maybe just turning to the LNG projects out there. Just, obviously, Tellurian, I mean they're sticking to their time line and as are the others. But just would love to get your thoughts on some of the things going on within FERC with the death of one of the commissioners and thoughts on does the government shutdown or anything like that impact the timing in anyway? Or do you kind of view that these are projects that, yes, they have to check a few boxes but they are committed to moving forward and pushing really hard?

Yes. So we are -- we have full confidence that these are projects that are committed to moving forward. Even with some of the noise around FERC and the government shutdown, you've seen a lot of FERC activity in the last 6 weeks in terms of moving projects ahead. We don't feel that there is a negative implication from a timing standpoint and even in certain cases, where there may have been some slippage by weeks, FERC recently said that they were expanding -- extending deadlines, et cetera. With respect to the composition of FERC itself, certainly awaiting the fifth member being appointed, that would be helpful, I think. But right now, our view is, it's early 2019, and we don't see a shift on the time frame of any of these projects that I spoke about on the call.

Got it. Okay. And then just last one for me. You mentioned Arctic LNG and the Golden Pass and the hope to have some content there. I don't know if you're able to, but any way to give a range of what that content might be, whether a dollar amount or percentage of that product -- or I'm sorry, those projects?

Certainly. So, across, I mentioned, Arctic, Mozambique, there's Golden Pass, Papua New Guinea, there is some Qatar Gas. Our scope on these types of projects mainly is with respect to the LNG pretreatment system. And what that means is cold boxes and Brazed Aluminum Heat Exchangers for those pretreatment applications. We see opportunities for us anywhere from, kind of, the $5 million range to the $30-plus million per project on this.

Our next question comes from the line of Rob Brown with Lake Street Capital Markets.

My question is on the heat exchanger market -- on the air cooled heat exchanger market. How has that been more recently with oil price volatility? And are you seeing any trend taking shape there?

Yes. So the air cooled heat exchanger market has actually been, in my mind, a little bit of an anomaly. So we had very strong strength really late 2017 through 2018. As you know, early 2018, we talked about the fact that I had built fairly conservative increases in that side of the business based on the strength coming out of '17, and we've done the same into 2019, but we have not seen the soften at all even in the last 4 weeks. I mentioned that $4.4 million air cooled order and some of these other petrochemical orders that we received in January, which have air cooled content. And so we're manufacturing at very high capacity right now in both Tulsa as well as our Beasley, Texas facility for air cooled. I am surprised, I will tell you that, that it's continued at this level of strength and we've built a small level of air cooled growth in our 2019 plan with the expectation that there could be some softening, but have not seen that yet. And just a little more color anecdotally around that. Traditionally, January would be our lowest order intake month on air cooled heat exchangers and we're pretty close to setting a record on -- from coming out of January.

And then in the -- shifting to European LNG tank decision about, I guess, what drives that decision? How much CapEx are you thinking about? And I guess what's the capacity, revenue capacity of that additional production line?

Yes. Okay, so you probably remember back in early 2018, we added the capacity in our Georgia facility for this same application. That facility can produce about $65 million of revenue. The line that we are contemplating putting into VRV, Italy would produce a similar level of revenue. And that should give you kind of a sense of what our expectation is if we are to get the longer-term agreements in place that I briefly commented on, on the call. So the decision point really stems from our confidence in understanding surrounding being a source provider for certain customers which we are very far along in conversation, and that's with respect to understanding threshold volumes, understanding firming up length of time of long-term agreements, and this is really with more than one customer in this space. We expect to be making that decision herein within the next two months. The level of capital to put this line into our VRV facility is between $5 million and $7 million.

Our next question comes from the line of Walter Liptak with Seaport Global.

I wanted to ask about the Slide 5 with the big LNG orders, the $400 million to $500 million. I wonder if you could tell us a percentage of total potential award, what that $400 million to $500 million is.

As I commented on the call that these 10 are illustrative of where we see and expect 2019 order activity to be. There are many more projects that we expect to have content on that aren't shown on this page. The $500 million right now from a realistic standpoint is about 1/3 of the potential orders for large LNG that we would have content on.

Okay. And with that 1/3, is it -- 1/3 -- I mean, as these orders come through, is it 2020, 2021 with the other 2/3 you would expect to come through? Or do you think 2019 is just the beginning and that we have a ramp-up in 2020 orders?

Correct. So I think 2019 will be a strong year given all the dynamics that we commented on, and I think there'll be a ramp-up in 2020, but I think those are the two years you'll see the order activities, and I can expect that to me kind of three year ramp, I think it's 2019 and 2020.

Okay, great. And why don't we go into your China comments? I think the EBITDA you talked about as being positive, I wonder if you could provide a little bit more detail about what's going on in China. I think you said this was the first year of EBITDA positive in 2018. How is that ramping in 2019 and any concerns just about U.S. trade and how that may impact 2019 EBITDA levels?

So 2018 was not only our first EBITDA 12-month positive year, it was also operating income positive, which is significant for us. That's the result of the activities on the restructuring side that we completed in 2017 and early 2018, which is primarily related to facility consolidation. We expect that trend to continue and increase year-over-year meaning that we'll have more operating income positive increases in 2019. I would comment in general, just as a statement that is cautiously optimistic, that when I say operating income positive, I'm not talking about tens of millions of dollars, I'm talking about hundreds of thousands of dollars, which were increasing to, in our minds, more like $1 million, $1 million and change. So that's the magnitude that I'm dealing with. On the orders side, Asia, last year, for total Chart, orders increased over 20% in the Asia region and sales increased about 17%. So we have a lot of activity happening in Asia in totality, which is not just China but also Southeast Asia. We expect to continue to see growth. We've built 10% growth into our sales forecast for China specifically, which is, I would say, conservative compared to what you hear people talk about in terms of LNG ramp and infrastructure build-out. Certainly, there is some risk given the geopolitical and macroeconomic situation that's happening right now. Yet, for us, it would have a very minimal impact. Big swing in our Chinese numbers does not dramatically change our results.

Our next question comes from the line of Tom Hayes with Northcoast Research.

I'm just wondering on the packaged gas side you said it was record year for you guys in 2018. I was just wondering is that reflective of the growth in the industrial market. And did you guys take some share there as well?

Yes, it's both. Generally, I would say, the industrial growth market and gas market drives activity in packaged gas. Some of the comments I made around the specialty markets that we're really intently focused on now is also gaining us a share meaning not necessarily share taken from a competitor but share in a space that we didn't have previously. She we're feeling very good about packaged gas as we head into 2019. And similar to my comments around the air cooled heat exchangers start of the year in January, we've had a very strong start on packaged gas as well as in the D&S side of business.

Great. And then just as a follow-up maybe, I know it's early in the program but maybe talk about any successes or contributions you've had from the global commercial sales team program?

Absolutely. I'm so thrilled with the global commercial team and the key accounts that they worked on, not only selfishly from a visibility standpoint, it gives me better access directly to our customers, but they have really coordinated well globally linking between the regional sales force and the global sales force. We're seeing a lot of the synergy activities that I commented on about VRV is coming through that global commercial team. There is a team member that works on strictly integration and synergy-related work with VRV, and that's generated some of these early wins that I talked about on the call. But not only that, I think that, what I'm hearing at least back from our customers is they appreciate having a direct global touch point with Chart, and they're learning more and more about the other side of the business that they previously were really strictly a D&S customer or strictly an E&C customer. Just anecdotally, there is a potential small-scale LNG project that I'm sure many of you are aware of in the Northeast, which would be a nice combination of Chart equipment both on the E&C side and the D&S side, from a heat exchanger standpoint all the way through trailers and trucking LNG from an offshore location -- an onshore location through the port. So we're excited about that, and that's a good example of some of the early wins that we're seeing from our commercial team.

Our next question comes from the line of Matt Trusz with G. Research.

So when we discussed the Asian re-gasification infrastructure build-out opportunity, can you discuss the general sizing of the revenue opportunity either per MTPA or per representative projects?

Yes. So on the re-gas side, our opportunity there really ranges between kind of $10 million and $40 million per project. Typically, it's on the lower end of things from a re-gas standpoint, and that's upfront processing equipment.

Great. And then on capital allocation, just as we head into this multiyear cycle of LNG projects and given the backdrop the big VRV deal in Hudson. What would be your appetite for also executing further significant acquisitions? If you could just your bandwidth as well as whether you are currently seeing anything that's interesting? And how close to core the future deal could potentially be?

Yes. So certainly, we are focused on continuing to integrate Hudson and integrating VRV. Yes, we do have -- still have an active pipeline. What we see in our pipeline right now, which is in core areas that we want to expand inorganically are deals that would have purchase prices from, kind of, $15 million to $50 million. And those are really surrounding the continued build-out of our service and our CAIRE footprint. We're very interested in building out the cryogenic valve and pump side of our technology offering. And then lastly, there is equipment content that we're interested in on this Marine opportunity, in particular, in Europe. So we have certain current tank offerings that we put to the LNG Marine space. And expanding that offering would get us a significant level of additional content, in particular, on the bunkering opportunities. So those are the three areas that we're actively pursuing in our pipeline.

Our next question comes from John Sturges with Oppenheimer & Co.

Jill, could you add some color to this? In 2014, you had a significant dollar headwind that developed. But since then, you've largely overcome that. Could you comment on how that was accomplished?

Yes. So coming out of 2012 and 2013, which is where we had a lot of the revenue from some of the Wheatstone project, some of the other PDH and GP projects, we really hit the down cycle. What we've done since then, has been focusing ourselves around some of the less cyclical side of the business, in particular, the addition of Hudson products brought us some offsets of the traditional cyclicality in our E&C business with 37% aftermarket content. The addition of VRV does a similar function for us. We've tried to really focus on some of the higher-growth bases on D&S. So I think one of the misnomers historically was that we're strictly an energy company, and we're an energy company as well as an industrial company and leveraging the industrial space and growing that beyond just being what I call kind of a sleepy 3% to 3.5% industrial grower is where we spend a lot of time focusing. And then, equally important, in my mind, has been to be thoughtful around our cost structure and set ourselves up to be able to grow at mid- to high single digits organically and not have to flex the cost structure as dramatically as it had been previously.

And then you also have a lean processes approach that you've put into place more recently?

We do. Yes, so we launched the 80/20 process which incorporates some lean principles as well as some statistical evaluation around what we sell and to whom we sell those products, what we make, how often we make them and really understanding the elements of how to focus on our products, how to focus on our customers. That's been successfully launched in our D&S West business, and we moved it to D&S East over the last 45 days. We're seeing a lot of activity coming out of that both from a customer satisfaction standpoint, working one voice of customer, but also from some of the operational activities. We also, in mid-2018, pulled five of our best guys out of our business units and put them together as a special operations task force to help us drive some of the efficiencies and take the activities in our plants. And that's been a very good success and those guys have done a real nice job of trying to infiltrate that throughout our culture.

This concludes today's question-and-answer session. I would now like to turn the call back over to Jill Evanko for any further remarks.

Thank you, Sarah. Thank you all for joining us today. Our strategic portfolio realignment in the second half of 2018, our strong orders and year-end backlog combined with the margin improvement activities underway support our full year 2019 guidance. We look forward to an active LNG project order year, and we'll provide updates as activity unfolds. Finally, a big thank you to our Chart team members, including our newest additions at VRV who showed their dedication to delivering profitable growth in 2018 and supported executing our portfolio changes. Thanks, everyone, for your time. Goodbye.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone, have a great day.