XML 39 R24.htm IDEA: XBRL DOCUMENT
v3.24.0.1

Acquisitions and Joint Ventures | 12 Months Ended
--- | ---
Dec. 31, 2023
Business Combinations [Abstract] |
Acquisitions and Joint Ventures | 14. Acquisitions and Joint Ventures Kemco Systems Co., LLC On August 23, 2023, the Company acquired 100% of the equity interests of Kemco Systems Co., LLC ("Kemco") for $24.0 million in cash, which was financed with a draw on the Company’s revolving credit facility. As additional consideration, the former owners are entitled to earn-out payments up to $4.0 million based upon specified financial results through August 31, 2026. Based on projections at the acquisition date, the Company estimated the fair value of the earn-out to be $2.2 million. This fair value measurement is based on inputs not observable in the market, which is considered Level 3 on the fair value hierarchy. As of December 31, 2023, the earnout liability recorded in “Accrued expenses” and "Other liabilities" on the Consolidated Balance Sheets was $1.1 million and $1.1 million, respectively, based on the anticipated payout timing, for a total of $2.2 million. Kemco designs and manufactures energy and water conservation systems and equipment for applications regarding wastewater reuse and recycle, heat recovery, water heating, and vapor energy. This acquisition advances the Company's position within the North American water and wastewater treatment market within the Engineered Systems segment. The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed at the date of closing.
(in thousands) |  |  |
Current assets (including accounts receivable of $2,328) |  | $ | 8,902 |
Property and equipment |  |  | 341 |
Right-of-use assets from operating leases |  |  | 1,602 |
Intangible - finite life |  |  | 11,610 |
Goodwill |  |  | 11,017 |
Other assets |  |  | 16 |
Total assets acquired |  |  | 33,488 |
Current liabilities assumed |  |  | (6,853 | )
Other liabilities assumed |  |  | (404 | )
Deferred tax liability |  |  | (12 | )
Net assets acquired |  | $ | 26,219 |
The Company acquired technology, customer lists and tradename intangible assets valued at $1.4 million, $8.7 million and $1.5 million, respectively. These assets were determined to have useful lives of 7, 10 and 10 years, respectively. During the year ended December 31, 2023, Kemco accounted for $13.1 million in revenue and $2.0 million of net income included in the Company’s results. Transcend Solutions On March 31, 2023, the Company acquired 100% of the equity interests of Transcend Solutions, LLC ("Transcend") for $22.4 million, including $20.0 million in cash, which was financed with a draw on the Company’s revolving credit facility, $2.4 million of deferred cash consideration, consisting of $0.4 million of holdback paid within one year and $2.0 million of notes payable due in equal installments over two years. Transcend is a process filtration solution design and manufacturing company with applications in hydrocarbon and chemical processing. This acquisition improves the Company's short-cycle and long-cycle mix and expands the Company's reach into midstream oil and gas, liquified natural gas, hydrocarbon processing, and chemical processing applications within the Engineered Systems segment. The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed at the date of closing.
(in thousands) |  |  |
Current assets (including cash of $52 and accounts receivable of $1,493) |  | $ | 2,614 |
Property and equipment |  |  | 1,153 |
Intangible - finite life |  |  | 8,930 |
Goodwill |  |  | 10,839 |
Other assets |  |  | 231 |
Total assets acquired |  |  | 23,767 |
Current liabilities assumed |  |  | (1,203 | )
Deferred tax liability |  |  | (168 | )
Net assets acquired |  | $ | 22,564 |
The Company acquired technology, customer lists and tradename intangible assets valued at $0.6 million, $7.6 million and $0.7 million, respectively. These assets were determined to have useful lives of 7, 10 and 10 years, respectively. During the year ended December 31, 2023, Transcend accounted for $10.3 million in revenue and $1.7 million of net income included in the Company’s results. Malvar Engineering Limited On January 10, 2023, the Company acquired 100% of the equity interests of Malvar Engineering Limited, including its subsidiaries Arkanum Management Limited and Wakefield Acoustics Limited (collectively, "Wakefield"), for $4.1 million in cash, which was financed with a draw on the Company’s revolving credit facility, and $0.4 million of deferred cash consideration. As additional consideration, the former owners were entitled to earn-out payments based upon specified financial results through July 31, 2023. Based on projections at the acquisition date, the Company estimated the fair value of the earn-out to be $0.6 million. A payment of $0.6 million, representing the fully earned amount, was made in the fourth quarter of 2023. Wakefield is a producer of industrial engineered noise control solutions, including custom acoustical gen-set packages, ambient air baffles, acoustical louvres, and skid enclosures, primarily serving server farms for data centers, standby and emergency power generation, oil and gas, petrochemical, commercial construction, infrastructure, and general manufacturing industries. This acquisition advances the Company's position within the industrial silencing and noise attenuation market by adding a range of solutions and access to new geographic markets within the Engineered Systems segment. The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed at the date of closing.
(in thousands) |  |  |
Current assets (including accounts receivable of $2,467) |  | $ | 3,240 |
Property and equipment |  |  | 635 |
Intangible - finite life |  |  | 1,778 |
Goodwill |  |  | 5,296 |
Total assets acquired |  |  | 10,949 |
Current liabilities assumed |  |  | (4,860 | )
Deferred income tax liability |  |  | (961 | )
Net assets acquired |  | $ | 5,128 |
The Company acquired customer lists and tradename intangible assets valued at $1.5 million and $0.3 million, respectively. These assets were determined to have useful lives of 10 years. During the year ended December 31, 2023, Wakefield accounted for $13.8 million in revenue and $1.3 million of net income 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 paid within one year from the date of closing. 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. 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 paid within one year from the date of closing. 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. 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, which was paid in the third quarter of 2023. 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. 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 Company determined CECO was the primary beneficiary of this variable interest entity and therefore the noncontrolling equity interest is in the Consolidated Balance Sheet. The fair value ascribed to the equity interest of the former owners of GRC was approximately $4.1 million. As of December 31, 2023, there were $14.5 million in current assets, $26.7 million in long-lived assets, and $12.5 million in total liabilities related to the EFM JV included in the Consolidated Balance Sheets. For the years ended December 31, 2023 and 2022, EFM JV accounted for $37.7 million and $35.8 million in revenue, respectively. 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. The Company has finalized the valuation of assets acquired and liabilities assumed related to the 2022 acquisitions. The purchase accounting related to the 2023 acquisitions is subject to final adjustment, primarily for the valuation of intangible assets pending final valuation results for such assets and tax balances for the further assessment of the acquiree’s tax positions. 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 in 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 these acquisitions had occurred at the beginning of the fiscal year prior to the acquisition:
|  | December 31, |
(table only in thousands, except per share data) |  | 2023 |  |  | 2022 |
Net sales |  | $ | 564,608 |  |  | $ | 478,802 |
Net income attributable to CECO Environmental Corp. |  | $ | 14,562 |  |  |  | 20,179 |
Earnings per share: |  |  |  |  |  |
Basic |  | $ | 0.42 |  |  | $ | 0.58 |
Diluted |  | $ | 0.41 |  |  | $ | 0.58 |
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.

X
- 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://www.xbrl.org/2003/role/disclosureRef -Topic 805 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479907/805-20-50-5 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//805/tableOfContent + Details
Name: | us-gaap_BusinessCombinationDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_BusinessCombinationsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration