Good morning, and welcome to the Chart Industries Incorporated 2019 Second Quarter Conference Call. All lines have been placed on mute to prevent background noise. After the speakers remarks, there will be a question-and-answer session. The Company's supplemental presentation was issued earlier this morning. If you have not received the release, you may access it by visiting charts website at www.chartindustries.com. A telephone replay of today's broadcast will be available following the conclusion of the call until Thursday, July 25, 2019. The replay information is contained in the Company's press release. Before we begin, the Company would like to remind you that statements made during this call that are not historical in fact are 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 SEC. The Company undertakes no obligation to update publicly or revise any forward-looking statements. I'll now like to turn the conference call over Jill Evanko; Chart Industry's CEO.

Thank you Daniel. Good morning, everyone, and thank you for joining us today to go through our second quarter 2019 results and full year outlook. As usual, we will walk through our supplemental presentation that was released this morning starting on Slide 2. Thematically, we are seeing significant demand for LNG, not just for big LNG, but also for the global infrastructure buildout. This is a unique opportunity for us as our Distribution and Storage and Energy and Chemicals products serve various global applications ranging from small and utility scale LNG facilities to big LNG export terminals to fueling stations to regasification plants. The scaling of this infrastructure build is happening quickly. In particular, as a number of countries importing LNG is rising. Currently at 42 countries, including Panama, Gibraltar and Bangladesh, the three newest additions in 2018. What is important about the increasing number of countries importing LNG is that all of these countries, regardless of size, will need infrastructure to utilize the gas. The need for alternative energy in conjunction with ramping regulatory requirements such as IMO 2020 are driving decisions toward natural gas. Also unique to us is our access to global geographic and specialty growth markets. The additions of VRV and Air-X-Changers, which closed on July 1, brought in our product offering across the gas to liquid cycle, as well as access to regions such as India with localized manufacturing capabilities. You'll hear more today about how we will leverage our footprint, increase international opportunities, inclusive of taking air-cooled heat exchangers outside of the United States. We will conclude today's call with a reiteration of our prior full year 2019 guidance inclusive of the impacts from our recent strategic financing in the addition of Air-X-Changers. We are able to reiterate our guidance because of the strengthened…

Thanks Jill. The margin expansion activities Jill described contributed to our net income for the second quarter of 2019 of $14.4 million, an increase over the first quarter 2019, net income of $0.9 million. Reported earnings per share $0.41 is an increase over the first quarter 2019 EPS of $0.03. Slide 13 shows adjusted EPS of $0.68 for the second quarter of 2019, which included $6.7 million of restructuring and transaction related cost, $0.8 million of VRV associated integration costs and dilution impact from convertible notes that are fully hedged. Second quarter 2019 adjusted EPS of $0.68, a 74% increase over the first quarter adjusted EPS of $0.39 and a 42% increase over the second quarter 2018 adjusted EPS of $0.48 as shown in the last row of the chart. Slide 14 is a recap of our reiterated guidance that Jill walked you through. In addition to the sales EPS tax rate guidance already shared, our capital expenditure guidance remains at $35 million to $40 million of anticipated spend. Year-to-date, we have spent $15.1 million. Finally, while we do not share a guide at the segment level, the following will give you a sense of the second half 2019 revenue and gross margin ranges by the four segments. We expect E&C FinFans gross margins as a percent of sales to be in the range of 26.5% to 28%, and the revenue of $270 million to $285 million. E&C Cryo revenue range is anticipated to be at $135 million to $150 million, with associated gross margin of 25% to 28%. D&S West revenue range of $245 million to $260 million, with expected gross margin as a percent of sales between 35% and 37%. And finally, D&S East gross margin as a percent of sales is expected to be 22% to 23.5% with associated second half revenue of $150 million to $165 million. I will now turn it over to Daniel to open it up for questions.

[Operator Instructions] Our first question comes from James West with Evercore ISI. Your line is now open.

And congrats on another solid beat, solid quarter. With all the moving parts that we've seen over the last 18 months or so, the acquisitions and divestitures, a lot of work on the margin side. Where do you think if I exclude big LNG, which can be episodic, as you know, where do you think you're kind of mid cycle earnings would shake out at this point? And I think it's about $4, but I'm curious to hear your thoughts on that?

I would agree with your estimate there. In mid cycle, you know, from our perspective, it is looking like on a seven-year cycle type of view and from our 2020 outlook, we maintain what we put out in early May that our updated outlook inclusive of big LNG projects is $8 to $8.75 of adjusted EPS in 2020. We also anticipate that 2020 is not the peak in this cycle.

And then just follow-up from me on the base business, actually the large scale LNG. Where is that -- what do you think your growth rate is now? It's not normalized growth rate post all the acquisitions, etcetera.

We forecast 7% to 9% organic growth on the base business pre any big LNG. That's our outlook for 2020. And there's a little bit of upside potential to that, but that's really available to us. And we have a good line of sight to achieving that into the next year.

And our next question comes from Martin Malloy with Johnson Rice. Your line is now open.

There's been some news recently about -- in some international markets about mid-scale LNG liquefaction projects in conjunction with bunkering opportunities related to marine. Can you maybe talk about how you're seeing that market develop and opportunities there for you? It seems like it's a combination of two markets that you're well suited for.

Yes, absolutely. That is correct. That is an opportunity that's recently been developing and I think folks mix between small scale and mid-scale, we tend to call these small scale and regasification terminals, but that's inclusive also of some of the marine bunkering applications. We are starting to see interest in the utilization of IPSMR Process technology for certain terminals overseas. And that's something that also has been leveraged through the work that's been done over the last three years with the international oil companies that I referenced with respect to their projects and their development, whether through joint ventures or investment in some of the smaller mid-scale terminals. So we see a lot of opportunity. Those opportunities are included in the small scale and regasification numbers that I provided on the call today.

And then on Harsco, you mentioned international markets for growth there. Could you maybe just talk about some of the potential applications that you're seeing for the equipment?

So this is an area that -- this is first time we're talking about revenue synergies from the AXC acquisition and there's a huge opportunity for us to take air coolers overseas. It's something that neither we Chart did nor Harsco AXC did previously. And that was really a function of the localized manufacturing needed in the region. Just not economical to ship these things from anywhere in North America to applications ranging from NGP to Petrochem to other large facility builds. And we're seeing a significant desire for air coolers in the Middle East, as well as starting to see that in Southeast Asia, in locations such as Thailand, Vietnam, Myanmar. So Southeast Asia and Middle East are really the two target geographies.

And our next question comes from Tom Hayes with Northcoast Research. Your line is now open.

Jill, maybe it's kind of on the manufacturing front as kind of maybe you just been talking about -- maybe a softening on the manufacturing front globally. Do you see any change in your demands for your industrial gas storage business?

We've not yet seen any negative impacts on that side of the house. We are monitoring it because it's certainly something that's a macroeconomic factor that could impact us. But I think the other thing to remember is our markets, while tied to industrial gas, also are very broad and have a wide set of applications. So the linkages to some of these industry tailwinds that we talked about today also help in terms of keeping industrial gas moving forward and as well as the fact that we are on long term agreements with the major industrial guys. That gives us a little bit better visibility than perhaps the general macroeconomic situation gives. So not yet, but it's something that we are watching.

And then, excuse me on a follow up, think about the longer term margin profile. Do you see that the gap between the gross margin on D&S West and D&S East closing over time?

We do see that gap closing over time. So D&S West was the frontrunner in our business purposely on the 80/20 actions. We have started 80/20 in D&S East, but there's also some just fundamental margin opportunities for us to get quickly out of the D&S East business. We would anticipate that D&S West that it's peak in the high 30%, possibly up to 40% gross margin as a percent of sales, whereas D&S East can inch up toward 30%. We don't see D&S East just given the China dynamic ever overlapping where D&S West gross margins are.

And our next question comes from Rob Brown with Lake Street Capital Markets. Your line is now open.

On the sourcing effort, you said you're running ahead of plan there. Could you just update on where you think that can go and how much more room you have there?

We've been extremely pleased with the results of the sourcing activities and a big part of that is credit to the Chart business service team inclusive of naming an individual to run the global sourcing project and all of the folks around the globe that have participated in the efforts. So, I want to make sure that I don't diminish what they've done, because they've really just hammered away the first half of this year. We see another $5 million of sourcing savings from the core business and then on top of that inclusive in our $20 million of AXC is $3 million to $4 million of sourcing.

And then moving to the fueling station -- LNG fueling station opportunity, what geographies do you see the most growth? And what's the size of that market opportunity in your view at this point?

So of the 28 in the first half of the year, 10 of those were in China and the other 18 were in Europe. I think Europe by far is our most early day’s significant grower between the two regions. LNG fueling station for us, depending on the size and the construct ranges between $650,000 and $1.01 million per station. The opportunity there -- we are quoting like crazyon these fueling stations in Europe. I'm not going to cite a number for you because I don't want everybody to get out over their skis. But suffice it to say that it is a very active market right now. And the infrastructure in Europe buildout is supporting at least that in the second half.

And our next question comes from Eric Stine with Craig-Hallum. Your line is now open.

So maybe a bigger picture in E&C. Obviously with IPSMR and IPSMR plus, you're in a good position or very good position this current cycle, but as you think long term, just curious, do you feel like the market fully realize the benefits of that versus other process technologies? And then you've got -- you mentioned the acceptance when the two global energy majors, just aside from what that means from an overall market perspective, should we view that as if those majors have projects, they are committed exclusively to go IPSMR or anything you can share that would be helpful?

And I do want to just restate what I said on the call that there's a third, that's highly interested in working with us as well. So I think that the process is starting to get -- it starting to get better known in a wider audience. Certainly the Fortis British Columbia facility and installation of IPSMR is somewhere that we can take future customers to see it working and running. So as it starts to take hold, we are seeing an acceleration of others interested in it. And as you're well aware, there's only a certain number of process technologies in the market. I do think that this bodes well for us in the next 10 years. So just like you're seeing right now, projects that are coming online from seven, eight, nine years ago this cycle, I think you'll start to see that happen again in the next cycle and that will have even more of a foothold for IPSMR. With respect to the second half of your question around, what does that mean with the IOCs. My hands are pretty tied in terms of what I can share publicly on our agreements and relationships with those IOCs. But we do work closely when they have a project or when they are invested in a project to move the process technology and get it involved there, but that's the extent of what I can tell you on that.

Maybe last from me, just on the vehicle tank side, I know you've got the two agreements in Europe and you're adding capacity there. I think in the last call or two, you've mentioned talking to more than a handful in terms of LNG interests, which I guess probably means you're talking to everyone. So I mean, just maybe any detail on how that's progressed in the market?

We haven't seen any meaningful progression with any of the new guys that we're talking to. So it's really been maintained with the two that we have a long-term agreement with. There's a third that we do sell some tanks to. What we're seeing now is the folks that we have the long-term agreements with are working very closely with us on that next gen that I spoke about, and that is ramping next three year volumes. So we'll see a significant uptick is our anticipation in 2020 and again in 2021 from those guys. I think it's going to be a slower roll for some of these other regions and/or customers that we're working to penetrate. We've been talking with them for a few years and it's - what has been evidenced in - certainly in the European market. Is it takes one mover and then some of the other folks follow and I think that's going to - be the case in places like India or places like Southeast Asia.

And our next question comes from Pavel Molchanov with Raymond James. Your line is now open.

I remember in 2013 and 2014, PetroChina was a huge customer, specifically for those natural gas fueling stations. And that business essentially went away for a period of time and you're indicating that it's coming back, including in China. I'm curious kind of what the dynamic there is that led to a revival of something that seems to have disappeared?

Well, it's certainly not coming back to any level close to 2013 or 2014. So I'll be perfectly crystal clear on that. 10 stations in the first half of the year is an increase over last year and that's a good sign. But we're talking about increasing of 10% versus what we saw in 2013/2014 of 30%. So we don't forecast, nor do we expect anything higher than kind of that 10% to 12% going forward. And with respect to the second piece of your question, we are seeing a little bit of movement in the market, and that's really what's been happening over the last five years to seven years. When the government is pushing for certain regulations and certain requirements, then you see the market move that way, but it's not been, nor will it be close to what it was back in the boom time of 2013 or 2014.

Okay. Can you [indiscernible] with the equity raise from a month ago, are you essentially where you want to be in terms of your leverage metrics?

Yes I think, post closure of the Harsco deal, right out the gates were at 3.3, which is a little north of our stated range of 2x to 3x, but we've got visibility that to delevering against that very quickly. And I think that - would that will continue to be the way that we think about the business. We want to work with a strong balance sheet and give ourselves the ability to take advantage of opportunities there in the market from time-to-time. So yeah, I think we're, where we want to be.

And our next question comes from Craig Shere with Tuohy Brothers. Your line is now open.

Look forward to seeing in two, three weeks here. I'm just trying to understand the 7% and 9% organic growth before big LNG. It seems like there's a little disconnect between that and some of the stair step opportunities and small scale LNG, maritime fuel, over-the-road of opportunities, food and beverage. Maybe you could elaborate on how much of a very doable target that is? And how much we could exceed it if some of these other opportunities really manifest as you've been kind of generally describing they could?

Hi, are you calling me a sandbagger?

Just wanted to get sense of what the potential upside might be?

Yes, so hopefully all of you have been around us for a period of time now. Understand that we like to guide to something that we have a high level of confidence in. And that's what we've done again in this 2020 outlook. So to your point Craig, there is upside to that certainly in the base business, as well as the specialty markets business. What we are waiting on in terms of increasing that any further is with respect to the timing around the new HLNG design for the vehicle tank that we talked about today. So that could be a significant lever for us. We do have a good line of sight on potential hydrogen projects that would increase this as well. And probably the other one I would talk to is around the fueling stations that there's high potential for more than what we've included here. And then later on, IMO and LNG by rail, you could be in a 11% to 13% growth very quickly here. But the 7% to 9%, we have tangibly actions and order books - in order bidding activity that give us high level confidence in that forecast.

Is it fair to say that that low double-digit growth could be a multi-year phenomenon?

Yes.

And one last question here kind of following up on Pavel [ph] balance sheet query given your low CapEx are ramping free cash flow. You're looking at material organic deleveraging as time goes on here. Assuming there's no more real big ticket M&A at some point, probably you're going to be in the fortuitous position of having, two and a half times leverage and still very robust free cash flow. What do you think about - as you envision a couple of years out, could you see potentially looking at share buybacks?

Yes I would say, we articulated our priorities for free cash flow. It's continue to invest in growth and productivity in the business and from a CapEx perspective, we sort of given you that, that guidance. And certainly in the near term we're going to focus on deleveraging the business, but to your point we should be able to achieve that relatively quickly. And, the other business ought to continue to generate very healthy free cash flows beyond that. But, as we sort of survey the field and continue to think about our potential growth initiatives. We have an active M&A pipeline that we evaluate. We still see opportunities in the marketplace and we would prioritize that at this point in time. Down the road never rule anything out [ph], but those are our priorities that we stated and I think we're going to stick to those for the foreseeable future.

And our next question comes from John Sturges with Oppenheimer and Company. Your line is now open.

Impressive margin improvement for the quarter so congrats on that. I had two questions. They're mostly top down policy, one is recent regulation reductions in the U.S. Does that have any impact on margin improvement or is that mostly internally generated? And the second one is has to do with U.S. tariff policy to reduce global tariffs. I'm curious as to how that may impact U.S. versus your global manufacturing sites in terms of where you might have shipped production?

So the margin expansion is nearly whole from internal activities, to the first half of your question. To the second half of your question, we are uniquely positioned and very pleased with the position of having the options to decide where we make what. We have a lot of flexibility in our lines in terms of being able to produce in various different geographic locations. And that is something that we constantly are looking at based on the economic and the trade situations that are happening. So we will take advantage of having the opportunity to manufacture closer to our customers and also think through the impacts from any tariffs on our products.

Thank you. If there are no more questions, I will now turn the call back over to Jill Evanko for some concluding remarks.

Thanks, Daniel. As you heard today, our unique position in serving liquefaction, storage and transport for global LNG infrastructure provides a strong and varied order book ahead. We continue to be bullish on our big LNG opportunities. And while we are carefully watching the macroeconomic, industrial and China trade war situation, we are pleased to reiterate our 2019 full year guidance. I want to thank our team members for executing the quarter results, continuing to drive order opportunities and completing the Air-X-Changers acquisitions. Last but certainly not least, an official warm Chart welcome to the Air-X-Changers team. Thank you all for your time today and goodbye.

Ladies and gentlemen, thank you for participating in today’s conference. This concludes today’s program and you may all disconnect. Everyone have a wonderful day.