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Acquisitions and Joint Ventures | 6 Months Ended
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Jun. 30, 2022
Business Combinations [Abstract] |
Acquisitions and Joint Ventures | 14. Acquisitions and Joint Ventures General Rubber LLC On March 7, 2022, the Company, through the EFM JV, acquired 100% of the equity interests of General Rubber LLC ("GRC") for $19.7 million in cash, which was financed with a combination of a draw on the Company's revolving credit facility and issuance of term debt by the EFM JV (see Note 7). As additional consideration, the former owners were issued 10% of the equity interest in the EFM JV. The fair value ascribed to the equity interest was approximately $4.1 million. During the three-month period ended June 30, 2022, we recorded an adjustment of $0.9 million to the fair value of the equity interest, as reflected in the Condensed Consolidated Statement of Shareholders' Equity. As of June 30, 2022, there were $13.7 million in current assets, $28.5 million in long-lived assets, and $30.5 million in total liabilities related to the EFM JV included in our Condensed Consolidated Balance Sheets. GRC engineers and manufactures non-metallic expansion joints and flow control products including rubber expansion joints, ducting expansion joints, and industrial pinch and duck bill valves, serving the industrial water and wastewater markets. The acquisition diversifies and expands our EFM JV product offerings within our Engineered Systems segment. 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 $137) |  | $ | 4,963 |
Property and equipment |  |  | 459 |
Goodwill |  |  | 11,120 |
Intangible - finite life |  |  | 8,380 |
Total assets acquired |  |  | 24,922 |
Current liabilities assumed |  |  | (714 | )
Deferred income tax liability |  |  | (388 | )
Net assets acquired |  | $ | 23,820 |
During the three and six-months ended June 30, 2022, GRC accounted for $3.8 million and $4.5 million in revenue, respectively and $0.5 million and $0.8 million, respectively of net income included in the Company’s results. Compass Water Solutions, Inc. On May 3, 2022, the Company acquired 100% of the equity interests of Compass Water Solutions, Inc. ("Compass") for $9.0 million in cash, which was financed with a draw on the Company’s revolving credit facility, and $2.0 million in notes payable over two years. As additional consideration, the former owners are entitled to earn-out payments based upon a multiple of specified financial results through April 30, 2023. Based on projections at the acquisition date, the Company estimated the fair value of the earn-out to be $1.4 million. As of June 30, 2022, the earnout liability recorded in “Accounts payable and accrued expenses” on the Condensed Consolidated Balance Sheets is $1.4 million. Compass, is a leading global supplier of membrane-based industrial water and wastewater treatment systems that help customers achieve regulatory compliance of water discharge at the lowest lifecycle cost. The acquisition diversifies and expands our industrial water product offerings within our Engineered Systems segment. 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 $334) |  | $ | 4,796 |
Property and equipment |  |  | 101 |
Goodwill |  |  | 4,848 |
Intangible - finite life |  |  | 4,900 |
Total assets acquired |  |  | 14,645 |
Current liabilities assumed |  |  | (623 | )
Deferred income tax liability |  |  | (1,627 | )
Net assets acquired |  | $ | 12,395 |
During the three and six-months ended June 30, 2022, Compass accounted for $0.8 million in revenue, and $0.1 million of net loss included in the Company’s results. Western Air Ducts Ltd. On June 22, 2022, the Company acquired 100% of the equity interests of Western Air Ducts Limited for $10.7 million in cash, which was financed with a draw on the Company’s revolving credit facility, and deferred cash consideration of $0.8 million payable in one year. The deferred consideration is recorded in “Accounts payable and accrued expenses” on the Condensed Consolidated Balance Sheets. Western Air Ducts is a leading European supplier of dust and fume extraction solutions, providing consultation, design, manufacturing, installation, and service. The acquisition diversifies and expands our industrial air product offerings within our Industrial Process Solutions segment. 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 $1,557) |  | $ | 2,711 |
Property and equipment |  |  | 188 |
Goodwill |  |  | 9,712 |
Total assets acquired |  |  | 12,611 |
Current liabilities assumed |  |  | (1,127 | )
Deferred income tax liability |  |  | (34 | )
Net assets acquired |  | $ | 11,450 |
The approximate fair values of the assets acquired and liabilities assumed related to the acquisitions 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 valuation of assets acquired and liabilities assumed. These 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. 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 these acquisitions is not deductible for tax purposes. 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. The following unaudited pro forma financial information represents the Company’s results of operations as if the GRC, Compass, and Western Air Ducts acquisitions had occurred on January 1, 2021:
|  | Three months ended June 30, |  |  | Six months ended June 30, |
(table in thousands, except per share data) |  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Net sales |  | $ | 106,995 |  |  | $ | 85,828 |  |  | $ | 204,280 |  |  | $ | 164,979 |
Net income attributable to CECO Environmental Corp. |  |  | 4,573 |  |  |  | 431 |  |  |  | 7,508 |  |  |  | 2,415 |
Earnings per share: |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.13 |  |  | $ | 0.01 |  |  | $ | 0.21 |  |  | $ | 0.07 |
Diluted |  | $ | 0.13 |  |  | $ | 0.01 |  |  | $ | 0.21 |  |  | $ | 0.07 |
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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