CHART INDUSTRIES INC - 10-K Annual Report

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Securities and Exchange Commission
Washington, D.C. 20549

FORM 10-K

(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended
December 31, 1997
OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the transition period
from to

Commission file number 1-11442

CHART INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

Delaware 34-1712937
- ------------------------------------------------ ------------------------------------------------
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER IDENTIFICATION NO.)
ORGANIZATION)

5885 Landerbrook Dr. #150, Mayfield Hts., Ohio 44124
- ------------------------------------------------ ------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

Registrant's telephone number, including area code: (440) 753-1490

Securities registered pursuant to Section 12(b) of the Act:

NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------

Common Stock, New York Stock Exchange
par value $.01 per share

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

As of January 30, 1998, the registrant had 16,118,489 shares of Common
Stock outstanding. As of that date, the aggregate market value of the voting
stock of the registrant held by non-affiliates was $229,770,071 (based upon the
closing price of $21.375 per share of Common Stock on the New York Stock
Exchange on January 30, 1998). For purposes of this calculation, the registrant
deems the 5,369,012 shares of Common Stock held by all of its Directors and
executive officers to be the shares of Common Stock held by affiliates.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive Proxy Statement to be used in
connection with its Annual Meeting of Stockholders to be held on April 30, 1998
are incorporated by reference into Part III of this Form 10-K.

Except as otherwise stated, the information contained in this Form 10-K is
as of December 31, 1997.
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PART I

ITEM 1. BUSINESS; ITEM 2. PROPERTIES; AND ITEM 3. LEGAL PROCEEDINGS.

THE COMPANY

Chart Industries, Inc. (the "Company" or "Chart") was organized in June
1992 as a Delaware corporation to serve as a holding company for the operations
described herein. As used herein, the terms "Company" or "Chart" mean Chart
Industries, Inc., its subsidiaries and its predecessors, unless the context
otherwise indicates. The Company's executive offices are located at 5885
Landerbrook Drive #150, Mayfield Heights, Ohio 44124, and its telephone number
is (440) 753-1490.

The Company's sales for the year ended December 31, 1997 reached $192.2
million, an increase of 29.5% over sales of $148.4 million in 1996. The
Company's net income in 1997 improved to $22.6 million from $15.0 million in
1996 (an increase of 50.6%). In July 1997, the Company acquired Cryenco
Sciences, Inc. ("Cryenco"); including Cryenco's results on a pro forma basis,
the Company's sales and net income for 1997 were $208.5 million and $22.3
million, respectively. Management believes that global expansion of the
industrial gas and hydrocarbon processing markets presents attractive
opportunities for growth. Management anticipates demand for the Company's
products in the industrial gas market to increase over the next several years,
driven principally by global industrialization, heightened environmental
standards and demands for increased purity of gas products and increased
efficiency in gas production. In the hydrocarbon processing market, management
expects continued strong domestic and international growth, stemming in part
from increased global demand for liquefied natural gas ("LNG") and ethylene.

BUSINESS

GENERAL

The Company is a leading supplier of standard and custom-built industrial
process equipment, primarily for cryogenic (low-temperature) applications. The
Company has developed a particular expertise in cryogenic systems and equipment,
which operate at low temperatures sometimes approaching absolute zero (0
degreesKelvin/ -273 degrees Centigrade/ -459 degrees Fahrenheit). The majority
of the Company's products, including heat exchangers, cold boxes, cryogenic
tanks and other cryogenic components, are used in the processing, liquefaction,
storage and transportation of gases and hydrocarbons. The Company also supplies
products for special applications, including high vacuum systems and specialty
stainless steel tubing.

MARKET OVERVIEW

The markets served by the Company's principal products are the industrial
gas market and hydrocarbon processing market. All categories of the Company's
cryogenic products, including heat exchangers, cold boxes, cryogenic tanks and
cryogenic components, serve both of these markets.

Management believes that the global expansion of the industrial gas and
hydrocarbon processing markets presents attractive opportunities for growth. To
date, the sources of the Company's international business principally have been
its large domestic-based customers who are aggressively expanding into
international markets, and large foreign-based companies with significant U.S.
operations. In 1997, approximately 25% of the Company's sales were destined for
use at job sites outside the United States. To position the Company to take
advantage of anticipated growth opportunities in the industrial gas and
hydrocarbon processing markets abroad, management recently has concentrated its
efforts on enhancing the Company's international presence.

The industrial gas market is the largest market served by the Company,
representing approximately 46% of its sales in 1997. The top world producers of
industrial gases have been among the Company's largest customers for each of the
last three years. Producers of industrial gases separate atmospheric air into
its component gases using cryogenic processes. The resultant liquid gases are
then stored and transported for ultimate use by a wide variety of customers in
the petrochemical, electronics, glass, paper, metals, food, fertilizer, welding,
enhanced oil recovery and medical industries. Industrial gas producers use heat
exchangers and cold boxes to produce liquid
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gases, and cryogenic tanks and cryogenic components, including pumps, valves and
piping, to store, transport and distribute liquid gases to end users.

Representing approximately 27% of the Company's sales in 1997, the
hydrocarbon processing market consists of petrochemical and natural gas
processors. Natural gas processing involves the separation and purification of
natural gas for the production of liquid gas end products such as methane (when
liquefied, LNG), ethane, propane and butane, and by-products such as helium,
which have numerous commercial and industrial applications. In the petrochemical
industry, cryogenic separation and purification processes are required to
produce ethylene (the basic building block of plastics), propylene and numerous
other primary hydrocarbons having industrial uses. Like the industrial gas
market, the hydrocarbon processing market uses all of the categories of the
Company's cryogenic products in the gas separation and purification processes
and the subsequent storage and distribution of liquid gases. Major customers for
the Company's products in the hydrocarbon processing markets are large
multinational firms in the oil and gas industry, and large engineering and
construction concerns.

In addition to the industrial gas and hydrocarbon processing markets, the
Company also serves certain special market niches, the two largest of which are
vacuum systems and specialty stainless steel tubing. Vacuum equipment is
supplied principally to the satellite testing market, which has developed
worldwide. Vacuum equipment also is supplied to observatories for telescope
mirror coating. Under the Company's largest single contract to date, the Company
supplies sophisticated vacuum equipment to the LIGO project; a government funded
gravitational observatory research project. The Company anticipates continued
growth in its share of the market for large sophisticated vacuum systems. The
Company's specialty stainless steel tubing is supplied principally to
distributors who in turn sell to customers having immediate or short lead time
needs. As the Company's stainless steel tubing is intended to meet short
delivery schedules, it commands high margins in this spot-market business.

PRODUCTS

The Company's principal products include the following:

Heat Exchangers. The Company is the leading designer and manufacturer of
cryogenic heat exchangers. Using technology pioneered by the Company, heat
exchangers are incorporated into systems such as cold boxes to facilitate the
progressive cooling and liquefaction of air or hydrocarbon mixtures for the
subsequent recovery or purification of component gases. In the industrial gas
market, heat exchangers are used to obtain high purity atmospheric gases, such
as oxygen, nitrogen, and argon, which have numerous diverse industrial
applications. In hydrocarbon processing industries, heat exchangers allow
producers to obtain both purified forms of hydrocarbons and a variety of gas
by-products, such as methane, ethane, propane and ethylene, which are
commercially marketable for various industrial or residential uses. Heat
exchangers are customized to the customer's order and range in price from
$30,000 for a relatively simple unit to as high as $10 million for a major
project.

Management anticipates continued strong demand for its heat exchangers,
resulting substantially from increased activity in the petrochemical and liquid
natural gas segments of the hydrocarbon processing market. In particular,
management believes that continuing efforts by less developed countries to
broaden their industrial base present a promising source of demand for the
Company's heat exchangers. Demand for heat exchangers in developed countries is
expected to continue as firms upgrade their facilities for greater efficiency
and regulatory compliance. To ensure adequate capacity for anticipated growth in
demand in heat exchangers, a major expansion of the Company's facilities was
recently completed.

The Company's principal competitors for heat exchangers are Linde,
Sumitomo, IMI, Kobe and Nordon. Management believes that the Company is the only
producer of large brazed aluminum heat exchangers in the United States, and has
the leading market share in the global market for heat exchangers. Major
customers for the Company's heat exchangers in the industrial gas market include
Air Liquide, Air Products, BOC, MG Industries and Praxair, and in the
hydrocarbon processing market producers including AMOCO, ARCO, EXXON and
contractors including ABB Randall, Bechtel, and M.W. Kellogg.

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Cold Boxes. The Company is a leading designer and fabricator of cold
boxes. Cold boxes are highly engineered systems used to reduce significantly the
temperature of gas mixtures to the point where component gases liquefy and can
be separated and purified for further use in multiple industrial, scientific and
commercial applications. In the industrial gas market, cold boxes are used to
separate air into its major atmospheric components, including nitrogen, oxygen
and argon, used in a diverse range of applications such as the quick-freezing of
food, wastewater treatment and industrial welding. In the hydrocarbon processing
market, the Company's cold box systems are used in natural gas processing and in
the petrochemical industry. The construction of a cold box generally consists of
one or more heat exchangers and other equipment packaged in a "box" consisting
of metal framing and a complex system of piping and valves. Cold boxes, which
are designed and fabricated to order, sell in the approximate price range of
$500,000 to $10 million, with the majority of cold boxes priced between $1
million and $2 million.

The Company has a number of competitors for fabrication of cold boxes,
including E.S. Fox, Ivor J. Lee, McShane and NAPTech. In addition, the Company's
customers may decide to fabricate cold boxes themselves, purchasing the majority
of the components from third parties including the Company. Principal customers
for the Company's cold boxes include Air Liquide, ABB Randall, AMOCO, Bechtel,
BOC, MG Industries, M.W. Kellogg, Mesa Petroleum and Praxair.

Cryogenic Storage Tanks. The Company is a leading supplier of cryogenic
tanks, trailers, intermodal containers and railcars. Using sophisticated vacuum
insulation systems placed between inner and outer tanks, these tanks are able to
store and transport liquefied industrial gases and hydrocarbon gases at
temperatures nearing absolute zero. The Company has experienced substantial
growth in its storage tank sales as the demand for liquefied industrial gases
and liquefied hydrocarbon gases has increased. Customers for the Company's
cryogenic storage tanks include industrial gas producers, chemical producers,
and manufacturers of electrical components and businesses in the oil and natural
gas industry. Prices for the Company's cryogenic storage tanks range from
$25,000 to $500,000. Principal customers for the Company's cryogenic storage
tanks are AGA, Air Liquide, Air Products, BOC, Jack B. Kelly and Praxair. The
Company competes chiefly with MVE and Harsco for cryogenic storage tank
customers.

Cryogenic Components. The Company's line of cryogenic components,
including high-pressure cryogenic pumps, valves, vacuum jacketed piping systems
and specialty components, are recognized in the market for their reliability,
quality and performance. These products are sold to the Company's heat exchanger
and cold box customers in the industrial gas and hydrocarbon processing
industries, as well as to a diverse group of customers in those and other
industries. The Company competes with a number of other suppliers of cryogenic
components, including MVE, Cryogenic Industries, CCI and Acme Cryogenics.

Special Products. The Company designs and manufactures thermal vacuum
systems marketed to a customer base that includes the aerospace industry,
government agencies, universities and national research facilities. The Company
is a leading domestic supplier of space simulation systems used to test
satellites and related components. The Company also manufactures large vacuum
chambers for telescope mirror aluminizing; a process in which aluminum is
vaporized to coat the surface of a large telescope mirror to restore its
reflectivity. Management believes that the Company, as a pioneer in the
development of this technology, has supplied the majority of these systems
worldwide. The Company's major competitors in the market for thermal vacuum
products and systems for aerospace and research applications include Tenney
Vacuum and Bemco.

The Company's experience and technological advancements in the high-vacuum
area have resulted in its involvement, commencing in 1995, in equipping the
Laser Interferometer Gravitational-Wave Observatory ("LIGO") project, a
scientific research project sponsored by the National Science Foundation and
jointly managed by the Massachusetts Institute of Technology and the California
Institute of Technology. The observatories will be dedicated to the detection
and measurement of cosmic gravitational waves and the harnessing of these waves
for scientific research. The Company has a three-year contract under which it
supplies all of the required LIGO vacuum equipment, including vacuum chambers,
large pipe spools, valves, vacuum pumps, controllers and modular clean rooms.
Management believes that expertise in the field of high vacuum technology
developed by the Company through its involvement in the LIGO project may have a
number of new commercial applications.

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The Company produces small diameter stainless steel tubing for sale to
distributors to satisfy their customers' requirements for quick delivery. The
Company's manufacturing strategy is to focus on custom sizes and smaller
production runs, which management believes gives the Company a competitive
advantage in providing a superior quality product while meeting customer demands
for dependable, fast delivery. With its production and marketing efforts
directed principally to customers relying on prompt delivery, the Company is
able to compete primarily on the basis of service rather than price. Numerous
manufacturers of stainless steel tubing are able to compete with the Company in
this market.

ENGINEERING AND PRODUCT DEVELOPMENT

The Company's engineering and product development activities are primarily
associated with assisting in the design of products or modifications to execute
specific customer orders. The Company's engineering, technical and marketing
employees actively assist customers in specifying their needs and in determining
appropriate products to meet those needs. For example, the Company's product
development activities led to the introduction of the Core-in-Kettle(R) heat
exchanger in 1990, which has met with widespread customer acceptance by the
hydrocarbon processing market. The Company also has invested in the development
of new heat exchanger fins to enhance the performance of its products. Portions
of the Company's engineering expenditures typically are charged to customers
either as a separate item or as a part of product cost. The Company does not
devote a material amount of resources to unfunded research and development
activities.

COMPETITION

Management believes the Company can compete effectively for new projects
around the world and that it is a leading competitor in its markets. Competition
is based primarily on performance and the ability to provide the design,
engineering, fabrication and manufacturing capabilities required to complete
projects in a timely and cost-efficient manner. Contracts are usually awarded on
a competitive bid basis. Quality, technical expertise and timeliness of
completion are the principal competitive factors within the industry. Price and
terms of sale are also important competitive factors but only after technical
expertise and ability to perform has been established. Because reliable market
share data is not available, it is difficult to estimate the Company's exact
position in its markets, although the Company believes it ranks among the
leaders in its markets.

MARKETING

The Company's principal operating units currently market products and
services in North America primarily through 37 direct sales personnel, and
supplement these direct sales through 45 independent sales representatives and
distributors. The technical and custom design nature of the Company's products
requires a professional, highly trained sales force. Each salesperson is
expected to develop a highly specialized knowledge of one product or group of
products and to sell that product or group of products in all markets in which
the product is used, rather than to sell many products to a single market.
Substantially all of the Company's sales personnel have engineering or technical
experience.

The Company uses independent sales representatives nearly exclusively to
conduct its sales in the foreign countries which the Company serves. These
independent sales representatives supplement the Company's direct sales force in
dealing with language and cultural matters. The Company's domestic and foreign
independent sales representatives earn commission on sales, which vary by
product type.

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ORDERS AND BACKLOG

The Company considers orders to be those for which the Company has received
a signed purchase order or other written contract from the customer. Such orders
are included in backlog until recognized as revenue or cancelled. The table
below sets forth orders and backlog for the periods presented.

DECEMBER 31,
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1997 1996 1995
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(IN THOUSANDS)

ORDERS
Industrial Gas Equipment............................... $ 88,489 $ 77,623 $ 72,483
Hydrocarbon Processing Equipment....................... 56,240 54,173 30,212
Special Products....................................... 35,361 33,895 66,948
-------- -------- --------
Total........................................ $180,090 $165,691 $169,643
======== ======== ========
BACKLOG
Industrial Gas Equipment............................... $ 59,508 $ 48,134 $ 44,456
Hydrocarbon Processing Equipment....................... 49,161 45,200 21,424
Special Products....................................... 18,812 34,944 45,107
-------- -------- --------
Total........................................ $127,481 $128,278 $110,987
======== ======== ========

The Company has experienced growth in orders and backlog since 1994 in the
industrial gas market. The acquisition of Cryenco should further increase
orders, particularly for this market. Hydrocarbon processing market orders have
been steady for the last 18 months at approximately a $55 million annualized
rate, resulting in increased backlog because of the long lead-time for the
typical hydrocarbon project. Special product orders in 1995 include the $39
million LIGO project which is a three-year project running through 1998. The
reduction in backlog in special products is primarily the result of progress in
completing this order.

Approximately 94% of the December 31, 1997 backlog is scheduled to be
recognized as sales during 1998, and the remainder is scheduled to be recognized
as sales in 1999. The Company's backlog fluctuates from time to time and the
amounts set forth above are not necessarily indicative of future backlog levels
or the rate at which they will be recognized as sales.

CUSTOMERS

Ten customers accounted for 55% of consolidated sales in 1997. The
Company's sales to particular customers fluctuate from period to period.
Approximately 25% of sales are destined to be used in foreign countries. To
reduce credit risk for both foreign and domestic sales the Company requires
customer advances, letters of credit and other such guarantees of payment.
Management believes the Company's relationships with its customers are good.

PATENTS AND TRADEMARKS

Although the Company has a number of patents, trademarks and licenses
related to its business, no one of them or related group of them is considered
by the Company to be of such importance that its expiration or termination would
have a material adverse effect on the Company's business. In general, the
Company depends upon technological capabilities, manufacturing quality control
and application of know-how, rather than patents or other proprietary rights in
the conduct of its business.

The Company holds a group of patents for its Ryan/Holmes technology, which
is used primarily in treating associated gases produced from tertiary oil
recovery projects. In addition to fabricating recovery plants on a turnkey basis
for customers, the Company also grants licenses under this technology to
customers for use in their own construction and operation of such facilities.
The revenues received by the Company attributable to this technology are not
material.

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The Company has a licensing agreement with Praxair under which the Company
licenses technology related to the design of nitrogen rejection units, a type of
cold box used in the natural gas processing industry to purify methane by the
removal of nitrogen. The agreement provides for the joint marketing by the
Company and Praxair of products using the licensed technology, prohibits the
sale of such products to certain competitors of Praxair and may be terminated by
either party upon not less than six months' notice to the other party.

RAW MATERIALS AND SUPPLIERS

The Company manufactures most of the products it sells. The raw materials
used in manufacturing include aluminum fin stock, brazing sheets, bars, plate
and piping, stainless steel hollows, strip, heads, plate and piping, carbon
steel heads and plate, and 9% nickel steel heads and plate. Most raw materials
are available from multiple sources of supply.

Commodity metals used by the Company have experienced fluctuations in
price. The Company has generally been able to recover the costs of such price
increases through its contracts with customers. The Company foresees no acute
shortages of any raw materials, which would have a material adverse effect on
its operations.

EMPLOYEES

As of December 31, 1997, the Company had approximately 1,290 employees,
including approximately 340 salaried, 390 union hourly and 560 non-union hourly
employees. The salaried employees included approximately 130 engineers and
draft-persons and 210 other professional, technical and clerical personnel.

The Company is a party to two collective bargaining agreements through its
operating subsidiaries. The agreement of ALTEC International Limited Partnership
("ALTEC") with the International Association of Machinists and Aerospace Workers
covering 296 employees expired February 7, 1998. The Company has negotiated a
new three-year contract on a basis consistent with prior agreements. Process
Engineering's agreement with the International Brotherhood of Boilermakers, Iron
Ship Builders, Blacksmiths, Forgers and Helpers covering 91 employees expires
August 27, 1999. Since the acquisition of each of its operating units, the
Company has not had any work stoppages or strikes. The Company believes its
employee relations are good.

FACILITIES

The Company has nine principal manufacturing locations. The Company
occupies a total of approximately 900,000 square feet, with the majority,
approximately 800,000 square feet, devoted to manufacturing, assembly and
storage. Of the approximately 900,000 square feet occupied, approximately
500,000 square feet are owned and 400,000 square feet are occupied under
operating leases. The Company considers its manufacturing facilities sufficient
to meet its current and planned operational needs. The Company leases
approximately 4,500 square feet of space for its executive offices in Mayfield
Heights, Ohio.

GOVERNMENT CONTRACTS

In 1997, approximately 11.8% of the Company's revenues were derived from
contracts or subcontracts with, or funded by, the United States government,
mostly related to LIGO. These contracts and subcontracts contain standard
provisions permitting the government to terminate them at its option, without
cause. In the event of such termination, the Company is entitled to receive
reimbursement on the basis of work completed (costs incurred plus a reasonable
profit). In addition, these contracts and subcontracts are subject to
renegotiations of profits. The Company has no knowledge of any pending or
threatened renegotiations or termination of any material government contract or
subcontract.

ENVIRONMENTAL MATTERS

The Company's operations involve and have involved the handling and use of
substances, such as various cleaning fluids used to remove grease from metal,
that are subject to federal, state and local environmental laws and regulations
that impose limitations on the discharge of pollutants into the soil, air and
water, and establish

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standards for their storage and disposal. The Company monitors and reviews its
procedures and policies for compliance with environmental laws. Company
management is familiar with these regulations, and supports an ongoing capital
investment program to maintain the Company's adherence to required standards.

As part of its ongoing environmental compliance and monitoring programs,
the Company is voluntarily developing work plans for remediation of
environmental conditions involving certain of its operating facilities. Based
upon the Company's study of the known conditions and its prior experience in
investigating and correcting environmental conditions, the Company estimates
that the potential costs of these site remediation efforts will not have a
material adverse effect on the Company's financial position or liquidity.
Approximately $2.2 million is recorded at December 31, 1997 as reserves for
known environmental matters. These expenditures are expected to be made mostly
in the next 18 to 24 months, if the necessary regulatory agency approvals of the
Company's work plans are obtained. Although the Company believes it has
adequately provided for the cost of all known environmental conditions, the
applicable regulatory agencies could insist upon different and more costly
remediative measures than those the Company believes are adequate or required by
existing law. Except for its continuing remediative efforts described above, the
Company believes that it is currently in substantial compliance with all known
material and applicable environmental regulations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

EXECUTIVE OFFICERS OF THE REGISTRANT

Certain information as of December 31, 1997, regarding each of the
Company's executive officers is set forth below:

NAME AGE POSITION
---- --- --------

Arthur S. Holmes............. 56 Chairman, Chief Executive Officer and a Director
James R. Sadowski............ 56 President and Chief Operating Officer
Don A. Baines................ 54 Chief Financial Officer, Treasurer and a Director

ARTHUR S. HOLMES has been Chairman and Chief Executive Officer of the
Company since its formation in June 1992, and was President until December 1993.
He also has been President and the principal owner of Holmes Investment
Services, Inc. ("HIS"), a management consulting firm, since 1989. Mr. Holmes is
currently the Chairman and Chief Executive Officer of ALTEC, and served as
President of ALTEC from 1985 through 1989. From 1978 through 1985, he served in
a variety of management capacities for Koch Process Systems, Inc., the
predecessor of Process Systems International, Inc. ("PSI"), most recently as
Vice President-Manager of the Gas Processing Division. Mr. Holmes is the
co-inventor of the Company's patented Ryan/Holmes technology. See "Business --
Patents and Trademarks". Mr. Holmes holds a BS and an MS in Chemical Engineering
from the Pennsylvania State University and an MBA from Northeastern University.

JAMES R. SADOWSKI has been President and Chief Operating Officer of the
Company since December 1993. Prior to joining the Company, Mr. Sadowski served
as Group Vice President of Parker Hannifin Corporation's Bertea Aerospace Group
("Bertea") from 1991 to 1993. Prior to his service at Bertea he served in
various managerial capacities at Parker Hannifin Corporation and TRW Inc. Mr.
Sadowski holds a BS in Engineering/Science from Case Institute of Technology and
an MS degree from the same institution in Mechanical Engineering.

DON A. BAINES has been Chief Financial Officer of ALTEC since 1986 and has
been the Chief Financial Officer and Treasurer of the Company since its
formation in June 1992. He also has served as Chief Financial Officer for HIS
since 1989. From 1986 through 1989, Mr. Baines served as Vice President, Manager
of Finance for ALTEC. From 1976 through 1985, Mr. Baines served in a variety of
management capacities, most recently Controller, in the Process/Transport
Division of the Trane Company, which included the predecessor of ALTEC. Mr.
Baines is a Certified Public Accountant and holds a BBA in Accounting from St.
Edward's University, Austin, Texas.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Quarterly Stock Prices and Dividends

QUARTER HIGH LOW DIVIDEND
- ------- ---- --- --------

1996
1st 7.000 4.500 .047
2nd 11.250 6.583 .047
3rd 12.333 8.333 .047
4th 11.917 10.083 .060

QUARTER HIGH LOW DIVIDEND
- ------- ---- --- --------

1997
1st 17.083 11.333 .060
2nd 18.417 13.250 .060
3rd 21.500 17.375 .060
4th 26.063 20.125 .075

Chart Industries Common Stock is traded on the New York Stock Exchange
under the symbol "CTI". The information in the table above has been adjusted to
reflect the three-for-two split of the Common Stock effected as a 50% share
dividend in June 1997.

Shareholders of record on January 31, 1998 numbered 1,104. The Company
estimates that an additional 3,500 shareholders own stock held for their
accounts at brokerage firms and financial institutions.

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ITEM 6. SELECTED FINANCIAL DATA

SELECTED FINANCIAL DATA

(Dollars in thousands, except per share amounts)

YEARS ENDED DECEMBER 31
--------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- ------- -------

INCOME STATEMENT DATA:
Sales..................................... $192,249 $148,400 $112,479 $84,258 $83,734
Gross profit.............................. 61,240 45,002 30,775 15,808 17,779
Selling, general and administrative....... 26,206 21,745 18,108 15,020 15,865
Restructuring charge...................... 2,151
Operating income (loss)................... 35,034 23,257 12,667 (1,363) 1,914
Net interest expense...................... 350 623 1,858 996 602
Income tax expense (benefit).............. 12,057 7,605 3,746 (896) 512
Net income (loss)......................... 22,627 15,029 7,063 (1,463) 800
EARNINGS PER COMMON SHARE:
Net income (loss)(1)...................... $ 1.52 $ 1.01 $ .47 ($ .10) $ .05
Net income (loss) -- assuming
dilution(1)............................. $ 1.48 $ .99 $ .47 ($ .10) $ .05
OTHER FINANCIAL DATA:
Income from continuing operations before
income taxes, depreciation and
amortization............................ $ 38,195 $ 25,342 $ 13,551 $ 339 $ 3,385
Depreciation and amortization............. 3,511 2,708 2,742 2,698 2,073
Dividends................................. 3,858 3,002 2,787 2,764 2,793
Dividends per share(1).................... $ .255 $ .20 $ .187 $ .187 $ .187
BALANCE SHEET DATA:
Cash, cash equivalents and restricted
cash.................................... $ 22,095 $ 9,408 $ 229 $ 206 $ 704
Working capital........................... 37,126 12,647 17,750 15,483 19,847
Total assets.............................. 128,919 81,196 66,506 54,881 48,003
Total debt................................ 4,753 4,830 14,573 18,080 14,810
Long-term debt, less current portion...... 4,195 4,469 12,566 16,073 13,000
Shareholders' equity...................... 76,457 28,096 18,433 14,364 18,418

- ---------------

(1) The per-share data have been adjusted to reflect the three-for-two split of
the Common Stock effected as a 50% share dividend in June 1997.

9
11

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

GENERAL

In 1997, Chart Industries experienced a 50.6 percent increase in net income
over the prior year. A large portion of this increase can be attributed to a
strong demand for industrial gas and hydrocarbon processing equipment, including
heat exchangers, cold boxes, cryogenic tanks and assorted system components.
Also contributing to the increase in net income in 1997 was the LIGO project,
the Company's largest contract to date, on which the Company's progress at the
end of 1997 was about two-thirds complete.

The Company has seen a tremendous increase in the demand for both
industrial gas and hydrocarbon processing equipment through its order bookings
in the last two years. New orders in these areas were $144.7 million in 1997
compared to $131.8 million and $102.7 million in 1996 and 1995, respectively.
Backlog in these two areas at December 31, 1997, totaled $108.7 million and the
Company's total consolidated backlog was $127.5 million.

QUARTERLY BACKLOG

12/31/92 47.3
3/31/93 39.1
6/30/93 35.8
9/30/93 36.1
12/31/93 41.1
3/31/94 38.9
6/30/94 44.3
9/30/94 48.5
12/31/94 53.8
3/31/95 58.2
6/30/95 57.3
9/30/95 97.7
12/31/95 111.0
3/31/96 112.9
6/30/96 124.4
9/30/96 125.7
12/31/96 128.1
3/31/97 117.7
6/30/97 126.6
9/30/97 125.6
12/31/97 127.5

OPERATING RESULTS

The following table sets forth, for the periods indicated, the percentage
relationship to sales of the Company each line item represents.

YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
----- ----- -----

Sales....................................................... 100.0% 100.0% 100.0%
Cost of products sold....................................... 68.1 69.7 72.6
Gross profit................................................ 31.9 30.3 27.4
Selling, general and administrative expense................. 13.6 14.7 16.1
Operating income............................................ 18.3 15.6 11.3
Interest expense, net....................................... .2 .4 1.7
Income taxes................................................ 6.3 5.1 3.3
Net income.................................................. 11.8 10.1 6.3

10
12

YEAR ENDED DECEMBER 31, 1997, 1996, AND 1995
MARKET SECTOR ANALYSIS

YEARS ENDED DECEMBER 31,
-----------------------------------
1997 1996 1995
--------- --------- ---------
(IN THOUSANDS, EXCEPT PERCENTAGES)

SALES
Industrial Gas Equipment................................. $ 88,077 $ 73,945 $ 50,061
Hydrocarbon Processing Equipment......................... 52,628 30,397 23,914
Special Products......................................... 51,544 44,058 38,504
-------- -------- --------
Total............................................ $192,249 $148,400 $112,479
======== ======== ========
GROSS PROFIT
Industrial Gas Equipment................................. $ 26,702 $ 22,531 $ 12,301
Hydrocarbon Processing Equipment......................... 20,763 9,976 7,882
Special Products......................................... 13,775 12,495 10,592
-------- -------- --------
Total............................................ $ 61,240 $ 45,002 $ 30,775
======== ======== ========
GROSS PROFIT MARGIN
Industrial Gas Equipment................................. 30.3% 30.5% 24.6%
Hydrocarbon Processing Equipment......................... 39.5% 32.8% 33.0%
Special Products......................................... 26.7% 28.4% 27.5%
Total............................................ 31.9% 30.3% 27.4%

YEARS ENDED DECEMBER 31, 1997 AND 1996

Sales for 1997 were $192.2 million, an increase of $43.8 million or 29.5
percent over 1996. By far, the largest increase in sales occurred in the
hydrocarbon processing equipment market, with 1997 sales exceeding 1996 sales by
$22.2 million, of which $14.8 million was attributable to increased sales of
brazed aluminum heat exchangers and the remainder to increased sales of cold box
assemblies.

Sales in the industrial gas equipment area increased $14.1 million over the
prior year, almost entirely in cryogenic tanks and trailers, primarily due to
the acquisition of Cryenco.

Special products sales also increased by $7.5 million in 1997. Much of the
sales improvement in this market is the result of vacuum equipment being
supplied to the LIGO project, the sales of which totaled approximately $17.8
million during 1997, as well as increased sales of cryogenic components.

Gross profit for 1997 increased $16.2 million or 36.1 percent from 1996
levels. The gross margin increased from 30.3 percent in 1996 to 31.9 percent in
1997. As in sales, a large portion of the improvement in both gross profit and
in gross margin came from the hydrocarbon processing equipment market. The most
dramatic improvement came as a result of increased volume and price in the
brazed aluminum heat exchanger market. However, the cold box engineering and
fabrication market also responded with better productivity and volume.

Selling, general and administrative (SG&A) expense totaled $26.2 million
for 1997, an increase of $4.5 million from 1996. However, as a percentage of
sales, SG&A expense decreased from 14.7 percent in 1996 to 13.6 percent in 1997.
This improvement is the result of increasing volume relative to the fixed
overhead. The $4.5 million increase in SG&A expense is largely driven by the
variable expenses of profit sharing, management incentive compensation and
selling commissions, all of which are closely tied to profitability and sales
levels. In addition, the acquisition of Cryenco added $1.4 million of SG&A
expense during the five months its results were included in the Company's
results.

Net interest expense declined during 1997. The 1997 expense is related both
to the debt resulting from the acquisition of Cryenco, which was outstanding for
approximately one quarter before the proceeds from the stock offering were used
to pay down all borrowings under the credit facility and the IRB which remained
outstanding throughout the year.

11
13

As a result of the continued growth of the Company's brazed aluminum heat
exchanger operations and the addition of Cryenco, total employment has increased
39.5 percent to 1,290 employees. The Company believes that this increase is
appropriately commensurate with the Company's annual revenue growth of 30
percent in the last three years.

YEARS ENDED DECEMBER 31, 1996 AND 1995

Sales for 1996 were $148.4 million, an increase of $35.9 million or 31.9
percent over 1995. The largest increase in sales over 1995 came in industrial
gas equipment totaling $23.9 million, with increases of $10.1 million in
cryogenic tanks, $8.5 million in brazed aluminum heat exchangers, $2.9 million
in cold boxes and $2.4 million in assorted cryogenic components during 1996.
Sales in the hydrocarbon processing equipment area increased $6.5 million, a
majority of which was in brazed aluminum heat exchanges, which were for the most
part supplying an increase in the demand for ethylene-related equipment. Sales
to the special products market increased in 1996. Much of the sales improvement
in this market was the result of vacuum equipment being supplied to the LIGO
project, which totaled approximately $13 million during 1996.

Gross profit for 1996 increased $14.2 million or 46.2 percent from 1995
levels. The gross profit margin increased from 27.4 percent in 1995 to 30.3
percent in 1996. As in sales, a large portion of the improvement in both gross
profit and in gross profit margin came from the industrial gas sector. The most
significant improvement was in the cryogenic tank business, which was
restructured in 1994. This business moved from a negative gross profit margin to
a gross profit margin level consistent with the Company's other industrial gas
products. The brazed aluminum heat exchanger market also saw large volume and
price improvement in 1996.

As the LIGO job progresses toward completion, it is having a positive
effect in the special products area, where the margin percentage has grown to
28.4 percent from 27.5 percent.

Selling, general and administrative (SG&A) costs totaled $21.7 million for
1996, an increase of $3.6 million from 1995. As a percentage of sales, SG&A has
decreased from 16.1 percent in 1995 to 14.7 percent in 1996. This improvement is
the result of increasing volume relative to the fixed overheads. The $3.6
million increase in expense was in support of increased sales.

Net interest expense declined during 1996 with borrowings declining from
$14.6 million to a net positive cash position. This was also the last year of
amortization for the loan origination costs related to a $25 million credit
agreement.

The 1996 tax expense includes the positive effect of eliminating the
deferred tax valuation allowance that related to certain tax loss carryforwards
as well as the on-going benefits of several different tax credits.

1997 LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operations in 1997 was $22.4 million compared to $32.9
million in 1996 and $8.8 million in 1995. As the Company takes on large orders
and progresses through completion, there could be large fluctuations in cash
flows depending on negotiated payment terms with customers. The Company is
currently well positioned in regard to working capital needs, due to large
progress payments by its customers and net income which offsets the need for
additional inventory to complete the Company's higher level of backlog.

Capital expenditures in 1997, 1996, and 1995 were $7.1 million, $4.9
million and $2.1 million, respectively. The 1997 and 1996 capital expenditures
relate mainly to the expansion of capacity in the brazed aluminum heat exchanger
operation, as well as general throughput enhancing expenditures at the Company's
other operations. The 1995 expenditures included the leasehold improvements and
various machinery and equipment purchases for the Company's initial operation at
Chart Coastal Fabrication, along with various productivity-enhancing machinery
and equipment throughout all of the Company's facilities.

On July 31, 1997, the Company acquired all of the outstanding shares of
Cryenco, a Denver, Colorado based manufacturer of cryogenic tanks and related
products for the transportation, storage and dispensing of LNG and liquefied
argon, oxygen, and nitrogen. Consideration for the acquisition included the
payment of $19.6 million to purchase the Company's outstanding common stock and
certain warrants of Cryenco, the payment of $685,000 to

12
14

redeem its outstanding preferred stock, and the assumption of approximately $6.2
million in indebtedness for borrowed money. The Company also assumed Cryenco's
obligations under other warrants, which were converted into warrants to purchase
Common Stock of the Company, and are recorded in the Company's accounts at an
estimated fair value of $436,000.

The Company has completed a preliminary assessment of its exposure to the
"year 2000" computer problem. Based on this assessment, the Company believes
that no critical software systems will be impacted by this situation as the
systems currently in use are either already "year 2000" compliant or are
scheduled for upgrade in 1998 to compliant versions. The Company expects the
costs of these upgrades to be minimal as they are generally covered in the
Company's standard maintenance contracts. Although the Company believes that it
is taking appropriate precautions against disruption of its systems due to the
"year 2000" problem, there can be no assurance that the Company's suppliers and
customers will not be adversely affected by the "year 2000" problem. Any
resulting systems failures or interruptions at the Company's suppliers or
customers could have a material adverse effect on the Company's business,
financial conditions and operating results.

The Company completed a stock offering on October 9, 1997. Of the 3,220,000
shares of Common Stock sold, 1,720,000 were offered by the Company and 1,500,000
were offered by certain stockholders. Consideration for the sale of all shares
sold in the offering (excluding underwriter discounts and expenses) was $21.00
per share. The proceeds to the Company from the stock sale were used to repay
the outstanding borrowings under the Company's $45 million credit facility ("the
Credit Facility").

In November 1996, the Board of Directors authorized a program to repurchase
1,000,000 shares of the Company's Common Stock. The amount and timing of share
purchases will depend on market conditions, share price, and other factors. The
Company reserves the right to discontinue the repurchase program at any time. In
1997 and 1996, 375,150 and 219,450 shares, respectively, were acquired under the
program. All treasury shares were retired during 1997.

Management believes that cash generated by operations, borrowings under the
Credit Facility, which now extends through June 1999, and access to capital
markets will be sufficient to satisfy its working capital, dividend, capital
expenditure, and debt repayment requirements and finance continued growth
through acquisition.

Dividends totaling $3.9 million, or $.255 per share, $3.0 million or $.20
per share and $2.8 million or $.19 per share were paid during 1997, 1996 and
1995, respectively. Any future declarations of dividends are at the sole
discretion of the Company's Board of Directors. No assurance can be given as to
whether dividends may be declared in the future, and if declared, the amount and
timing of such dividends.

FORWARD-LOOKING STATEMENTS

The Company is making this statement in order to satisfy the "safe harbor"
provisions contained in the Private Securities Litigation Reform Act of 1995.
This Annual Report on Form 10-K includes forward-looking statements relating to
the business of the Company. Forward-looking statements contained herein or in
other statements made by the Company are made based on management's expectations
and beliefs concerning future events impacting the Company and are subject to
uncertainties and factors relating to the Company's operations and business
environment, all of which are difficult to predict and many of which are beyond
the control of the Company, that could cause actual results of the Company to
differ materially from those matters expressed or implied by forward-looking
statements. The Company believes that the following factors, among others, could
affect its future performance and cause actual results of the Company to differ
materially from those expressed or implied by forward-looking statements made by
or on behalf of the Company: (a) general economic, business and market
conditions; (b) competition; (c) decreases in spending by its industrial
customers; (d) the loss of a major customer or customers; (e) ability of the
Company to identify, consummate and integrate the operations of suitable
acquisition targets; (f) ability of the Company to manage its fixed-price
contract exposure; (g) its relations with its employees; (h) the extent of
product liability claims asserted against the Company; (i) variability in the
Company's operating results; (j) the ability of the Company to attract and
retain key personnel; (k) the costs of compliance with environmental matters;
and (l) the ability of the Company to protect its proprietary information.

13
15

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

REPORT OF INDEPENDENT AUDITORS

To the Shareholders and Board of Directors
of Chart Industries, Inc.

We have audited the accompanying consolidated balance sheets of Chart
Industries, Inc. and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Chart
Industries, Inc. and subsidiaries at December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.

/s/ ERNST & YOUNG LLP

Cleveland, Ohio
February 2, 1998

14
16

CHART INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31
-----------------------
1997 1996
---------- ---------
(DOLLARS IN THOUSANDS)

ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 22,095 $ 4,304
Restricted cash........................................... 5,104
Accounts receivable, net of allowances of $707 and $329... 31,636 25,922
Inventories, net.......................................... 25,617 21,727
Unbilled contract revenue................................. 2,520 1,402
Deferred income taxes..................................... 2,134 1,365
Prepaid expenses.......................................... 847 863
-------- -------
TOTAL CURRENT ASSETS........................................ 84,849 60,687
Property, plant and equipment, net.......................... 27,241 17,882
Goodwill, net............................................... 15,698 1,722
Other intangible assets..................................... 1,131 905
-------- -------
TOTAL ASSETS................................................ $128,919 $81,196
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.......................................... $ 8,911 $ 8,582
Customer advances......................................... 13,710 12,698
Billings in excess of contract revenue.................... 3,030 11,444
Accrued salaries, wages and benefits...................... 9,340 6,810
Contract and warranty reserves............................ 4,809 4,710
Accrued expenses and other liabilities.................... 7,365 3,435
Current portion of long-term debt......................... 558 361
-------- -------
TOTAL CURRENT LIABILITIES................................... 47,723 48,040
Long-term debt.............................................. 4,195 4,469
Deferred income taxes....................................... 544 591
SHAREHOLDERS' EQUITY
Preferred stock, 1,000,000 shares authorized, none issued
or outstanding
Common stock, par value $.01 per share -- 30,000,000
shares authorized, 16,187,673 and 15,304,800 shares
issued at December 31, 1997 and 1996, respectively..... 162 102
Additional paid-in capital................................ 42,787 18,118
Retained earnings......................................... 33,508 14,321
Treasury stock, at cost, 543,878 shares at December 31,
1996................................................... (4,445)
-------- -------
76,457 28,096
-------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................. $128,919 $81,196
======== =======

The accompanying notes are an integral part of these consolidated financial
statements.
15
17

CHART INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31
-----------------------------------------
1997 1996 1995
----------- ----------- -----------
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)

Sales...................................................... $192,249 $148,400 $112,479
Cost of products sold...................................... 131,009 103,398 81,704
-------- -------- --------
Gross profit............................................... 61,240 45,002 30,775
Selling, general and administrative expenses............... 26,206 21,745 18,108
-------- -------- --------
Operating income........................................... 35,034 23,257 12,667
Interest expense -- net.................................... (350) (623) (1,858)
-------- -------- --------
Income before income taxes................................. 34,684 22,634 10,809
Income tax expense (benefit):
Current.................................................. 12,874 8,566 4,556
Deferred................................................. (817) (961) (810)
-------- -------- --------
12,057 7,605 3,746
-------- -------- --------
Net income................................................. $ 22,627 $ 15,029 $ 7,063
======== ======== ========
Net income per share....................................... $ 1.52 $ 1.01 $ .47
======== ======== ========
Shares used in per share calculations...................... 14,891 14,917 14,912
======== ======== ========
Net income per share -- assuming dilution.................. $ 1.48 $ .99 $ .47
======== ======== ========
Shares used in per share calculations -- assuming
dilution................................................. 15,240 15,186 15,098
======== ======== ========

The accompanying notes are an integral part of these consolidated financial
statements.
16
18

CHART INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

ADDITIONAL RETAINED TOTAL
SHARES COMMON PAID-IN EARNINGS TREASURY SHAREHOLDERS'
OUTSTANDING STOCK CAPITAL (DEFICIT) STOCK EQUITY
----------- ------ ---------- --------- -------- -------------
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Balance at January 1, 1995......... 9,885 $100 $16,916 $(1,940) $ (712) $14,364
Net income....................... 7,063 7,063
Dividends ($.187 per share)...... (2,787) (2,787)
Treasury stock acquisitions...... (97) (664) (664)
Stock options, net of tax
benefit....................... 97 1 68 (40) 150 179
Contribution of treasury stock to
employee benefit plans........ 46 40 (2) 240 278
------ ---- ------- ------- ------- -------
Balance at December 31, 1995....... 9,931 101 17,024 2,294 (986) 18,433
Net income....................... 15,029 15,029
Dividends ($.20 per share)....... (3,002) (3,002)
Treasury stock acquisitions...... (255) (3,732) (3,732)
Stock options, net of tax
benefit....................... 115 1 737 28 766
Contribution of treasury stock to
employee benefit plans........ 50 357 245 602
------ ---- ------- ------- ------- -------
Balance at December 31, 1996....... 9,841 102 18,118 14,321 (4,445) 28,096
Net income....................... 22,627 22,627
Dividends ($.255 per share)...... (3,858) (3,858)
Treasury stock acquisitions...... (252) (5,646) (5,646)
Stock options, net of tax
benefit....................... 39 1 469 470
Conversion of Cryenco warrants... 436 436
Three for two stock split........ 4,809 51 (51)
Contribution of stock to employee
benefit plans................. 31 571 95 666
Stock offering................... 1,720 17 33,649 33,666
Retirement of treasury shares.... (9) (9,987) 9,996
------ ---- ------- ------- ------- -------
Balance at December 31, 1997....... 16,188 $162 $42,787 $33,508 $ -- $76,457
====== ==== ======= ======= ======= =======

The accompanying notes are an integral part of these consolidated financial
statements.
17
19

CHART INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31
-----------------------------
1997 1996 1995
------- ------- -------
(DOLLARS IN THOUSANDS)

OPERATING ACTIVITIES
Net income................................................ $22,627 $15,029 $ 7,063
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 3,511 2,708 2,742
Deferred income taxes.................................. (817) (961) (810)
Contribution of treasury stock to employee benefit
plans................................................ 666 602 278
Increase (decrease) in cash resulting from changes in
operating assets and liabilities:
Accounts receivable.................................. (323) 692 (6,720)
Inventory and other current assets................... 126 (1,383) (3,779)
Accounts payable and accrued liabilities............. 4,040 5,468 4,042
Billings in excess of contract revenue and customer
advances.......................................... (7,402) 10,707 6,022
------- ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES................. 22,428.. 32,862 8,838
INVESTING ACTIVITIES
Capital expenditures...................................... (7,140) (4,868) (2,111)
Acquisition of Cryenco, net of cash acquired.............. (20,128)
Acquisition of the PSI building........................... (3,578)
Other investing activities................................ 195 474 75
------- ------- -------
NET CASH USED IN INVESTING ACTIVITIES..................... (27,073) (7,972) (2,036)
FINANCING ACTIVITIES
Principal payments on long-term debt...................... (550) (3,243) (2,007)
Repayments on credit facility............................. (54,750) (44,750) (40,500)
Borrowings on credit facility............................. 48,000 33,250 39,000
Borrowing under Industrial Revenue Bond................... 5,000
Purchase of treasury stock................................ (5,646) (3,732) (664)
Stock offering............................................ 33,666
Stock options exercised................................... 470 766 179
Dividends paid to shareholders............................ (3,858) (3,002) (2,787)
------- ------- -------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES....... 17,332 (15,711) (6,779)
------- ------- -------
Net increase in cash and cash equivalents................... 12,687 9,179 23
Cash and cash equivalents at beginning of year.............. 9,408 229 206
------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR.................... $22,095 $ 9,408 $ 229
======= ======= =======

The accompanying notes are an integral part of these consolidated financial
statements.
18
20

CHART INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A -- NATURE OF OPERATIONS

The Company is involved in the engineering and manufacturing of industrial
equipment and systems for the cryogenic and process industries and various
research applications. Substantially all of the Company's sales and trade
accounts receivable are related to the air separation, hydrocarbon and chemical
processing and power generation industries and laboratories related to space and
high physics research located throughout the world. To reduce credit risk for
both foreign and domestic sales the Company requires customer advances, letters
of credit and other such guarantees of payment. Sales to U.S. government funded
projects accounted for 12%, 11% and 5% of consolidated sales in 1997, 1996 and
1995, respectively.

NOTE B -- SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation: The consolidated financial statements include
the accounts of the Company and its subsidiaries. Intercompany accounts and
transactions are eliminated in consolidation. Certain items in previous
financial statements have been reclassified to conform to 1997 presentation.

Cash and Cash Equivalents: The Company considers all investments with an
initial maturity of three months or less when purchased to be cash equivalents.
The December 31, 1997 balance includes commercial paper, money market
investments, overnight repurchases and cash.

Goodwill and Other Intangible Assets: All intangible assets are carried at
cost less applicable amortization. Goodwill represents the excess of purchase
price over the fair value of the individual assets and liabilities acquired in
an acquisition. Goodwill is amortized on the straight-line method over the
periods of expected benefit, but not in excess of 40 years. Total amortization
of all intangibles was $376,000, $507,000, and $499,000 in 1997, 1996 and 1995,
respectively. The accumulated amortization included in the amounts on the
balance sheet is $745,000 and $387,000 at December 31, 1997 and 1996,
respectively.

Inventories: Inventories are stated at the lower of cost or market with
cost being determined by both the last-in, first-out ("LIFO") method
(approximately 54 percent and 75 percent of total inventory at December 31, 1997
and 1996, respectively), and the first-in, first-out ("FIFO") method. The
components of inventory on a first-in, first-out basis are as follows:

DECEMBER 31
--------------------
1997 1996
-------- --------
(DOLLARS IN
THOUSANDS)

Raw materials and supplies.................................. $12,971 $11,507
Work in process............................................. 11,992 10,536
Finished goods.............................................. 922 25
LIFO reserve................................................ (268) (341)
------- -------
$25,617 21,727
======= =======

Stock Split: All shares of common stock (except for the shares outstanding
in the Consolidated Statements of Shareholders' Equity) and per share amounts
have been adjusted to give retroactive effect to a three-for-two stock split
effected in the form of a 50% stock dividend distributed on June 30, 1997 to
shareholders of record on June 16, 1997.

Anticipated Effect of Yet To Be Adopted Accounting Statements: In June
1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 131, Disclosures about Segments of an enterprise and
Related Information (Statement 131), which is effective for years beginning
after December 15, 1997. Statement 131 establishes standards for the way that
public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports. It also
establishes standards for related disclosures about

19
21
CHART INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE B -- SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
products and services, geographic areas, and major customers. The Company will
adopt the new requirements retroactively in 1998 but has not yet completed its
assessment of the effect of the adoption of this statement on the Company's
reporting.

Property, Plant and Equipment: Property, plant and equipment are stated on
the basis of cost. Expenditures for maintenance, repairs and renewals are
charged to expense as incurred, whereas major betterments are capitalized. The
cost of applicable assets is depreciated over their estimated useful lives.
Depreciation is computed using the straight-line method for financial reporting
purposes and accelerated methods for income tax purposes. The following table
shows original costs and the estimated useful lives of the different types of
assets:

DECEMBER 31
------------------
CLASSIFICATION EXPECTED USEFUL LIFE 1997 1996
-------------- ----------------------- ------- -------

Land and buildings........................ 20-35 years (buildings) $11,992 $10,831
Machinery and equipment................... 3-12 years 26,415 14,724
Furniture and fixtures.................... 3-5 years 3,831 2,256
Construction in process................... 794 2,793
------- -------
43,032 30,604
Less accumulated depreciation............. (15,791) (12,722)
------- -------
Total Property, Plant and Equipment....... $27,241 $17,882
======= =======

Property, plant and equipment along with the intangible assets are
periodically evaluated for impairment. The Company assesses impairment for each
of its operating units by measuring future cash flows against the carrying value
of these long-lived assets. If the future undiscounted cash flows are less than
the carrying amount, an impairment reserve is recorded.

Revenue Recognition: The Company uses the percentage of completion method
of accounting for significant contracts. Earned revenue is based on the
percentage that incurred costs to date bear to total estimated costs after
giving effect to the most recent estimates of total cost. Earned revenue on jobs
in process totaled $69.9 million. Timing of amounts billed on contracts varies
greatly from contract to contract causing high variation in working capital
needs. Amounts billed on percentage completion jobs in process total $70.3
million. The cumulative impact of revisions in total cost estimates during the
progress of work is reflected in the period in which these changes become known.
Earned revenue reflects the original contract price adjusted for agreed upon
claim and change order revenue, if any. Losses expected to be incurred on jobs
in process, after consideration of estimated minimum recoveries from claims and
change orders, are charged to income as soon as such losses are known.
Otherwise, revenue is recognized when the products are completed or shipped.

Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates especially in regard to the percentage of completion method of revenue
recognition.

Deferred Income Taxes: The Company and its subsidiaries file a
consolidated federal income tax return. Deferred income taxes are provided for
temporary differences between financial reporting and the consolidated tax
return in accordance with the liability method.

Net Income Per Share: In 1997, the Financial Accounting Standards Board
issued Statement No. 128, "Earnings per Share". Statement 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share is very similar to

20
22
CHART INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE B -- SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
the previously reported fully diluted earnings per share. All earnings per share
amounts for all periods have been presented, and where appropriate, restated to
conform to the Statement 128 requirements.

The following table sets forth the computation of basic and diluted
earnings per share:

1997 1996 1995
------- ------- -------
(IN THOUSANDS)

Numerator:
Net income:......................................... $22,627 $15,029 $ 7,063
Denominator:
Denominator for basic earnings per share -- weighted
average shares................................... 14,891 14,917 14,912
Effect of dilutive securities:
Employee stock options and warrants................. 349 269 186
------- ------- -------
Dilutive potential common shares...................... 15,240 15,186 15,098
======= ======= =======
Net income per share.................................. $ 1.52 $ 1.01 $ .47
======= ======= =======
Net income per share -- assuming dilution............. $ 1.48 $ .99 $ .47
======= ======= =======

Employee Stock Options: The Company has elected to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB
25) and related interpretations in accounting for its employee stock options.
Under APB 25, because the exercise price of the Company's employee stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.

NOTE C -- LONG-TERM DEBT

The Company currently maintains a consolidated credit and revolving loan
facility ("Facility") which provides for loans of up to $45 million, of which
$15 million may be available for the issuance of letters of credit and bank
guarantees. The Company had no borrowings at December 31, 1997. The Facility
extends to June 30, 1999. The Facility provides the bank with a secured interest
in substantially all of the property, plant and equipment of the Company.

Under the terms of the Facility, loans (including draws under any proposed
letters of credit) will bear interest, at the Company's option, at a rate equal
to the bank's base rate (8.50 percent at December 31, 1997) or LIBOR plus 1.25
percent per annum. Based on the Company's financial position, the Company and
its banks have agreed to adjust the LIBOR differential on a set schedule. The
Company is also required to pay a commitment fee of .375% per annum on the
unused portion of the Facility, payable quarterly in arrears.

The Facility contains certain covenants and conditions which impose
limitations on the Company and its operating units, including meeting certain
financial tests and the maintenance of certain financial ratios on a
consolidated basis such as: minimum current ratio, minimum net worth, maximum
leverage, minimum interest coverage ratio and minimum fixed charge ratio. As of
December 31, 1997, the Company was in compliance with all covenants and
conditions. The Company has outstanding letters of credit and bank guarantees
totaling $4,961,000 all backed up by the Facility.

As part of the expansion of the ALTEC facility, the Company issued
Industrial Development Revenue Bonds (IRB) totaling $5 million during 1996 ($4.4
million and $4.8 million outstanding at December 31, 1997 and 1996,
respectively). The bonds are collateralized by the equipment related to the
expansion. These notes pay interest at 6.3 percent and have maturities in the
next five years as follows: 1998 -- $405,000; 1999 -- $431,000;
2000 -- $459,000, 2001 -- $489,000, and 2002 -- $521,000 and a final maturity in
2006.

Interest paid was $709,000 in 1997, $688,000 in 1996, and $1,799,000 in
1995.

21
23
CHART INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE D -- ACQUISITION OF CRYENCO SCIENCES, INC. ("CRYENCO")

On July 31, 1997, the Company acquired all of the outstanding shares of
Cryenco, a Denver, Colorado based manufacturer of cryogenic tanks and related
products for the transportation, storage and dispensing of LNG and liquefied
argon, oxygen, and nitrogen. Consideration for the acquisition included the
payment of $19.6 million to purchase the Company's outstanding common stock and
certain warrants of Cryenco, the payment of $685,000 to redeem its outstanding
preferred stock, and the assumption of approximately $6.2 million in
indebtedness for borrowed money. The Company also assumed Cryenco's obligations
under other warrants, which were converted into warrants to purchase Common
Stock of the Company, and are recorded as additional paid-in capital at an
estimated fair value of $436,000. The acquisition was accounted for using the
purchase method of accounting. Accordingly, the purchase price was allocated to
assets acquired and liabilities assumed based on their estimated fair values.
This treatment resulted in approximately $14.3 million of cost in excess of net
assets acquired (goodwill). Such excess is being amortized on a straight-line
basis over 40 years. Cryenco's results of operations have been included in the
consolidated results of operations since the date of acquisition.

The unaudited pro forma results of operations for 1997 and 1996, assuming
consummation of the acquisition as of January 1, 1996, are as follows:

1997 1996
-------- --------
(DOLLARS IN THOUSANDS)

Sales................................................ $208,540 $179,048
Net income........................................... 22,255 14,437
Net income per share................................. 1.49 .97
Net income per share -- assuming dilution............ 1.46 .95

NOTE E -- INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. At December 31, 1997, the
Company had net operating loss carryforwards for income tax purposes of $807,000
that expire in years 2003 through 2006. These carryforwards resulted from the
Company's 1991 acquisition of Process Engineering and are subject to Separate
Return Limitation Year (SRLY) and Section 382 limitations imposed by the
Internal Revenue Service Code of 1986, as amended, and the regulations
thereunder. Significant components of the Company's deferred tax liabilities and
assets are as follows:

22
24
CHART INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE E -- INCOME TAXES -- CONTINUED

DECEMBER 31
--------------------------------
1996 1995
------ ------
(DOLLARS IN THOUSANDS)

Deferred tax liabilities:
Property, plant and equipment........................... $2,315 $1,506
Inventory............................................... 1,292 1,243
Other -- net............................................ 417 159
------ ------
TOTAL DEFERRED TAX LIABILITIES.................. $4,024 $2,908
====== ======
Deferred tax assets:
Accruals and reserves................................... $5,323 $3,332
Net operating loss carryforwards........................ 282 322
Other -- net............................................ 9 28
------ ------
TOTAL DEFERRED TAX ASSETS....................... $5,614 $3,682
====== ======

Significant components of the provision for income taxes attributable to
continuing operations are as follows:

YEARS ENDED DECEMBER 31
---------------------------------
1997 1996 1995
------- ------ ------
(DOLLARS IN THOUSANDS)

Current:
Federal................................................. $11,908 $7,936 $4,015
State................................................... 966 630 541
------- ------ ------
12,874 8,566 4,556

Deferred:
Federal................................................. (750) (850) (644)
State................................................... (67) (111) (166)
------- ------ ------
(817) (961) (810)
------- ------ ------
$12,057 $7,605 $3,746
======= ====== ======

The reconciliation of income tax attributable to continuing operations
computed at the U.S. federal statutory tax rates to income tax expense is:

YEARS ENDED DECEMBER 31
---------------------------------------------------------
1997 1996 1995
----------------- ---------------- ----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------- ------- ------ ------- ------ -------
(DOLLARS IN THOUSANDS)

Tax at U.S. statutory rates............... $12,139 35.0% $7,922 35.0% $3,684 34.0%
State income taxes, net of federal tax
benefit................................. 584 1.7 337 1.5 248 2.3
Reversal of valuation allowance........... (370) (1.6)
Federal tax benefit of Foreign Sales
Corp.................................... (528) (1.5) (213) (.9) (122) (1.1)
Other -- net.............................. (138) (.4) (71) (.4) (64) (.5)
------- ---- ------ ---- ------ ----
$12,057 34.8% $7,605 33.6% $3,746 34.7%
======= ==== ====== ==== ====== ====

The Company paid approximately $11.1 million, $8 million and $3.1 million
in income taxes in 1997, 1996 and 1995, respectively.

23
25
CHART INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE F -- EMPLOYEE BENEFIT PLANS

The Company has two defined benefit pension plans which cover certain
hourly and salary employees. The plan benefits are based on either an average of
the employee's compensation for certain periods during their employment or fixed
amounts per year of service as negotiated with the employees' collective
bargaining unit. The Company's funding policy is to contribute at least the
minimum funding amounts required by law. Plan assets consist primarily of U.S.
Treasury notes and corporate stocks and bonds.

The actuarially computed combined pension cost included the following
components for the years ended December 31:

1997 1996 1995
------ ------ ------
(DOLLARS IN THOUSANDS)

Service cost................................................ $ 321 $ 281 $ 204
Interest cost............................................... 336 302 264
Actual return on plan assets................................ (574) (290) (530)
Net amortization and deferrals.............................. 265 18 296
----- ----- -----
TOTAL PENSION COST.......................................... $ 348 $ 311 $ 234
===== ===== =====

The following table sets forth the funded status and amounts recognized in
the balance sheets as of December 31:

ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS
---------------- ----------------
1997 1996 1997 1996
------ ------ ------ ------
(DOLLARS IN THOUSANDS)

Actuarial present value of benefit obligation
Vested benefit obligation........................... $2,238 $2,047 $1,565 $1,299
====== ====== ====== ======
Accumulated benefit obligation...................... $2,330 $2,140 $1,866 $1,544
====== ====== ====== ======
Projected benefit obligation.......................... $3,500 $3,115 $1,866 $1,544
Plan assets at fair value............................. 3,529 3,129 1,584 1,272
------ ------ ------ ------
Plan assets in excess of (under) projected benefit
obligation.......................................... 29 14 (282) (272)
Unrecognized prior service cost....................... 162 173
Unrecognized net actuarial loss/(gain)................ 788 766 (162) (45)
------ ------ ------ ------
PREPAID ASSETS (LIABILITIES).......................... $ 817 $ 780 $ (282) $ (144)
====== ====== ====== ======

The assumptions used in determining pension cost and funded status
information are as follows:

1996 1995
---- ----

Discount rate............................................... 7% 7%
Rate of increase in compensation............................ 4-5% 4-5%
Expected long-term rate of return on assets................. 8% 8%

The Company has defined contribution savings plans that cover most of its
employees. Company contributions to the plans are based on employee
contributions and the level of Company match and discretionary contributions.
Expenses under the plans totaled $1,314,000, $1,127,000, and $907,000 for the
years 1997, 1996 and 1995, respectively.

24
26
CHART INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE G -- STOCK OPTION PLANS

In July 1992, the Company adopted a Key Employee Stock Option Plan which
provides for the granting of options to purchase shares of Common Stock to
certain key employees of the Company. In May 1997, shareholders approved an
increase in the amount of shares authorized for the Plan of 375,000 shares of
Common Stock. Nonqualified stock options are exercisable for up to 10 years at
an option price determined by the Compensation Committee of the Board of
Directors.

Certain information for 1997, 1996 and 1995 relative to the Key Employee
Stock Option Plan is summarized below:

1997 1996 1995
-------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
NUMBER EXERCISE NUMBER EXERCISE NUMBER EXERCISE
OF SHARES PRICE OF SHARES PRICE OF SHARES PRICE
--------- -------- --------- -------- --------- --------

Outstanding at beginning of
year............................ 486,750 $ 5.72 453,497 $ 1.76 500,703 $ 1.76
Granted........................... 171,806 19.63 180,000 9.39 101,250 4.00
Exercised......................... (31,190) 5.82 (146,747) 1.07 (145,456) .17
Expired or canceled............... (3,000) 10.58 -- (3,000) 3.67
------- ------ -------- ------ -------- ------
Outstanding at end of year........ 624,366 $ 9.52 486,750 $ 5.72 453,497 $ 1.76
======= ====== ======== ====== ======== ======
Exercisable at end of year........ 215,066 128,250 208,997
======= ======== ========
Weighted-average fair value of
options granted during the
year............................ $ 7.72 $ 3.69 $ 1.57
====== ====== ======
Participants at end of year....... 57 35 32
======= ======== ========
Available for future grant at end
of year......................... 240,851 34,658 64,658
======= ======== ========

Exercise prices for options outstanding as of December 31, 1997 ranged from
$.12 to $38.67. The weighted-average remaining contractual life of those options
is 7.8 years. Certain information for ranges of exercise prices is summarized
below:

OUTSTANDING EXERCISABLE
---------------------------------- --------------------
WEIGHTED AVERAGE WEIGHTED
---------------------- AVERAGE
EXERCISE NUMBER EXERCISE CONTRACTUAL NUMBER EXERCISE
PRICE OF SHARES PRICE LIFE OF SHARES PRICE
-------- --------- -------- ----------- --------- --------

Less than $10............................... 359,500 $ 4.45 6.8 183,700 $ 3.80
Equal to or greater than $10................ 264,866 16.40 9.1 31,366 14.78

In May 1996, the shareholders approved the 1996 Outside Directors Stock
Option Plan, which provides for the granting of options to purchase up to
112,500 shares of Common Stock. The option price for options granted under the
Plan to outside directors will be equal to the fair market value of a share of
Common Stock on the date of grant and will be exercisable for a period of ten
years from the date of grant exercisable in 33.3% increments on each of the
first through the third anniversaries of the date of grant.

25
27
CHART INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE G -- STOCK OPTION PLANS -- CONTINUED
Certain information for 1997, 1996 and 1995 relative to the Outside
Directors Stock Option Plans is summarized below:

1997 1996 1995
-------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
NUMBER EXERCISE NUMBER EXERCISE NUMBER EXERCISE
OF SHARES PRICE OF SHARES PRICE OF SHARES PRICE
--------- -------- --------- -------- --------- --------

Outstanding at beginning of year.... 34,998 $ 3.94 45,000 $ 2.86 30,000 $ 2.67
Granted............................. 22,500 15.61 15,000 5.25 15,000 3.25
Exercised........................... (15,000) 4.06 (25,002) 2.79
Expired or canceled.................
------- ------ ------- ------ ------- ------
Outstanding at end of year.......... 42,498 $10.08 34,998 $ 3.94 45,000 $ 2.86
======= ====== ======= ====== ======= ======
Exercisable at end of year.......... 10,000 0 10,000
======= ======= =======
Weighted-average fair value of
options granted during the year... $ 4.55 $ 1.52 $ .94
====== ====== ======
Participants at end of year......... 3 2 2
======= ======= =======
Available for future grant at end of
year.............................. 75,000 97,500 60,000
======= ======= =======

Pro forma information regarding net income and earnings per share is
required by FASB Statement No. 123, "Accounting for Stock-Based Compensation",
which also requires that the information be determined as if the Company has
accounted for its employee stock options granted subsequent to December 31,
1994, under the fair value method of that Statement. The fair value for these
options was estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted-average assumptions for 1997, 1996 and 1995:
risk-free interest rates of 6.7 percent; dividend yields of 2 percent;
volatility factors of the expected market price of the Company's common stock of
.38; and a weighted-average expected life of the option of six (6) years for key
employee options and three (3) years for outside directors options.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options, which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's Key Employee and Outside Directors stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can materially
affect the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of these
stock options.

The Company's pro forma disclosures showing the estimated fair value of the
options, amortized to expense over the options' vesting period are as follows
(in thousands except for earnings per share information):

1997 1996 1995
------- ------- ------

Pro forma net income................................. $22,321 $14,971 $7,051
Pro forma net income per share....................... $ 1.50 $ 1.00 $ .47
Pro forma net income per share -- assuming
dilution........................................... $ 1.46 $ .99 $ .47

Because FASB Statement No. 123 is applicable only to options granted
subsequent to December 31, 1994, its pro forma effect will not be fully
reflected until 1999.

26
28
CHART INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE H -- LEASE COMMITTMENTS

The Company had $1,533,000, $774,000 and $800,000 of rental expenses in
1997, 1996 and 1995, respectively. At December 31, 1997, future minimum lease
payments for non-cancelable operating leases for the next five years totaled
$6.5 million and are payable as follows: 1998 -- $1,836,000; 1999 -- $1,723,000;
2000 -- $1,215,000; 2001 -- $928,000; and 2002 -- $846,000.

NOTE I -- CONTINGENCIES

The Company's operating units are parties, in the ordinary course of their
businesses, to various legal actions related to performance under contracts,
product liability and other matters, several of which actions claim substantial
damages. The Company believes these legal actions will not have a material
effect on the Company's financial position or liquidity. The Company is subject
to federal, state and local environmental laws and regulations concerning, among
other matters, waste water effluents, air emissions and handling and disposal of
hazardous materials such as cleaning fluids.

As part of its ongoing environmental compliance and monitoring programs,
the Company is voluntarily developing work plans for environmental conditions
involving certain of its operating facilities. Based upon the Company's study of
the known conditions and its prior experience in investigating and correcting
environmental conditions, the Company estimates that the potential costs of
these site remediation efforts will not be material to the financial position or
liquidity of the Company. Approximately $2.2 million for these costs is recorded
in accrued liabilities at December 31, 1997 for known environmental matters.
These expenditures are expected to be made mostly in the next 18 to 24 months,
if the necessary regulatory agency approvals of the Company's work plans are
obtained. Though the Company believes it has adequately provided for the cost of
all known environmental conditions, the applicable regulatory agencies could
insist upon different and more costly remediative measures than those the
Company believes are adequate or required by existing law. Otherwise, the
Company believes that it is currently in compliance with all known material and
applicable environmental regulations.

NOTE J -- QUARTERLY DATA (UNAUDITED)

Selected quarterly data for the years ended December 31, 1997 and 1996 are
as follows:

YEAR ENDED DECEMBER 31, 1997
----------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- --------
(DOLLARS IN THOUSANDS)

Sales................................... $42,440 $41,758 $51,939 $56,112 $192,249
Gross profit............................ 12,168 13,474 16,661 18,937 61,240
Operating income........................ 6,782 7,148 9,305 11,799 35,034
Net income.............................. 4,481 4,701 5,791 7,654 22,627
Net income per share.................... .31 .33 .40 .48 1.52
Net income per share -- assuming
dilution.............................. .30 .32 .39 .47 1.48

YEAR ENDED DECEMBER 31, 1996
----------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- --------
(DOLLARS IN THOUSANDS)

Sales................................... $34,727 $30,612 $37,970 $45,091 $148,400
Gross profit............................ 10,017 9,784 11,277 13,924 45,002
Operating income........................ 5,110 5,401 5,951 6,795 23,257
Net income.............................. 3,209 3,548 3,813 4,459 15,029
Net income per share.................... .22 .24 .26 .30 1.01
Net income per share -- assuming
dilution.............................. .21 .23 .25 .29 .99

27
29
CHART INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE K -- SUBSEQUENT EVENT (UNAUDITED)

On March 5, 1998 the Company signed a definitive agreement with IMI plc, a
major international engineering group, to acquire the Industrial Heat Exchanger
("IHE") division of IMI Marston Limited, a wholly-owned subsidiary of IMI plc.
Under the terms of the agreement, the Company has formed a wholly-owned
subsidiary in the U.K., Chart Marston Limited, to acquire the assets of IHE for
approximately $34.6 million in cash. The Company anticipates closing the
acquisition on or before March 27, 1998.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The information appearing under the captions "Election of Directors" and
"Compliance with Section 16(a) of the Securities Exchange Act of 1934" in the
registrant's definitive Proxy Statement to be used in connection with the Annual
Meeting of Stockholders to be held on April 30, 1998 (the "1998 Proxy
Statement") is incorporated herein by reference. Information regarding executive
officers of the registrant is set forth in Part I of this Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION.

The information required by this item is incorporated herein by reference
to "Election of Directors" and "Executive Compensation" in the 1998 Proxy
Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The information required by this item is incorporated herein by reference
to "Stock Ownership of Principal Holders and Management" in the 1998 Proxy
Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

None.

28
30

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a)(1) Report of Independent Auditors.............................. 14
Consolidated Balance Sheets at December 31, 1997 and 1996... 15
Consolidated Statements of Income for the Years Ended
December 31, 1997, 1996 and 1995.......................... 16
Consolidated Statements of Shareholders' Equity for the
Years Ended December 31, 1997, 1996 and 1995.............. 17
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995.......................... 18
Notes to Consolidated Financial Statements.................. 19

(a)(2) Exhibits
See the Index to Exhibits at page E-1 of this Form 10-K
Annual Report.

(b) Financial Statement Schedules.
No financial statement schedules required.

(c) Reports on Form 8-K.

First Amendment to Credit Agreement, dated as of October 8, 1997, among the
Company, ALTEC, ALTEC, Inc., Chart Management Company, Inc., Chart Industries
Foreign Sales Corporation, Greenville Tube Corporation, PSI and Cryenco,
National City Bank and NBD Bank; (the "Banks"); and National City as Agent for
the Banks, reported on Current Report on Form 8-K dated October 8, 1997 (File
No. 1-11442).

29
31

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

CHART INDUSTRIES, INC.

By: /s/ ARTHUR S. HOLMES

------------------------------------
Arthur S. Holmes,
Chairman & Chief Executive Officer

Date: March 19, 1998

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.

/s/ ARTHUR S. HOLMES
- ------------------------------------------------------
Arthur S. Holmes,
Chairman & Chief Executive Officer
and a Director
(Principal Executive Officer)

/s/ ROBERT G. TURNER, JR.
- ------------------------------------------------------
Robert G. Turner, Jr.
Director

/s/ DON A. BAINES
- ------------------------------------------------------
Don A. Baines,
Chief Financial Officer, Treasurer
and a Director
(Principal Financial Officer &
Principal Accounting Officer)

/s/ RICHARD J. CAMPBELL
- ------------------------------------------------------
Richard J. Campbell,
Director

/s/ LAZZARO G. MODIGLIANI
- ------------------------------------------------------
Lazzaro G. Modigliani,
Director

Date: March 19, 1998

30
32

EXHIBIT INDEX

SEQUENTIAL
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----------

2.1 Plan and Agreement of Merger, dated April 30, 1997, by and
among the Company, Greenville Tube Corporation, Chart
Acquisition Company, Inc. and Cryenco Sciences, Inc......... (G)
3.1 Amended and Restated Certificate of Incorporation of the
Company as filed with the Secretary of State of Delaware on
December 3, 1992............................................ (A)
3.2 Amended and Restated By-Laws of the Company................. (A)
4.1 Specimen certificate of the Company's Common Stock.......... (B)
4.2 Form of Warrant Agreements of various dates, between Cryenco
and various warrant holders with respect to warrants to
purchase 111,165 shares having exercise prices ranging from
$18.18 to $47.88............................................ (G)
4.3 Form of Amendment No. 1 to Warrant Agreement between Cryenco
and Chart and various warrant holders....................... (G)
4.4 Form of Warrant Certificate.................................
10.2 Form of Indemnity Agreement of the Company.................. (B)
*10.4 Key Employees Stock Option Plan of the Company.............. (B)
10.5 1994 Stock Option Plan for Outside Directors of the
Company..................................................... (C)
10.5.1 1995 Stock Option Plan for Outside Directors of the
Company..................................................... (D)
10.5.2 1996 Stock Option Plan for Outside Directors of the
Company..................................................... (E)
10.5.3 1997 Stock Option and Incentive Plan........................ (F)
10.5.4 1997 Stock Bonus Plan....................................... (F)
10.6 License Agreement by and between PSI and Koch Industries,
Inc., dated August 30, 1991, relating to the Ryan/Holmes
Technology.................................................. (B)
10.8 Lease by and between Koch Process Systems, Inc. and PSI,
dated August 1991........................................... (B)
10.12 Employment Agreement by and between Charles E. Downs and
Greenville Tube dated March 4, 1991......................... (B)
10.13 1989-1992 Labor Agreement by and between ALTEC and District
Lodge 66 of the International Association of Machinists and
Aerospace Workers, AFL-CIO, dated March 30, 1989, as
extended by 1992-1995 Labor Agreement Extension, dated
January 29, 1991 and by 1995-1998 Labor Agreement Extension
dated March 16, 1995........................................ (D)
10.14 Agreement by and between Process Engineering and The
International Brotherhood of Boilermakers, Iron Ship
Builders, Blacksmiths, Forgers & Helpers Local Lodge No. 752
of the AFL-CIO, effective July 21, 1996..................... (E)
10.16 Credit Agreement among the Company and National City Bank,
as agent.................................................... (G)
10.16.1 First Amendment to Credit Agreement among the Company and
National City Bank, as agent................................ (H)
*10.18 Employment Agreement by and between James R. Sadowski and
Chart Management Company, Inc. dated November 30, 1995...... (H)
21.1 Subsidiaries of the Registrant
23.1 Consent of Ernst & Young LLP
27.1 Financial Data Schedule

- ---------------

* Management contract or compensation plan or arrangement identified pursuant
to Item 14(c) of this Form 10-K Annual Report.

(A) Incorporated herein by reference to the appropriate exhibit to the Company's
Registration Statement on Form S-1 (Reg. No. 333-35321).

(B) Incorporated herein by reference to the appropriate exhibit to the Company's
Registration Statement on Form S-1 (Reg. No. 33-52754).
33
EXHIBIT INDEX -- (CONTINUED)

(C) Incorporated herein by reference to the appropriate exhibit to the Company's
Form 10-K Annual Report for the year ended December 31, 1994.

(D) Incorporated herein by reference to the appropriate exhibit to the Company's
Form 10-K Annual Report for the year ended December 31, 1995.

(E) Incorporated herein by reference to the appropriate exhibit to the Company's
Form 10-K Annual Report for the year ended December 31, 1996.

(F) Incorporated herein by reference to the appropriate exhibit to the Company's
Registration Statement on Form S-8 (Reg. No. 333-32535).

(G) Incorporated herein by reference to the appropriate exhibit to the Company's
Form 8-K dated July 31, 1997.

(H) Incorporated herein by reference to the appropriate exhibit to the Company's
Form 8-K dated October 8, 1997.