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CECO Environmental Corp. Reports Second Quarter and Six Months 2018 Results
Achieved $100 Million in Quarterly Bookings and Improving Operating Results

DALLAS, Aug. 8, 2018 /PRNewswire/ -- CECO Environmental Corp. (Nasdaq: CECE), a leading global air quality and fluid handling company serving the energy, industrial and other niche markets, today reported its financial results for the second quarter and first six months of 2018. 

CECO Environmental Corp. Logo (PRNewsfoto/CECO Environmental Corp.)

Highlights of the Second Quarter 2018*

  • Revenue of $81.1 million, compared with $93.9 million
  • Gross profit of $27.2 million (33.5% margin), compared with $28.5 million (30.4% margin)
  • Operating income of $2.6 million, compared with $9.3 million
  • Non-GAAP operating income of $5.2 million, compared with $9.4 million 
  • Net loss was $(0.9) million, compared with net income of $5.5 million
  • Non-GAAP net income of $1.8 million, compared with $2.9 million
  • Net loss per diluted share was $(0.03), compared with net income per diluted share of $0.16
  • Non-GAAP net income per diluted share of $0.05, compared with $0.08
  • Adjusted EBITDA of $6.9 million, compared with $11.0 million
  • Bookings of $100.4 million, compared with $87.2 million 
  • Backlog of $200.0 million, compared with $168.9 as of December 31, 2017

* All comparisons are versus the comparable prior-year period, which include results from divestitures, unless otherwise stated.

CECO's Chief Executive Officer Dennis Sadlowski commented, "I am very pleased that we were able to achieve a third successive quarter of increased bookings along with a strong book to bill ratio as our team demonstrated the value of the CECO offerings.  Bookings exceeded $100 million for the first time in two years and backlog now stands at $200 million, a significant increase over previous quarters. It is clear that rigorous execution of our 4-3-3 operating strategy is generating solid results and momentum.  The second quarter results provide evidence that we are executing well in the face of a continued slump in the global power generation market. Our other markets remain strong, which supports the new investments we are making to strengthen the company."

Mr. Sadlowski added, "In addition, we achieved sequential increases in revenues, non-GAAP operating income and adjusted EBITDA. What is especially encouraging is that these improved second quarter results excluded the two brands we sold in the first quarter of 2018.  We will continue to ensure the company is best-positioned to maximize our market opportunities in all segments and drive organic growth throughout 2018 and beyond."

SECOND QUARTER RESULTS

Revenue in the second quarter of 2018 was $81.1 million, down 13.6% from $93.9 million in the prior-year period.

Operating income was $2.6 million for the second quarter of 2018 (3.2% margin), compared with $9.3 million in the prior-year period (9.9% margin).  Operating income on a non-GAAP basis was $5.2 million for the second quarter of 2018 (6.4% margin), compared with $9.4 million in the prior-year period (10.0% margin).

Net loss was $0.9 million for the second quarter of 2018, compared with net income of $5.5 million in the prior-year period.  Net income on a non-GAAP basis was $1.8 million for the second quarter of 2018, compared with $2.9 million in the prior-year period.

Net loss per diluted share was $0.03 for the second quarter of 2018, compared with net income per diluted share of $0.16 in the prior-year period. Non-GAAP net income per diluted share was $0.05 for the second quarter of 2018, compared with $0.08 for the prior-year period.

Cash and cash equivalents were $35.6 million and bank debt was $83.1 million, as of June 30, 2018, compared with $29.9 million and $117.7 million, respectively, as of December 31, 2017.

BACKLOG AND BOOKINGS

Total backlog at June 30, 2018 was $200.0 million as compared with $168.9 million on December 31, 2017, and $167.9 million on June 30, 2017.

Bookings were $100.4 million for the second quarter of 2018, compared with $87.2 million in the prior-year period, of which $11.7 million was attributable to the Keystone and Strobic divested businesses. Bookings were $195.4 million for the first six months of 2018 compared with $171.2 million for the prior-year period.

YEAR-TO-DATE RESULTS

Revenue in the first six months of 2018 was $155.2 million, down 16.8% from $186.5 million in the prior-year period.

Operating income was $14.7 million for the first six months of 2018 (9.5% margin), compared with $10.6 million in the prior-year period (5.7% margin).  Operating income on a non-GAAP basis was $9.2 million for the first six months of 2018 (5.9% margin), compared with $19.5 million in the prior-year period (10.5% margin).

Net income was $4.9 million for the first six months of 2018, compared with $5.5 million in the prior-year period.  Net income on a non-GAAP basis was $3.5 million for the first six months of 2018, compared with $9.9 million in the prior-year period.

Net income per diluted share was $0.14 for the first six months of 2018, compared with $0.16 in the prior-year period. Non-GAAP net income per diluted share was $0.10 for the first six months of 2018, compared with $0.29 for the prior-year period.

CONFERENCE CALL
A conference call is scheduled for today at 7:30 a.m. CT to discuss the second quarter 2018 financial results. The conference call may be accessed by dialing toll free (877) 870-4263 within North America or Toll/International (412) 317-0790. A replay of the conference call will be available on the Company's website for 7 days.  The replay may be accessed by dialing toll free (877) 344-7529 within North America or Toll/International (412) 317-0088 and entering passcode 10122577.

The live webcast and slides can also be accessed at https://investors.cecoenviro.com/events-webcasts-and-presentations.

ABOUT CECO ENVIRONMENTAL

CECO Environmental is a global leader in air quality and fluid handling serving the energy, industrial and other niche markets. Providing innovative technology and application expertise, CECO helps companies grow their business with safe, clean and more efficient solutions that help protect our shared environment. In regions around the world, CECO works to improve air quality, optimize the energy value chain and provide custom engineered solutions for applications including oil and gas, power generation, water and wastewater, battery production, poly silicon fabrication, chemical and petrochemical processing along with a range of others. CECO is listed on Nasdaq under the ticker symbol "CECE". For more information, please visit www.cecoenviro.com.

Contact:
Matthew Eckl, Chief Financial Officer
(888) 990-6670
investor.relations@onececo.com

 

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS




(unaudited)






(dollars in thousands, except per share data)


June 30, 2018



December 31,
2017


ASSETS









Current assets:









Cash and cash equivalents


$

35,556



$

29,902


Restricted cash



284




591


Accounts receivable, net



67,796




67,990


Costs and estimated earnings in excess of billings on uncompleted contracts



35,188




33,947


Inventories, net



22,450




20,969


Prepaid expenses and other current assets



12,601




10,760


Prepaid income taxes



699




1,930


Assets held for sale



6,708




7,853


Total current assets



181,282




173,942


Property, plant and equipment, net



22,161




23,400


Goodwill



152,371




166,951


Intangible assets – finite life, net



42,444




49,956


Intangible assets – indefinite life



18,300




19,691


Deferred charges and other assets



4,843




4,609


Total assets


$

421,401



$

438,549


LIABILITIES AND SHAREHOLDERS' EQUITY









Current liabilities:









Current portion of debt


$



$

11,296


Accounts payable and accrued expenses



79,352




70,786


Billings in excess of costs and estimated earnings on uncompleted contracts



23,340




20,469


Note payable



5,300




5,300


Income taxes payable



1,612





Total current liabilities



109,604




107,851


Other liabilities



30,407




30,382


Debt, less current portion



80,895




103,537


Deferred income tax liability, net



9,268




10,210


Total liabilities



230,174




251,980


Commitments and contingencies









Shareholders' equity:









Preferred stock, $.01 par value; 10,000 shares authorized, none issued







Common stock, $.01 par value; 100,000,000 shares authorized, 34,892,193
and
34,707,924 shares issued and outstanding at June 30, 2018 and December
31, 2017,
respectively



349




347


Capital in excess of par value



249,674




248,170


Accumulated loss



(47,420)




(52,673)


Accumulated other comprehensive loss



(11,020)




(8,919)





191,583




186,925


Less treasury stock, at cost, 137,920 shares at June 30, 2018 and December
31, 2017



(356)




(356)


Total shareholders' equity



191,227




186,569


Total liabilities and shareholders' equity


$

421,401



$

438,549


 

 

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)




Three Months Ended June 30,



Six Months Ended June 30,


(dollars in thousands, except per share data)


2018



2017



2018



2017


Net sales


$

81,089



$

93,870



$

155,229



$

186,521


Cost of sales



53,937




65,384




102,143




126,106


Gross profit



27,152




28,486




53,086




60,415


Selling and administrative expenses



21,967




21,476




43,931




44,732


Amortization and earnout expenses (income)



2,493




(2,245)




5,397




5,078


Loss (gain) on divestitures, net of selling costs



73







(11,104)





Restructuring expenses



38







150





Income from operations



2,581




9,255




14,712




10,605


Other (expense) income, net



(373)




360




(711)




251


Interest expense



(1,793)




(1,645)




(3,713)




(3,356)


Income before income taxes



415




7,970




10,288




7,500


Income tax expense



1,316




2,484




5,426




1,976


Net (loss) income


$

(901)



$

5,486



$

4,862



$

5,524


(Loss) earnings per share:

















Basic


$

(0.03)



$

0.16



$

0.14



$

0.16


Diluted


$

(0.03)



$

0.16



$

0.14



$

0.16


Weighted average number of common shares outstanding:

















Basic



34,669,810




34,473,688




34,631,519




34,345,317


Diluted



34,669,810




34,806,808




34,715,141




34,685,687


 

 

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP MEASURES




Three Months Ended June 30,



Six Months Ended June 30,


(dollars in millions)


2018



2017



2018



2017


Operating income as reported in accordance with GAAP


$

2.6



$

9.3



$

14.7



$

10.6


Operating margin in accordance with GAAP



3.2

%



9.9

%



9.5

%



5.7

%

Legacy design repairs






1.8







2.0


Plant, property and equipment valuation
adjustment






0.1







0.3


Amortization and earnout expenses (income)



2.5




(2.2)




5.4




5.1


Loss (gain) on divestitures, net of selling costs



0.1







(11.1)





Restructuring expenses









0.2





Executive transition expenses






0.4







1.3


Facility exit expenses












0.2


Non-GAAP operating income


$

5.2



$

9.4



$

9.2



$

19.5


Non-GAAP operating margin



6.4

%



10.0

%



5.9

%



10.5

%

















Three Months Ended June 30,



Six Months Ended June 30,


(dollars in millions)


2018



2017



2018



2017


Net (loss) income as reported in accordance with
GAAP


$

(0.9)



$

5.5



$

4.9



$

5.5


Legacy design repairs






1.8







2.0


Plant, property and equipment valuation
adjustment






0.1







0.3


Amortization and earnout expenses (income)



2.5




(2.2)




5.4




5.1


Loss (gain) on divestiture, net of selling
costs



0.1







(11.1)





Restructuring expenses









0.2





Executive transition expenses






0.4







1.3


Facility exit expenses












0.2


Foreign currency remeasurement



1.0




(1.2)




0.7




(1.5)


Tax (benefit) expense of adjustments



(0.9)




(1.5)




3.4




(3.0)


Non-GAAP net income


$

1.8



$

2.9



$

3.5



$

9.9


Depreciation



0.9




1.0




1.9




2.1


Non-cash stock compensation (excluding
executive transition costs)



0.8




0.7




1.4




1.2


Other (income) expense



(0.6)




0.8







1.2


Interest expense



1.8




1.6




3.7




3.4


Income tax expense



2.2




4.0




2.0




5.0


Adjusted EBITDA


$

6.9



$

11.0



$

12.5



$

22.8



















(Loss) earnings per share:

















Basic


$

(0.03)



$

0.16



$

0.14



$

0.16


Diluted


$

(0.03)



$

0.16



$

0.14



$

0.16



















Non-GAAP net income per share:

















Basic


$

0.05



$

0.08



$

0.10



$

0.29


Diluted


$

0.05



$

0.08



$

0.10



$

0.29


 

 

NOTE REGARDING NON-GAAP FINANCIAL MEASURES

CECO is providing certain non-GAAP historical financial measures as presented above as the Company believes that these figures are helpful in allowing individuals to better assess the ongoing nature of CECO's core operations. A "non-GAAP financial measure" is a numerical measure of a company's 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 operating income, non-GAAP net income, non-GAAP operating margin, non-GAAP earnings per basic and diluted share and adjusted EBITDA, as we present them in the financial data included in this press release, have been adjusted to exclude the effects of transactions related to gain on divestitures, net of selling costs, legacy design repairs, property, plant and equipment valuation adjustments, acquisition and integration expense activities including retention, legal, accounting, banking, amortization and contingent earn-out expenses, foreign currency re-measurement, executive transition expenses, facility exit expenses, restructuring expense, other nonrecurring or infrequent items and the associated tax benefit of these items. Management believes that these items are not necessarily indicative of the Company's ongoing operations and their exclusion provides individuals with additional information to compare the Company's 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 operating income, non-GAAP net income, non-GAAP operating margin, non-GAAP earnings per basic and diluted share and 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 CECO's results as reported under GAAP.  Additionally, CECO cautions investors that non-GAAP financial measures used by the Company may not be comparable to similarly titled measures of other companies.

In accordance with the requirements of Regulation G issued by the Securities and Exchange Commission, non-GAAP operating income, non-GAAP net income, non-GAAP operating margin, non-GAAP earnings per basic and diluted share and 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.  

SAFE HARBOR

Any statements contained in this Press Release, other than statements of historical fact, including statements about management's beliefs and expectations, are forward-looking statements and should be evaluated as such. These statements are made on the basis of management's views and assumptions regarding future events and business performance. We use words such as "believe," "expect," "anticipate," "intends," "estimate," "forecast," "project," "will," "plan," "should" and similar expressions to identify forward-looking statements. Forward-looking statements 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. Potential risks, among others, that could cause actual results to differ materially are discussed under "Part I – Item 1A. Risk Factors" of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017 and include, but are not limited to: our ability to successfully realize the expected benefits of our restructuring program; our ability to successfully integrate acquired businesses and realize the synergies from acquisitions, as well as a number of factors related to our business, including economic and financial market conditions generally and economic conditions in CECO's service areas; dependence on fixed price contracts and the risks associated therewith, including actual costs exceeding estimates; fluctuations in operating results from period to period due to cyclicality or seasonality of the business; the effect of growth on CECO's infrastructure, resources, and existing sales; the ability to expand operations in both new and existing markets; the potential for contract delay or cancellation; liabilities arising from faulty services or products that could result in significant professional or product liability, warranty, or other claims; changes in or developments with respect to any litigation or investigation; failure to meet timely completion or performance standards that could result in higher cost and reduced profits or, in some cases, losses on projects; the potential for fluctuations in prices for manufactured components and raw materials, including as a result of tariffs and surcharges; the substantial amount of debt incurred in connection with our 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 Industrial Solutions segment, Energy Solutions segment and Fluid Handling Solutions segment industries. Many of these risks are beyond management's 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. 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 SEC, we undertake no obligation to update or review any forward-looking statements, whether as a result of new information, future events or otherwise.

SOURCE CECO Environmental Corp.

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