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Acquisitions and Joint Ventures | 6 Months Ended
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Jun. 30, 2021
Business Combinations [Abstract] |
Acquisitions and Joint Ventures | 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 through 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. During 2020, the Company increased the earnout liability to $1.7 million at December 31, 2020 based on the estimated fair value at that date. During 2021, the Company increased the estimated earnout fair value an additional $0.5 million and made earnout payments of $0.8 million related to 2020 performance. The changes in fair value were a result of EIS performing above acquisition operational expectations. As of June 30, 2021 the earnout liability recorded in “Accounts payable and accrued expenses” on the Condensed Consolidated Balance Sheets is $1.4 million. EIS engineers products that clean air through a variety of technologies including volatile organic compounds (“VOC”) abatement, odor control, and other air pollution control solutions, which complements our Industrial Solutions Segment businesses. The following table summarizes the 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 Income are related to acquisition activities, which include retention, legal, accounting, banking, and other expenses. For the three and six months ended June 30, 2021, EIS accounted for $5.5 million and $8.1 million in revenue, respectively and $0.7 million and $0.9 million, respectively of net income included in the Company’s results. 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 holds 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 Consolidated Balance Sheet. The results of the joint venture are included in our Engineered Systems segment. The fair value of Mader’s net assets contributed was $1.0 million. As of June 30, 2021 there were $6.6 million in current assets, $8.8 million in long-lived assets, and $6.8 million in total liabilities related to the Effox-Mader joint venture included in our Condensed Consolidated Balance Sheets. For the three and six months ended June 30, 2021 Mader accounted for $4.7 million and $9.6 million in revenue, respectively, and $0.6 million and $1.2 million of net income, respectively, included in the Company’s results. The following table summarizes the 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 |  |  | 2,085 |
Deferred income tax asset |  |  | 287 |
Total assets acquired |  |  | 4,515 |
Current liabilities assumed |  |  | (515 | )
Other liabilities |  |  | (500 | )
Long term debt |  |  | (2,508 | )
Net assets acquired |  | $ | 992 |
Goodwill recognized represents value the Company expects to be created by combining the various operations of the joint venture 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 fair values of the assets acquired and liabilities assumed related to the above acquisition and joint venture were finalized during the quarter ended June 30, 2021. 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, 2020:
|  | Three months ended June 30, |  |  | Six months ended June 30, |
(table in thousands, except per share data) |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Net sales |  | $ | 78,680 |  |  | $ | 79,809 |  |  | $ | 150,572 |  |  | $ | 168,608 |
Net income attributable to CECO Environmental Corp. |  |  | 293 |  |  |  | 3,834 |  |  |  | 1,474 |  |  |  | 8,198 |
Earnings per share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.01 |  |  | $ | 0.11 |  |  | $ | 0.04 |  |  | $ | 0.23 |
Diluted |  | $ | 0.01 |  |  | $ | 0.11 |  |  | $ | 0.04 |  |  | $ | 0.23 |
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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