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Acquisitions and Joint Ventures | 12 Months Ended
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Dec. 31, 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. As additional consideration, the former owners of GRC were issued 10% of the equity interest in the EFM JV, resulting in the Company holding 63% of the equity in the joint venture. The fair value ascribed to the equity interest of the former owners of GRC was approximately $4.1 million. As of December 31, 2022, there were $13.4 million in current assets, $27.7 million in long-lived assets, and $29.8 million in total liabilities related to the EFM JV included in the Consolidated Balance Sheets. For the year ended December 31, 2022, EFM JV accounted for $35.8 million in revenue. 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 the EFM JV product offerings within the Engineered Systems segment. The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of closing.
(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 |
The Company acquired customer lists and tradename intangible assets valued at $7.7 million and $0.7 million, respectively. These assets were determined to have useful lives of 10 years. During the year ended December 31, 2022, GRC accounted for $11.7 million in revenue and $2.1 million 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 to the former owners 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 December 31, 2022, the earnout liability recorded in “Accounts payable and accrued expenses” on the Consolidated Balance Sheets is $1.2 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 the Company's industrial water product offerings within the Engineered Systems segment. The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of closing.
(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 |
The Company acquired customer lists and tradename intangible assets valued at $4.4 million and $0.5 million, respectively. These assets were determined to have useful lives of 10 years. During the year ended December 31, 2022, Compass accounted for $3.7 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 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 the Company's industrial air product offerings within the Industrial Process Solutions segment. The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of closing.
(in thousands) |  |  |
Current assets (including cash of $1,557) |  | $ | 2,711 |
Property and equipment |  |  | 188 |
Goodwill |  |  | 7,344 |
Intangible - finite life |  |  | 3,158 |
Total assets acquired |  |  | 13,401 |
Current liabilities assumed |  |  | (1,127 | )
Deferred income tax liability |  |  | (824 | )
Net assets acquired |  | $ | 11,450 |
The Company acquired customer lists and tradename intangible assets valued at $2.8 million and $0.4 million, respectively. These assets were determined to have useful lives of 10 years. During the year ended December 31, 2022, Western Air Ducts accounted fo r $1.5 million in revenue and $0.3 million of net loss included in the Company's results. DS21 Co., Ltd. On September 19, 2022, the Company acquired 100% of the equity interests of DS21 Co., Ltd. ("DS21") for $9.2 million, including $8.9 million in cash, which was financed with a draw on the Company’s revolving credit facility, and deferred cash consideration of $0.3 million payable in one year. DS21 is a South Korean-based design and manufacturing firm specializing in innovative water and wastewater treatment solutions. The addition of DS21 advances the Company's leadership position in niche oily water and produced water treatment, demineralization water treatment and ultra-pure water supply applications within the Company's Engineered Systems segment. The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of closing.
(in thousands) |  |  |
Current assets (including cash of $1,453) |  | $ | 5,099 |
Property and equipment |  |  | 4,112 |
Intangible - finite life |  |  | 422 |
Deferred income taxes |  |  | 557 |
Other assets |  |  | 169 |
Total assets acquired |  |  | 10,359 |
Current liabilities assumed |  |  | (1,008 | )
Other liabilities |  |  | (113 | )
Net assets acquired |  | $ | 9,238 |
The Company acquired customer lists and tradename intangible assets valued at $0.1 million and $0.3 million, respectively. These assets were determined to have useful lives of 10 years. During the year ended December 31, 2022, DS21 accounted fo r $1.9 million in revenue and $0.5 million of net loss included in the Company's results. 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 the revolving credit facility. As additional consideration, the former owners were entitled to earn-out payments based upon a multiple of specified financial results through December 31, 2021, which was estimated to be $0.6 million at the acquisition date. See Note 7 for additional information on the earnout. 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 the Industrial Process Solutions segment businesses. The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of closing.
(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 |
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. Mader On July 31, 2020, the Company entered into the JV Agreement with Mader in which CECO contributed the net assets of its Effox-Flextor damper business and Mader contributed the net assets of its damper business. Under the terms of the JV Agreement, CECO will hold 70% of the equity in the joint venture, and 50% voting interest. The Company 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 EFM JV are included in the Engineered Systems segment. The fair value of Mader’s net assets contributed was $1.0 million. The following table summarizes the fair values of the assets acquired and liabilities assumed at the JV agreement date.
(in thousands) |  |  |
Current assets (including cash of $229) |  | $ | 2,040 |
Property and equipment |  |  | 103 |
Goodwill |  |  | 2,085 |
Deferred income tax asset |  |  | 287 |
Total assets assumed |  |  | 4,515 |
Current liabilities assumed |  |  | (515 | )
Other liabilities |  |  | (500 | )
Long term debt |  |  | (2,508 | )
Net assets acquired |  | $ | 992 |
The approximate fair values of the assets acquired and liabilities assumed related to the acquisitions occurring in 2022 are based on preliminary estimates and assumptions. These preliminary estimates and assumptions could change significantly during the purchase price measurement period as the Company finalizes 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 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, Western Air Ducts, and DS21 acquisitions had occurred on January 1, 2021:
|  | December 31, |
(table only in thousands, except per share data) |  | 2022 |  |  | 2021 |
Net sales |  | $ | 435,216 |  |  | $ | 358,724 |
Net income attributable to CECO Environmental Corp. |  |  | 18,074 |  |  |  | 4,466 |
Earnings per share: |  |  |  |  |  |
Basic |  | $ | 0.52 |  |  | $ | 0.13 |
Diluted |  | $ | 0.52 |  |  | $ | 0.13 |
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 https://asc.fasb.org/topic&trid=2303972 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 5 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=128092470&loc=d3e4946-128472 + Details
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