17.

Business Segment Information

Effective January 1, 2014, the Company implemented an internal reorganization related to the integration of recent acquisitions, which resulted in three reportable segments, defined as follows:

Air Pollution Control Segment

Our Air Pollution Control Segment is comprised of Adwest Technologies, Inc., Duall Air and Odor Technologies, Busch International, Buell Energy Cyclones, Flex-Kleen Dust Collection Technologies, FKI, Kirk & Blum, and KB Duct. This segment provides the design and manufacture of product recovery and air pollution control technologies that enable our customers to meet compliance targets for toxic emissions, fumes, volatile organic compounds, process and industrial odors. These products and solutions include chemical and biological scrubbers, fabric filters and cartridge collectors, thermal and catalytic oxidation systems, cyclones, separators, gas absorbers and industrial ventilation systems. This segment also provides component parts for industrial air systems and provides cost effective alternatives to traditional duct components, as well as custom metal engineered fabrication services. These products and services are applicable to a wide variety of industries.

Energy Segment

Our Energy Segment is comprised of Aarding Thermal Acoustics, Effox-Flextor and AVC Specialists, Inc. This segment provides the design and manufacture of technologies for flue gas and diverter dampers, non-metallic expansion joints, natural gas turbine exhaust systems, and silencer and precipitator applications, primarily for coal-fired and natural gas power plants, refining, oil production and petrochemical processing, as well as a variety of other industries.

Fluid Handling and Filtration Segment

Our Fluid Handling and Filtration Segment is comprised of Met-Pro Global Pump Solutions, Mefiag Filtration Solutions, Keystone Filtration Solutions, CECO Filters and Strobic Air Corporation. This segment provides the design and manufacture of technologies including high quality centrifugal pumps for corrosive, abrasive and high temperature liquids, filter products for air and liquid filtration, as well as product recovery equipment, and technologically advanced air movement and exhaust systems. These products are applicable to a wide variety of industries, particularly the aquarium/aquaculture, plating and metal finishing, food and beverage, chemical/petrochemical, wastewater treatment, desalination and pharmaceutical markets.

The accounting policies of the reporting segments are the same as those described in the summary of significant accounting policies. Interest income and expense are not included in the measure of segment profit reviewed by management. Income taxes are also not included in the measure of segment operating profit reviewed by management. The operating results of the segments are reviewed through to the “Income from operations” line on the condensed consolidated statements of income.

The financial segment information is presented in the following table:


	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014			2013
Net Sales (less intra-, inter-segment sales)
Air Pollution Control Segment	$	32,939	$	24,069	$	59,687		$	44,589
Energy Segment		16,835		18,996		32,116			31,019
Fluid Handling Filtration Segment		16,650		1,245		32,145			2,890
Corporate and Other⁽¹⁾		217		123		(137	)		296

Net sales	$	66,641	$	44,433	$	123,811		$	78,794

(1)	Includes adjustment for revenue on intercompany jobs.


	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Income from Operations
Air Pollution Control Segment	$	4,876		$	3,839		$	8,742		$	7,150
Energy Segment		1,596			3,135			3,983			5,413
Fluid Handling Filtration Segment		3,069			259			5,740			441
Corporate and Other⁽²⁾		(2,221	)		(3,689	)		(4,956	)		(6,152	)
Eliminations		(132	)		(237	)		(829	)		(207	)

Net operating income	$	7,188		$	3,307		$	12,680		$	6,645

(2)	Includes corporate compensation, professional services, information technology, acquisition and integration expenses, and other general and administrative corporate expenses.


	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Property and Equipment Additions
Air Pollution Control Segment	$	132	$	42	$	268	$	94
Energy Segment		33		141		67		142
Fluid Handling Filtration Segment		119		-		333		-
Corporate and Other		12		-		43		-

Property and equipment additions	$	296	$	183	$	711	$	236


	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Depreciation and Amortization
Air Pollution Control Segment	$	383	$	243	$	778	$	498
Energy Segment		564		615		1,219		733
Fluid Handling Filtration Segment		1,637		8		3,325		16
Corporate and Other		35		33		67		66

Depreciation and Amortization	$	2,619	$	899	$	5,389	$	1,313


	June 30, 2014		December 31, 2013
Identifiable Assets
Air Pollution Control Segment	$	73,556	$	74,556
Energy Segment		64,232		76,960
Fluid Handling Filtration Segment		178,446		185,646
Corporate and Other⁽³⁾		17,392		11,374

Identifiable Assets	$	333,626	$	348,536

⁽³⁾	Corporate assets primarily consist of cash and income tax related assets.


	June 30, 2014		December 31, 2013
Goodwill
Air Pollution Control Segment	$	21,952	$	21,690
Energy Segment		14,900		14,962
Fluid Handling Filtration Segment		97,149		95,568

Goodwill	$	134,001	$	132,220

Intra-segment and Inter-segment Revenues

The Company has multiple divisions that sell to each other within segments (intra-segment sales) and between segments (inter-segment sales) as indicated in the following tables:


	Three Months Ended June 30, 2014
						Less Inter-Segment Sales
	Total Sales		Intra- Segment Sales			APC			Energy			FHF			Corp and Other		Net Sales to Outside Customers
Net Sales
Air Pollution Control Segment	$	35,576	$	(2,461	)	$	—		$	(15	)	$	(161	)	$	—	$	32,939
Energy Segment		18,120		(1,284	)		(1	)		—			—			—		16,835
Fluid Handling Filtration Segment		17,095		(402	)		(43	)		—			—			—		16,650
Corporate and Other⁽⁴⁾		—		—			—			—			—			217		217

Net Sales	$	70,791	$	(4,147	)	$	(44	)	$	(15	)	$	(161	)	$	217	$	66,641


	Three Months Ended June 30, 2013
						Less Inter-Segment Sales
	Total Sales		Intra- Segment Sales			APC			Energy			FHF			Corp and Other		Net Sales to Outside Customers
Net Sales
Air Pollution Control Segment	$	26,635	$	(2,549	)	$	—		$	(12	)	$	(5	)	$	—	$	24,069
Energy Segment		19,667		(671	)		—			—			—			—		18,996
Fluid Handling Filtration Segment		1,266		—			(21	)		—			—			—		1,245
Corporate and Other⁽⁴⁾		—		—			—			—			—			123		123

Net Sales	$	47,568	$	(3,220	)	$	(21	)	$	(12	)	$	(5	)	$	123	$	44,433


	Six Months Ended June 30, 2014
						Less Inter-Segment Sales
	Total Sales		Intra- Segment Sales			APC			Energy			FHF			Corp and Other			Net Sales to Outside Customers
Net Sales
Air Pollution Control Segment	$	63,660	$	(3,490	)	$	—		$	(322	)	$	(161	)	$	—		$	59,687
Energy Segment		34,310		(2,193	)		(1	)		—			—			—			32,116
Fluid Handling Filtration Segment		32,935		(747	)		(43	)		—			—			—			32,145
Corporate and Other⁽⁴⁾		—		—			—			—			—			(137	)		(137	)

Net Sales	$	130,905	$	(6,430	)	$	(44	)	$	(322	)	$	(161	)	$	(137	)	$	123,811


	Six Months Ended June 30, 2013
						Less Inter-Segment Sales
	Total Sales		Intra- Segment Sales			APC			Energy			FHF			Corp and Other		Net Sales to Outside Customers
Net Sales
Air Pollution Control Segment	$	48,721	$	(3,705	)	$	—		$	(28	)	$	(399	)	$	—	$	44,589
Energy Segment		31,721		(700	)		(2	)		—			—			—		31,019
Fluid Handling Filtration Segment		2,911		—			(21	)		—			—			—		2,890
Corporate and Other⁽⁴⁾		—		—			—			—			—			296		296

Net Sales	$	83,353	$	(4,405	)	$	(23	)	$	(28	)	$	(399	)	$	296	$	78,794

⁽⁴⁾	Includes adjustment for revenue on intercompany jobs.

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES