8-K
0000003197false00000031972021-11-082021-11-08

 

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 8, 2021

 

CECO ENVIRONMENTAL CORP.

(Exact Name of registrant as specified in its charter)

 

 

Delaware

 

000-7099

 

13-2566064

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

14651 North Dallas Parkway

Suite 500

Dallas, TX

 

75254

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (214) 357-6181

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))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.01 per share

CECE

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 


Item 2.02. Results of Operations and Financial Condition.

On November 8, 2021, CECO Environmental Corp., a Delaware corporation (the “Company”), issued a press release announcing its financial results for the three and nine months ended September 30, 2021. 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

 

Exhibit
Number

 

Exhibit Title

 

 

99.1

 

104

 

 

 

 

 

Press Release, CECO Environmental Reports Third Quarter and Year-to-date 2021 Results

 

Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

 

 

 

 


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.

 

 

 

Date: November 8, 2021

 

 

 

CECO Environmental Corp.

 

 

 

 

 

 

 

 

By:

 

/s/ Matthew Eckl

 

 

 

 

 

 

Matthew Eckl

 

 

 

 

 

 

Chief Financial Officer

 


EX-99.1

Exhibit 99.1

 

https://cdn.kscope.io/e52b8d08b6eb88215a330be90b0d1bf4-img212404897_0.jpg  

 

 

 

CECO Environmental Reports Third Quarter and Year-to-Date 2021 Results;

Bookings Up 39 Percent, but Q3 Results Impacted by Challenging Operating Environment

 

DALLAS (Nov. 8, 2021) -- 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 third quarter of 2021.

 

Highlights of the Third Quarter 2021*

Revenue of $80.0 million, compared with $77.4 million
Gross profit of $22.7 million (28.4% margin), compared with $24.8 million (32.0% margin)
Operating loss of $(0.6) million, compared with operating income of $1.0 million
Non-GAAP operating income of $1.8 million, compared with $5.9 million
Net loss of $(1.2) million, compared with $(0.2) million
Non-GAAP net income of $0.5 million, compared with $3.8 million
Adjusted EBITDA of $3.5 million, compared with $7.3 million
Bookings of $92.6 million, compared with $66.8 million
Backlog of $219.1 million, compared with $183.1 million as of December 31, 2020
Net loss per diluted share of $(0.04), compared with $(0.01)
Non-GAAP earnings per diluted share of $0.01, compared with $0.11
Bank Debt of $67.0 million, compared with $74.0 million as of December 31, 2020
Repurchased approximately 521,000 shares of common stock at cost of $3.7 million

 

*All comparisons are versus the comparable prior year period, unless otherwise stated

 

“Third quarter and year-to-date results reflect the ‘tale of two CECOs’, so to speak,” said Todd Gleason, Chief Executive Officer. “On the one hand, our orders were up 39 percent in the third quarter and up 33 percent year-to-date. This represents strong bookings’ growth and positions CECO for corresponding revenue growth in the coming quarters. Unfortunately, in the third quarter, we could not overcome challenges associated with lower-margin projects booked in late 2020, various short-term execution issues associated with supply chain and logistics costs, customer delays, and labor shortages. As the fourth quarter continues to progress, we are confident we will achieve improved volumes and margins, which we expect to result in revenues up double-digits and adjusted EBITDA to more than double sequentially from the third quarter.”

 

Gleason concluded, “As we announced today, we are pleased to welcome Richard Wallman, the former CFO of Honeywell, to CECO’s Board of Directors to assist me, the leadership team and the board in executing our longer-term strategy. We look forward to delivering stronger financial results in the fourth quarter and throughout 2022, as well as starting to utilize our healthy balance sheet to transform our portfolio.”

 

 

 

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Exhibit 99.1

 

 

CONFERENCE CALL

 

A conference call is scheduled for today at 8:30 a.m. ET to discuss the third quarter 2021 financial results. The conference call may also be accessed by dialing (888) 346-4547 (Toll-Free) within the U.S., (855) 669-9657 (Toll-Free) within Canada or Toll/International (412) 317-5251.

 

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

 

A live and archived replay of the conference call will be available on the Company's website for 90 days. The telephone replay will be available one hour after the call ends through November 15, 2021. To access the replay, please dial (877) 344-7529 (Toll-Free) within the U.S., (855) 669-9658 (Toll-Free) within Canada, or Toll/International (412) 317-0088 and entering access code 10160914.

 

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Exhibit 99.1

 

ABOUT CECO ENVIRONMENTAL

 

CECO Environmental is a global leader in industrial air quality and fluid handling, serving a broad landscape of 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 systems for applications including power generation, petrochemical processing, general industrial, refining, midstream oil & gas, electric vehicle production, poly silicon fabrication, battery recycling, beverage can, and water/wastewater treatment along with a wide range of other applications. 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Exhibit 99.1

 

 

 

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

 

 

(dollars in thousands, except per share data)

 

(unaudited)
September 30, 2021

 

 

December 31, 2020

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

31,925

 

 

$

35,992

 

Restricted cash

 

 

2,541

 

 

 

1,819

 

Accounts receivable, net

 

 

70,024

 

 

 

63,046

 

Costs and estimated earnings in excess of billings on uncompleted contracts

 

 

50,536

 

 

 

45,498

 

Inventories, net

 

 

18,609

 

 

 

17,343

 

Prepaid expenses and other current assets

 

 

12,229

 

 

 

11,530

 

Prepaid income taxes

 

 

3,844

 

 

 

7,790

 

Assets held for sale

 

   —

 

 

 

467

 

Total current assets

 

 

189,708

 

 

 

183,485

 

Property, plant and equipment, net

 

 

15,893

 

 

 

16,228

 

Right-of-use assets from operating leases

 

 

10,998

 

 

 

11,376

 

Goodwill

 

 

161,593

 

 

 

161,820

 

Intangible assets – finite life, net

 

 

27,658

 

 

 

29,637

 

Intangible assets – indefinite life

 

 

9,701

 

 

 

12,937

 

Deferred charges and other assets

 

 

3,125

 

 

 

3,831

 

Total assets

 

$

418,676

 

 

$

419,314

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current portion of debt

 

$

3,750

 

 

$

3,125

 

Accounts payable and accrued expenses

 

 

89,633

 

 

 

84,997

 

Billings in excess of costs and estimated earnings on uncompleted contracts

 

 

24,559

 

 

 

20,691

 

Income taxes payable

 

 

467

 

 

 

543

 

Total current liabilities

 

 

118,409

 

 

 

109,356

 

Other liabilities

 

 

19,486

 

 

 

20,576

 

Debt, less current portion

 

 

62,182

 

 

 

69,491

 

Deferred income tax liability, net

 

 

7,188

 

 

 

6,970

 

Operating lease liabilities

 

 

8,884

 

 

 

9,310

 

Total liabilities

 

 

216,149

 

 

 

215,703

 

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, 35,809,061 and
35,504,757 shares issued and outstanding at September 30, 2021 and
December 31, 2020, respectively

 

 

358

 

 

 

355

 

Capital in excess of par value

 

 

257,482

 

 

 

255,296

 

Accumulated loss

 

 

(37,916

)

 

 

(38,141

)

Accumulated other comprehensive loss

 

 

(14,401

)

 

 

(14,496

)

 

 

 

205,523

 

 

 

203,014

 

Less treasury stock, at cost, 659,417 and 137,920 shares at September 30, 2021
and December 31, 2020, respectively

 

 

(4,101

)

 

 

(356

)

Total CECO shareholders' equity

 

 

201,422

 

 

 

202,658

 

Non-controlling interest

 

 

1,105

 

 

 

953

 

Total shareholders' equity

 

 

202,527

 

 

 

203,611

 

Total liabilities and shareholders' equity

 

$

418,676

 

 

$

419,314

 

 

 

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Exhibit 99.1

 

 

 

 

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

(dollars in thousands, except per share data)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net sales

 

$

79,979

 

 

$

77,425

 

 

$

230,551

 

 

$

233,081

 

Cost of sales

 

 

57,254

 

 

 

52,615

 

 

 

158,164

 

 

 

154,176

 

Gross profit

 

 

22,725

 

 

 

24,810

 

 

 

72,387

 

 

 

78,905

 

Selling and administrative expenses

 

 

20,929

 

 

 

18,989

 

 

 

60,894

 

 

 

59,374

 

Amortization and earnout expenses

 

 

1,776

 

 

 

2,050

 

 

 

5,849

 

 

 

5,546

 

Restructuring expenses

 

 

397

 

 

 

871

 

 

 

655

 

 

 

1,753

 

Acquisition and integration expenses

 

 

219

 

 

 

368

 

 

 

357

 

 

 

1,067

 

Executive transition expenses

 

 

 

 

 

1,514

 

 

 

29

 

 

 

1,514

 

(Loss) income from operations

 

 

(596

)

 

 

1,018

 

 

 

4,603

 

 

 

9,651

 

Other income (expense), net

 

 

185

 

 

 

(290

)

 

 

(1,155

)

 

 

1,057

 

Interest expense

 

 

(722

)

 

 

(772

)

 

 

(2,152

)

 

 

(2,739

)

(Loss) income before income taxes

 

 

(1,133

)

 

 

(44

)

 

 

1,296

 

 

 

7,969

 

Income tax expense

 

 

63

 

 

 

206

 

 

 

813

 

 

 

1,549

 

Net (loss) income

 

 

(1,196

)

 

 

(250

)

 

 

483

 

 

 

6,420

 

Non-controlling interest

 

 

53

 

 

 

(11

)

 

 

259

 

 

 

(11

)

Net (loss) income attributable to CECO Environmental Corp.

 

$

(1,249

)

 

$

(239

)

 

$

224

 

 

$

6,431

 

(Loss) earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.04

)

 

$

(0.01

)

 

$

0.01

 

 

$

0.18

 

Diluted

 

$

(0.04

)

 

$

(0.01

)

 

$

0.01

 

 

$

0.18

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

35,472,298

 

 

 

35,358,913

 

 

 

35,463,279

 

 

 

35,263,688

 

Diluted

 

 

35,472,298

 

 

 

35,358,913

 

 

 

35,729,887

 

 

 

35,471,551

 

 

 

 

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Exhibit 99.1

 

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

 

 

 

 

 

 

THREE MONTHS ENDED SEPTEMBER 30,

 

 

NINE MONTHS ENDED SEPTEMBER 30,

 

(dollars in millions)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Operating (loss) income as reported in accordance with GAAP

 

$

(0.6

)

 

$

1.0

 

 

$

4.6

 

 

$

9.7

 

Operating margin in accordance with GAAP

 

 

(0.8

)%

 

 

1.3

%

 

 

2.0

%

 

 

4.2

%

Amortization and earnout expenses

 

 

1.8

 

 

 

2.1

 

 

 

5.8

 

 

 

5.5

 

Restructuring expenses

 

 

0.4

 

 

 

0.9

 

 

 

0.7

 

 

 

1.8

 

Acquisition and integration expenses

 

 

0.2

 

 

 

0.4

 

 

 

0.4

 

 

 

1.1

 

Executive transition expenses

 

 

 

 

 

1.5

 

 

 

 

 

 

1.5

 

Non-GAAP operating income

 

$

1.8

 

 

$

5.9

 

 

$

11.5

 

 

$

19.6

 

Non-GAAP operating margin

 

 

2.3

%

 

 

7.6

%

 

 

5.0

%

 

 

8.4

%

 

 

 

 

 

 

THREE MONTHS ENDED SEPTEMBER 30,

 

 

NINE MONTHS ENDED SEPTEMBER 30,

 

(dollars in millions)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net (loss) income as reported in accordance with GAAP

 

$

(1.2

)

 

$

(0.2

)

 

$

0.2

 

 

$

6.4

 

Amortization and earnout expenses

 

 

1.8

 

 

 

2.1

 

 

 

5.8

 

 

 

5.5

 

Restructuring expenses

 

 

0.4

 

 

 

0.9

 

 

 

0.7

 

 

 

1.8

 

Acquisition and integration expenses

 

 

0.2

 

 

 

0.4

 

 

 

0.4

 

 

 

1.1

 

Executive transition expenses

 

 

 

 

 

1.5

 

 

 

 

 

 

1.5

 

Foreign currency remeasurement

 

 

(0.1

)

 

 

0.4

 

 

 

1.5

 

 

 

0.3

 

Tax benefit expense of adjustments

 

 

(0.6

)

 

 

(1.3

)

 

 

(2.1

)

 

 

(2.6

)

Non-GAAP net income

 

$

0.5

 

 

$

3.8

 

 

$

6.5

 

 

$

14.0

 

Depreciation

 

 

0.8

 

 

 

0.6

 

 

 

2.3

 

 

 

1.8

 

Non-cash stock compensation

 

 

0.9

 

 

 

0.7

 

 

 

2.5

 

 

 

1.5

 

Other (income) expense

 

 

(0.1

)

 

 

(0.1

)

 

 

(0.3

)

 

 

(1.4

)

Interest expense

 

 

0.7

 

 

 

0.8

 

 

 

2.2

 

 

 

2.7

 

Income tax expense

 

 

0.7

 

 

 

1.5

 

 

 

2.9

 

 

 

4.1

 

Adjusted EBITDA

 

$

3.5

 

 

$

7.3

 

 

$

16.1

 

 

$

22.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.04

)

 

$

(0.01

)

 

$

0.01

 

 

$

0.18

 

Diluted

 

$

(0.04

)

 

$

(0.01

)

 

$

0.01

 

 

$

0.18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.01

 

 

$

0.11

 

 

$

0.18

 

 

$

0.40

 

Diluted

 

$

0.01

 

 

$

0.11

 

 

$

0.18

 

 

$

0.40

 

 

 

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Exhibit 99.1

 

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 amortization expenses for acquisition related intangible assets, contingent retention and earnout expenses, restructuring expenses primarily relating to severance and legal expenses, acquisition and integration expenses which include retention, legal, accounting, banking, and other expenses, executive transition expenses and 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 are reconciled to the most directly comparable GAAP financial measures.

 

 

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Exhibit 99.1

 

 

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 and uncertainties, 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, 2020, and include, but are not limited to: the sensitivity of our business to 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 and method of accounting for revenue; 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 as a result of on-going or worsening supply chain challenges; 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 strategic transactions and our ability to repay or refinance it or incur additional debt in the future; the impact of federal, state or local government regulations; our ability to repurchase shares of our common stock and the amounts and timing of repurchases, if any; economic and political conditions generally; our ability to successfully realize the expected benefits of our restructuring program; our ability to successfully integrate acquired businesses and realize the synergies from strategic transactions; and unpredictability and severity of catastrophic events, including cyber security threats, acts of terrorism or outbreak of war or hostilities or public health crises, such as uncertainties regarding the extent and duration of impacts of matters associated with the novel coronavirus (“COVID-19”), as well as management’s response to any of the aforementioned factors. 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 Securities and Exchange Commission, we undertake no obligation to update or review any forward-looking statements, whether as a result of new information, future events or otherwise.

 

 

 

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