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Acquisition | 9 Months Ended
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Sep. 30, 2020
Business Combinations [Abstract] |
Acquisition | 14. Acquisitions and Joint Ventures Environmental Integrated Solutions On June 4, 2020, the Company acquired 100% of the equity interests of Environmental Integrated Solutions (“EIS”) for $10.3 million in cash, which was financed with an additional draw on our revolving credit facility. As additional consideration, the former owners are entitled to earn-out payments based upon a multiple of specified financial results through December 31, 2021. Based on projections at the acquisition date, the Company estimated the fair value of the earn-out to be $0.6 million; the earn-out liability is recorded in “Accounts payable and accrued expenses” on the Condensed Consolidated Balance Sheets. EIS engineers products that clean air through a variety of technologies including volatile organic compounds (“VOC”) abatement, odor control, regenerative thermal oxidizers, and other air pollution control solutions, which complements our Industrial Solutions Segment businesses. The following table summarizes the approximate fair values of the assets acquired and liabilities assumed at the date of closing.
(table only in thousands) |  |  |  |
Current assets (including cash of $4,212) |  | $ | 6,416 |
Property and equipment |  |  | 26 |
Other assets |  |  | 44 |
Goodwill |  |  | 7,022 |
Intangible - finite life |  |  | 4,840 |
Total assets acquired |  |  | 18,348 |
Current liabilities assumed |  |  | (6,514 | )
Deferred income tax liability |  |  | (920 | )
Net assets acquired |  | $ | 10,914 |
Goodwill recognized represents value the Company expects to be created by combining the various operations of the acquired businesses with the Company’s operations, including the expansion into markets within existing business segments, access to new customers and potential cost savings and synergies. Goodwill related to this acquisition is not deductible for tax purposes. The Company acquired customer lists and tradename intangible assets valued at $4.2 million and $0.6 million, respectively. These assets were determined to have useful lives of 10 years. Acquisition and integration expenses on the Condensed Consolidated Statements of Operations are related to acquisition activities, which include retention, legal, accounting, banking, and other expenses. For the three and nine months ended September 30, 2020, EIS accounted for $5.3 and $5.8 million in revenue, respectively and $0.4 million and $0.6 million of net income included in the Company’s results, respectively. Mader On July 31, 2020, the Company entered into a joint venture agreement (“JV Agreement”) with Mader Holdings L.P. (“Mader”) in which CECO contributed the net assets of its Effox-Flextor damper business and Mader contributed the net assets of their damper business. Under the terms of the JV Agreement, CECO will hold 70% of the equity in the joint venture, and 50% voting interest. We determined CECO was the primary beneficiary of this variable interest entity and therefore the 30% noncontrolling equity interest is in the Condensed Consolidated Balance Sheet. The results of the joint venture are included in our Energy Segment. The fair value of Mader’s net assets contributed was $1.0 million. As of September 30, 2020, there were $6.2 million in current assets, $8.7 million in long-lived assets, and $7.3 million in total liabilities related to the Effox-Mader joint venture included in our Condensed Consolidated Balance Sheets. The following table summarizes the approximate fair values of the assets acquired and liabilities assumed at the JV agreement date.
(table only in thousands) |  |  |  |
Current assets (including cash of $229) |  | $ | 2,040 |
Property and equipment |  |  | 103 |
Goodwill |  |  | 2,000 |
Deferred income tax asset |  |  | 287 |
Total assets assumed |  |  | 4,430 |
Current liabilities assumed |  |  | (430 | )
Other liabilities |  |  | (500 | )
Long term debt |  |  | (2,508 | )
Fair value of 30% noncontrolling equity interest in Mader |  | $ | 992 |
Goodwill recognized represents value the Company expects to be created by combining the various operations of the acquired businesses with the Company’s operations, including the expansion into markets within existing business segments, access to new customers and potential cost savings and synergies. Goodwill related to this joint venture is not deductible for tax purposes. The approximate fair values of the assets acquired and liabilities assumed related to the above acquisition and joint venture are based on preliminary estimates and assumptions. These preliminary estimates and assumptions could change significantly during the purchase price measurement period as we finalize the valuations of the assets acquired and liabilities assumed. Such changes could result in material variances between the Company’s future financial results, including variances in the estimated purchase price, fair values recorded and expenses associated with these items. The following unaudited pro forma financial information represents the Company’s results of operations as if the EIS acquisition and the joint venture with Mader had occurred on January 1, 2019:
|  | Three months ended September 30, |  |  | Nine months ended September 30, |
(table in thousands, except per share data) |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Net Sales |  | $ | 77,943 |  |  | $ | 91,099 |  |  | $ | 246,550 |  |  | $ | 269,982 |
Net (loss) income attributable to CECO Environmental Corp. |  |  | (222 | ) |  |  | 2,468 |  |  |  | 7,975 |  |  |  | 10,788 |
(Loss) earnings per share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | (0.01 | ) |  | $ | 0.07 |  |  | $ | 0.23 |  |  | $ | 0.31 |
Diluted |  | $ | (0.01 | ) |  | $ | 0.07 |  |  | $ | 0.22 |  |  | $ | 0.30 |
The pro forma results have been prepared for informational purposes only and include adjustments to amortize acquired intangible assets with finite life, reflect additional interest expense on debt used to fund the acquisition, and to record the income tax consequences of the pro forma adjustments. These pro forma results do not purport to be indicative of the results of operations that would have occurred had the purchase been made as of the beginning of the periods presented or of the results of operations that may occur in the future.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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