Chart Industries - Earnings Call - Q1 2020
April 23, 2020
Transcript
Operator (participant)
Good morning and welcome to the Chart Industries Inc 2020 first quarter conference call. All lines have been placed on mute to prevent background noise. After the speaker's remarks, there will be a question-and-answer session. The company supplemental presentation was issued earlier this morning. If you have not received a release, you may access it by visiting Chart's website at www.ChartIndustries.com. A telephone replay of today's broadcast will be available following the conclusion of the call until Thursday, April 30, 2020. The replay information is contained in the company's press release.
Before we begin, the company would like to remind you that statements made during this call that are not historical, in fact, are forward-looking statements. Please refer to the information regarding forward-looking statements and risk factors included in the company's earnings release and the latest filings with the SEC. The company undertakes no obligation to update publicly or revise any forward-looking statements. I will now turn the conference call over to Jill Evanko, Chart Industries CEO.
Jillian Evanko (CEO)
Thank you, Shannon. Good morning, everyone, and thank you for joining us today to go through our first quarter 2020 results and business update. Joining me today is Scott Merkle, our Chief Accounting Officer. You'll hear about our recent actions related to the COVID pandemic, the continued breadth of our order book, and an update on our views of 2020 given the uncertainty surrounding COVID-19 as we walk through our supplemental presentation released this morning. As you can see on slide three, our long-term strategy is unchanged even in these uncertain times. But right now, we are responding to the here-and-now impacts as well as preparing for continued uncertainty in our markets from the coronavirus. Starting on slide five, first and foremost is the safety of our team members, in particular, given the fact that our businesses are deemed essential.
We have as many team members as possible working remotely, yet we continue to have approximately 70% of our workforce that must be in our factories to manufacture critical care products. Therefore, we have taken the following measures, which are just a few examples, to ensure the safety of our team members: staggered start and end times of shift schedules to reduce interaction, broken lunches into rotating groups during the shifts, designated time clocks by department to reduce community touchpoints, enhanced personal protective equipment for all employees, enhanced cleaning in all facilities, and have two deep cleaning companies on call nearby each of our manufacturing locations around the world, designed and installed kick plates on doors for opening and closing without using your hands, and finally, we are providing assistance for our team members to stay safe, not just at work.
Beginning March 6, we suspended the employee portion of our Teladoc fees to support those in need of healthcare assistance while also reducing non-critical hospital and doctor's visits. Given our essential status by all governments in the locations where we operate, keeping our employees safe is critical, in particular, as we ramped production beginning in March for medical oxygen products to meet increasing demand. We were able to increase production by 50% in our Czech Republic facility, 63% in our Georgia location, and doubled in our Minnesota factory for these products. We did have a total of 40 non-working days across our locations in the first quarter, for which I will share the operational impacts on a coming slide. Additionally, our team did an exceptional job quickly achieving the ability to use dual certifications for U.S. product in Europe when the urgent European demand exceeded localized manufacturing lead times.
To receive this authority from the governing certifying bodies is quite an accomplishment, as it typically would take up to six months. As with all companies these days, non-essential travel in the company is on hold. Last year, we averaged $1.1 million of travel and expenses per month, and in March, we saved just under $1 million from those expenses. While these are temporary savings, they contribute to our bottom line until the world reopens. We are constantly assessing our manpower needs in relation to changing demand and are able to quickly adapt our variable cost structure. Since the beginning of the year, we have reduced our workforce by 13% over 600 full-time heads. These reductions have been a combination of direct labor in response to declining order rates, primarily in FinFans, as well as flattening the organization across all segments and corporate.
These reductions have resulted in $49 million of annualized cost savings, of which $12.4 million of the savings were from actions taken this week. We saw $2.2 million of savings in Q1 based on the timing of the early reductions and expect $34 million in the remainder of 2020. The largest reduction was in our E&C FinFans segment, for which annualized savings from the year-to-date reductions is $23.6 million. To give you a sense of the magnitude of the go-forward run rate, in December 2019, revenue per person per year in FinFans was $280,000. Coming out of March, that same metric is $450,000 per person per year. These reductions are in addition to Chart-wide savings generated by actions taken in 2019 and in addition to integration cost synergies. We will continue to be agile based on market demand and actively and responsibly manage through this crisis.
The 2019 savings are reflected in the first quarter 2020 gross margin and SG&A results. First quarter gross margin as a percent of sales increased 350 basis points sequentially over the fourth quarter of 2019 and 530 basis points over Q1 2019. Each segment's gross margin as a percent of sales increased both sequentially and year-over-year, with the exception of E&C FinFans. SG&A, when normalized for one-time costs, primarily severance, was $49.3 million for the first quarter of 2020 and included $2.9 million of share-based compensation expense, which only is significant each year in the first quarter. We expect SG&A to continue to decrease further in 2020 as a result of the cost reduction activities we've taken year-to-date. As we publicly stated on March 20, we quickly worked with our lender group to amend our net leverage ratio bank covenant for what we referred to as just-in-case scenarios.
While we did not nor do not anticipate hitting even the prior covenant cap, we felt it was prudent to get ahead of any extreme downside case given the uncertainty of the coronavirus impacts. Flipping to slide six, you can see that we successfully completed the amendment process on April 20. Previously, the net leverage ratio covenant stepped down to 3.5x September 30, 2020. Our new covenant holds at 4.25x through 2020 and does not step down to 3.5x until the end of 2021. It is also worth pointing out that our pricing grid is unchanged up to our prior covenant level, which we do not expect to exceed. Once above 3.5x, there is a new pricing tier as shown in the left-hand corner of the slide. Finally, very little of our existing debt matures until 2024, inclusive of our convertible notes, revolver, and term loan.
Our current net leverage ratio is 3.1, and our cash on hand is $89 million as of March 31st. Given our balance sheet, the recent covenant amendment, and our cost reduction actions, we do not currently foresee using the CARES Act. As I indicated, Chart Business has been considered essential manufacturing at every one of our production sites, not just at the seven locations where we manufacture critical care equipment. In the United States, the transportation of medical supplies and equipment related to the testing, diagnosis, and treatment of COVID-19 is considered essential, as are all manufacturers, warehouse operators, or distributors of medical gases and manufacturers of energy infrastructure per the Department of Homeland Security. The same exceptions and approvals have been granted in our Indian and European locations, including in one of the hardest-hit COVID countries, Italy.
Yet we did have days where we were unable to produce in the first quarter as we either waited for the approval of our essential status or there was a mandatory government shutdown, as was the case in China. We lost a total of 40 production days in the first quarter across our locations, with 26 of those being in our Chinese facilities in late January and early February. We were 100% operational in China as of mid-February. We do not estimate lost revenue from these 40 days, but rather revenue that pushed out of Q1 to later in 2020. The total revenue pushed out of the first quarter because of coronavirus shutdowns was $7.5 million, with $3 million of that in China. So what does critical care products for medical applications really mean with respect to Chart's production?
By way of background on slide eight, medical oxygen supplied to hospitals must meet regulatory standards to be 99.99% pure and medically certified by the FDA in the United States or to European Pharmacopoeia standards in Europe. This oxygen is either trucked in liquid form to the hospital that has specialized storage tanks that feed it into the hospital or is compressed into metal cylinders of varying capacities. Our products for these applications range from MicroBulk Storage Systems to liquid cylinders to mobile delivery systems to bulk tanks used as the primary source of oxygen in hospitals. Our MicroBulk Storage Systems provide liquid oxygen storage for respiratory applications and can be used for the mandatory 24-hour backup supply of liquid oxygen to a hospital's primary bulk tank. Our Perma-Cyl units are pallet-based and can be installed very quickly on any surface, which are perfect for field hospitals.
Ideal for pop-up medical facilities are our medical skids as well as our mobile options. Liquid cylinders can be used to remotely fill liquid oxygen systems in home healthcare and nursing homes as well as being manifolded together to supply oxygen in a field hospital. Our cryobiological shippers can be used for the storage and transport of biological samples, including viruses, and recently, we sold multiple units for the research of a treatment for COVID-19. The CDC has shared that up to 64% of critically ill patients treated for COVID have received high-flow oxygen therapy. In both Europe and the U.S., there are over 45 million cylinders in use. However, only 15%-20% of these cylinders are currently certified for medical oxygen service, and as mentioned already, not only are our cylinders certified, we received permission to produce dual-coded products, which can be used in both regions.
Products that we manufacture that can be used in medical applications run about 20% of total Chart revenue. This was 21% for the full year 2019, with just under 10% of that in the United States, 7.5% in Europe, and slightly above 4% in Asia. Our customers, the industrial and medical gas suppliers, have reported a rise in recent weeks in demand for medical oxygen of three to five-fold in both cylinder and liquid form. In places like Italy and Spain, hospitals saw oxygen consumption rates as much as 10x normal levels. Turning to slide nine, our known medical oxygen-specific orders increased 34% compared to the first quarter of 2019 and 29% compared to Q4 2019. You can see each region's order increases in the middle of slide nine.
As we have entered the second quarter, demand in this area has increased further, in particular in both North and South America, where order levels month-to-date are higher than the entire first quarter for medical oxygen kits specifically. For example, in the past week, we've received $2.6 million of orders for medical-ready shippers for one customer that is responding to the COVID situation in Mexico. Through yesterday, April month-to-date orders for these applications are at 39% of the entire first quarter related orders. We expect these types of orders to return to pre-COVID levels later in 2020. We thank our employees who have ramped up production on our critical care products.
There is not enough time on this call to share all of the stories of lifesaving efforts to expedite products to hospitals, pop-up medical facilities, and other healthcare locations, but you can see some of them highlighted on this slide. Let me share one additional story. On a recent Friday afternoon at 12:15 P.M., the Chart commercial team received a call that three main tanks at hospitals in the New York City area failed. While the reason is unknown, there is industry assumption that they overdrew the oxygen system and it shut down supply. By 3:00 P.M. that same afternoon, we were able to have 20 Dura-Cyl on a dedicated truck, which I'm sure you know isn't easy to find given the supply chain challenges of late, that arrived on site the very next afternoon.
Our operations team stayed all Friday evening to load the truck, and it typically wouldn't be a headline news story. We hope that these 20 units help save 50-70 people's lives. For our cryobiological products, the first quarter started slowly, in particular with the shutdown in China. As impacts from COVID-19 began happening in late February and early March, orders dramatically increased, with total first quarter orders of just under $21 million, a 14% increase over the first quarter of 2019. The demand increase is driven both directly and indirectly by COVID. As mentioned, with China reopened, there has been increased activity from biobanks in the region. We have sold our cryobio products to many institutions for COVID research.
As elective surgeries are delayed, we have sold freezers to companies that need to store biological inventory for longer periods of time so those valuable assets do not perish. Flipping to slide 10, it makes me proud to share that while we continue to serve our customer needs, our employees have banded together to identify hospitals and healthcare providers in our local communities to donate personal protective gear from our safety stock. To date, we have donated thousands of N95 industrial masks to hospitals in each community that we live and work in. We thank those working to keep people safe through this crisis. Let's move from the COVID discussion to our medium and long-term fundamentals, market dynamics, and recent demand trends starting on slide 12.
We continue to see long-term strength in the fundamentals of our markets, in particular the transition to clean energy and the needed infrastructure associated with that. Many have asked about whether carbon emissions reductions targets that were so important before this global pandemic will exist going forward. From what we hear, this will be even more top of mind coming out of this crisis, ranging from global leaders seeing more need for energy independence given the recent oil price impacts and that there will be a focus on actions that can be achieved by 2030 versus the longer 2050 timeline. Even during the recent shutdown, the Indian Parliament approved an increase in the excise duty on gasoline and diesel, which will help protect their transition to natural gas.
Backlog of $733 million is flat to the first quarter of 2019, which included $135 million of Venture Global Calcasieu Pass big LNG orders. As of the end of the first quarter of 2020, there was $93 million of Calcasieu Pass backlog remaining, which is expected to be recognized as revenue fairly evenly over the next four quarters. When removing that, backlog increased 7% year-over-year, as shown on slide 13. In D&S West, first quarter backlog of $151 million is the highest in the history of the business, up 19% over the first quarter of 2019. D&S East backlog of $221 million is the highest backlog for March 31 for the segment since the first quarter of 2015, which included a significant portion of PetroChina LNG-related backlog. Also worth noting is that we have not had any material cancellations in our backlog to date.
We sold to 120 new customers in the first quarter of 2020, of which 84 were outside of North America. This included 23 new customers in India, 26 in Europe and China, 12 in Southeast Asia, one in Africa, and one in Mexico. 36 of these new customers were obtained in March. To date in April, we have orders from 29 new customers as well as a $4.7 million order for an industrial plant application in E&C Cryo, a $3.1 million air-cooled heat exchanger retrofit order for a refinery in E&C FinFans, and a $1.5 million order for a space launch application in D&S West. Sales of $321 million is an increase of 11% over the first quarter of 2019 and flat organically. E&C Cryo sales were up nearly 77% with the inclusion of $22.9 million of Venture Global Calcasieu Pass revenue.
The first quarter of 2019 did not include any Calcasieu Pass revenue. On slides 14 and 15, we'll walk through each segment right to left from weakening to consistent to strengthening demand. These categories we are sharing are based on the last six weeks of information since the pandemic took full hold of the global environment. In Distribution & Storage West, the product line with weakening short-term demand is our HLNG fuel systems, known to you as HLNG vehicle tanks. This product line has two main sole-source customers whose operations are located in Europe. These customers' production lines have been closed for the prior month and are expected to reopen in the coming weeks. Order activity with these customers dropped by 75% over the past four weeks, with our current expectation that orders return to normal levels in June.
Assuming a three-month period of this level of orders, our annual forecasted revenue in this product line would be reduced by $15 million-$20 million in 2020. We reduced our workforce for this line by 50% early in March to adjust to the current demand situation. We've made significant progress on other potential customers' use of our HLNG fuel systems products. Specifically, we expect customers in both India and Russia to move ahead this year with LNG mine haul trucks and two large logistics companies in the U.S. to add to their LNG fleet, one having recently completed a successful pilot program. Also, late-breaking news, yesterday we received formal notice that a second significant patent for LNG fuel systems will be granted to us in Europe. This further enhances our leadership position for LNG vehicles in the region. Dosing equipment, space applications, and water treatment orders are consistent.
Originally, I would have thought water treatment being primarily with municipalities would have slowed given COVID, but we booked four different municipalities' orders in the first quarter and already one in the second quarter. The reason for this is that municipalities are also considered essential business, and they have a budget with a timeline that is lost if not used. Dosing order activity is consistent with the prior quarter, although we have seen a wide swath of new applications being used for our dosers in recent weeks. In particular, we are working with a fuel additive company, which is a new industry using dosers to help change the way they are packaging their product. Just this past week, we sold our first doser for an eyelash enhancement product.
In addition to the critical care products for which I've already discussed the increasing demand, specialty markets orders continue at and in some cases above our previously forecasted levels. Orders in the first quarter of 2020 were up 9% over the fourth quarter of 2019 and up nearly 11% over the first quarter of 2019. Hydrogen, cannabis, food and beverage, and space all show strengthening demand. Our customers associated with fast food and convenience stores are increasing demand for our products, somewhat offset by independent and casual restaurants that are hit by having to shut down. Customers including McDonald's, Yum, and Chick-fil-A have all confirmed that they will continue with their new builds. Q1 food and beverage sales included strong beverage tank sales driven by Speedway convenience stores that had 3,000 stores with new tanks, each with a new telemetry feature on the content gauges.
Many states that have issued shelter-in-place orders to combat COVID-19 continue to include alcohol, wine, beer, and cannabis in the essential category. In today's ever-changing lifestyle, the demand for canned premium wine has also risen. One of our key customers, The Family Coppola Winery, was one of the first to offer premium wine in a can. We supported The Family Coppola Winery in packaging of their wine and cans with our liquid nitrogen dosing systems. Overall, food and beverage orders were up 17% as compared to the fourth quarter of 2019 and 36% compared to the first quarter of 2019. The reason that food and beverage shows on this slide in two categories is that while we have seen the demand described above, in the past week, beverage has been weaker than typical as we believe we are now seeing the tail of impacts from the casual restaurant shutdowns.
Finally, in D&S West, aftermarket service and repair demand is increasing. This is a theme that you'll hear throughout all segments as there is a trend to utilization of existing infrastructure versus new purchases. For D&S West, parts repair and service revenues increased 11%, with operating income up more than 200% over the first quarter of 2019, driven by increased demand from the industrial gas majors and cost reductions taken in the second half of 2019. D&S West aftermarket service and repair as a percent of total sales was 9.8% in the first quarter, up from 8.2% in the fourth quarter of 2019. In both D&S West and East, we are seeing an increasing number of bid requests for regasification terminals. In the first quarter, we booked the first regas station for the Malaysian region.
We are also expecting regas orders for military locations in the United States in the third quarter, as well as quoting on 20 regas stations for South America. D&S East is shown on the second row on slide 14. In the first quarter, we booked 14 LNG fueling stations, which is the same level as Q1 2019 and on par with the average per quarter throughout 2019, which was a record year. Additionally, in April, we received verbal commitment from Shell for the supply of seven LNG fueling stations. Our teams are currently working toward a multi-year long-term contract, which will allow for expansion above the first seven stations. In the Middle East and Asia-Pacific outside of China region, March 2020 was the second best order intake month in the last year, second only to December, which was a record.
This region had above-average intake in E&C products with the sale of a cold box for Korea and a brazed aluminum heat exchanger for IOCL India. India had its second highest order month in the history of the business in March. We have seen softening in trailer demand in recent weeks. This is not surprising as both 2018 and 2019 were record trailer order years for us, but it is happening sooner than we expected in 2020. Any softening in trailer orders would not be expected to impact 2020 revenue as lead times on trailers are 10+ months. Moving to our energy and chemical segment and starting with Cryo, which is shown on the top row of slide 15. Starting on the far right columns, we saw significant demand for natural gas processing plant-related equipment in 2017 and 2018 after a few years of none whatsoever.
In 2019, this dramatically fell with three plants for which we received a total of $1.6 million of orders. Our original expectation in 2020 was five to seven plants being ordered with none in the first half. Given the current oil and gas situation, we would expect very few to none of these types of orders in 2020, which would impact our 2020 revenue by approximately $5 million. Additionally, we do not expect to receive any big LNG new orders in 2020. Yet there are some positives in the sea of LNG morass these days. Our work on Venture Global Calcasieu Pass project continues on schedule, and there are no anticipated delays for that project. This project is $100 million of 2020 equipment revenue. Venture Global continued their off-take agreement for 1 million tons per annum capacity on their next project, Plaquemines.
As a reminder, VG already has final FERC clearance for Plaquemines. On projects that have not yet FIDed but continue to progress even in these difficult times. Tellurian extended their 2019 term loan to November 2021. On March 19, FERC approved the Jordan Cove LNG project. If Jordan Cove moves ahead to FID and construction, we would have $60 million of equipment content on that project. Qatar Petroleum stated that they have zero projects being canceled for the development of the North Field, including the second phase. We're currently bidding on brazed aluminum and other equipment content for this project. Moving to the middle column labeled consistent demand for E&C Cryo, you can see that global petrochemical applications, industrial gas applications, and small-scale LNG demand continues as we have expected even into recent weeks.
While some petrochem projects may have slower schedules, they have all confirmed that they plan to move ahead. Specifically, there are three that we expect to still be awarded in 2020, and these range in Chart content from $15 million-$30 million on average each. In late February, we received an order of $29.5 million to deliver process design and equipment for a U.S. Gulf Coast PDH plant. We expect $13 million of this project to be revenue recognized in 2020, which was included in our original revenue forecast for the year. The air-cooled heat exchangers for this project have not yet been awarded, and we are in the bid for those coolers, which would be in the $5 million-$10 million range. We received the LOI for process technology and equipment on Eagle's Jacksonville small-scale LNG facility in January.
We expect limited notice to proceed on the project to begin engineering work in conjunction with Matrix in the second quarter. Additionally, we continue to see small-scale projects, in particular for power generation and utilities, progress on their original bid timelines. We have 17 terminals in our 2020 bid pipeline that the operators have indicated continue to have a realistic chance to move ahead to order point this year. These 17 projects total over $355 million of potential order content. Even the major international oil companies that have begun the small-scale journey, as evidenced by the letter of cooperation that we signed with ExxonMobil and Indian Oil Corporation in February, are continuing on their global infrastructure build-out using small-scale LNG in many cases. Finally, our Lifecycle business is seeing increased demand, in particular in the past few weeks around repair and service opportunities.
There is one potential repair and service project that would be $4 million for which we expect a decision to be made in the next month. Additionally, as many of you know, we have four competitors globally for brazed aluminum heat exchangers. One of those competitors had a regional certification permanently revoked late in the first quarter. As a result of this, we have seen an uptick in requests for bids from their customers that are looking for alternative supply of brazed. Moving to E&C FinFans, shown on the bottom of slide 15. FinFans has been our hardest-hit segment to date, not just from COVID but also from the oil and gas situation.
While orders in the first quarter were the highest out of the past three quarters, including $23 million in the month of March, we anticipate that this will quickly fall off, in particular on the air-cooled heat exchanger side of the business related to our midstream and upstream end use. In 2019, approximately $110 million of our total Chart revenue related to midstream and upstream applications. To date, some of our midstream and upstream customers have publicly announced CapEx spending cuts of over 30%. As I commented during the COVID update, we have taken over 40% of total headcount out of this segment in the first quarter. With the possibility of 35% year-over-year order and revenue declines in the air cooler side of the segment, we expect that we can maintain profitability at these softening levels.
The fans business continues to breeze along with our Cofimco fan order levels the highest in a year, and like D&S West, E&C FinFans has seen an increase in aftermarket service and repair. Service and repair as a percent of sales for this segment was 26.4% in the first quarter, up from 22.5% in Q4 2019. A portion of this increase is attributable to the strength and demand for fans, and a portion is from our customers looking for creative ways to differentiate themselves in the medium and long term. Examples of first-of-a-kind orders for FinFans are shown on slide 16 as part of the total 15 firsts we had in Q1. For example, we completed the first high-specification vertical order for one of the U.S.
Department of Energy strategic petroleum reserves for emergency crude oil storage facilities, as well as putting our first vertical fan into field trials with a key customer. Other first-of-a-kind orders are related to our medium and long-term market fundamentals that I described earlier. These types of orders, in combination with 35 customers ordering over $1 million in the first quarter, demonstrate the varied applications we play in, as well as the global view that the clean energy transition will be as important as ever coming out of the current situation. A few examples. We received an order for a study for liquid hydrogen-propelled marine vessels, including passenger ships. This order came to us in the last week of March. And while you might think that the passenger cruise industry is completely at a standstill, this further reiterates the clean energy transition will continue as we come through the COVID-19 situation.
We booked an order for our first biomethane LNG project in Italy. These plants use biogas from farm fields to generate power. The Italian government recently renewed their subsidies for these applications, so we expect this trend to continue. And finally, we are working with a large retail food company that is in the process of transitioning their larger chicken farms from propane to gas for higher efficiencies. Many of these first-of-a-kind orders support our customers in their ESG initiatives and carbon footprint reductions. Slide 17 shows our 2019 figures. In 2020, our customers are looking to future applications that reduce their carbon footprint while becoming more efficient. I'll now hand it over to Scott to walk through our earnings and free cash flow.
Scott Merkle (VP and Chief Accounting Officer)
Thanks, Jill. First quarter 2020 reported diluted earnings per share is $0.24, an increase of $0.21 compared to the first quarter of 2019. When adjusted for one-time costs shown on slide 19, adjusted earnings per diluted share is $0.57, a 46% increase over the adjusted first quarter of 2019. Adjustments include severance for the headcount reductions that Jill described, hard costs to expedite materials related to COVID-19 medical essential production, the mark-to-market impacts from our equity investments, which we explained we would be calling out each quarter regardless of the positive or negative impact for that quarter, and finally, integration costs.
The only integration costs included are related to Air-X-Changers, which is substantially complete and expected to be fully complete by the end of the second quarter. There are no VRV integration costs included going forward. Our adjusted EPS does not reflect the impact of the 40 days of lost production in the first quarter, as Jill described.
To reiterate, the total revenue pushed out of the first quarter because of COVID-19 impacts was $7.5 million, with $3 million of that in China. Free cash flow from operating activities and capital expenditures is $15 million for the quarter. This is inclusive of us carrying additional safety stock in our inventory for critical raw material and components that we consciously chose to increase to offset potential supply chain disruptions. As Jill mentioned earlier, we ramped production for our critical care products in various locations. We estimate $13.4 million of additional inventory for these purposes was on hand at the end of the first quarter. The $15 million of free cash flow is before the $19 million of share repurchases completed in early March. Our first quarter DSO of 55 is a 10-day improvement compared to the first quarter of 2019.
This example of our continued working capital management is one element as to why we continue to expect strong cash generation in 2020. Many of you have asked, what's different about the Chart Business during this down cycle than in the 2014-2016 timeframe? On slide 21, you can see the changes to the composition of the portfolio of products we offer, as well as the acquisition and divestiture activities that have resulted in a much more diverse and geographically broad company. A few specifics when comparing today to the former years. We had virtually no aftermarket service and repair revenue. We are now at 13% of total Chart revenue, with a roadmap to over 20%. In the prior cycle, we were heavily reliant on one big LNG project.
As you have heard us discuss over the past 18 months, we think of the big LNG as icing on the cake and have a line of sight to growth in many of our base businesses across the cycle. We have a much more diversified global footprint, which accesses applications and projects that previously were not able to participate in. A year and a half ago, we sold into 21 countries. We now work on projects and sell into over 70 countries. Even with these changes, there remains a high amount of uncertainty surrounding the potential business impacts from COVID-19. As of today, we have not seen a meaningful impact on total bookings, although a shift from FinFans to D&S is expected, and certainly the fundamentals of the business remain very much intact.
But because of the high level of uncertainty that COVID-19 has created, we are withdrawing our prior 2020 full-year guidance until we have more clarity on the duration and severity of the situation. While we think it's prudent to hold off on issuing new guidance until the situation stabilizes, we can provide the following data points for 2020, as shown on slide 22. Venture Global's Calcasieu Pass project remains on schedule with $100 million of expected revenue in our E&C Cryo segments in 2020. We are seeing a short-term increase in demand in our medical-related products, as described earlier. We continue to expect strong free cash flow generation in the year, have suspended our share buyback program, and continued to prioritize debt paydown. Year to date, we have taken cost reductions totaling over $49 million of annualized savings.
This is in addition to the $38 million of savings from cost reductions taken in 2019. Our expected effective tax rate remains unchanged at 20% for the full year 2020. Our capital expenditures are flexible, and we will continue to assess the spend as the year progresses. At this time, we anticipate CapEx spend will be in the $25 million-$30 million range. We expect the full-year diluted weighted average shares outstanding to be $35.45 million, based on our March 2020 share buyback of approximately 750,000 shares.
Jillian Evanko (CEO)
One more item before we open it up for questions. Many of you dealt with John Bishop and his Investor Relations capacity. As you have heard today, we have taken layers out of the organization and eliminated certain roles. The Chief Operating Officer role, which John occupied, was one of them.
We valued John's contributions to our business and offered him the role of Vice President of Investor Relations, a role which we need going forward. Unfortunately, John declined our offer for this opportunity, and therefore we will begin a search for this role immediately. In the meantime, you all know Tom Pittet, and he will be your point of contact. John's leaving will be treated as a without-cause departure. We thank John for all of his contributions to Chart as a valued team member. With that, I'll now turn it over to Shannon to open it up for questions.
Operator (participant)
Ladies and gentlemen, to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from James West with Evercore ISI. Your line is open.
James West (Analyst)
Hey, good morning, Jill.
Jillian Evanko (CEO)
Hey, James.
James West (Analyst)
Jill, I know and Scott talked about it too, big LNG, nice to have, not necessary, and you're not expecting anything for the rest of this year to hit the backlog, but I'd love to hear how the conversations are going with customers that were planning to FID around this time period or maybe before mid-year, what they're telling you about their intentions, if they're canceling the ideas totally or just pushing things back. What's the flavor of those conversations?
Jillian Evanko (CEO)
The majority of the conversations are around pushing things to the right, so we haven't heard anybody that's talking about completely negating the project in its entirety, and pushing to the right being 2021 at the earliest, 2022, even in some cases. We have one particular customer that's remained favorable on FIDing in late 2020, which we're unable to share exactly who that is.
The other theme that we're hearing as well is, while we're not canceling projects, we might go about the structure differently, in particular in modular mid-scale. So where originally a project might have had, pick a hypothetical example, 10 trains, and starting with all 10, that particular customer might say, "Well, we're going to start with 5 and incrementally add to that." So those are really the two things that we're hearing. Again, I think you'll have the big guys, the ones that we continue to talk about as our customers, have the intent to move things forward and have taken the right steps in the short term to be able to get through this next 12 months.
James West (Analyst)
Okay. That's very helpful. Thank you. And then with respect to the critical care medical devices that you guys are supplying, obviously we're getting a big bump right now because of the pandemic, but there's also a big rethinking of the global supply chain. You can hear it from both U.S. governments, European governments as well, and thoughts about stockpiling and resource allocation. And so what's your, it's an early thought, but what's your thoughts on that part of your business being, while it won't be the same size, I don't think, at least as it is intense right now, but what's your thought in terms of that business being much more sustainable going forward?
Jillian Evanko (CEO)
Yeah, definitely echo your comments around the current levels that we're seeing won't be what we see going forward. This is a temporary significant increase in these particular products.
But to your point, we've had multiple discussions with government agencies around what this supply chain looks like going forward, and that timeframe is not just three months away. It's kind of in the next 12 months and permanent supply chain situations and how we participate in that. So our expectation would be that ongoing there will continue to be higher than previous levels, but not at the levels that we see right now. But really goes into what the industrial gas customers choose to do around how they utilize assets that can be used in industrial applications as well as oxygen applications and how they plan to keep a safety stock in particular on hand.
What we're also starting to see in the last week or so is that some of those industrial gas customers in North America in particular that utilize existing assets, in particular MicroBulk and Bulk tanks for medical oxygen-related capacity, they're now saying we need to backfill on the industrial gas side for customers that are coming back online. So I think overall you'll see a little bit of a boost to the total Bulk and MicroBulk side of the business in D&S for us.
James West (Analyst)
Okay. Great. Thanks, Jill. That's very helpful.
Jillian Evanko (CEO)
Thanks, James. Talk to you soon.
Operator (participant)
Our next question comes from John Walsh with Credit Suisse. Your line is open.
John Walsh (Analyst)
Hello. Good morning.
Jillian Evanko (CEO)
Hey, John.
John Walsh (Analyst)
Question around free cash flow. Obviously realize you're not updating the prior guidance framework, but I guess given your comments on the debt covenant, we can at least back into some semblance of an EBITDA number. As we think about going through the year, liquidating inventory, you pulled the lever on CapEx. I mean, what are the other moving parts that you're able to do to kind of really protect free cash flow? Because right when you go through these periods, what you see in the decline in free cash flow is usually much less than what you would see, obviously, on the EBIT line as you kind of liquidate some of the balance sheet.
Jillian Evanko (CEO)
You're absolutely correct. Like you said, while we haven't updated a guide on free cash flow, our commentary around our continued expectation of strong free cash flow generation in 2020 should kind of give a qualitative indicator on our feeling toward the continued levels that we think we can do even with potential downturns on the horizon. With that said, we do have multiple levers to pull. You referenced some that we already have around skinning down CapEx as well as some of the AR activities that we have in place. We also are working very diligently with our supply chain.
Over the last four weeks, we've primarily given updates around the fact that we have very few single-digit high-risk suppliers, but also part of the sourcing discussions are. I'm certain what you're hearing from multiple other companies around taking advantage of the opportunity for extended terms where applicable, as well as cost reductions on the supply-based side of things. We also have multiple different ways that we can manage our accounts receivable, and we're very pleased with that we've made through our Chart Business Services, in particular on the accounts receivable side, where our cash conversion cycle continues to improve month over month with those activities.
On the inventory side of things, we did a very quick, early, and agile update to what we needed on the safety stock side of things, and we're really well positioned from that standpoint in terms of not needing to go out and continuing to ramp our raw materials given where we sit today. So where you saw the $13.4 million of additional inventory related to the raw material in the supply chain that Scott mentioned, that's a temporary bump on the inventory side, and you'll see that normalize throughout the year.
John Walsh (Analyst)
Gotcha. Great. And then just thinking about the cost actions here, obviously getting ahead of it, but I think demand forecasts are kind of fluid. If you were just to think if we saw another leg down or worse, are there more things you can do, or are there other actions around integration you can accelerate to protect the profit dollars?
Jillian Evanko (CEO)
There are many, many more actions that we can take. We feel like we got at this very early in this situation, so we were, I would say, even earlier than what other companies have done in terms of cost reductions. But there's a laundry list of other actions that we can take. We've not yet had the situation where we've had to go through a furlough. We've obviously not adjusted executive compensation at this level of demand. We also have not furthered any facility consolidations that we have a roadmap for the future on what that could look like if needed. I think that was one of your references there.
Facility consolidations are a little harder to do when all non-essential travel is locked down, but certainly there's a lot of quick actions that we have in our various different scenario planning that have not yet been taken. But again, we do think that we've gotten to a level where we can sustain even further downturn in demand across all four segments based on the level of cuts that we've taken to date.
John Walsh (Analyst)
Great. Appreciate the color. Pass it along.
Jillian Evanko (CEO)
Thanks, John.
Operator (participant)
Thank you. Our next question comes from Rob Brown with Lake Street Capital. Your line is open.
Rob Brown (Analyst)
Hi. Good morning, Jill.
Jillian Evanko (CEO)
Hey, Rob.
Rob Brown (Analyst)
On the aftermarket business, could you give us a sense of what the capacity is there and maybe the amount of business mix that that could become over the next 12 months or so?
Jillian Evanko (CEO)
Yeah, we're definitely seeing that tick up as we referenced in the prepared remarks. We do have additional capacity in our existing facilities, and part of those steps that we've taken to ensure that we have that capacity has been the result of us hearing from our industrial customers, some of which are on long-term agreements, providing demand forecasts on the repair and service side that are greater than what they've been in the last few years. Additionally to that, we've launched various different aftermarket programs for refurbishment of different products on the E&C side in particular, as well as a little bit on the D&S West side of things. So we have the ability to take on just over 20% of Chart revenue for prior revenue forecasts, which obviously has since been suspended in our current capacity.
We are evaluating the need for a Southeast U.S. Repair and Service project, which we've held off on, obviously given the current situation, but also as we get through discussions with our industrial gas customers where we've been working to understand the amount of product that will be coming our way on the Repair and Service side and understanding if we can get minimum commitments from those customers. So I think you'll continue to see this uptick throughout 2020 and even into 2021, and we're well on our way toward that 20% mark by the end of 2021.
Rob Brown (Analyst)
Okay. Great. Thank you. And then you talked about the fans business in particular seeing some strength. What markets are you seeing strength there in, and sort of what's your visibility in that strength?
Jillian Evanko (CEO)
Yeah. So we continue to see strength in the fans business in its entirety, which touches over 10 different end markets. So there hasn't been one that's really been a standout market. It's just kind of been broad-based growth for fans. And just by way of giving you a size on the fans business, last year, fans was just under $100 million in revenue in the E&C FinFans segment. Also, in the total fans business, there's about 35% of that that is aftermarket service and repair, and that's been ticking up as well. So I think those two dynamics we expect to continue throughout the year.
Rob Brown (Analyst)
Great. Thank you. I'll turn it over.
Operator (participant)
Thank you. Our next question comes from Eric Stine with Craig-Hallum Capital Group. Your line is open.
Eric Stine (Analyst)
Hi, Jill. Hi, Scott.
Jillian Evanko (CEO)
Hey, Eric.
Scott Merkle (VP and Chief Accounting Officer)
Hey, Eric.
Eric Stine (Analyst)
Hey. So you touched on industrial gas in terms of oxygen, and you just did on the aftermarket, but just wondered, could you talk about that more broadly? I mean, certainly different than it has been in the past since you've got long-term contracts, but also know that that's typically a GDP plus business, and the outlook going forward, given all going on and how much it lasts, is somewhat uncertain.
Jillian Evanko (CEO)
We're seeing continued, I would say, strength. At a minimum, I would characterize it as consistent to the last couple of years from the industrial gas side of things on the more positive side, better than the last couple of years to date. In the total industrial gas arena, from an order standpoint, orders increased kind of year-over-year over 4% in that particular area. And that was. We had guided originally at just under 3%. I think we were at like 2.8%, so slightly ahead of what we had originally thought.
From a broader and more macro commentary with our industrial gas customers, there has been this industry consolidation over the last three years, and we're seeing that sort itself out where assets have landed, and there's more industrial gas players than what there had been in 2018 and 2019. So you have kind of the Messers and Mathesons of the world are now entering into that larger-tier industrial gas customer, which gives us a little bit of a broader-based growth opportunity across more customers. But also, I think everybody, from what we were hearing commercially, is looking at the repair and service side and how can they utilize existing assets.
So we'd expect kind of the 3%-4%, if not a little bit better, to continue, but also have a margin mix, which we're unable to share with you guys, but around the repair and service side, that should be improving.
Eric Stine (Analyst)
Got it. And I would assume that that's a business, just given oil and some other things across the rest of your business, that that's going to be a bigger percentage of your business going forward. I think today now it's 40%-45%.
Jillian Evanko (CEO)
That's correct. Both of your statements are correct.
Eric Stine (Analyst)
Okay. Maybe just turning to China, you mentioned the largest order there that you've gotten in some time. Just curious, you think that now that things have restarted there, that some of those trends, that that is sustainable? And also, should we take it from your, at least the guide that you could provide on the tax rate, should we take that as an indication that you expect to be profitable in China in 2020 still?
Jillian Evanko (CEO)
We do expect to be profitable in China in 2020. We are, I think for the last two years, the term I've used is cautiously optimistic, and I would probably drop the cautiously at this point. I think we're seeing continued demand, and the shift in demand has really been to more of the industrial gas side of things. Our backlog at the end of the first quarter in China was $68 million. The last time it was that high was the second quarter of 2015, and that included a lot of that LNG-related PetroChina backlog that subsequent to that got canceled. So the backlog is a nicer mix of product in the current state, and the profitability has continued to be expected in 2020 in that region.
Eric Stine (Analyst)
Got it. Okay. Maybe last one for me, just on the CapEx, pulling that number back a little bit. And is part of that the tank facility or the expansion there? I mean, is that something you still plan, but we should think about more in 2021?
Jillian Evanko (CEO)
Actually, almost done with that LNG vehicle tank line in our Italian facility. So that CapEx is already baked almost in full. We expect that facility's line to go online in June of this year, and that's a critical part of us serving our European customers and also margin expansion to reduce the cost of shipping from the States to Europe.
Eric Stine (Analyst)
Got it. I mean, any areas you can then point out that would be part of that CapEx? I mean, I think you've reduced it by $10 million-$20 million versus last go-around. I don't know if you can provide that clarity.
Jillian Evanko (CEO)
Without going to project-specific detail, I would say that we have, because we constantly have very low-level maintenance capital almost every year, below $30 million, we've always taken productivity and capacity expansion projects that are on top of that maintenance and included them in our outlook for the year.
So we haven't ever said, "Well, we don't want to do a productivity project." And now we've really kind of battened down the hatches and said, "All right, let's take each one of these as we go and based on product line demand and see what we need to do." So it's really kind of a bucket of productivity and capacity expansion that's being much more disciplined than what we would have been if we had really high demand across the business going forward.
Eric Stine (Analyst)
Okay. Got it. Thanks.
Jillian Evanko (CEO)
Okay. Thanks.
Operator (participant)
Thank you. Our next question comes from Ben Nolan of Stifel. Your line is open.
Ben Nolan (Analyst)
Hey, Jill, Scott. Good morning.
Scott Merkle (VP and Chief Accounting Officer)
Hey, Ben.
Ben Nolan (Analyst)
Hey. So my first question relates to sort of, I guess, the guidance or the removal of guidance. Completely understand that. Although I'd say, at least in my opinion, and Jill, it sounds like you guys have a lot better visibility than I would have imagined into a lot of projects and the backlog into the back half of the year. Do you envision a point later in the year where you can reinstate some guidance? And are you feeling like now things maybe are settling and you're getting closer to a point where you could do that?
Jillian Evanko (CEO)
I certainly hope so in terms of being able to provide a guide sooner rather than later. I'm not yet there yet. I think is the best way to characterize it. There's certainly still a lot of things that haven't settled down. There's still a lot of flux around timing of reopening with respect to COVID, as well as how do the projects that are from a longer-term nature in the FinFan side of the business, how does that sort itself out? There's varying different views on how the oil and gas situation rebounds and what that timing looks like. So a lot of that's going to be dependent on those types of factors. But the goal would be the next time we talk next quarter, I'll hopefully be able to share an updated guide.
Ben Nolan (Analyst)
Okay. Helpful. And then you mentioned something that I'm curious, I guess, with respect to, I think, the brazed aluminum for Qatar. It sounds like Qatar is moving forward. Any sense of maybe what the potential project size for that would be? Just trying to think through magnitude a little bit.
Jillian Evanko (CEO)
Sure. Without giving specifics on that project, our international content tends to be for pre-cooling as well as for the upfront activities on these projects, and those can be anywhere from kind of $20 million-$50 million. It wouldn't be bigger than that, Ben.
Ben Nolan (Analyst)
Okay. All right. I appreciate it. Thanks, Jill.
Jillian Evanko (CEO)
Thanks, Ben. Talk soon.
Operator (participant)
Thank you. Our next question comes from Martin Malloy with Johnson Rice. Your line is open.
Martin Malloy (Analyst)
Good morning.
Jillian Evanko (CEO)
Hey, Marty.
Scott Merkle (VP and Chief Accounting Officer)
Hi, Marty.
Martin Malloy (Analyst)
My first question's on the LNG fueling stations, and it sounds like you had a pretty good quarter in terms of order flow there and the potential arrangement with Shell. Could you maybe talk about geographies that you're seeing strength in demand for these LNG fueling stations?
Jillian Evanko (CEO)
Yes. It's been both Europe as well as India. And we've started to see much more activity on the quoting side in the rest of Southeast Asia beyond India. But the actual order activity has been Europe and India.
Martin Malloy (Analyst)
Okay. And then on the beverage side, you mentioned a few restaurant chains that you're selling into. And I know that a lot of you've had a few customers out there testing this. Are those restaurant chains? Were those ones that were testing it and you're dosing and now moving to actual purchases? And maybe could you give us kind of a broad update on that beverage area?
Jillian Evanko (CEO)
Sure. Those customers use both our tanks as well as our dosers in some cases. So these are customers that have been around for a while. Some of them buy through distribution, and some buy directly with us.
In terms of some of the pilot programs that we've referenced over the last couple of quarters with some of the beverage customers in particular, those are much more on the larger named beverage companies that provide beverages to the restaurants that we reference as our customers, and those pilots continue to progress. We haven't seen any breakthrough in terms of purchases from any of those pilots, but we've received favorable feedback from 100% of them. We've also just begun a new pilot, which we're under a confidentiality agreement to not be able to discuss, but it's a very interesting one that goes into a new way of packaging of water in particular with one of these major beverage customers. We see this to the second half of your question. We see this particular business. We kind of lump it as food and beverage, but even just beverage specifically.
This is where you're going to continue innovation. And because it's so global in nature, even with a minor hiccup where you have the casual restaurant chains having the impact from having to shut down, we think that from a medium even short, medium, long-term perspective, beverage continues to be a key part of our growth story in specialty markets.
Martin Malloy (Analyst)
Great. Thank you.
Jillian Evanko (CEO)
Thanks, Marty.
Operator (participant)
Thank you. Our next question comes from Connor Lynagh with Morgan Stanley. Your line is open.
Connor Lynagh (Analyst)
Yeah. Thanks. Good morning. Thanks for squeezing me in here.
Jillian Evanko (CEO)
Hey, Connor.
Connor Lynagh (Analyst)
Hey. I'll just leave it with just one, although admittedly it's a bit of a long answer, I'd imagine. But if we look at these slide 14 and 15, this is a helpful framework. I'm wondering if you could just frame sort of a percentage of revenue as opposed to a percentage of products, how significant the like what percentage of your portfolio is strengthening versus weakening over the past couple of weeks here.
Jillian Evanko (CEO)
Let me answer it in reverse. So on the weakening side of things, if you were to kind of say, in the worst-case scenario, I quantified HLNG vehicle tanks as $15 million-$20 million, nat gas processing as $5 million, and then gave you the up and midstream revenue from 2019 being $110 million. So if you kind of framed it that way, I think that's the best way to try to assess what a worst-case impact would be on total revenue.
So take a number of decline on the air-cooled up and midstream, probably pick a pretty big number on that one, and then add the $25 million on the others that I referenced. And that's probably the best way to go about it. But the other way I could answer it for you is there's a much more significant portion of the business that's consistent in strengthening than is in the weakening category, in the not just the majority.
Connor Lynagh (Analyst)
All right. Yeah. Got it. All right. Thanks very much.
Jillian Evanko (CEO)
Thanks, Connor.
Operator (participant)
Thank you. Our next question comes from Walter Liptak with Seaport. Your line is open.
Walter Liptak (Analyst)
Hi. Thanks. Good morning. Hi. I wanted to ask about the covenant redo. And is there going to be a change to interest expense? I wonder if you can help us understand that or amortization of fees throughout the year?
Jillian Evanko (CEO)
No, there's not going to be a change unless you go above the original covenant of $3.5, which we do not expect to have that situation. So your original interest and amortization forecast still holds.
Walter Liptak (Analyst)
Okay. And then kind of along those lines, the corporate expenses were a little bit higher, and I guess that was because of the 2019 bonus comp. What's the rest of the year run rate per quarter for corporate expense?
Jillian Evanko (CEO)
Yeah. There was probably about $4 million or so of unusual in the corporate expense in the first quarter. So if you reduce that, that'd be a good run rate for Corp.
Walter Liptak (Analyst)
Okay. Got it. And then maybe a last one for me. Thinking about China a little bit more and just the trajectory of it, in your opinion, as China went back to work, is it rebounding back to previous levels, which sounds like it's there and with a better mix, or is it a slow recovery as they go back to work? Just kind of thinking about China as sort of a guide for how the U.S. and Europe and maybe the rest of the world recovers in the future.
Jillian Evanko (CEO)
What we saw in our particular product in China was a very quick rebound back to pre-shutdown levels, if not, in some cases, a little bit better. I'm not certain that that can be used as a proxy for the other regions. For ours, some of it's very region-specific, and customer behaviors differ in the United States and Europe and in India. But certainly, China was a very quick rebound for our products.
Walter Liptak (Analyst)
Okay. Great. Thank you.
Jillian Evanko (CEO)
Thanks.
Operator (participant)
Thank you. Our next question comes from J.B. Lowe with Citi. Your line is open.
J.B. Lowe (Analyst)
Hey, Jill. Hey, Scott.
Jillian Evanko (CEO)
Hey, J.B.
Scott Merkle (VP and Chief Accounting Officer)
Hey, J.B.
J.B. Lowe (Analyst)
I know we're into overtime here, so I'll be quick with just one. I guess we'll get kind of a better idea of the pullback in your different segments and product lines next quarter. I'm just wondering, are there any particular product lines that you think could have a sharp rebound after seeing the downtick in 2Q, and which segments would that be?
Jillian Evanko (CEO)
I think in D&S West, in the HLNG vehicle tanks, there's continued demand for that. And that's really a matter of those particular key customers getting back to work. So it's less about the demand side than it is about having people in their production facility. So that's one that could very quickly come back for us. I don't think that'll be the case in nat gas processing. And I do expect the air-cooler side to be a little bit further out in terms of recovery. So not just a quick bounce back, but at a minimum, a couple of quarters of what we're starting to see here, if not a little bit longer. So really on that weakening column, the one that could surprise us is HLNG vehicle tanks. But we think the rest of the business, again, we haven't seen any sharp declines at this point.
J.B. Lowe (Analyst)
All right. Great. Thanks, guys.
Jillian Evanko (CEO)
Thanks, J.B.
Scott Merkle (VP and Chief Accounting Officer)
Thank you.
Operator (participant)
Thank you. Our next question comes from Greg Lewis with BTIG. Your line is open.
Greg Lewis (Analyst)
Yes. Thank you and good morning. Just one for me. In the prepared remarks, you talked a little bit about some of the impacts that you're seeing as business continues in the environment, spacing, moving employees around. Is there any way we can kind of think about the margin impact of that across the businesses? Could some of the areas be less exposed or more exposed to maybe having some margin compression related to that? Just kind of curious any comments around that would be helpful. Thanks very much.
Jillian Evanko (CEO)
Sure. It's hard to quantify that. I would say in the areas that probably have that impact, without being able to specifically give you a number, in India and in Italy, you'd have impacts from having fewer production employees being able to be in the factories at the same time. But I would go so far as to say that I think it's a de minimis margin impact at this point to the business.
Greg Lewis (Analyst)
Okay. Perfect. Thank you.
Operator (participant)
Thanks.
Thank you. Our next question comes from Tom Hayes with North Coast Research. Your line is open.
Tom Hayes (Analyst)
Good morning, Jill. Good morning, Scott. Thanks for squeezing me in. Just as far as looking at the uses of cash, just real quickly, would you expect to kind of continue to do some of the share repurchases and any comments on potential debt payments in 2020?
Jillian Evanko (CEO)
Debt paydown is absolutely our priority right now in terms of the use of our cash. We feel great of the share repurchases that we were able to do in the open window in March that have been completed. But at this point, given the program has been suspended, we don't anticipate that we'll be doing any more at this point.
Tom Hayes (Analyst)
All right. Thank you.
Operator (participant)
Thank you. Our next question comes from Patrick Baumann with JPMorgan. Your line is open.
Patrick Baumann (Analyst)
Oh, hi, Jill. Thanks for taking my questions. Hey, good morning. First off, yeah, good morning. First off, just wanted to say sorry to hear John's gone. Not sure if he's listening, but want to wish him the best. Just had a few questions. First off, it sounds like you're seeing stable demand for small-scale LNG at this stage, which I guess I was kind of surprised to hear. Any color on the pluses and minuses to the outlook there? Just thought that with oil coming down so hard and also just the general economic uncertainty, it would weaken the outlook for that area. And maybe on that Jacksonville where you announced in January, did that ever close?
Jillian Evanko (CEO)
Sure. So first of all, we all will miss John as well. He was a great member of our team. So we'll have to it'll be big shoes to fill for the new IR person coming in. On the LNG side of things, so overall, I want to make sure that I characterize that we do expect a sharp downturn in the air-cooler side of the FinFans business. So making sure that you're carving that particular piece out. So all of the negatives that we called out on the E&C side, we do expect those to be softening in the coming weeks and months. But with respect to the small-scale LNG side of things, a lot of these projects have customers already and are pretty far down the road.
So you're talking about weeks and months of possible delays, not full project delays or quarters types of delays. On the Eagle LNG Jacksonville LOI, we have not booked the particular order, which is in the mid-$30 millions. We wait on that for FID to formally occur on the project. So we do expect that to be booked in the coming months here. In terms of whether it's closed or moving forward, we do expect limited notice to proceed on the work with the EPC that they chose, which is Matrix, here very quickly in the second quarter.
Patrick Baumann (Analyst)
Okay. And you mentioned FinFans. I was surprised to see the order strength at E&C in the quarter, but it sounds very so. Just curious, any sense on how this cycle could look relative to the last one? I think back then revenue went from $200 million or so down to a little bit under $100 million at the trough. Is there any reason it could hold up better this time?
Jillian Evanko (CEO)
So that was particular for the air exchanger side of the business. And you're correct in terms of the last downturn of what it dropped. We do have more aftermarket service and repair, which would be a minor help to that. But I don't see any particular fundamental on the air-cooler side that's different this time than last time.
Patrick Baumann (Analyst)
Got it. And then quickly on the specialty markets, it looks like some pluses and minuses on slide 14. Do you think the aggregate can still grow this year, or is the weakening in the trailer and the HLNG stuff too big to overcome? I just don't know the size of those buckets within specialty.
Jillian Evanko (CEO)
Specialty markets absolutely will grow this year. That's something that we have a lot of confidence in and in the high single digits.
Patrick Baumann (Analyst)
Okay. I didn't know you'd mentioned that. Okay. And then if I could just squeeze one last one in, the restructuring. Can you just walk through how we should think about related spend through the balance of the year? It just seems like the magnitude of the savings that you're talking about outweighs the actual spend. But I think, well, I guess if I look at an earlier slide, it seems like 25% of the savings came this week. So maybe there's a step up in restructuring in the second quarter. Just kind of curious if you could give some color on that and kind of what you're targeting with the spend.
Jillian Evanko (CEO)
Yes. So if I understand your question correctly, the savings, you can take $34 million of 2020 savings across the next three quarters, and you can do that evenly across the quarters. If you're splitting the total $48.8 million between SG&A and gross margin, 45% of it is SG&A and 55% is gross margin.
Patrick Baumann (Analyst)
Is there more restructuring spend that needs to happen to generate that for the rest of the year, or that's just based on what you've already spent?
Jillian Evanko (CEO)
That's based on what we've already spent. At this point, we don't have further restructuring spend in our thinking, but it will obviously we constantly assess needs against the demand by product category.
Patrick Baumann (Analyst)
How did you get that 12 million just this week then? What did that come from? There were specific headcount reduction actions taken primarily in the E&C businesses, both in Cryo and FinFans. And then we had a couple of changes in the corporate structure, which were delayering of the organization.
And that restructuring spend now, I'm sorry to belabor this, will occur in the second quarter because you just generated the savings this week, or that already occurred in the first quarter?
Jillian Evanko (CEO)
That'll be in the second quarter. So the total restructuring for April for Q2 is just under $3 million.
Patrick Baumann (Analyst)
Okay. Thanks so much. Thanks so much. I appreciate all the detail. Good luck.
Jillian Evanko (CEO)
Thank you.
Patrick Baumann (Analyst)
Thank you. Our next question comes from Pavel Molchanov with Raymond James. Your line is open.
Pavel Molchanov (Analyst)
Thanks for taking the question. You've been very active in M&A in the previous commodity down cycle, 2014 to 2016. Obviously, you had less debt than you do today, but different business mix as well. If there are some opportunities to do both on M&A, particularly some small, maybe middle-market distressed M&A situations, would you even consider doing those?
Jillian Evanko (CEO)
We would opportunistically consider a very small bolt-on if they were ones that are part of our long-term strategy. And right now, those really would look like on the cryogenic pump side of the business and potentially on the hydrogen side of the business. But beyond that, there's really nothing strategically that is in the hopper that we need to continue down the path that we've laid out.
Pavel Molchanov (Analyst)
Okay. And in terms of your manufacturing capacity, obviously, you're operating below capacity today as everybody is. What level of revenue could you theoretically generate on a calendar year basis if demand were limitless and you had your existing production capacity?
Jillian Evanko (CEO)
We could get to about $2.2 billion. A little bit of that would depend on where the demand is. So for example, we'd really have a lot of the capacity and plan for that capacity in our La Crosse, Wisconsin facility and our New Iberia, Louisiana facility in anticipation of some of the bigger LNG projects. So a little bit of it would be a mix driven, but 2.2 is a pretty good number to use.
Pavel Molchanov (Analyst)
Okay. Very helpful. Thanks very much.
Jillian Evanko (CEO)
Thanks, Pavel.
Operator (participant)
Thank you. Our next question comes from Craig Shere with Tuohy Brothers. Your line is open.
Craig Shere (Analyst)
Morning, Jill. Thanks for taking the question.
Jillian Evanko (CEO)
Hey, Craig.
Craig Shere (Analyst)
You mentioned de minimis ongoing impact on margins from adjusted staffing shifts. But I wonder in the first quarter if the margins could have been even better barring one-time margin impacts on less efficient logistics and maybe product deliveries from that 40 days of manufacturing shut-ins in various regional locations.
Jillian Evanko (CEO)
Yes. I think it could have been. Very hard to quantify what that would have looked like.
Craig Shere (Analyst)
But whatever hit that was would be gone. Ongoing, we should be slightly better than even what you just posted. Is that correct?
Jillian Evanko (CEO)
That is correct.
Craig Shere (Analyst)
Okay. Thank you.
Operator (participant)
Thank you. And I'll now shut down further questions at this time. I'd like to turn the call back over to Jill Evanko for closing remarks.
Jillian Evanko (CEO)
Thanks, Shannon. During this unprecedented time, my closing remarks are for our Chart team members on slide 23. Thank you for all you've done and are continuing to do as essential workers to help save lives. Your efforts are noticed, appreciated, and impactful. And we'll talk more tomorrow on our global CEO update. Thanks, everybody, for joining us today and goodbye.
Operator (participant)
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.