UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant
to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 5, 2015
CECO Environmental Corp.
(Exact Name of registrant as specified in its charter)
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Delaware |
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000-7099 |
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13-2566064 |
(State or other jurisdiction
of in corporation) |
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(Commission
File Number) |
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(IRS Employer
Identification No.) |
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4625 Red Bank Road
Cincinnati, OH |
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45227 |
(Address of principal executive offices) |
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(Zip Code) |
Registrants telephone number, including area code: (513) 458-2600
Not applicable
(Former
Name or Former Address, if Changed Since Last Report)
Check the appropriate box below
if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. |
Results of Operations and Financial Condition. |
On November 5, 2015, CECO
Environmental Corp., a Delaware corporation (CECO) issued a press release announcing its financial results for the three and nine months ended September 30, 2015. A copy of the press release is furnished as Exhibit 99.1 to this
report and is incorporated herein by reference.
The information in this Item 2.02, including the exhibit, shall not be deemed
filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except
as shall be expressly set forth by specific reference in such filing.
Item 9.01. |
Financial Statements and Exhibits. |
(d) Exhibits
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Exhibit
Number |
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Exhibit Title |
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99.1 |
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Press Release, dated November 5, 2015. |
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
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Date: November 5, 2015 |
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CECO Environmental Corp. |
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By: |
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/s/ Edward J. Prajzner |
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Edward J. Prajzner |
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Chief Financial Officer |
Exhibit 99.1
CECO Environmental Corp. Reports Third Quarter 2015 Results;
Achieved record quarterly revenue, non-GAAP adjusted EBITDA and Backlog
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Revenue of $98.2 million for the third quarter of 2015 was up 55.2% from the prior-year period; Organic revenue was up 4.5% on a constant currency basis from the prior-year period. |
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Gross profit of $30.8 million, or 31.4% gross margin, for the third quarter of 2015 was up 46.2%, from $21.1 million, or 33.3% gross margin, in the prior-year period. Gross margin of 31.4% for the third quarter was also
up from the second quarter gross margin of 30.6%. |
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Operating loss of $2.2 million for the third quarter of 2015, compared with operating income of $5.2 million in the prior-year period. |
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Non-GAAP operating income was $13.0 million, or 13.2% margin, for the third quarter, up 58.5% from $8.2 million, or 12.9% margin, in the prior-year period. |
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Non-GAAP adjusted EBITDA was $14.1 million for the third quarter, up from $9.5 million in the prior-year period and up from $13.5 million in the second quarter of 2015. |
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Net loss per diluted share was $0.17 for the third quarter, compared with net income per diluted share of $0.14 in the prior-year period. Non-GAAP net income per diluted share was $0.27 for the third quarter of 2015,
compared with $0.28 for the prior-year period. |
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Completed acquisition of PMFG, Inc. |
CINCINNATI, Ohio, November 5, 2015 CECO Environmental
Corp. (Nasdaq:CECE), a leading global environmental, energy and fluid handling technology company, today reported its financial results for the third quarter of 2015.
Revenue in the third quarter of 2015 was $98.2 million, up 55.2% from $63.3 million in the prior-year period. Recent acquisitions(1) contributed $33.8 million of incremental revenue in the third quarter of 2015. Organic revenue was up 4.5% on a constant currency basis compared with prior-year period.
Revenue in the first nine months of 2015 was $266.2 million, up 42.3% from $187.1 million in the prior-year period. Recent acquisitions(1) contributed $75.5 million of incremental revenue in the first nine months of 2015. Organic revenue was up 4.5% for the first nine months of 2015 compared with the prior-year period on a constant
currency basis compared with the prior-year period.
Operating loss was $2.2 million for the third quarter of 2015 compared with $5.2 million operating
income in the prior-year period, and $4.5 million for the second quarter of 2015. Operating income on a non-GAAP basis was $13.0 million for the third quarter of 2015 compared with $8.2 million in the prior-year period.
Operating income in the first nine months of 2015 was $5.3 million compared with $17.9 million in the prior-year period. Operating income on a non-GAAP basis
in the first nine months of 2015 was $32.8 million compared with $26.3 million in the prior-year period.
Net loss per diluted share was $0.17 for the
third quarter of 2015, compared with net income per diluted share of $0.14 in the prior-year period. Non-GAAP net income per diluted share was $0.27 for the third quarter of 2015, compared with $0.28 for the prior-year period.
Cash and cash equivalents were $36.1 million and bank debt was $194.3 million as of September 30, 2015 compared with $19.4 million and $112.4 million,
respectively, as of December 31, 2014.
1 | P a g e
BACKLOG AND BOOKINGS
Total backlog at September 30, 2015 was $212.3 million as compared with $140.1 million on December 31, 2014, and $140.6 million on June 30,
2015.
Bookings were $257.2 million in the first nine months of 2015, compared with $191.2 million in the first nine months of 2014, an increase of 34.5%.
Bookings were $88.8 million in the third quarter of 2015, compared with $69.9 million in the prior-year period.
OPERATIONAL SUMMARY
We are pleased with our third quarter results as we executed on our core objectives and achieved several milestones, including record revenue, adjusted
EBITDA, non-GAAP operating income and backlog. Additionally, gross margins improved, from the first half of 2015, due to project management excellence, a better aftermarket mix and solid performance in each of our three business segments, said
Chief Executive Officer Jeff Lang. We continue to focus on our Sales Excellence and OneCECO initiatives, which helped drive quarterly and year-over-year organic revenue growth on a constant currency basis.
Jeff Lang commented, We completed the PFMG acquisition in early September and I am pleased with the integration and execution thus far, as well as the
level of talent among the PMFG employees. We have exceeded the committed level of cost savings synergies achieved for 2015, and we are on track to realize the overall committed synergies of $15 million within 18 months, six months ahead of schedule,
resulting in accretive contributions from PMFG by the end of 2016. Overall, I am optimistic about our growth opportunities for the remainder of 2015 and beyond, as we leverage our strengthened global platform to drive shareholder value. The
direction and core of our business is fundamentally strong, and we have the right team in place to drive growth in our solid end markets.
CONFERENCE CALL
Jeff Lang, Chief Executive Officer, Ed
Prajzner, Chief Financial Officer, and Tracy Krumme, Vice President of Investor Relations will discuss the Companys third quarter results during a conference call scheduled for Thursday, November 5, 2015 at 9:30 a.m. ET.
The conference call may be accessed by dialing +1.855.327.6837 (Toll-Free) in the U.S. and Canada or by dialing +1.631.891.4304 for international calls. A
replay will be available from 11:30a.m. EST on the day of the call until November 19, 2015 at 11:59 p.m. EST. The replay may be accessed by dialing +1.877.870.5176 (Toll-Free) in the U.S. and Canada or by dialing +1.858.384.5517 for
international calls and entering passcode 116901.
The live webcast and slides can also be accessed at
http://www.cecoenviro.com/investor-relations.
(1) |
Acquisitions completed within the past twelve months |
2 | P a g e
ABOUT CECO ENVIRONMENTAL
CECO is a diversified global provider of leading engineered technologies to the environmental, energy, and fluid handling and filtration industrial segments,
targeting specific niche-focused end markets through an attractive asset-light business model, strategically balanced across the world. CECO targets its over $5 billion+ of installed-base, specifically to expand and grow a higher recurring revenue
of aftermarket products and services. CECOs well respected brands, technologies and solutions have been evolving for well over 50 years to become leading-class technologies in specific niche global end markets, including natural gas turbine
power, refinery & petrochemical engineered cyclones and mid-stream energy pipeline gas transmission. CECO is listed on NASDAQ under the ticker symbol CECE. For more information, please visit www.cecoenviro.com.
Contacts:
Ed Prajzner, Chief Financial Officer
800.333.5475
eprajzer@cecoenviro.com
Tracy Krumme, Vice President of Investor Relations
914.282.9051
tkrumme@cecoenviro.com
3 | P a g e
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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(dollars in thousands, except per share data) |
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(unaudited) SEPTEMBER 30, 2015 |
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DECEMBER 31, 2014 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
36,113 |
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$ |
19,362 |
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Accounts receivable, net |
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100,758 |
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58,394 |
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Costs and estimated earnings in excess of billings on uncompleted contracts |
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58,686 |
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24,371 |
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Inventories, net |
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29,850 |
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23,416 |
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Prepaid expenses and other current assets |
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11,812 |
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9,046 |
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Prepaid income taxes |
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4,719 |
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4,190 |
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Assets held for sale |
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2,500 |
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4,188 |
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Total current assets |
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244,438 |
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142,967 |
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Property, plant and equipment, net |
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47,489 |
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18,961 |
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Goodwill |
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226,365 |
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167,547 |
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Intangible assets-finite life, net |
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83,975 |
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58,398 |
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Intangible assets-indefinite life |
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30,249 |
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19,766 |
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Deferred charges and other assets |
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8,158 |
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6,726 |
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$ |
640,674 |
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$ |
414,365 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Current liabilities: |
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Current portion of debt |
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$ |
19,699 |
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$ |
8,887 |
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Accounts payable and accrued expenses |
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105,074 |
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51,462 |
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Billings in excess of costs and estimated earnings on uncompleted contracts |
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23,341 |
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14,597 |
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Income taxes payable |
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646 |
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405 |
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Total current liabilities |
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148,760 |
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75,351 |
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Other liabilities |
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29,416 |
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27,884 |
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Debt, less current portion |
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174,584 |
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103,541 |
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Deferred income tax liability, net |
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43,561 |
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26,365 |
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Total liabilities |
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396,321 |
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233,141 |
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Commitments and contingencies |
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Shareholders equity: |
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Preferred stock, $.01 par value; 10,000 shares authorized, none issued |
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Common stock, $.01 par value; 100,000,000 shares authorized, 34,048,024 and 26,404,869 shares issued in 2015 and 2014,
respectively |
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340 |
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264 |
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Capital in excess of par value |
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242,571 |
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168,886 |
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Accumulated earnings |
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10,523 |
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19,051 |
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Accumulated other comprehensive loss |
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(8,725 |
) |
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(6,621 |
) |
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244,709 |
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181,580 |
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Less treasury stock, at cost, 137,920 shares in 2015 and 2014 |
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(356 |
) |
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(356 |
) |
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Total shareholders equity |
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244,353 |
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181,224 |
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$ |
640,674 |
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$ |
414,365 |
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4 | P a g e
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(unaudited)
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THREE MONTHS ENDED SEPTEMBER 30, |
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NINE MONTHS ENDED SEPTEMBER 30, |
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(dollars in thousands, except per share data) |
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2015 |
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2014 |
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2015 |
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2014 |
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Net sales |
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$ |
98,230 |
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$ |
63,300 |
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$ |
266,176 |
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$ |
187,111 |
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Cost of sales |
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67,435 |
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42,242 |
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187,778 |
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124,875 |
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Gross profit |
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30,795 |
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21,058 |
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78,398 |
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62,236 |
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Selling and administrative expenses |
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18,054 |
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13,038 |
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46,158 |
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36,402 |
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Acquisition and integration expenses |
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5,685 |
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81 |
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6,978 |
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321 |
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Amortization and earn-out expenses |
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9,250 |
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2,394 |
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19,989 |
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7,288 |
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Legal reserves |
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300 |
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300 |
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Income (loss) from operations |
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(2,194 |
) |
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5,245 |
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5,273 |
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17,925 |
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Other income (expense), net |
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(282 |
) |
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(1,459 |
) |
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(1,456 |
) |
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(1,686 |
) |
Interest expense |
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(1,711 |
) |
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|
(767 |
) |
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(3,845 |
) |
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(2,255 |
) |
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Income (loss) before income taxes |
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|
(4,187 |
) |
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|
3,019 |
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(28 |
) |
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13,984 |
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Income tax expense (benefit) |
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|
638 |
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(684 |
) |
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2,495 |
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2,767 |
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Net income (loss) |
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$ |
(4,825 |
) |
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$ |
3,703 |
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$ |
(2,523 |
) |
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$ |
11,217 |
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Earnings (loss) per share: |
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Basic |
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$ |
(0.17 |
) |
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$ |
0.14 |
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$ |
(0.09 |
) |
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$ |
0.44 |
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Diluted |
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$ |
(0.17 |
) |
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$ |
0.14 |
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$ |
(0.09 |
) |
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$ |
0.43 |
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Weighted average number of common shares outstanding: |
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Basic |
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28,617,589 |
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25,691,884 |
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27,066,072 |
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25,647,561 |
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Diluted |
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28,909,934 |
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26,129,427 |
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27,407,788 |
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26,105,415 |
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5 | P a g e
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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(dollars in millions) |
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2015 |
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2014 |
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2015 |
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|
2014 |
|
Gross profit as reported in accordance with GAAP |
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$ |
30.8 |
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$ |
21.1 |
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$ |
78.4 |
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$ |
62.2 |
|
Gross profit margin in accordance with GAAP |
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31.4 |
% |
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33.3 |
% |
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29.5 |
% |
|
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33.3 |
% |
Plant, property and equipment valuation adjustment |
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0.2 |
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|
0.2 |
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0.5 |
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0.5 |
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Non-GAAP gross margin |
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$ |
31.0 |
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$ |
21.3 |
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$ |
78.9 |
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$ |
62.7 |
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Gross profit margin |
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31.6 |
% |
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33.6 |
% |
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29.7 |
% |
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33.6 |
% |
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Three Months Ended September 30, |
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|
Nine Months Ended September 30, |
|
(dollars in millions) |
|
2015 |
|
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2014 |
|
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2015 |
|
|
2014 |
|
Operating (loss) income as reported in accordance with GAAP |
|
$ |
(2.2 |
) |
|
$ |
5.2 |
|
|
$ |
5.3 |
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$ |
17.9 |
|
Operating margin in accordance with GAAP |
|
|
(2.2 |
)% |
|
|
8.3 |
% |
|
|
2.0 |
% |
|
|
9.6 |
% |
Plant, property and equipment valuation adjustment |
|
|
0.2 |
|
|
|
0.2 |
|
|
|
0.5 |
|
|
|
0.5 |
|
Acquisition and integration expenses |
|
|
5.7 |
|
|
|
0.1 |
|
|
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7.0 |
|
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|
0.3 |
|
Amortization and earn-out expenses |
|
|
9.3 |
|
|
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2.4 |
|
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20.0 |
|
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|
7.3 |
|
Legal reserves |
|
|
|
|
|
|
0.3 |
|
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0.3 |
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP operating income |
|
$ |
13.0 |
|
|
$ |
8.2 |
|
|
$ |
32.8 |
|
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$ |
26.3 |
|
Operating margin |
|
|
13.2 |
% |
|
|
12.9 |
% |
|
|
12.3 |
% |
|
|
14.1 |
% |
|
|
|
|
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Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
(dollars in millions) |
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
Net (loss) income as reported in accordance with GAAP |
|
$ |
(4.8 |
) |
|
$ |
3.7 |
|
|
$ |
(2.5 |
) |
|
$ |
11.2 |
|
Plant, property and equipment valuation adjustment |
|
|
0.2 |
|
|
|
0.2 |
|
|
|
0.5 |
|
|
|
0.5 |
|
Acquisition and integration expenses |
|
|
5.7 |
|
|
|
0.1 |
|
|
|
7.0 |
|
|
|
0.3 |
|
Amortization and earn-out expenses |
|
|
9.3 |
|
|
|
2.4 |
|
|
|
20.0 |
|
|
|
7.3 |
|
Legal reserves |
|
|
|
|
|
|
0.3 |
|
|
|
|
|
|
|
0.3 |
|
Deferred financing fee adjustment |
|
|
0.3 |
|
|
|
|
|
|
|
0.3 |
|
|
|
|
|
Foreign currency remeasurement |
|
|
(0.3 |
) |
|
|
1.7 |
|
|
|
1.8 |
|
|
|
1.9 |
|
Tax benefit of expenses |
|
|
(2.6 |
) |
|
|
(1.2 |
) |
|
|
(5.1 |
) |
|
|
(2.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income |
|
$ |
7.8 |
|
|
$ |
7.2 |
|
|
$ |
22.0 |
|
|
$ |
18.8 |
|
Depreciation |
|
|
0.7 |
|
|
|
0.8 |
|
|
|
2.0 |
|
|
|
2.3 |
|
Non-cash stock compensation |
|
|
0.4 |
|
|
|
0.5 |
|
|
|
1.3 |
|
|
|
1.2 |
|
Other (income)/expense |
|
|
0.6 |
|
|
|
(0.2 |
) |
|
|
(0.3 |
) |
|
|
(0.2 |
) |
Interest expense |
|
|
1.4 |
|
|
|
0.8 |
|
|
|
3.6 |
|
|
|
2.3 |
|
Income tax expense |
|
|
3.2 |
|
|
|
0.4 |
|
|
|
7.6 |
|
|
|
5.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted EBITDA |
|
$ |
14.1 |
|
|
$ |
9.5 |
|
|
$ |
36.2 |
|
|
$ |
29.8 |
|
|
|
|
|
|
Earnings (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.17 |
) |
|
$ |
0.14 |
|
|
$ |
(0.09 |
) |
|
$ |
0.44 |
|
|
|
|
|
|
Diluted |
|
$ |
(0.17 |
) |
|
$ |
0.14 |
|
|
$ |
(0.09 |
) |
|
$ |
0.43 |
|
Non-GAAP net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.27 |
|
|
$ |
0.28 |
|
|
$ |
0.81 |
|
|
$ |
0.72 |
|
|
|
|
|
|
Diluted |
|
$ |
0.27 |
|
|
$ |
0.28 |
|
|
$ |
0.80 |
|
|
$ |
0.72 |
|
6 | P a g e
NOTE REGARDING NON-GAAP FINANCIAL MEASURES
CECO is providing the non-GAAP historical financial measures presented above as the Company believes that these figures are helpful in allowing individuals to
better assess the ongoing nature of CECOs core operations. A non-GAAP financial measure is a numerical measure of a companys historical financial performance that excludes amounts that are included in the most directly
comparable measure calculated and presented in the GAAP statement of operations.
Non-GAAP gross margin, non-GAAP operating income, non-GAAP net income,
non-GAAP gross profit margin, non-GAAP operating margin, non-GAAP earnings per basic and diluted share and non-GAAP adjusted EBITDA, as we present them in the financial data included in this press release, have been adjusted to exclude the effects
of expenses related to property, plant equipment valuation adjustments, acquisition and integration expense activities including retention, legal, accounting, banking, amortization and contingent earnout expenses, foreign currency re-measurement,
legal reserves and the associated tax benefit of these charges. Management believes that these items are not necessarily indicative of the Companys ongoing operations and their exclusion provides individuals with additional information to
compare the companys results over multiple periods. Management utilizes this information to evaluate its ongoing financial performance. Our financial statements may continue to be affected by items similar to those excluded in the non-GAAP
adjustments described above, and exclusion of these items from our non-GAAP financial measures should not be construed as an inference that all such costs are unusual or infrequent.
Non-GAAP gross margin, non-GAAP operating income, non-GAAP net income, non-GAAP gross profit margin, non-GAAP operating margin, non-GAAP earnings per basic
and diluted shares and non-GAAP Adjusted EBITDA are not calculated in accordance with GAAP, and should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Non-GAAP
financial measures have limitations in that they do not reflect all of the costs associated with the operations of our business as determined in accordance with GAAP. As a result, you should not consider these measures in isolation or as a
substitute for analysis of CECOs results as reported under GAAP.
In accordance with the requirements of Regulation G issued by the Securities and
Exchange Commission, non-GAAP gross margin, non-GAAP operating income, non-GAAP net income, non-GAAP gross profit margin, non-GAAP operating margin, non-GAAP earnings per basic and diluted share and non-GAAP Adjusted EBITDA, stated in the tables
above present the most directly comparable GAAP financial measure and reconcile to the most directly comparable GAAP financial measures.
7 | P a g e
Safe Harbor
Any statements contained in this press release other than statements of historical fact, including statements about managements beliefs and
expectations, are forward-looking statements and should be evaluated as such. These statements are made on the basis of managements views and assumptions regarding future events and business performance. Words such as estimate,
believe, anticipate, expect, intend, plan, target, project, should, may, will and similar expressions are intended to identify
forward-looking statements. Forward-looking statements (including oral representations) involve risks and uncertainties that may cause actual results to differ materially from any future results, performance or achievements expressed or implied by
such statements. These risks and uncertainties include, but are not limited to: our ability to successfully complete the acquisition of PMFG; our ability to successfully integrate acquired businesses and realize the synergies from acquisitions,
including PMFG, as well as a number of factors related to our business including economic and financial market conditions generally and economic conditions in CECOs service areas; dependence on fixed price contracts and the risks associated
therewith, including actual costs exceeding estimates and method of accounting for contract revenue; fluctuations in operating results from period to period due to seasonality of the business; the effect of growth on CECOs infrastructure,
resources, and existing sales; the ability to expand operations in both new and existing markets; the potential for contract delay or cancellation; changes in or developments with respect to any litigation or investigation; the potential for
fluctuations in prices for manufactured components and raw materials; the substantial amount of debt incurred in connection with our recent acquisitions and our ability to repay or refinance it or incur additional debt in the future; the impact of
federal, state or local government regulations; economic and political conditions generally; and the effect of competition in the product recovery, air pollution control and fluid handling and filtration industries. These and other risks and
uncertainties are discussed in more detail in CECOs filings with the Securities and Exchange Commission, including our reports on Form 10-K and Form 10-Q. Many of these risks are beyond managements ability to control or predict. Should
one or more of these risks or uncertainties materialize, or should the assumptions prove incorrect, actual results may vary in material aspects from those currently anticipated. Investors are cautioned not to place undue reliance on such
forward-looking statements as they speak only to our views as of the date the statement is made. All forward-looking statements attributable to CECO or persons acting on behalf of CECO are expressly qualified in their entirety by the cautionary
statements and risk factors contained in this press release and CECOs respective filings with the Securities and Exchange Commission. Furthermore, forward-looking statements speak only as of the date they are made. Except as required under the
federal securities laws or the rules and regulations of the Securities and Exchange Commission, CECO undertakes no obligation to update or review any forward-looking statements, whether as a result of new information, future events or otherwise.
8 | P a g e
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