Chart Industries - 10-K annual report

Securities and Exchange Commission

Washington, D.C. 20549

Form 10-K

(Mark One)

SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2002

OR

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)

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

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

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.    x

Indicate by check mark if the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).     Yes  ¨    No  x

As of March 31, 2003, the registrant had 25,893,876 shares of Common Stock outstanding.

As of June 30, 2002, the aggregate market value of 17,350,240 shares of Common Stock of the registrant held by non-affiliates was $33,485,963 (based upon the closing price of $1.93 per share of Common Stock on the New York Stock Exchange on June 30, 2002). For purposes of this calculation, the registrant deems the 7,674,999 shares of Common Stock held by all of its Directors and executive officers as of such date 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 planned to be held on June 5, 2003 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, 2002.

PART I

ITEM 1. BUSINESS

General

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, Suite 150, Cleveland, Ohio 44124, and its telephone number is (440) 753-1490.

The Company manufactures standard and custom-built industrial process equipment primarily used for low-temperature and cryogenic applications. The Company has developed an expertise in cryogenic systems and equipment, which operate at low temperatures sometimes approaching absolute zero (0° Kelvin; -273° Centigrade; -459° Fahrenheit). The majority of the Company’s products, including vacuum-insulated containment vessels, heat exchangers, cold boxes and other cryogenic components, are used throughout the liquid-gas supply chain for the purification, liquefaction, distribution, storage and use of industrial gases and hydrocarbons.

Management anticipates that demand for the Company’s products will increase over the next several years. The Company has initiatives to pursue multiple new products focused on the end-user equipment markets for low-temperature and cryogenic liquids. The use of liquid natural gas (“LNG”) as a vehicle fuel and power generating feedstock, the migration from high pressure cylinders to micro bulk distribution and telemetry to improve distribution logistics each in their own right offer considerable market potential. In addition, the Company plans to continue to focus on its worldwide presence as global industrialization and heightened environmental standards are expected to result in higher demand for high purity industrial gases, which are generally produced, stored and distributed in a cryogenic state. The mergers of several global industrial gas producers and distributors have temporarily reduced the demand for new process and distribution equipment that the Company offers to industrial gas markets. The pressures for increased efficiency in the industry, however, are expected to result in renewed demand for newer equipment and increased service of existing equipment. The Company is well positioned to benefit from both of these developments. In the energy and chemicals markets, management expects strong domestic and international growth, stemming in part from increased global natural gas and ethylene production. Oil producing countries are newly committed to capturing and marketing flared methane that previously was a waste product of the crude oil production process. This increased availability of economically priced hydrocarbons is expected to result in greater demand for equipment to liquefy, process and transport these gases.

Segments and Products

The Company’s operations are organized within three segments: Biomedical, Distribution and Storage and Energy and Chemicals. The Company changed its operating segments, effective October 1, 2002, to reflect the Company’s new organization. All segment information included in this Annual Report on Form 10-K has been restated to conform to the current year presentation. Further information about these segments is found in Note J to the Company’s consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.

Biomedical Segment

The Biomedical segment, which accounted for 23 percent of the Company’s sales in 2002, consists of various product lines built around the Company’s core competencies in cryogenics but with a focus on the medical and biological end users of the liquids and gases instead of the large producers and distributors of cryogenic liquids. The Company’s products in the Biomedical segment include the following:

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Medical Products

The medical oxygen product line is comprised of a limited range of medical respiratory products, including liquid oxygen systems, ambulatory oxygen systems and oxygen concentrators, all of which are used for the in- home supplemental oxygen treatment of patients with chronic obstructive pulmonary diseases, such as bronchitis, emphysema and asthma.

Individuals for whom supplemental oxygen is prescribed generally purchase or rent an oxygen system from a home healthcare provider or medical equipment dealer. The provider/dealer or physician usually selects which type of oxygen system to recommend to its customers: liquid oxygen systems, oxygen concentrators or high-pressure oxygen cylinders. Of these modalities, liquid oxygen is believed to offer greater long-term therapeutic benefits by providing the option of increased patient ambulation.

The Company’s primary competitor in the medical products line is Puritan-Bennett, a division of Tyco. The Company believes that competition for liquid oxygen systems is based primarily upon product performance, reliability, ease-of-service and price and focuses its marketing strategies on these considerations.

Biological Storage Systems

This product line consists of vacuum-insulated containment vessels for the storage of biological materials. The primary markets for this product line include medical laboratories, pharmaceutics, research facilities, blood and tissue banks, veterinary laboratories, large-scale repositories and artificial insemination, particularly in the beef and dairy industry.

The number of competitors for biological storage systems includes only a few companies worldwide. These products are sold through multiple channels of distribution specifically applicable to each market sector. The distribution channels range from highly specialized cryogenic storage systems providers to general supply and catalogue distribution operations to breeding service providers. Historically, competition in this field has been focused on design, reliability and price. Additionally, the Company believes its understanding of the end-user’s applications and concerns enables the Company to sell a “total value” package. Alternatives to vacuum insulated containment vessels include mechanical, electrically powered refrigeration.

Magnetic Resonance Imaging (“MRI”) Cryostat Components

The basis of the MRI technique is that the magnetic properties of certain nuclei of the human body can be detected, measured and converted into images for analysis. MRI equipment uses high-strength magnetic fields, applied radio waves and high-speed computers to obtain cross-sectional images of the body. The major components of the MRI assembly are a series of concentric thermal shields and a supercooled electromagnet immersed in a liquid helium vessel (a “cryostat”) that maintains a constant, extremely low temperature (4° Kelvin; -452° Fahrenheit) to achieve superconductivity. The Company manufactures large cryostats, various cryogenic interfaces, electrical feed-throughs and various other MRI components that are used to transfer power and/or cryogenic fluids from the exterior of the MRI unit to the various layers of the cryostat and superconducting magnet.

The Company currently sells all of its MRI cryostats to General Electric Company (“GE”), a leading worldwide manufacturer of MRI equipment.

Telemetry Products

The Company has developed this product line as a new business model that focuses primarily on providing distribution routing data to distributors of home health care oxygen and beverage carbon dioxide (“CO₂”). The Company expects this business will expand into other areas of liquid distribution, such as micro-bulk industrial gases, as the product gains market visibility. The routing data provided has proven to lower distribution costs and make the supply of liquid oxygen and liquid CO₂ more competitive than the existing modes of supply. The Company pursues this opportunity through its CoolTel^® (“CoolTel”) business unit.

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Distribution and Storage Segment

Representing 46 percent of the Company’s sales in 2002, the products supplied by the Distribution and Storage segment are driven primarily by the large and growing installed base of users of cryogenic liquids as well as new applications and distribution technologies for cryogenic liquids. The Company’s products span the entire spectrum of the industrial gas market from small customers requiring cryogenic packaged gases to large users requiring custom engineered cryogenic storage systems and include the following:

Cryogenic Bulk Storage Systems

The Company is a leading supplier of cryogenic bulk storage systems of various sizes ranging from 500 gallons to 100,000 gallons. Using sophisticated vacuum insulation systems placed between inner and outer vessels, these bulk storage systems are able to store and transport liquefied industrial gases and hydrocarbon gases at temperatures from -100° Fahrenheit to temperatures nearing absolute zero. The Company has experienced growth in its bulk storage systems sales as the demand for liquefied industrial gases and liquefied hydrocarbon gases has increased. End use customers for the Company’s cryogenic storage tanks include industrial gas producers, chemical producers, manufacturers of electrical components and businesses in the oil and natural gas industries. Prices for the Company’s cryogenic bulk storage systems range from $20,000 to $500,000. Global industrial gas producers, including Air Liquide, Air Products and BOC, are the principal customers for the Company’s cryogenic bulk storage systems. Additionally, in the North American market industrial gas distributors such as Airgas are significant customers. On a worldwide basis, the Company competes primarily with Harsco in this product area. In the European and Asian markets, the Company competes with several suppliers owned by global industrial gas producers.

Cryogenic Packaged Gas Systems

The Company is a leading supplier of cryogenic packaged gas systems of various sizes ranging from 160 liters to 1,500 liters. Cryogenic liquid cylinders are used extensively in the packaged gas industry to allow smaller quantities of liquid to be easily delivered to the customers of the industrial gas distributors on a full-for-empty basis. Principal customers for the Company’s liquid cylinders are the same global industrial gas producers and the North American industrial gas distributors who purchase the Company’s cryogenic bulk storage systems. The Company competes on a worldwide basis primarily with Harsco in this product area. The Company has developed two new technologies in the packaged gas product area: ORCA^® Micro-Bulk systems and Tri-fecta^® Laser Gas assist systems. ORCA^® Micro-Bulk systems bring the ease of use and distribution economics of bulk gas supply to customers formerly supplied by high pressure or cryogenic liquid cylinders. The ORCA^® Micro-Bulk system growth has exceeded Company expectations and is the substantial market leader in this growing segment. The Tri-fecta^® Laser Gas assist system was developed to meet the “assist gas” performance requirements for new high powered lasers being used in the metal fabrication industry. Growth of this product has also exceeded Company expectations.

Cryogenic Systems and Components

The Company’s line of cryogenic components, including vacuum-insulated pipe 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 suppliers of cryogenic components, including Cryogenic Industries, CCI and Acme Cryogenics.

Beverage Liquid CO₂ Systems

This product line consists primarily of vacuum-insulated, bulk liquid CO₂ containers used for beverage carbonation in restaurants, convenience stores and cinemas, in sizes ranging from 100 pounds to 600 pounds of liquid CO₂ storage. The Company also manufactures and markets non-insulated, bulk flavored syrup containers

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for side-by-side installation with its CO₂ systems. The Company’s beverage systems are sold to food franchisers, soft drink companies and CO₂ distributors. The Company’s primary competitors for its bulk liquid CO₂ beverage delivery systems are producers of high-pressure gaseous CO₂ systems and sellers of bulk liquid CO₂ beverage systems.

The Company has also begun to market cryogenic and non-cryogenic nitrogen dispensing systems to be used in conjunction with the Company’s beverage liquid CO₂ systems for the dispensing of draught beer. These mixed gas dispense systems serve a major share of the beverage market in the United Kingdom, and the Company is leading the market penetration of these systems in North America.

Cryogenic Services

The Company operates three locations providing installation, service and maintenance of cryogenic products including storage tanks, liquid cylinders, cryogenic trailers, cryogenic pumps and vacuum-insulated pipe.

Energy and Chemicals Segment

The Company’s principal products within the Energy and Chemicals segment, which accounted for 31 percent of sales in 2002, are focused on the process equipment, primarily heat exchangers, coldboxes and LNG fuel systems, used by the major natural gas, petrochemical processing and industrial gas companies in the production of their products.

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 hydrocarbon processing industries, heat exchangers allow producers to obtain purified hydrocarbon by-products, such as methane, ethane, propane and ethylene, which are commercially marketable for various industrial or residential uses. 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. Heat exchangers are customized to the customer’s requirements and range in price from approximately $30,000 for a relatively simple unit to as high as $10 million for a major project.

Management anticipates the return of demand for its heat exchangers in 2003, resulting substantially from increased activity in the petrochemical and natural gas segments of the hydrocarbon processing market. In particular, management believes that continuing efforts by petroleum producing countries to make better use of stranded natural gas and previously flared gases, as well as efforts to broaden their industrial base, present a promising source of demand for the Company’s heat exchangers and cold box systems. Demand for heat exchangers in developed countries is expected to continue as firms upgrade their facilities for greater efficiency and regulatory compliance. Historic demand for heat exchangers has cycled to very low levels and typically recovered to new peak requirements. To more effectively balance the Company’s production capacity with worldwide demand, the Company now operates only one heat exchanger facility, located in the United States. The Company closed its heat exchanger manufacturing facility in Wolverhampton, United Kingdom, in the first quarter of 2003.

The Company’s principal competitors for heat exchangers are Linde, Sumitomo, Kobe and Nordon. Management believes that the Company is the only producer of large brazed aluminum heat exchangers in the United States and is the leader in the global heat exchanger market. Major customers for the Company’s heat exchangers in the industrial gas market include Air Liquide, Air Products, Linde/BOC, MG Industries and Praxair. In the hydrocarbon processing market, major customers include BP Amoco/Arco, Exxon/Mobil, Chevron/Texaco, Conoco/Phillips and contractors such as ABB Lummus, Bechtel and Kellogg, Brown and Root.

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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 significantly reduce 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, where the gases are 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 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 Linde, Air Products and many smaller fabrication-only facilities around the world. Principal customers for the Company’s cold boxes include Air Liquide, ABB Lummus, BP Amoco/Arco, Bechtel, Lurgi, Stone and Webster, and Kellogg, Brown and Root.

LNG Alternative Fuel Systems

This product line consists of vacuum-insulated containers for LNG storage, cryogenic pumps and liquid dispensers for vehicle fueling systems and LNG and liquid/compressed natural gas (“LCNG”) refueling systems for centrally fueled fleets of vehicles powered by natural gas, such as fleets operated by metropolitan transportation authorities, refuse haulers and heavy-duty truck fleets. Competition for LNG fueling and storage systems is based primarily on product design, customer support and service, dependability and price. Although there are alternatives to LNG as a fuel, the Company is not aware of any viable alternatives to vacuum-insulated containers for LNG fueling and storage systems. The Company pursues this opportunity through its NexGen Fueling^® (“NexGen”) business unit.

Stainless Steel Tubing

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.

Market Overview

The Company serves a wide variety of markets through its emphasis on providing equipment for end-users of cryogenic liquids. These markets include beverage bottling and dispensing, alternative transportation fuels, biomedical research, medical test equipment, home healthcare and electronics testing, to name just a few. With such a wide variety of markets, the Company has reduced the effect that fluctuations in the overall industrial gas and hydrocarbon markets have on its profitability.

Despite its cyclicality, 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 2002, approximately 33 percent of the Company’s sales were destined for use at job sites outside the United States

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compared to 34 percent in 2001 and 33 percent in 2000. Further information about the Company’s international business is found in Note A to the Company’s consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.

The industrial gas market is the largest market served by the Company. 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 gases. Cryogenic tanks and components, including pumps, valves and piping, are also used to store, transport and distribute liquid gases to end users.

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, ethane, propane and butane, and by-products such as helium, all of 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.

Engineering and Product Development

The Company’s engineering and product development activities are focused on developing new and improved solutions and equipment for the users of cryogenic liquids. The Company’s engineering, technical and marketing employees actively assist customers in specifying their needs and in determining appropriate products to meet those needs. Portions of the Company’s engineering expenditures typically are charged to customers, either as separate items or as components of product cost.

Competition

Management believes the Company can compete effectively 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 and manufacturing capabilities required in a timely and cost-efficient manner. Contracts are usually awarded on a competitive bid basis. Quality, technical expertise and timeliness of delivery are the principal competitive factors within the industry. Price and terms of sale are also important competitive factors. 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 each of the markets it serves.

Marketing

The Company markets its products and services throughout the world primarily through 161 direct sales personnel and through independent sales representatives and distributors. The technical and custom design nature of the Company’s products requires a professional, highly trained sales force. While each salesperson and sales representative is expected to develop a highly specialized knowledge of one product or group of products within a segment of the Company, each salesperson and certain sales representatives are now able to sell many products from different segments to a single market. The Company uses independent sales representatives and distributors to market its products and services in certain foreign countries that the Company serves and in certain North American markets. 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 commissions 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 by segment for the last three fiscal years.

During 2002, the Biomedical segment continued its recent annual trend of increasing order performance primarily fueled by strong demand for MRI and medical products. The Company expects the strong medical products demand to continue throughout 2003, even though the Biomedical backlog is at its lowest level in the past three years. Orders in the Distribution and Storage segment significantly decreased in 2002 compared with 2001 due to the continued worldwide slowdown experienced by the manufacturing sectors of the industrialized world and the further reductions in capital expenditures in the consolidating global industrial gas industry. The Energy and Chemicals segment showed a significant increase in orders in 2002 after a cyclical order low in 2001. Strengthening of the worldwide hydrocarbon market, as evidenced by the large order received in 2002 from Bechtel for additional phases of the Trinidad LNG project, led this resurgence in orders. The Company expects this trend in demand to continue in 2003.

During 2001, the Biomedical segment continued with very strong order performance in each of its product lines. The Distribution and Storage segment experienced a reduction in orders across its product portfolio in 2001 compared with 2000 due to the worldwide slowdown experienced by the manufacturing sectors of the industrialized world and a slowdown in cryogenic systems mainly for the electronics industry. The Energy and Chemicals segment returned to a cyclical order low in 2001 after being buoyed in 2000 by several orders related to the Trinidad LNG project.

Almost all of the Company’s December 31, 2002 backlog is scheduled to be recognized as sales during 2003. 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 backlog will be recognized as sales. The increased focus within the Company on the Biomedical and Distribution and Storage segments will generally reduce backlog, as products within these segments tend to have shorter lead times than those in the Energy and Chemicals segment.

Customers

Sales to the Company’s top ten customers accounted for 41 percent of consolidated sales in 2002. The Company’s sales to particular customers fluctuate from period to period. In 2002, approximately 33 percent of sales were destined to be used in foreign countries. The Company’s customers are spread across the industrial

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gas, hydrocarbon and chemical processing industries in several countries. The Company’s management has established certain credit requirements that its customers must meet before sales credit is extended. The Company monitors the financial condition of its customers to help ensure collections and to minimize losses. For certain domestic and foreign customers, the Company requires customer advances, letters of credit and other such guarantees of payment. Certain customers require the Company to issue letters of credit or performance bonds, particularly in instances where customer advances are involved, as a condition of placing the order. The Company believes its relationships with its customers are generally good, but have been strained by the Company’s current leverage situation and the delays in successfully completing a restructuring of the Company’s senior debt.

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.

Raw Materials and Suppliers

The Company manufactures most of the products it sells. The raw materials used in manufacturing include aluminum sheets, bars, plate and piping, stainless steel strip, heads, plate, piping, valves and gauges, palladium oxide, carbon steel heads and plate and nine percent nickel steel heads and plate. Most raw materials are available from multiple sources of supply. In March 2002, the United States Government instituted various levels of tariffs on certain imported steel products, which would have had the impact of increasing the manufactured cost of certain of the Company’s Distribution and Storage segment bulk storage tanks by between 8 percent and 18 percent due to the Company’s use of nine percent nickel steel plate. Nine percent nickel steel plate was subsequently granted an exclusion from the tariffs in June 2002, and the Company did not experience cost increases.

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

Employees

As of December 31, 2002, the Company had 2,022 employees, including 1,407 domestic employees and 615 international employees. These employees consisted of 631 salaried, 432 union hourly and 959 non-union hourly employees. The salaried employees included 112 engineers and draft-persons and 519 other professional, technical and clerical personnel.

The Company is a party to three collective bargaining agreements through its operating subsidiaries. The agreement with the International Association of Machinists and Aerospace Workers covering 160 employees at the Company’s La Crosse, Wisconsin heat exchanger facility expires February 3, 2004. The agreement with the International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers and Helpers covering 66 employees at the Company’s Plaistow, New Hampshire facility expires August 31, 2003. The agreement with the United Steel Workers covering 206 employees at the Company’s New Prague, Minnesota facility expires January 15, 2006. 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.

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. These regulations impose limitations on the discharge of pollutants into the soil, air and water,

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

The Company is involved with environmental compliance, investigation, monitoring and remediation activities at certain of its operating facilities, and, except for these continuing remediation efforts, believes it is currently in substantial compliance with all known environmental regulations. The Company accrues for certain environmental remediation-related activities for which commitments or remediation plans have been developed and for which costs can be reasonably estimated. These estimates are determined based upon currently available facts regarding each facility. Actual costs incurred may vary from these estimates due to the inherent uncertainties involved. Future expenditures relating to these environmental remediation efforts are expected to be made over the next ten years as ongoing costs of remediation programs. 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. The Company believes that any additional liability in excess of amounts accrued which may result from the resolution of such matters will not have a material adverse effect on the Company’s financial position, liquidity, cash flows or results of operations.

Available Information

The Company’s Internet website address is www.chart-ind.com. The Company makes available free of charge on www.chart-ind.com its annual, quarterly and current reports, proxy statements and other documents as soon as reasonably practical after the Company electronically files such material with, or furnishes it to, the SEC. However, the information found on the Company’s website is not part of this or any other report. The public may read and copy any material that the Company files with the SEC at the SEC’s Public Reference Room located at 450 Fifth Street, NW, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Additionally, the SEC maintains a website, www.sec.gov, that contains all reports, proxy statements and other information filed by the Company with the SEC.

ITEM 2.    PROPERTIES

The Company occupies 29 principal facilities totaling approximately 2.1 million square feet, with the majority devoted to manufacturing, assembly and storage. Of these manufacturing facilities, approximately 1.7 million square feet are owned and 0.4 million square feet are occupied under operating leases. The Company considers its manufacturing facilities more than sufficient to meet its current and planned operational needs. The Company leases approximately 11,400 square feet for part of its corporate offices in Cleveland, Ohio. The Company’s owned facilities in the United States are subject to mortgages securing the Company’s consolidated credit and revolving loan facility.

As further described in Note D to the Company’s consolidated financial statements included in Item 8 of this Annual Report on Form 10-K, as a result of its operational restructuring activities, the Company has closed its Biomedical segment warehouse and sales office in Solingen, Germany, its Distribution and Storage manufacturing facilities in Denver, Colorado, Columbus, Ohio and Costa Mesa, California and its Energy and Chemicals manufacturing facility in Wolverhampton, United Kingdom. The Company has fully provided for all remaining lease obligations related to the leased facilities in this category as part of its employee separation and plant closure costs and is attempting to buy out the leases at reduced terms and/or find sub-lease tenants to improve cash flow related to these facilities. The Company is currently attempting to sell its Wolverhampton, United Kingdom facility. The proceeds of such sale will most likely be used to satisfy obligations of the Company’s insolvent United Kingdom subsidiary, which is more fully described in “Item 3. Legal Proceedings.”

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The following table sets forth certain information about the Company’s facilities:

ITEM 3.     LEGAL PROCEEDINGS

The Company has been named as a defendant in several similar civil cases pending related to an accident occurring on December 7, 2000 at a nursing home outside Dayton, Ohio. A nitrogen tank was connected to the nursing home’s oxygen system resulting in the immediate death of four elderly patients and injuries to three additional patients from inhaling the nitrogen. The seven claims originally filed against the Company in these cases include negligence, strict product liability, failure to warn, negligence per se, breach of warranty, punitive damages, wrongful death, loss of consortium and negligent infliction of emotional distress. The allegations underlying the claims include defective or deficient manufacture, construction, design, labeling, formulation and warnings with regard to a cylinder. Certain co-defendants were criminally indicted in this matter. The Company, however, has not been so indicted. The court originally granted stays in all of these cases pending the outcome of the criminal charges. The trial in the criminal matter of the State of Ohio vs. BOC Gases, et al., was heard in May 2002. The trial lasted three days and resulted in a directed verdict in favor of the defendants. A second criminal trial, State of Ohio vs. I.H.S. Carriage-by-the-Lake, concluded in October 2002. I.H.S. Carriage-by-the-Lake, Inc. (“IHS”) plead guilty to four counts of involuntary manslaughter. IHS was fined $60,000 and ordered to undergo a three-year court-ordered operational change. The Company has been dismissed from three of the civil cases. The

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four remaining plaintiffs, however, have advised that they intend to pursue discovery before considering dismissal of claims against the Company. The plaintiffs in the remaining four open cases are seeking, in total, $15.0 million in compensatory damages, $15.0 million in punitive damages, $2.0 million for loss of consortium damages, prejudgment and post-judgment interest and costs and fees from the Company and other defendants named in the claims. These four remaining cases have been settled with the other defendants. While the Company is open to the possibility of good faith settlement negotiations, the Company is vigorously defending all of these cases and has filed its answer, denied all liability and cross-claimed for contribution from certain co-defendants. Additionally, the Company believes that the claims made against it are the most tenuous of any defendant.

In March 2003, the Company completed the closure of its Wolverhampton, United Kingdom manufacturing facility, operated by Chart Heat Exchangers Limited (“CHEL”), and all future heat exchanger manufacturing will be conducted by the Company’s LaCrosse, Wisconsin facility. On March 28, 2003, CHEL filed for a voluntary administration under the U.K. Insolvency Act 1986. CHEL’s application for voluntary administration was approved on April 1, 2003 and an administrator was appointed. CHEL’s net pension plan obligations have increased significantly, primarily due to a decline in plan asset values and interest rates, resulting in an estimated plan deficit of approximately $12 million. Based on the Company’s present financial condition, it has determined not to advance funds at this time to CHEL in amounts necessary to fund CHEL’s obligations. CHEL does not have the necessary funds to enable it to fund its net pension plan deficit, pay remaining severance due to former employees or pay other creditors. As a result, the trustees of the CHEL pension plan terminated this plan in April 2003. At the present time, the Company is unable to determine the impact on its 2003 pension expense or cash funding requirements for the April 1, 2003 approval of insolvency administration for CHEL and the related termination of the Company’s United Kingdom pension plan. The Company can provide no assurance that claims will not be asserted against the Company for these obligations of CHEL. To the extent the Company has significant liability with respect to CHEL’s obligations as a result of CHEL’s insolvency, such liability would have a material adverse impact on the Company’s liquidity and its financial position.

The Company is a party to other legal proceedings incidental to the normal course of its business. Based on the Company’s historical experience in litigating these actions, as well as the Company’s current assessment of the underlying merits of the actions and applicable insurance, management believes that the final resolution of these matters will not have a material adverse affect on the Company’s financial position, liquidity, cash flows or results of operations.

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

Not applicable.

Executive Officers of the Registrant

Certain information as of March 31, 2003 regarding each of the Company’s executive officers is set forth below:

Arthur S. Holmes has been Chairman and Chief Executive Officer of the Company since its formation in June 1992, and reassumed the title of President in July 2002 upon elimination of the position of Chief Operating Officer. Mr. Holmes served as President of ALTEC International, Inc. from 1985 through 1989. From 1978 through 1985, he served in a variety of managerial capacities for Koch Process Systems, Inc., the predecessor of Process Systems International, Inc., an operating unit of the Company, 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. Mr. Holmes holds a BS and an MS in Chemical Engineering from the Pennsylvania State University and an MBA from Northeastern University.

Michael F. Biehl has been the Chief Financial Officer and Treasurer of the Company since July 2001. Prior to joining the Company, Mr. Biehl served as Vice President, Finance and Treasurer at Oglebay Norton Company,

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a publicly held company that provides industrial minerals to a broad range of industries. He joined Oglebay Norton in 1992 as Corporate Controller, was promoted to Treasurer and Director of Finance in 1994 and to Vice President, Finance in 1998. Prior to joining Oglebay Norton, he worked in the audit practice of Ernst & Young, LLP in Cleveland, Ohio from 1978 to 1992. Mr. Biehl, a Certified Public Accountant, holds a BBA in Accounting from Ohio University and an MBA from Northwestern University’s Kellogg Graduate School of Management.

Charles R. Lovett has been Vice President of Manufacturing for the Company since October 2002. Mr. Lovett has served in various roles with the Company and its predecessors since 1978, including Vice President, Manufacturing, Koch Process Systems, Inc. until 1988, Vice President, Operations, AMW Industries until January 1991, President, Process Systems International, Inc. until 1994, President, Process Engineering, Inc. until 1999, and Vice President, Operations, Ferox a.s. in the Czech Republic. Mr. Lovett holds a Bachelors degree in Mechanical Engineering Technology from the University of Dayton.

PART II

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

Quarterly Stock Prices and Dividends

The high and low sales prices for the Company’s Common Stock reported on the New York Stock Exchange for each quarterly period within the most recent two years are set forth in the table below:

The Company did not pay any dividends in 2002 or 2001.

Limitations on the Payment of Dividends

The Company is permitted to pay cash dividends not exceeding $7.2 million in any fiscal year, but only if at both the time of payment of the dividend and immediately thereafter there is no event of default under the Credit Facility.

Related Stockholder Matters

Prior to April 4, 2003, Chart Industries common stock was traded on the New York Stock Exchange (“NYSE”) under the symbol “CTI.” The Company was notified on April 4, 2003 that its common stock was being immediately suspended from trading on the NYSE and that the delisting of the Company’s common stock from the NYSE is pending the completion of applicable procedures, including any appeal by the Company, due to the Company’s inability to meet the NYSE continued listing criteria. Subsequent to this date, Chart Industries common stock has been traded on the over-the-counter market pink sheets under the symbol “CTIT.” The Company is currently seeking an additional trading venue for its common stock.

Shareholders of record on March 31, 2003 numbered 1,706. The Company estimates that an additional 5,000 shareholders own stock held for their accounts at brokerage firms and financial institutions.

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ITEM 6.    SELECTED FINANCIAL DATA

The following table sets forth selected financial data of the Company for each of the five years in the period ended December 31, 2002. The data was derived from the annual audited consolidated financial statements of the Company for the relevant years and includes the operations of acquired businesses after their date of acquisition, including for periods after April 12, 1999, the operations of MVE Holdings, Inc. (“MVE”).

SELECTED FINANCIAL DATA

(Dollars in thousands, except per share amounts)

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General

The markets the Company serves did not experience the recovery in 2002 that the Company was expecting. Sales in the Distribution and Storage segment decreased 25 percent from 2001 levels, reflecting the continued economic slowdown in the consolidating global industrial gas industry. Energy and Chemicals segment sales, although slightly up from 2001, did not experience the originally projected improvement in the industrial gas markets of its business. Sales in the Biomedical segment in 2002 represented the only sizable increase compared with 2001, increasing by 17 percent.

As a result of the continued weakness in the Company’s core markets, its high debt level and management’s dissatisfaction with overall operating performance and shareholder returns, the Company undertook a significant operational restructuring in 2002. The Company closed several manufacturing facilities that were operating well below capacity and consolidated production in remaining manufacturing facilities in an effort to eliminate fixed costs. The Company flattened out its organizational structure by eliminating the separate office of the President and by consolidating its various businesses into three distinct operational groups, each reporting directly to the Chief Executive Officer. The Company also reviewed its sales and administrative personnel ranks and made many reductions in headcount to generate additional savings. The Company’s management believes these operational restructuring efforts, which will continue in 2003, will position the Company for significant improvements in operating performance and enable the Company to better weather future downturns in its markets.

In addition to the operational restructuring activities undertaken by the Company, during 2002 management focused substantial effort on identifying a long-term solution to improving the Company’s financial condition and reducing its leverage. These efforts included discussions with potential equity investors (two of which performed substantial due diligence), negotiating with the Company’s senior lenders for a restructuring of the Company’s senior debt and considering the sales of several non-core assets. Management of the Company is extremely disappointed that it was unable to solve the Company’s leverage situation prior to December 31, 2002, but remains committed to achieving a long-term solution in 2003.

The completion of planned manufacturing consolidations and operational restructuring activities in the first half of 2003 should position the Company for improved operating performance. Finally, expected resolution of the Company’s debt restructuring in 2003 should remove the aura of uncertainty that characterized the Company’s financial situation in 2002.

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Operating Results

The following table sets forth the percentage relationship that each line item in the Company’s consolidated statements of operations represents to sales in the last three fiscal years.

Segment Information

The following table sets forth sales, gross profit and gross profit margin for the Company’s three operating segments for the last three fiscal years.

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Years Ended December 31, 2002 and 2001

Sales for 2002 were $296.3 million versus $328.0 million for 2001, a decrease of $31.7 million, or 9.7 percent. A significant decrease of $44.3 million in Distribution and Storage segment sales, primarily driven by lower volume resulting from the continued economic slowdown experienced in 2002 in the industrial sectors of the worldwide economy, was slightly offset by sales growth in the Biomedical and Energy and Chemicals segments of $9.7 million and $2.9 million, respectively.

The Biomedical segment sales increase was largely driven by a $4.7 million increase in sales of medical oxygen products and biological storage systems, combined with an increase of $5.0 million in MRI cryostat components. Sales in the Distribution and Storage segment decreased significantly in 2002 when compared to 2001, with declines of $25.2 million and $12.3 million in cryogenic bulk storage systems and cryogenic systems and components, respectively, combined with a decrease of $7.2 million in cryogenic packaged gas systems and beverage liquid CO₂ systems. The Energy and Chemicals segment sales, while improving slightly compared with 2001, still reflect the significant and extended downturn in new production equipment for the industrial gas market. Heat exchanger and cold box system sales, the largest product lines within this segment, increased $5.2 million from 2001 driven by volume and price increases in the hydrocarbon processing market, while stainless steel tubing sales declined $2.6 million from 2001. Sales of LNG fueling systems, still a relatively new product line for the Company, were flat in 2002 when compared with 2001.

Gross profit for 2002 was $76.3 million versus $86.4 million for 2001. Gross profit margin decreased slightly, from 26.3 percent in 2001 to 25.8 percent in 2002, although the changes by operating segment varied. The Biomedical segment 2002 gross profit margin increased two points compared with 2001 primarily due to the inclusion in 2001 of a non-cash inventory valuation charge of $1.9 million included in cost of sales for the write-down to fair value of inventory related to a product line that was sold by the Company. Gross profit margin in the Distribution and Storage segment in 2002 declined approximately two points when compared with 2001 primarily due to lower manufacturing volume in the cryogenic bulk storage systems and cryogenic systems and components product lines. In spite of higher volumes in the heat exchanger and cold box product lines, the Energy and Chemicals segment experienced a one point gross profit margin decline in 2002 due to the lower prices on highly competitive projects and the inclusion in 2002 of a non-cash inventory valuation charge of $0.6 million included in cost of sales for the write-down to fair value of inventory at the Company’s Wolverhampton, United Kingdom facility.

In March 2002, the United States Government instituted various levels of tariffs on certain imported steel products, which would have had the impact of increasing the manufactured cost of certain of the Company’s Distribution and Storage segment cryogenic bulk storage tanks by between 8 percent and 18 percent due to the Company’s use of nine percent nickel steel plate. Nine percent nickel steel plate was subsequently granted an exclusion from the tariffs in June 2002, and the Company did not experience cost increases in this area.

Selling, general and administrative (“SG&A”) expense for 2002 was $68.0 million versus $58.6 million for 2001, an increase of $9.4 million, or 16.0 percent. As a percentage of sales, SG&A expense was 22.9 percent for 2002, up from 17.8 percent for 2001. In 2002 the Company recorded $4.9 million, or 1.7 percent of sales, of professional expenses related to its efforts to restructure its senior debt, compared with $0.3 million, or 0.1 percent of sales, in 2001. The Company also recorded $3.7 million of environmental remediation expense in 2002, or 1.2 percent of sales, as the Company increased its reserve for potential environmental remediation activities based upon the results of a recently completed Phase II environmental review in connection with a business the Company is considering selling. Additionally, overall increases in medical and workers’ compensation costs in 2002 added an additional $0.8 million of SG&A expense when compared with 2001.

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Due to the Company’s adoption of SFAS No. 142, “Goodwill and Other Intangible Assets,” in the first quarter of 2002, the Company is no longer recording goodwill amortization. In 2001, the Company recorded goodwill amortization expense of $5.0 million. During the second quarter of 2002, the Company completed the transitional impairment tests of SFAS No. 142 and determined that the fair value of each reporting unit exceeded the carrying value, including goodwill, of such reporting unit as of January 1, 2002. As such, the Company was not required to record a cumulative effect charge as of January 1, 2002 for the adoption of SFAS No. 142.

The Company performed its annual impairment test of goodwill as of October 1, 2002 using discounted cash flow techniques and values of comparable businesses. These tests resulted in the fair value of the Company’s Distribution and Storage reporting unit being less than its carrying value including goodwill, which caused the Company to advance to step two of SFAS No. 142 and engage a valuation specialist to provide valuations of the Distribution and Storage reporting unit’s tangible and identifiable intangible assets. Although those procedures confirmed the value of the reporting unit’s tangible assets exceeded their carrying value, goodwill of the Distribution and Storage reporting unit was determined to be impaired. As a result, in 2002 the Company recorded a non-cash impairment charge of $92.4 million, or $3.69 per diluted share, to write off non-deductible goodwill. This non-cash charge was due to the combination of a reduction in the overall estimated enterprise value of the Company, attributable to Chart’s leverage situation and recent financial performance, and a reduction in the specific estimated value of the Distribution and Storage reporting unit, caused by the worldwide slowdown experienced by the manufacturing sectors of the industrialized world, reductions in capital expenditures in the consolidating global industrial gas industry, and a lowering of expectations for future performance of this segment for these same reasons. Goodwill comprised 27.7 percent and 41.1 percent of total assets as December 31, 2002 and 2001, respectively, and arose primarily from the Company’s acquisition of MVE in 1999.

In response to the continued weakness of the Company’s core markets and its poor overall operating performance, in 2002 the Company embarked on an aggressive manufacturing facility reduction plan designed to consolidate excess capacity and reduce overall operating costs. The first step of this plan was the closure of the Company’s Denver, Colorado Distribution and Storage segment manufacturing facility, which was substantially completed during the second quarter of 2002. The second step in this plan, announced in July 2002, was the closure of the Company’s Distribution and Storage segment manufacturing facilities in Costa Mesa, California and Columbus, Ohio. The Costa Mesa plant closure was finalized in the fourth quarter of 2002, and the Columbus plant closure was completed in the first quarter of 2003. The third step of this plan, announced in December 2002, was the closure of the Company’s Energy and Chemicals segment manufacturing facility in Wolverhampton, United Kingdom. Closure of this plant was completed in the first quarter of 2003, with a sale of the land and buildings at this site possibly occurring in the second half of 2003. In addition to these plant closures, during 2002 the Company reduced headcount in many SG&A departments throughout the Company. The Company is considering the closure of up to two more manufacturing facilities. If completed, these closures will result in further employee separation and plant closure costs and may put some negative short-term pressure on sales. The recoupment of closure expenses from operational improvements related to the closure of these two additional facilities is expected to take approximately one year.

During 2002, the Company recorded employee separation and plant closure costs of $13.9 million related to the manufacturing facility reduction efforts and overall headcount reduction programs described above. The total charges included $6.8 million for lease termination and other facility-related closure costs, $4.2 million for severance and other benefits related to terminating certain employees at these and other sites and $2.9 million of actuarially determined pension expense related to the curtailment of the Wolverhampton, United Kingdom defined benefit pension plan. Additionally, in 2002 the Company recorded non-cash inventory valuation charges of $1.5 million included in cost of sales for the write-off of inventory at these sites. At December 31, 2002, the Company had a reserve of $8.8 million remaining for the closure of these facilities, primarily for lease termination and severance costs. A table summarizing the employee separation and plant closure costs recorded by the Company in 2002 and the remaining reserve for each facility is located in Note D of the Company’s consolidated financial statements.

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During 2001, the Company recorded employee separation and plant closure costs of $2.4 million. The total charges included $1.6 million related to the closure of the Company’s Ottawa Lake, Michigan facility and two smaller sites within the cryogenic services business of the Distribution and Storage segment, $0.4 million for terminating 25 employees at the Company’s Wolverhampton, United Kingdom, heat exchanger manufacturing facility and $0.4 million for terminating 45 other employees throughout the Company. The cryogenic services business charges of $1.6 million included $0.5 million for lease termination and facility-related closure costs, $0.6 million for writing off certain leasehold improvements and fixed assets, $0.1 million for terminating 32 employees, and $0.4 million for moving costs and other charges. At December 31, 2001, the Company had a reserve of $0.5 million remaining, primarily for lease termination costs.

The Company recorded $0.4 million of equity income in its Coastal Fabrication joint venture in 2002, compared with equity income of $0.5 million in 2001. The Company also received a $0.5 million cash dividend distribution from the joint venture in 2002.

The Company sold its cryogenic pump product line in 2002 for net proceeds of $2.3 million and recorded a gain of $1.4 million in other income. The Company sold its minority interest in Restaurant Technologies Inc. for net proceeds of $2.4 million in 2001, resulting in a gain of $0.5 million in other income.

Net interest expense for 2002 was $17.6 million compared with $21.6 million for 2001, reflecting lower overall interest rates. The Company manages its interest rate risk exposure through the use of interest rate collars on a portion of the term debt and to a lesser extent by varying LIBOR maturities in the entire Credit Facility. These agreements are generally described as collars and result in putting a cap on the base LIBOR interest rate at approximately 7.0 percent and a floor at approximately 5.0 percent on certain portions of the Company’s floating rate term debt. The Company’s interest rate collars do not qualify as hedges under the provisions of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” The Statement requires such collars to be recorded in the consolidated balance sheet at fair value. Changes in their fair value must be recorded in the consolidated statement of operations. Accordingly, the Company recorded a cumulative effect of a change in accounting principle, net of income taxes, as an adjustment to operations as of January 1, 2001. An interest rate collar covering $76.0 million of the Company’s debt expired and was settled on June 28, 2002. The Company’s remaining interest rate collar covering $29.8 million of debt expires on March 31, 2006. The fair value of the contract related to the collar outstanding at December 31, 2002 is a liability of $2.1 million and is recorded in accrued interest. The change in fair value of the contracts related to the collars during 2002 and 2001 of $1.6 million and $2.9 million, respectively, is recorded in derivative contracts valuation expense.

The Company recorded $1.1 million and $0.1 million of foreign currency remeasurement loss in 2002 and 2001, respectively. These foreign currency remeasurement losses result from certain of the Company’s subsidiaries entering into transactions in currencies other than their functional currency.

The Company recorded income tax expense of $11.1 million and $0.4 million, respectively, in 2002 and 2001. The expected income tax benefit on the Company’s 2002 pre-tax loss is completely offset by a charge of $32.6 million to increase the valuation allowance to fully reserve all of the Company’s net deferred tax assets resulting from the Company’s performance, its cumulative tax loss position and management’s assessment that it is more likely than not that the net deferred tax assets will not be realized. Although these net deferred tax assets have been fully reserved, they are still available to be utilized by the Company to offset income taxes payable should the Company generate sufficient taxable income in the future.

As a result of the foregoing, the Company incurred a net loss of $130.8 million in 2002, compared with a net loss of $5.2 million in 2001.

Years Ended December 31, 2001 and 2000

Sales for 2001 were $328.0 million versus $325.7 million for 2000, an increase of $2.3 million, or 0.7 percent. With minimal price changes in 2001, the increase in sales was primarily volume driven and resulted from sales growth in the Biomedical and Energy and Chemicals segments of $4.4 million and $10.3 million, respectively, offset by a $12.4 million decrease in Distribution and Storage segment sales.

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The Biomedical segment sales increase was largely driven by a $4.5 million increase in medical oxygen product shipments and $3.8 million in biological storage systems shipments, offset by a $3.7 million decline in MRI cryostat components. Sales by the Distribution and Storage segment were significantly impacted by the general economic slowdown in the second half of 2001. Declines of $4.3 million and $8.4 million in standard tanks and packaged gas liquid cylinders, respectively, more than offset the increased number of ORCA^® Micro-Bulk delivery systems and other mobile equipment sold. Sales of cryogenic systems and components also declined $4.8 million in 2001. The Energy and Chemicals segment sales, which improved slightly in 2001, reflected the significant and extended downturn in new production equipment for the industrial gas market. A $5.7 million increase in heat exchanger and cold box systems sales, combined with a $5.6 million increase in LNG alternative fuel system sales, drove the increase in this segment.

Gross profit for 2001 was $86.4 million versus $96.0 million for 2000. Gross profit was negatively impacted by non-cash inventory valuation charges included in cost of sales of $1.9 million in the Biomedical segment and $0.7 million in the Distribution and Storage segment related to the Company’s decisions to exit a product line and close certain cryogenic services business sites. Gross profit margin for 2001 was 26.3 percent versus 29.5 percent for 2000. The Biomedical segment 2001 gross profit margin decreased three percentage points compared with 2000 due to the non-cash inventory valuation charge for exiting a product line. Gross profit margin in the Distribution and Storage segment in 2001 declined when compared with 2000 primarily due to lower manufacturing volume in the cryogenic bulk and packaged gas areas. The Energy and Chemicals segment experienced declining margins in 2001 due to the lower prices on highly competitive projects, which were only partially offset by the impact of increased volume in this segment.

SG&A expense for 2001 was $58.6 million versus $59.5 million for 2000, a decrease of $0.9 million, or 1.5 percent. As a percentage of sales, SG&A expense was 17.8 percent for 2001, down from 18.2 percent for 2000. The decreases in both total SG&A expense and SG&A expense as a percentage of sales largely reflect the headcount reduction efforts of the Company during the year.

Goodwill amortization expense for 2001 was $5.0 million compared with $4.9 million for 2000. Goodwill comprised 41.1 percent and 40.3 percent of total assets at December 31, 2001 and 2000, respectively, and arose primarily from the Company’s acquisition of MVE in 1999. The Company applied the new rules on accounting for goodwill and other intangible assets under SFAS No. 141 “Business Combinations,” and SFAS No. 142, “Goodwill and Other Intangible Assets,” effective January 1, 2002. Under the new rules, goodwill and intangible assets deemed to have indefinite lives are no longer amortized but are subject to impairment tests in accordance with SFAS No. 142.

During 2001, the Company recorded employee separation and plant closure costs of $2.4 million. The charges included $1.6 million related to the closure of the Ottawa Lake, Michigan facility and two smaller sites within the cryogenic services business of the Distribution and Storage segment, $0.4 million for terminating 25 employees at the Company’s Wolverhampton, United Kingdom, heat exchangers manufacturing facility of the Energy and Chemicals segment and $0.4 million for terminating 45 other employees throughout the Company. The cryogenic services business charges of $1.6 million included $0.5 million for lease termination and facility-related closure costs, $0.6 million for writing off certain leasehold improvements and fixed assets, $0.1 million for terminating 32 employees, and $0.4 million for moving costs and other charges. At December 31, 2001, the Company had a reserve of $0.5 million remaining, primarily for lease termination costs.

The Company recorded $0.5 million of equity income in its Coastal Fabrication joint venture in 2001, compared with equity income of $0.04 million in 2000. The joint venture did not make any cash distributions to the Company or the other joint venture partner in 2001 or 2000.

In 2001, the Company recorded a $0.5 million gain on the sale of its minority investment in Restaurant Technologies, Inc. for cash proceeds of $2.4 million.

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Net interest expense for 2001 was $21.6 million compared with $26.7 million for 2000, reflecting lower interest rates due to decreases by the Federal Reserve in base interest rates. The Company recorded a charge to operations as of January 1, 2001 as a cumulative effect of a change in accounting principle, net of income taxes, for the adoption of SFAS No. 133. As a result of the significant interest rate decreases and an expectation that the forward interest rate yield curve would remain flat, the Company was required to record non-cash charges of $2.9 million in 2001 related to an estimated decline in fair value of the Company’s interest rate collars. There were no comparable non-cash charges in 2000. The fair value of the interest rate collars is determined by the expectation of future interest rates and is, therefore, difficult to predict. The liability relating to the collars of $2.3 million was recorded by the Company in accrued interest in the consolidated balance sheet at December 31, 2001, and represented the estimated payments to be made over the life of the collars.

The effective income tax rate for 2001 reflects the interaction of a book loss and taxable income, which was primarily the result of non-deductible goodwill amortization. The Company had net deferred tax assets of $15.1 million at December 31, 2001.

As a result of the foregoing, the Company incurred a net loss of $5.2 million in 2001, compared with net income of $2.2 million in 2000.

Liquidity and Capital Resources

Cash provided by operations in 2002 was $8.9 million compared with $13.3 million and $14.6 million provided in 2001 and 2000, respectively. The Company’s 2002 operating cash flow resulted primarily from the receipt of an income tax refund of $9.3 million, due to the new tax law allowing a five-year carry-back of net operating losses, as the Company managed its normal working capital requirements to an approximately neutral position in 2002. In 2001 the Company generated cash flow from positive cash earnings as well as reductions in both inventory and accounts receivable. In 2000, the Company increased inventory in several of its short lead-time items to service increasing sales volumes and to reduce orders lost due to backlog. If orders recover in the Energy and Chemicals segment and grow in the other segments as expected by the Company, there could be large fluctuations in operating cash flows depending on negotiated payment terms with customers.

Capital expenditures in 2002, 2001 and 2000 were $3.0 million, $8.1 million and $5.6 million, respectively. The Company limited its capital expenditures in 2002 to a maintenance level in order to conserve cash. The Company’s 2001 capital expenditures relate primarily to the Distribution and Storage segment, where new equipment was necessary as a result of the Company’s reorganization plan initiated in 1999. The Company expects capital expenditures in 2003 to be similar in magnitude to the 2002 amount.

In order to finance the acquisition of MVE, in March 1999 the Company negotiated a consolidated credit and revolving loan facility (the “Credit Facility”), which originally provided for term loans of up to $250.0 million and a revolving credit line of $50.0 million, which may also be used for the issuance of letters of credit. Due to scheduled reductions in the commitment amount, at December 31, 2002 the Credit Facility provides a revolving credit line of $49.0 million. The Credit Facility provides a secured interest in substantially all of the assets of the Company to the agent bank as representative of the senior lenders. The Company entered into the Series 1 Incremental Revolving Credit Facility in November 2000 and the Series 2 Incremental Revolving Credit Facility in April 2001 (collectively, the “Incremental Credit Facility”), which originally provided a revolving credit line of $10.0 million in addition to the credit line available under the Credit Facility. Due to scheduled reductions in the commitment amount, at December 31, 2002 the Incremental Credit Facility provides a revolving credit line of $9.8 million. Borrowings on the Incremental Credit Facility are secured by the same collateral as the Credit Facility. The Incremental Credit Facility expires on April 30, 2003. At December 31, 2002, the Company had borrowings of $213.7 million outstanding under the term loan portion of the Credit Facility, borrowings of $33.4 million outstanding under the revolving credit portion of the Credit Facility, borrowings of $9.8 million outstanding under the Incremental Credit Facility and letters of credit outstanding and bank guarantees totaling $15.1 million supported by the Credit Facility, leaving only $0.5 million of availability under the respective facilities.

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As of December 31, 2002, the Company was in default under its Credit Facility and its Incremental Credit Facility due to violations of financial covenants more fully described in Note C to the Company’s consolidated financial statements. Following December 31, 2002, the Company also was in default under the Credit Facility as a result of its failure to make principal payments when due and the insolvency of CHEL. The Company’s senior lenders amended the Credit Facility and Incremental Credit Facility in April 2003 to waive all defaults existing at December 31, 2002 and through April 30, 2003 and to defer until April 30, 2003 $6.5 million in scheduled term debt amortization and $9.8 million in Incremental Credit Facility amortization originally due on March 31, 2003. In addition, the amendment requires the Company to reach agreement with its senior lenders on the final terms of a debt restructuring by April 30, 2003. If a negotiated term sheet can be reached by April 30, 2003, the waiver of defaults and deferral of debt payments will be extended until June 30, 2003. The amendment also grants approval for certain small asset sales, the proceeds of which will be used to fund senior debt interest payments, restructuring related activities and working capital requirements. Receipt of this amendment prevents the Company from classifying its debt outstanding under its Credit Facility and Incremental Credit Facility totaling $256.9 million as “in default” on its consolidated balance sheet as of December 31, 2002. Since the waiver of defaults does not extend until January 1, 2004, this debt is classified as a current liability as of December 31, 2002.

Throughout 2002 the Company had been actively pursuing several alternatives to improve its financial condition and reduce its leverage, including a substantial equity investment in the Company and a restructuring of the Company’s debt outstanding with its senior lenders. In the fourth quarter of 2002, the Company commenced negotiations with its senior lenders regarding such a restructuring and negotiations continue. Although the terms of such restructuring remain under negotiation, the Company expects this restructuring will result in an exchange of a portion of such debt for a substantial equity ownership position in the Company and substantial dilution of current shareholders’ ownership interests in the Company. The Company can give no assurance that it will be able to consummate such a restructuring transaction or otherwise renegotiate its debt outstanding under the Credit Facility or Incremental Credit Facility. If the Company is unable to do so, it may be required to pursue other restructuring alternatives. These alternatives could have a material adverse effect on the Company’s financial position, liquidity, cash flows or results of operations. The consolidated financial statements do not include any adjustments to the amounts or classifications of assets or liabilities to reflect this uncertainty.

The Credit Facility was amended in August 1999, October 2000, October 2001 and December 2001 at costs to the Company of $1.2 million, $1.0 million and $0.8 million in 1999, 2000 and 2001, respectively. The Credit Facility and Incremental Credit Facility were subsequently amended in March 2002 (the “March 2002 Amendments”) at a cost of approximately $1.9 million to modify certain covenants until March 31, 2003, to defer $25.7 million of Term A and Term B amortization payments from scheduled payment dates in 2002 to 2005 and to extend the Incremental Credit Facility to March 31, 2003. The March 2002 Amendments resulted in an increase in interest rates of 0.25 percent, the addition of one financial covenant and scheduled reductions in the commitment amounts of the revolving credit lines of the Credit Facility and the Incremental Credit Facility.

The March 2002 Amendments called for the Company to prepay borrowings under the Credit Facility and Incremental Credit Facility in an aggregate amount of at least $75.0 million (“Minimum Prepayment Amount”) from the net proceeds of an equity investment, sale of assets and other sources of new capital. The March 2002 Amendments also called for the Company’s interest rates to increase by 0.25 percent if the Minimum Prepayment Amount was not achieved by September 30, 2002, and by an additional 0.25 percent each quarter thereafter that the Minimum Prepayment Amount was not made through March 31, 2003.

The March 2002 Amendments also provided for the issuance of market-priced warrants to the lenders for the purchase of two percent of the Company’s common stock at June 28, 2002. Accordingly, the Company was obligated to issue to its lenders at June 28, 2002 warrants to purchase, in the aggregate, 513,559 shares of Chart common stock at an exercise price of $2.425 per share. These warrants were valued at $0.7 million and are being amortized to financing costs amortization expense over the remaining term of the Company’s Credit Facility, which expires in March 2006. In addition, the March 2002 Amendments provided for the issuance of market-

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priced warrants to the lenders for the purchase of an additional five percent and three percent of the Company’s common stock if the Minimum Prepayment Amount was not made by September 30 or December 31, 2002, respectively. The Company did not achieve the Minimum Prepayment Amount at September 30, 2002 or December 31, 2002. Accordingly, the Company was obligated to issue to its lenders at September 30, 2002 and December 31, 2002 warrants to purchase, in the aggregate, 1,353,531 and 773,133 shares of Chart common stock at an exercise price of $0.898 and $0.75 per share, respectively. The September 30, 2002 and December 31, 2002 warrants have been valued at $1.2 million and $0.4 million, respectively, and will be amortized to financing costs amortization expense over the remaining term of the Company’s Credit Facility. All of these warrants are exercisable for a period of ten years from the respective dates of issuance.

The Credit Facility, as modified by the March 2002 Amendments, contains certain covenants and conditions which impose limitations on the Company and its operating units, including meeting certain financial tests and the quarterly maintenance of certain financial ratios on a consolidated basis such as: minimum net worth, maximum leverage, minimum pre-tax interest coverage ratio, minimum fixed charge coverage ratio and minimum earnings before interest, taxes, depreciation, amortization and restructuring charges. As of December 31, 2002, the Company was in default under its Credit Facility and Incremental Credit Facility due to violations of financial covenants, but received a waiver of such defaults at December 31, 2002 and through April 30, 2003, with the possibility of the waiver being extended to June 30, 2003 as previously discussed. The Company is permitted to pay cash dividends not exceeding $7.2 million in any fiscal year, but only if at both the time of payment of the dividend and immediately thereafter there is no event of default under the Credit Facility.

The Company’s contractual obligations as of December 31, 2002 are as follows:

The Company’s commercial commitments as of December 31, 2002, which include letters of credit and bank guarantees, represent potential cash outflows resulting from contingent events that require performance by the Company or its subsidiaries pursuant to funding commitments, and are as follows:

Consistent with previously announced plans, in March 2003, the Company completed the closure of its Wolverhampton, United Kingdom manufacturing facility, operated by Chart Heat Exchangers Limited (“CHEL”), and all future heat exchanger manufacturing will be conducted by the Company’s LaCrosse, Wisconsin facility. On March 28, 2003, CHEL filed for a voluntary administration under the U.K. Insolvency Act 1986. CHEL’s application for voluntary administration was approved on April 1, 2003 and an administrator was appointed. CHEL’s net pension plan obligations have increased significantly, primarily due to a decline in plan asset values and interest rates, resulting in an estimated plan deficit of approximately $12 million. Based on the Company’s present financial condition, it has determined not to advance funds at this time to CHEL in amounts necessary to fund CHEL’s obligations. CHEL does not have the necessary funds to enable it to fund its

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net pension plan deficit, pay remaining severance due to former employees or pay other creditors. As a result, the trustees of the CHEL pension plan terminated this plan in April 2003. At the present time, the Company is unable to determine the impact on its 2003 pension expense or cash funding requirements for the April 1, 2003 approval of insolvency administration for CHEL and the related termination of the Company’s United Kingdom pension plan. The Company can provide no assurance that claims will not be asserted against the Company for these obligations of CHEL. To the extent the Company has significant liability with respect to CHEL’s obligations as a result of CHEL’s insolvency, such liability would have a material adverse impact on the Company’s liquidity and its financial position.

In November 1996, the Board of Directors authorized a program to repurchase 2,250,000 shares of the Company’s common stock. The amount and timing of any 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 2002, 2001 and 2000, the Company acquired 130,400, 50,000, and 37,200 shares, respectively, under the program to provide shares of common stock for use in making the Company’s employer match contribution under its defined contribution pension plan. As of December 31, 2002, 127,067 shares remain available for repurchase under the program.

The Company did not pay any dividends in 2002, 2001 or 2000. Any future declarations of dividends are at the sole discretion of the Company’s Board of Directors, subject to the conditions of the Credit Facility. No assurance can be given as to whether dividends will be declared in the future, and if declared, the amount and timing of such dividends.

The Company was notified in the fourth quarter of 2002 by the New York Stock Exchange (“NYSE”) that its common stock was below the NYSE’s criteria for continued listing because the average closing price of its stock over a consecutive 30-trading-day period before notification was less than $1.00. At December 31, 2002, the Company has a shareholders’ deficit of $81.6 million, which is below the NYSE’s continued listing criteria pertaining to shareholders’ equity, which requires a minimum of $50.0 million shareholders’ equity given Chart’s recent market capitalization. The Company was notified on April 4, 2003 that its common stock was being immediately suspended from trading on the NYSE and that the delisting of the Company’s common stock is pending the completion of applicable procedures, including any appeal by the Company, due to failure to maintain these listing requirements. Subsequent to this date, the Company’s common stock has been traded on the over-the-counter market pink sheets. The Company is currently seeking an additional trading venue for its common stock.

Contingencies

The Company is involved with environmental compliance, investigation, monitoring and remediation activities at certain of its operating facilities, and accrues for these activities when commitments or remediation plans have been developed and when costs can be reasonably estimated. Historical annual cash expenditures for these activities have been less than $0.5 million, and have been charged against the related environmental reserves. Future expenditures relating to these environmental remediation efforts are expected to be made over the next ten years as ongoing costs of remediation programs. The Company believes that any additional liability in excess of amounts accrued which may result from the resolution of such matters will not have a material adverse effect on the Company’s financial position, liquidity, cash flows or results of operations.

The Company has been named as a defendant in several similar cases pending related to an accident occurring on December 7, 2000 at a nursing home outside Dayton, Ohio. Additionally, as previously mentioned, CHEL filed for a voluntary administration under the U.K. Insolvency Act of 1986. It is uncertain whether the Company will be subject to any significant liability resulting from CHEL’s insolvency administration. These proceedings are more fully described in “Item 3. Legal Proceedings.”

The Company, like other manufacturers, is occasionally subject to various legal actions related to performance under contracts, product liability and other matters, several of which actions claim substantial

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damages, in the ordinary course of its business. Based on the Company’s historical experience in litigating these actions, as well as the Company’s current assessment of the underlying merits of the actions and applicable insurance, the Company believes the resolution of these legal actions will not have a material adverse effect on the Company’s financial position, liquidity, cash flows or results of operations.

Foreign Operations

During 2002, the Company had operations in Australia, China, the Czech Republic, Germany and the United Kingdom, which accounted for 17 percent of consolidated revenues and 22 percent of total assets at December 31, 2002. Functional currencies used by these operations include the Australian Dollar, the Chinese Renminbi Yuan, the Czech Koruna, the Euro and the British Pound. The Company is exposed to foreign currency exchange risk as a result of transactions by these subsidiaries in currencies other than their functional currencies, and from transactions by the Company’s domestic operations in currencies other than the U.S. Dollar. The majority of these functional currencies and the other currencies in which the Company records transactions are fairly stable. The use of these currencies, combined with the use of foreign currency forward purchase and sale contracts, has enabled the Company to be sheltered from significant gains or losses resulting from foreign currency transactions. This situation could change if these currencies experience significant fluctuations in their value as compared to the U.S. Dollar.

Application of Critical Accounting Policies

The Company’s consolidated financial statements are based on the selection and application of significant accounting policies, which require management to make estimates and assumptions. The Company, after discussion with members of the Company’s audit committee, believes the following are some of the more critical judgmental areas in the application of its accounting policies that affect its financial position and results of operations.

Allowance for Doubtful Accounts:    The Company evaluates the collectibility of accounts receivable based on a combination of factors. In circumstances where the Company is aware of a specific customer’s inability to meet its financial obligations (e.g., bankruptcy filings, substantial downgrading of credit scores), a specific reserve is recorded to reduce the receivable to the amount the Company believes will be collected. For all other customers, the Company records allowances for doubtful accounts based on the length of time the receivables are past due and historical experience. If circumstances change (e.g., higher-than-expected defaults or an unexpected material adverse change in a customer’s ability to meet its financial obligations), the Company’s estimates of the collectibility of amounts due could be reduced by a material amount.

Inventory Valuation Reserves:    The Company values its inventory based on a combination of factors. In circumstances where the Company is aware of a specific problem in the valuation of a certain item, a specific reserve is recorded to reduce the item to its net realizable value. For all other inventory, the Company recognizes reserves based on the actual usage in recent history and projected usage in the near-term. If circumstances change (e.g., lower-than-expected usage), estimates of the net realizable value could be reduced by a material amount.

Goodwill and Indefinite Lived Intangibles:    As a result of the adoption of SFAS No. 142, the Company evaluates goodwill and indefinite lived intangible assets for impairment on an annual basis. To test for impairment, the Company is required to estimate the fair market value of each of its reporting units. Using management’s judgment, the Company developed a model to estimate the fair market value of its reporting units. This fair market value model incorporates the Company’s estimates of future cash flows, estimates of allocations of certain assets and cash flows among reporting units, estimates of future growth rates and management’s judgment regarding the applicable discount rates to use to discount those estimated cash flows. Changes to these judgments and estimates could result in a significantly different estimate of the fair market value of the reporting units, which could result in a different assessment of the recoverability of goodwill and indefinite lived intangible assets.

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Deferred Tax Assets:    As of December 31, 2002, the Company has a net deferred tax liability of $1.7 million resulting from gross deferred tax assets of $46.3 million, offset by a valuation allowance of $38.2 million and deferred tax liabilities of $9.7 million. These deferred tax assets and liabilities relate principally to various accruals and reserves and loss carryforwards. The realization of these assets is based upon estimates of future taxable income. In preparing estimates of future taxable income, the Company has used the same assumptions and projections utilized in its internal forecasts. Based on these projections, its cumulative tax loss position and management’s assessment, the Company believes that it is more likely than not that the net deferred tax assets will not be realized. Accordingly, the Company established a full valuation allowance against net deferred tax assets that would not be offset by taxable income generated by deferred tax liabilities. Estimates of future earnings are based on management’s expectations and beliefs concerning future events 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.

Pensions:    The Company accounts for its defined benefit pension plans in accordance with SFAS No. 87, “Employers’ Accounting for Pensions,” which requires that amounts recognized in financial statements be determined on an actuarial basis. The Company’s funding policy is to contribute at least the minimum funding amounts required by law. SFAS No. 87 and the policies used by the Company, notably the use of a calculated value of plan assets (which is further described below), generally reduce the volatility of pension expense from changes in pension liability discount rates and the performance of the pension plans’ assets.

A significant element in determining the Company’s pension expense in accordance with SFAS No. 87 is the expected return on plan assets. The Company has assumed that the expected long-term rate of return on plan assets as of December 31, 2002 will be 8.75 percent for the United States plans and 6.75 percent for the United Kingdom plan. These expected return assumptions were developed using a simple averaging formula based upon the United States plans’ and United Kingdom plan’s respective investment guidelines and the historical returns of equities and bonds as indicated by the SEC in their 2002 study on average annual returns for the United States plans and by the actuary for the United Kingdom plan. Over the long term, the investment strategy employed with the Company’s pension plan assets has earned in excess of such rates; therefore, the Company believes its assumptions are reasonable. The assumed long-term rate of return on assets is applied to the market value of plan assets. This produces the expected return on plan assets that is included in pension expense. The difference between this expected return and the actual return on plan assets is deferred. The net deferral of past asset gains or losses affects the calculated value of plan assets and, ultimately, future pension expense. The plan assets have earned a rate of return substantially less than the assumed rates in the last two years. Should this trend continue, future pension expense will likely increase.

At the end of each year, the Company determines the rate to be used to discount plan liabilities. The discount rate reflects the current rate at which the pension liabilities could be effectively settled at the end of the year. In estimating this rate, the Company looks to rates of return on high quality, fixed-income investments that receive one of the two highest ratings given by a recognized rating agency. At December 31, 2002, the Company determined this rate to be 6.75 percent for the United States plans and 5.75 percent for the United Kingdom plan. Changes in discount rates over the past three years have not materially affected pension expense, and the net effect of changes in the discount rate, as well as the net effect of other changes in actuarial assumptions and experience, have been deferred as allowed by SFAS No. 87.

At December 31, 2002, the Company’s consolidated net pension liability recognized was $3.1 million, a slight decrease from $3.2 million at December 31, 2001. The decrease was principally due to significant reductions in the number of plan participants based upon the facility closures and other terminations made throughout the Company. For the year ended December 31, 2002, the Company recognized consolidated pretax pension expense of $4.8 million, up from $0.9 million in 2001. The increase in 2002 pension expense is primarily due to the Company recognizing $2.9 million of expense related to the curtailment of the United Kingdom plan resulting from the termination of substantially all of the plan participants, and due to the lower return on plan assets and discount rates when compared to 2001. The Company currently expects that pension expense for its United States plans in 2003 will be at approximately the same level as 2002. At the present time, the Company is

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unable to determine the impact on its 2003 pension expense for the April 1, 2003 approval of insolvency administration for its CHEL subsidiary and the related termination of the Company’s United Kingdom pension plan.

Environmental Remediation obligations:    The Company’s obligations for known environmental problems at its current and former manufacturing facilities have been recognized based on estimates of the cost of investigation and remediation at each site. If the estimate can only be estimated as a range of possible amounts, with no specific amount being most likely, the minimum of the range is accrued. Management reviews its environmental remediation sites quarterly to determine if additional cost adjustments or disclosures are required. The characteristics of environmental remediation obligations, where information concerning the nature and extent of clean-up activities is not immediately available and changes in regulatory requirements frequently occur, result in a significant risk of increase to the obligations as they mature. Expected future expenditures are not discounted to present value. Potential insurance recoveries are not recognized until realized.

Product Warranty Costs:    The Company estimates product warranty costs and accrues for these costs as products are sold. Estimates are principally based upon historical product warranty claims experience over the warranty period for each product line. Due to the uncertainty and potential volatility of these warranty estimates, changes in assumptions could materially affect net income.

Revenue Recognition—Long-Term Contracts:    The Company recognizes revenue and profit as work on long-term contracts progresses using the percentage of completion method of accounting, which relies on estimates of total expected contract revenues and costs. The Company follows this method since reasonably dependable estimates of the revenue and costs applicable to various stages of a contract can be made. Since the financial reporting of these contracts depends on estimates, which are assessed continually during the term of the contract, recognized revenues and profit are subject to revisions as the contract progresses toward completion. Revisions in profit estimates are reflected in the period in which the facts that give rise to the revision become known. Accordingly, favorable changes in estimates result in additional profit recognition, and unfavorable changes in estimates result in the reversal of previously recognized revenue and profits. When estimates indicate a loss is expected to be incurred under a contract, cost of sales is charged with a provision for such loss. As work progresses under a loss contract, revenue and cost of sales continue to be recognized in equal amounts, and the excess of costs over revenues is charged to the contract loss reserve.

Debt Covenants:    The Company’s Credit Facility requires it to maintain certain financial ratios and a minimum level of net worth as discussed in Liquidity and Capital Resources and in Note C to the consolidated financial statements. The Company’s results of operations for the year ended December 31, 2002 would not have been in compliance with the financial covenants of the Credit Facility. Accordingly, the Company negotiated amendments in the first quarter of 2003 that waived such non-compliance at December 31, 2002 and through April 30, 2003. This waiver may be extended through June 30, 2003 if a term sheet for a restructuring of the Company’s senior debt can be negotiated with the senior lenders by April 30, 2003. If results of operations erode further or the Company is unable to obtain future amendments or waivers from its lenders, then the Company would be in default under the Credit Facility and the lenders could accelerate debt obligations so that all debt obligations outstanding under the Credit Facility and Incremental Credit Facility would be immediately due and payable. Expectations of future operating results and continued compliance with debt covenants cannot be assured and the lenders’ actions are not under the control of the Company. If projections of future operating results are not achieved and debt is placed in default, the Company would experience a material adverse impact on its reported financial position and results of operations.

Recently Issued Accounting Standards

In August 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations” which amends SFAS No. 19, “Financial Accounting and Reporting by Oil and Gas Producing Companies,” and is effective for all companies. This statement addresses the financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. The Company does not expect this statement to have a material impact on the Company’s financial position, liquidity, cash flows or results of operations.

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In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” which nullifies Emerging Issues Task Force Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002. The Company does not expect this statement to have a material impact on the Company’s financial position, liquidity, cash flows or results of operations.

In November 2002, the FASB issued Interpretation (“FIN”) No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” FIN No. 45 elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued, including product warranties. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and initial measurement provisions of FIN No. 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002 irrespective of the guarantor’s fiscal year end. The disclosure requirements in FIN No. 45 are effective for financial statements of interim or annual periods ending after December 15, 2002, and the Company has made the required disclosures in Note A of the consolidated financial statements. The Company does not expect this interpretation to have a material impact on the Company’s financial position, liquidity, cash flows or results of operations.

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure.” SFAS No. 148 amends the disclosure provisions of SFAS No. 123 and requires expanded and more prominent disclosure of the effects of an entity’s accounting policy with respect to stock-based employee compensation. The disclosure requirements in SFAS No. 148, which have been made in Note G to the consolidated financial statements, are effective for financial statements for fiscal years ending after December 15, 2002 and for financial reports containing condensed consolidated financial statements for interim periods beginning after December 15, 2002. The Company does not expect this statement to have a material impact on the Company’s financial position, liquidity, cash flows or results of operations.

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities.” FIN No. 46 provides guidance for identifying a controlling interest in a variable interest entity (“VIE”) established by means other than voting interests. FIN No. 46 also requires consolidation of a VIE by an enterprise that holds such a controlling interest. The effective date for FIN No. 46 will be July 1, 2003. The Company does not expect this interpretation to have a material impact on the Company’s financial position, liquidity, cash flows or results of operations.

Certain Factors That May Affect Future Results and Financial Condition

In addition to other information in this Annual Report on Form 10-K, the following factors could cause results and financial condition to differ materially from those anticipated or otherwise expressed or implied by forward-looking statements made in this Annual Report on Form 10-K and presented elsewhere by the Company’s management from time to time.

The Company’s Losses from Operations and Working Capital Deficiency Raise Substantial Doubt About its Ability to Continue as a Going Concern:    The Company incurred a net loss of $130.8 million in 2002. The independent auditor’s report to the Company for the year ended December 31, 2002 concludes that the Company’s working capital deficiency and shareholders’ deficit, among other factors, raise substantial doubt about the Company’s ability to continue as a going concern. The Company is currently engaged in negotiations with its senior lenders regarding a restructuring of its senior debt outstanding under its Credit Facility and Incremental Credit Facility. There can be no assurance, however, that the Company will be able to consummate a debt restructuring transaction or obtain additional capital from other sources on reasonable terms or at all. The inability of the Company to satisfactorily resolve these negotiations with its senior lenders and/or access other sources of capital on a timely basis could result in a liquidity crisis for the Company, and would have a material adverse impact on the Company’s financial condition. Such an event would leave the Company with

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substantially negative working capital and could result in the Company’s inability to operate as a going concern. If the Company is unable to continue as a going concern, the Company may file, or may be forced to file, bankruptcy or insolvency proceedings, or may pursue a sale of assets to satisfy creditors.

Satisfying Debt Covenants and Paying Down Debt Under the Credit Facility:    The Company’s Credit Facility requires it to maintain certain financial ratios and a minimum level of net worth as discussed in Liquidity and Capital Resources and Note C to the consolidated financial statements. The Company was not in compliance with the financial covenants of the Credit Facility at December 31, 2002. Accordingly, the Company negotiated an amendment as of April 2, 2003 that waives the violations at December 31, 2002 and through April 30, 2003. The Company’s expectations of future operating results indicate that it will not be able to remain in compliance with debt covenants and make required debt payments. Accordingly, the Company is seeking to reduce its leverage by restructuring the Credit Facility and Incremental Credit Facility as previously discussed. If the Company does not reach an agreement regarding such restructuring with its senior lenders by April 30, 2003, the Company will be in default under its Credit Facility. Upon default by the Company, the senior lenders could accelerate all debt obligations outstanding under the Credit Facility and Incremental Credit Facility, which would have a material adverse impact on the Company’s liquidity, its financial position and ability to continue as a going concern.

Recovery of Core Businesses, Negative Publicity and Current Economic Conditions:    Certain of the Company’s core businesses have been underperforming over the past few years. While the Company expects to see an upturn in 2003 in the various markets its underperforming core businesses serve, there can be no assurance that such an upturn will occur or that the businesses’ performance will be markedly improved in 2003. The publicity surrounding the Company’s financial condition and suspension of trading of its common stock on the NYSE could affect the Company’s reputation with its customers and suppliers, could cause the Company to lose potential orders for significant projects and could have a negative impact on the Company’s liquidity, financial condition and results of operations. Finally, current world economic and political conditions may reduce the willingness of the Company’s customers and prospective customers to commit funds to purchase its products and services.

Insolvency Proceeding of the Company’s Subsidiary:    On March 28, 2003, the Company’s CHEL subsidiary, which previously operated the closed Wolverhampton, United Kingdom manufacturing facility, filed for a voluntary administration under the U.K. Insolvency Act 1986. CHEL’s application for voluntary administration was approved on April 1, 2003 and an administrator was appointed. CHEL’s net pension plan obligations have increased significantly, primarily due to a decline in plan asset values and interest rates, resulting in an estimated plan deficit of approximately $12 million. Based on the Company’s present financial condition, it has determined not to advance funds at this time to CHEL in amounts necessary to fund CHEL’s obligations. CHEL does not have the necessary funds to enable it to fund its net pension plan deficit, pay remaining severance due to former employees or pay other creditors. As a result, the trustees of the CHEL pension plan terminated this plan in April 2003. The Company is unable to determine at this point whether it will have any liability with regard to CHEL’s net pension plan obligations or severance payments. To the extent the Company has significant liability with respect to CHEL’s obligations as a result of CHEL’s insolvency, such liability would have a material adverse impact on the Company’s liquidity and its financial position.

Ability to Qualify the Company’s Common Stockfor Trading in a National Trading Venue:    The Company was notified on April 4, 2003 that its common stock was being immediately suspended from trading on the NYSE and is subject to delisting pending the completion of applicable procedures, including any appeal by the Company, due to the Company’s inability to meet the NYSE continued listing criteria. Subsequent to this date, Chart Industries common stock has been traded on the over-the-counter market pink sheets under the symbol “CTIT.” The Company is currently seeking an additional trading venue for its common stock, although there can be no assurance that the Company will be able to meet applicable standards. The inability to trade in a national trading venue will make it difficult for the Company to raise funds through the sale of the Company’s securities. Additionally, the Company’s shareholders may have difficulty disposing of, or acquiring, the Company’s common stock which may negatively impact the market price for the shares.

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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. In some cases, forward-looking statements may be identified by terminology such as “may,” “will,” “should,” “expects,” “anticipates,” “believes,” “projects,” “forecasts,” “continue” or the negative of such terms or comparable terminology. 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 (including those described above under “Certain Factors That May Affect Future Results and Financial Condition”), could affect its future performance and liquidity of the Company’s common stock 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, political, business and market conditions and foreign currency fluctuations; (b) competition; (c) decreases in spending by its industrial customers; (d) the loss of a major customer or customers; (e) the effectiveness of operational changes expected to increase efficiency and productivity; (f) the ability of the Company to manage its fixed-price contract exposure; (g) the ability of the Company to pass on increases in raw material prices, including as a result of tariffs; (h) the Company’s relations with its employees; (i) the extent of product liability claims asserted against the Company; (j) variability in the Company’s operating results; (k) the ability of the Company to attract and retain key personnel; (l) the costs of compliance with environmental matters; (m) the ability of the Company to protect its proprietary information; (n) the ability of the Company to sell certain assets and/or access additional sources of capital; (o) the ability of the Company to qualify its common stock for trading in a national trading venue; (p) the ability of the Company to satisfy debt covenants, pay down its debt and restructure its debt arrangements; (q) the insolvency of CHEL and the commencement of its administration proceedings in the United Kingdom, including the potential liability of the Company with respect to CHEL’s obligations; and (r) the war in Iraq and the threat of terrorism and the impact of responses to that threat.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the normal course of business, the Company’s operations are exposed to continuing fluctuations in foreign currency values and interest rates that can affect the cost of operating and financing. Accordingly, the Company addresses a portion of these risks through a program of risk management.

The Company’s primary interest rate risk exposure results from the Credit Facility’s various floating rate pricing mechanisms. This interest rate exposure is managed by the use of interest rate collars on certain portions of the term debt and to a lesser extent by varying LIBOR maturities in the entire Credit Facility. The fair value of the contract related to the interest rate collar outstanding at December 31, 2002 is a liability of $2.1 million. If interest rates were to increase 200 basis points (2 percent) from December 31, 2002 rates, and assuming no changes in debt from the December 31, 2002 levels, the additional annual expense would be approximately $5.2 million on a pre-tax basis.

The Company has assets, liabilities and cash flows in foreign currencies creating foreign exchange risk, the primary foreign currencies being the British Pound, the Czech Koruna and the Euro. Monthly measurement, evaluation and forward exchange contracts are employed as methods to reduce this risk. The Company enters into foreign exchange forward contracts to hedge anticipated and firmly committed foreign currency transactions. The Company does not hedge foreign currency translation or foreign currency net assets or liabilities. The terms of the derivatives are one year or less. If the value of the U.S. dollar were to strengthen 10 percent relative to the currencies in which the Company has foreign exchange forward contracts at December 31, 2002, the result would be a loss in fair value of approximately $0.1 million.

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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, 2002 and 2001, and the related consolidated statements of operations, shareholders’ (deficit) equity and cash flows for each of the three years in the period ended December 31, 2002. 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 auditing standards generally accepted in the United States. 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, 2002 and 2001, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Notes A and C, the Company has a shareholders’ deficit and a working capital deficiency. In addition, the Company has received an amendment waiving violations of covenants under its debt and credit arrangements as of December 31, 2002 and through April 30, 2003, or conditionally through June 30, 2003. It is likely that the Company will be in violation of covenants under its debt and credit arrangements upon expiration of the waiver, and a new amendment or waiver to the Company’s debt and credit arrangements will need to be obtained in order for the debt not to be in default at May 1, 2003, or conditionally at July 1, 2003. These circumstances raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amount and classification of liabilities that may result from the outcome of this uncertainty.

As discussed in Note A to the consolidated financial statements, on January 1, 2002 and January 1, 2001, the Company changed its method of accounting for goodwill and derivative financial instruments, respectively.

/s/    ERNST & YOUNG LLP

Cleveland, Ohio

April 9, 2003

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CHART INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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

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CHART INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

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

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CHART INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ (DEFICIT) EQUITY

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

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CHART INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS