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Acquisitions | 12 Months Ended
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Dec. 31, 2024
Business Combinations [Abstract] |
Acquisitions | 14. Acquisitions Verantis Environmental Solutions Group On December 17, 2024, the Company acquired 100% of the equity interests of Verantis Environmental Solutions Group ("Verantis") for $65.5 million in cash, which was financed with a draw on the Company's revolving credit facility. Verantis is a global leader in engineering services and environmental systems that focuses on process improvement in a wide range of general industrial and high technology processes within the Industrial Processing Solutions segment. T he 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 $10,557) |  | $ | 21,107 |
Property and equipment |  |  | 373 |
Intangible - finite life |  |  | 22,070 |
Goodwill |  |  | 44,676 |
Other assets |  |  | 142 |
Total assets acquired |  |  | 88,368 |
Current liabilities assumed |  |  | (17,595 | )
Deferred income tax liability |  |  | (4,349 | )
Other liabilities assumed |  |  | (928 | )
Net assets acquired |  | $ | 65,496 |
The Company acquired technology, customer lists and tradename intangible assets valued at $2.4 million, $17.0 million and $2.6 million, respectively. These assets were determined to have useful lives of 7, 10 and 10 years, respectively. During the year ended December 31, 2024, Verantis accounted f or $2.4 million in revenue and $0.2 m illion of net income in the Company's results. WK Group On October 2, 2024, the Company acquired 100% of the equity interests of WK Group for $6.8 million in cash, which was financed with a draw on the Company's revolving credit facility. As additional consideration in the acquisition of WK Germany KG, GmbH and WK Asia-Pacific Pte. Ltd. (collectively, "WK Group"), the former owners of WK Group are also entitled to earn-out payments up to $27.5 million based upon specified financial results through September 30, 2025. Based on projections at the acquisition date, the Company estimated the fair value of the earn-out to be $6.3 million, recorded within "Accrued expenses" on its Consolidated Balance Sheets. This fair value measurement is based on inputs not observable in the market, which is considered Level 3 on the fair value hierarchy. WK Group designs and engineers a broad range of cutting-edge technical equipment and systems for process and environmental and surface technology applications, as well as innovative sustainable solutions within the Industrial Processing Solutions segment. T he 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 $9,705) |  | $ | 20,294 |
Property and equipment |  |  | 853 |
Intangible - finite life |  |  | 3,114 |
Goodwill |  |  | 2,981 |
Other assets |  |  | 441 |
Total assets acquired |  |  | 27,683 |
Current liabilities assumed |  |  | (12,430 | )
Deferred income tax liability |  |  | (854 | )
Other liabilities assumed |  |  | (1,320 | )
Net assets acquired |  | $ | 13,079 |
The Company acquired technology, customer lists and tradename intangible assets valued at $1.0 million, $1.2 million and $1.0 million, respectively. These assets were determined to have useful lives of 7, 10 and 10 years, respectively. During the year ended December 31, 2024, WK Group accounted for $4.6 million in revenue and $0.7 mil lion of net loss in the Company's results. EnviroCare International LLC On July 29, 2024, the Company acquired 100% of the equity interests of EnviroCare International LLC (“EnviroCare") for $16.8 million, including $15.7 million paid at closing, which was financed with a draw on the Company's revolving credit facility, and a seller promissory note of $1.7 million, partially offset by a working capital adjustment of $0.7 million. EnviroCare is an international designer and provider of industrial exhaust air contamination treatment and control systems, solutions and services across a wide range of industrial and municipal applications within the Industrial Processing Solutions 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 $596 and accounts receivable of $405) |  | $ | 3,111 |
Property and equipment |  |  | 17 |
Intangible - finite life |  |  | 7,250 |
Goodwill |  |  | 11,348 |
Total assets acquired |  |  | 21,726 |
Current liabilities assumed |  |  | (5,024 | )
Net assets acquired |  | $ | 16,702 |
The Company acquired technology, customer lists and tradename intangible assets valued at $0.8 million, $0.8 million and $5.7 million, respectively. These assets were determined to have useful lives of 7, 10 and 10 years, respectively. During the year ended December 31, 2024, EnviroCare accounted for $6.0 million in revenue and $0.9 million of net income in the Company's results. Kemco Systems Co., LLC On August 23, 2023, the Company acquired 100% of the equity interests of Kemco for $24.0 million in cash, which was financed with a draw on the Company’s revolving credit facility. During the year ended December 31, 2024, the Company received $0.4 million from the former owners of Kemco as a working capital adjustment, reducing the purchase price to $23.6 million. As additional consideration, the former owners of Kemco are entitled to earnout payments up to $4.0 million based upon specified financial results through August 31, 2026, of which $2.8 million was paid during the year ended December 31, 2024. Based on projections at the acquisition date, the Company estimated the fair value of the earnout to be $2.2 million, which was subsequently adjusted to $2.9 million during the year ended December 31, 2024. This fair value measurement is based on inputs not observable in the market, which is considered Level 3 on the fair value hierarchy. The remaining $0.1 million earnout liability was recorded i n "Accrued expenses" on its Consolidated Balance Sheets as of December 31, 2024. 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 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 | )
Net assets acquired |  | $ | 26,231 |
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, of which $1.0 million was paid in the year ended December 31, 2024. 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 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 |  | $ | 22,396 |
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 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. During the year ended December 31, 2022, the Company acquired DS21 Co., Ltd. which accounted for $1.9 million in revenue and $0.5 million of net loss included in the Company’s results, Western Air Ducts Ltd. which accounted for $1.5 million in revenue and $0.3 million of net loss included in the Company’s results, Compass Water Solutions, Inc. which accounted for $3.7 million in revenue and $0.1 million of net loss included in the Company’s results, and General Rubber LLC, through the EFM JV, which accounted for $11.7 million in revenue and $2.1 million of net income included in the Company’s results. The Company has finalized the valuation of assets acquired and liabilities assumed related to the 2023 acquisitions. The purchase accounting related to the 2024 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) |  | 2024 |  |  | 2023 |  |  | 2022 |
Net sales |  | $ | 636,191 |  |  | $ | 662,569 |  |  | $ | 478,802 |
Net income attributable to CECO Environmental Corp. |  | $ | 16,332 |  |  | $ | 17,013 |  |  | $ | 20,179 |
Earnings per share: |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.47 |  |  | $ | 0.49 |  |  | $ | 0.58 |
Diluted |  | $ | 0.45 |  |  | $ | 0.48 |  |  | $ | 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.

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