0000950170-23-006169 | 10-K | XBRL Viewer

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Document and Entity Information - USD ($) $ in Millions	12 Months Ended
Document and Entity Information - USD ($) $ in Millions	Dec. 31, 2022	Feb. 28, 2023	Jun. 30, 2022
Cover [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2022
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	FY
Entity Registrant Name	CECO ENVIRONMENTAL CORP.
Trading Symbol	CECO
Entity Central Index Key	0000003197
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Interactive Data Current	Yes
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Well Known Seasoned Issuer	No
Entity Public Float			$ 151.4
Entity Common Stock Shares Outstanding		34,419,948
Entity Shell Company	false
Entity Small Business	true
Entity Emerging Growth Company	false
Title of 12(b) Security	Common Stock, par value $0.01 per share
Security Exchange Name	NASDAQ
Entity File Number	0-7099
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	13-2566064
Entity Address, Address Line One	14651 North Dallas Parkway
Entity Address, Address Line Two	Suite 500
Entity Address, City or Town	Dallas
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	75254
City Area Code	214
Local Phone Number	357-6181
Document Annual Report	true
Document Transition Report	false
ICFR Auditor Attestation Flag	true
Documents Incorporated by Reference [Text Block]	Portions of the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders, which is to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2022, are incorporated by reference into Part III of this Annual Report to the extent described herein.
Auditor Id	243
Auditor Name	BDO USA, LLP
Auditor Location	Cincinnati, Ohio

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Current assets:
Cash and cash equivalents	$ 45,522	$ 29,902
Restricted cash	1,063	2,093
Accounts receivable, net	83,086	74,991
Costs and estimated earnings in excess of billings on uncompleted contracts	71,016	51,429
Inventories, net	26,526	17,052
Prepaid expenses and other current assets	12,174	10,760
Prepaid income taxes	1,271	2,784
Total current assets	240,658	189,011
Property, plant and equipment, net	20,828	15,948
Right-of-use assets from operating leases	11,373	10,893
Goodwill	183,197	161,183
Intangible assets – finite life, net	35,251	25,841
Intangible assets – indefinite life	9,508	9,629
Deferred income taxes	829	505
Deferred charges and other assets	3,077	3,187
Total assets	504,721	416,197
Current liabilities:
Current portion of debt	3,579	2,203
Accounts payable and accrued expenses	107,198	84,081
Billings in excess of costs and estimated earnings on uncompleted contracts	32,716	28,908
Income taxes payable	3,207	1,493
Total current liabilities	146,700	116,685
Other liabilities	15,129	14,826
Debt, less current portion	107,625	61,577
Deferred income tax liability, net	8,666	8,390
Operating lease liabilities	8,453	8,762
Total liabilities	286,573	210,240
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, 35,028,197 and 35,504,757 shares issued and outstanding at December 31, 2021 and 2020, respectively	344	350
Capital in excess of par value	250,174	252,989
Accumulated loss	(19,298)	(36,715)
Accumulated other comprehensive loss	(17,996)	(12,070)
Total CECO shareholders’ equity	213,224	204,554
Noncontrolling interest	4,924	1,403
Total shareholders' equity	218,148	205,957
Total liabilities and shareholders’ equity	$ 504,721	$ 416,197

Consolidated Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 2022	Dec. 31, 2021
Statement of Financial Position [Abstract]
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	10,000	10,000
Preferred stock, shares issued	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	34,381,668	35,028,197
Common Stock, shares outstanding	34,381,668	35,028,197

Consolidated Statements of Operations - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Income Statement [Abstract]
Net sales	$ 422,627	$ 324,140	$ 316,011
Cost of sales	294,402	223,218	210,883
Gross profit	128,225	100,922	105,128
Selling and administrative expenses	93,473	81,797	76,926
Amortization and earnout expenses	6,809	7,789	8,799
Acquisition and integration expenses	4,546	818	1,354
Executive transition expenses	1,161	29	1,522
Restructuring expenses	75	632	2,331
Intangible asset impairment			850
Income from operations	22,161	9,857	13,346
Other income (expense), net	6,947	(2,231)	2,033
Interest expense	(5,419)	(2,952)	(3,535)
Income before income taxes	23,689	4,674	11,844
Income tax expense	5,426	2,691	3,672
Net income	18,263	1,983	8,172
Noncontrolling interest	(846)	(557)	39
Net income (loss) attributable to CECO Environmental Corp.	$ 17,417	$ 1,426	$ 8,211
Income per share:
Basic	$ 0.50	$ 0.04	$ 0.23
Diluted	$ 0.50	$ 0.04	$ 0.23
Weighted average number of common shares outstanding:
Basic	34,672,007	35,345,785	35,289,616
Diluted	35,005,159	35,594,779	35,520,670

Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Statement of Comprehensive Income [Abstract]
Net income	$ 18,263	$ 1,983	$ 8,172
Other comprehensive income (loss), net of tax:
Translation (loss) income	(5,635)	(538)	2,256
Minimum pension liability adjustment	(291)	2,964	(2,247)
Comprehensive income	$ 12,337	$ 4,409	$ 8,181

- Definition

Amount after tax of increase (decrease) in equity from transactions and other events and circumstances from net income and other comprehensive income. Excludes changes in equity resulting from investments by owners and distributions to owners.

+ References + Details

- Definition

The consolidated profit or loss for the period, net of income taxes, including the portion attributable to the noncontrolling interest.

+ References

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+ Details

Consolidated Statements of Shareholders' Equity - USD ($) $ in Thousands	Total	Common Stock [Member]	Capital in Excess of Par Value [Member]	Accumulated Loss [Member]	Accumulated Other Comprehensive Loss [Member]	Treasury Stock [Member]	Noncontrolling Interest [Member]
Translation loss gain	$ 8,076
Beginning Balance at Dec. 31, 2019	193,017	$ 353	$ 253,869	$ (46,344)	$ (14,505)	$ (356)	$ 0
Beginning Balance, Shares at Dec. 31, 2019		35,275				(138)
Net income	8,172			8,211			(39)
Restricted stock units issued	(337)	$ 2	(331)	(8)
Restricted stock units issued, Shares		230
Share based compensation earned	1,758		1,758
Adjustment for minimum pension liability, net of tax	(2,247)				(2,247)
Translation gain (loss)	2,256				2,256
Noncontrolling interest distribution/acquired	(992)						992
Minimum pension liability adjustment beginning balance at Dec. 31, 2019	(6,429)
Accumulated other comprehensive loss, beginning balance at Dec. 31, 2019	(14,505)
Accumulated other comprehensive loss, activity	9
Minimum pension liability adjustment ending balance at Dec. 31, 2020	(8,676)
Accumulated other comprehensive loss, ending balance at Dec. 31, 2020	(14,496)
Ending Balance at Dec. 31, 2020	203,611	$ 355	255,296	(38,141)	(14,496)	$ (356)	953
Ending Balance, Shares at Dec. 31, 2020		35,505				(138)
Translation loss gain	5,820
Net income	1,983			1,426			557
Exercise of stock options	$ 13		13
Exercise of stock options and dividend reinvestment issuances, Shares	2,000	2
Restricted stock units issued	$ (514)	$ (3)	(517)
Restricted stock units issued, Shares		263
Share based compensation earned	3,558		3,558
Share based compensation earned, Shares		39
Common stock repurchase and retirement, Amount	(5,013)	$ (8)	(5,361)			$ 356	0
Common stock repurchase and retirement, Shares		(781)				138
Adjustment for minimum pension liability, net of tax	2,964				2,964
Translation gain (loss)	(538)				(538)
Noncontrolling interest distribution/acquired	(107)						(107)
Accumulated other comprehensive loss, activity	2,426
Minimum pension liability adjustment ending balance at Dec. 31, 2021	(5,712)
Accumulated other comprehensive loss, ending balance at Dec. 31, 2021	(12,070)
Ending Balance at Dec. 31, 2021	205,957	$ 350	252,989	(36,715)	(12,070)		1,403
Ending Balance, Shares at Dec. 31, 2021		35,028
Translation loss gain	6,358
Net income	18,263			17,417			846
Exercise of stock options	$ 377		377
Exercise of stock options and dividend reinvestment issuances, Shares	42,000	43
Restricted stock units issued	$ (440)	$ 3	(443)
Restricted stock units issued, Shares		286
Share based compensation earned	4,262	$ 1	4,261
Share based compensation earned, Shares		57
Common stock repurchase and retirement, Amount	(7,020)	$ (10)	(7,010)
Common stock repurchase and retirement, Shares		(1,032)
Adjustment for minimum pension liability, net of tax	(291)				291
Translation gain (loss)	(5,635)				(5,635)
Noncontrolling interest distribution/acquired	(1,425)						(1,425)
Accumulated other comprehensive loss, activity	(5,926)
Minimum pension liability adjustment ending balance at Dec. 31, 2022	(6,003)
Accumulated other comprehensive loss, ending balance at Dec. 31, 2022	(17,996)
Fair value of noncontrolling interest equity issued (see Note 14)	4,100						4,100
Ending Balance at Dec. 31, 2022	218,148	$ 344	$ 250,174	$ (19,298)	$ (17,996)		$ 4,924
Ending Balance, Shares at Dec. 31, 2022		34,382
Translation loss gain	$ 11,993

Consolidated Statements of Shareholders' Equity (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Statement of Stockholders' Equity [Abstract]
Adjustment for minimum pension liability, tax	$ 97	$ 866	$ 802

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Cash flows from operating activities:
Net income	$ 18,263	$ 1,983	$ 8,172
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	10,614	9,853	9,921
Unrealized foreign currency (gain) loss	(1,284)	2,047	346
Impairment of intangible assets	0	0	850
Fair value adjustments to earnout liabilities	(229)	704	1,193
Earnout payments	(1,007)	(587)	0
Loss (gain) on sale of property and equipment	10	(83)	63
Amortization of debt discount	371	404	415
Share based compensation expense	3,895	3,335	1,758
Bad debt expense	1,340	688	928
Inventory reserve expense	140	82	494
Deferred income tax (benefit) expense	(39)	0	1,038
Changes in operating assets and liabilities, net of acquisitions and divestitures:
Accounts receivable	(6,751)	(13,165)	8,367
Cost and estimated earnings of billings on uncompleted contracts	(16,851)	(7,007)	(9,561)
Inventories	(6,023)	(203)	4,366
Prepaid expenses and other current assets	37	5,911	(962)
Deferred charges and other assets	2,478	300	(4,095)
Accounts payable and accrued expenses	22,536	440	336
Billings in excess of costs and estimated earnings on uncompleted contracts	4,405	8,431	(17,635)
Income taxes payable	1,424	1,047	460
Other liabilities	(3,680)	(882)	(2,033)
Net cash provided by operating activities	29,649	13,298	4,421
Cash flows from investing activities:
Acquisitions of property and equipment	(3,376)	(2,616)	(3,945)
Net proceeds from sale of assets	19	533	605
Cash paid for acquisitions	(44,900)	0	(5,895)
Net cash used in investing activities	(48,257)	(2,083)	(9,235)
Cash flows from financing activities:
Borrowings on revolving credit lines	75,200	51,400	96,000
Repayments on revolving credit lines.	(35,900)	(57,100)	(86,800)
Borrowings of long-term debt	11,000
Repayments of long-term debt	(3,120)	(2,738)	(5,009)
Repayments of notes payable	(500)
Deferred financing fees paid	(130)	(801)	0
Payments on capital leases and sale-leaseback financing liability	(600)	(603)	(467)
Earnout payments	0	(823)	0
Proceeds from employee stock purchase plan, exercise of stock options, and dividend reinvestment plan	671	230	0
Distributions to non-controlling interest	(1,425)	(107)	0
Common stock repurchases	(7,020)	(5,014)	0
Net cash (used in) provided by financing activities	38,176	(15,556)	3,724
Effect of exchange rate changes on cash and cash equivalents	(4,978)	(1,475)	1,943
Net (decrease) increase in cash, cash equivalents and restricted cash	14,590	(5,816)	853
Cash, cash equivalents and restricted cash at beginning of year	31,995	37,811	36,958
Cash, cash equivalents and restricted cash at end of year	46,585	31,995	37,811
Cash paid (received) during the period for:
Interest	5,007	2,146	3,172
Income taxes	$ 5,378	$ (2,570)	$ 2,156

Nature of Business and Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2022

Accounting Policies [Abstract]

Nature of Business and Summary of Significant Accounting Policies

Nature of business— CECO Environmental Corp. and its consolidated subsidiaries (“CECO,” the “Company,” “we,” “us,” or “our”) is a leading environmentally focused, diversified industrial company, serving the broad landscape of industrial air, industrial water and energy transition markets globally providing innovative technology and application expertise. CECO helps companies grow their business with safe, clean, and more efficient solutions that help protect people, the environment and industrial equipment. CECO solutions improve air and water quality, optimize emissions management, and increase the energy and process efficiency for highly engineered applications in power generation, midstream and downstream hydrocarbon processing and transport, chemical processing, electric vehicle production, polysilicon fabrication, semiconductor and electronics production, battery production and recycling, specialty metals, aluminum and steel production, beverage can manufacturing, and industrial and produced water and wastewater treatment, and a wide range of other industrial end markets.

Principles of consolidation—The consolidated financial statements include the Company and its controlled subsidiaries. All intercompany balances and transactions have been eliminated.

Unless indicated, all balances within tables are in thousands except per share amounts.

Use of estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash equivalents—The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. At December 31, 2022 and 2021, Restricted Cash is cash in support of letters of credit issued by various foreign subsidiaries of the Company. The Company occasionally enters into letters of credit with durations in excess of one year.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Statements of Cash Flows.


	December 31,
	2022		2021
Cash and cash equivalents	$	45,522	$	29,902
Restricted cash		1,063		2,093
Total cash, cash equivalents and restricted cash	$	46,585	$	31,995

Accounts receivable—Receivables are generally uncollateralized customer obligations due under normal terms requiring payment generally within 30 days from the invoice date unless otherwise determined by specific contract terms, generally due to retainage provisions. The Company’s estimate of the allowance for credit losses for trade receivables is primarily determined based upon the length of time that the receivables are past due and management estimates of probable losses based upon an analysis of prior collection experience, specific account risks and economic conditions. Accounts are deemed uncollectible based on past account experience and the current financial condition of the account.

Inventories—The Company’s inventory is valued at the lower of cost or net realizable value, using the first-in, first-out inventory costing method. Inventory quantities are regularly reviewed and provisions for excess or obsolete inventory are recorded based on the Company’s forecast of future demand and market conditions. Significant unanticipated changes to the Company’s forecasts could require a change in the provision for excess or obsolete inventory.

Property, plant and equipment—Property, plant and equipment are carried at the cost of acquisition or construction and depreciated over the estimated useful lives of the assets. Depreciation and amortization are provided using the straight-line method in amounts sufficient to amortize the cost of the assets over their estimated useful lives (buildings and improvements—generally five to 40 years; machinery and equipment—generally two to 15 years). Upon sale or disposal of property, plant and equipment, the applicable amounts of asset cost and accumulated depreciation are removed from the accounts, and the net amount, less any proceeds from sale, is recorded in income.

Intangible assets— Indefinite life intangible assets are comprised of tradenames, while finite life intangible assets are comprised of technology, customer lists, and tradenames. Finite life intangible assets are amortized on a straight line or accelerated basis over their estimated useful lives of seven to 10 years for technology, five to 20 years for customer lists, and 10 years for tradenames.

Long-lived assets—Property, plant and equipment and finite life intangible assets are reviewed whenever events or changes in circumstances occur that indicate possible impairment. If events or changes in circumstances occur that indicate possible impairment, the impairment review is based on an undiscounted cash flow analysis at the lowest level at which cash flows of the long-lived assets are largely independent of other groups of assets and liabilities. This analysis requires management judgment with respect to changes in technology, the continued success of product lines, and future volume, revenue and expense growth rates. The Company conducts annual reviews for idle and underutilized equipment, and review business plans for possible impairment. Impairment occurs when the carrying value of the assets exceeds the future undiscounted cash flows expected to be earned by the use of the asset or asset group. When impairment is indicated, the estimated future cash flows are then discounted to determine the estimated fair value of the asset or asset group and an impairment charge is recorded for the difference between the carrying value and the estimated fair value.

Additionally, the Company evaluates the remaining useful life each reporting period to determine whether events and circumstances warrant a revision to the remaining period of depreciation or amortization. If the estimate of a long-lived asset’s remaining useful life is changed, the remaining carrying amount of the asset is amortized prospectively over that revised remaining useful life.

The Company completes an annual (or more often if circumstances require) impairment assessment on October 1 of its indefinite life intangible assets. As a part of its annual assessment, typically, the Company first qualitatively assesses whether current events or changes in circumstances lead to a determination that it is more likely than not (defined as a likelihood of more than 50 percent) that the fair value of an asset is less than its carrying amount. If there is a qualitative determination that the fair value of a particular asset is more likely than not greater than its carrying value, the Company does not need to proceed to the quantitative estimated fair value test for that asset. If this qualitative assessment indicates a more likely than not potential that the asset may be impaired, the estimated fair value is determined by the relief from royalty method. If the estimated fair value of an asset is less than its carrying value, an impairment charge is recorded for the amount by which the carrying value of the asset exceeds its estimated fair value.

Goodwill—The Company completes an annual (or more often if circumstances require) impairment assessment on October 1 of its goodwill on a reporting unit level, at or below the operating segment level. As a part of its annual assessment, the Company first qualitatively assesses whether current events or changes in circumstances lead to a determination that it is more likely than not (defined as a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount. If there is a qualitative determination that the fair value of a particular reporting unit is more likely than not greater than its carrying value, the Company does not need to quantitatively test for goodwill impairment for that reporting unit. If this qualitative assessment indicates a more likely than not potential that the asset may be impaired, the estimated fair value is determined using a weighting of the income method and the market method. If the estimated fair value of a reporting unit is less than its carrying value, an impairment charge is recorded.

Deferred financing costs—Deferred financing costs are amortized to interest expense over the life of the related loan. In fiscal 2021, the Company entered into Amendment No.2 to the Second Amended and Restated Credit Agreement (the “Credit Facility”). The Credit Facility amended the Company’s existing Amendment No. 1 to Second Amended and Restated Agreement. In connection with the Credit Facility, the Company incurred $0.8 million in customary closing fees in 2021 that were capitalized and classified as a debt discount (see Note 8 for further details on the Credit Facility). Amortization expense was $0.4 million, $0.4 million and $0.4 million for 2022, 2021 and 2020, respectively. As of December 31, 2022, and 2021, remaining capitalized deferred financing costs of $1.5 million and $1.7 million, respectively, are included as a discount to debt in the accompanying Consolidated Balance Sheets.

Revenue recognition—A significant portion of the Company's revenue is derived from fixed-price contracts. The Company accounts for a contract after it has been approved by all parties to the arrangement, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

For each contract, the Company assesses the goods and services promised to a customer and identify a performance obligation for each distinct promised good or service. The typical life of contracts is generally less than 12 months and each contract generally contains only one performance obligation, to provide goods or services to the customer. The Company determines the transaction price for each contract based on the consideration the Company expect to receive for the products or services being provided under the contract.

The Company recognizes revenue as performance obligations are satisfied and the customer obtains control of the products and services. A significant amount of the Company's revenue is recognized over a period of time as the Company performs under the contract because control of the work in process transfers continuously to the customer. For performance obligations to deliver products with continuous transfer of control to the customer, revenue is recognized based on the extent of progress towards

completion of the performance obligation. Progress is measured based on the ratio of costs incurred to date to the total estimated costs to complete the performance obligation. For these contracts, the cost-to-cost measure best depicts the continuous transfer of goods or services to the customer. Annual revenue recognized over a period of time is approximately 70% of total revenue.

For contracts where the duration is short, total contract revenue is insignificant, or control does not continuously transfer to the customer, revenues are recognized at the point in time control passes to the customer, which occurs generally upon shipment of product. Annual revenue recognized at a point in time is approximately 30% of total revenue.

Progress payments are generally made over the duration of the contract. Shipping and handling activities after control of the products has transferred to the customer are considered fulfillment activities. Sales taxes are recorded on a net basis.

Contract Assets and Contract Liabilities — Contract assets consist of costs and earnings in excess of billings, costs incurred for contracts recognized at a point in time, and retainage. Costs and earnings in excess of billings represent the estimated value of unbilled work for contracts with performance obligations recognized over time and are separately classified as current assets in the Consolidated Balance Sheets. Costs incurred for contracts recognized at a point in time are classified within inventories as work-in-process. Retainage represents a portion of the contract billings that have been billed, but for which the contract allows the customer to retain a portion of the billed amount until final settlement. Retainage is not considered to be a significant financing component because the intent is to protect the customer. Retainage is classified within accounts receivable and deferred charges and other assets depending on when it is due. Almost all of the Company’s contract assets are classified as current assets in the Consolidated Balance Sheets.

Billings in excess of costs and estimated earnings on uncompleted contracts are current liabilities, which relate to fixed-price contracts recognized over time, and represents payments in advance of performing the related contract work. Billings in excess of costs and estimated earnings on uncompleted contracts is not considered to be a significant financing component because it is generally used to meet working capital demands that can be higher in the early stages of a contract. Contract liabilities, classified in accounts payable and accrued expenses in the Consolidated Balance Sheets, include advance payments received from customers for which revenue has not been recognized for contracts where revenue is recognized at a point in time. Contract liabilities are reduced when the associated revenue from the contract is recognized, which is generally within one year.

The revenue streams within the Company are consistent with those disclosed for the Company's reportable segments. See Note 15 to the Consolidated Financial Statements for additional information on product offerings and segments.

Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes to job performance, job conditions, and estimated profitability may result in revisions to contract revenue and costs and are recognized in the period in which the revisions are made. There was no provision for estimated losses on uncompleted contracts at December 31, 2022 and 2021.

Cost of sales—Cost of sales amounts include materials, subcontract costs, direct labor and associated benefits, inbound freight charges, purchasing and receiving, inspection, warehousing, and depreciation.

Claims—Change orders arise when the scope of the original project is modified for any of a variety of reasons. The Company will negotiate the extent of the modifications, its expected costs and recovery with the customer. Costs related to change orders are added to the expected total cost of the project. In cases where contract revenues are assured beyond a reasonable doubt to be increased in excess of the expected costs of the change order, incremental profit also is recognized on the contract. Such assurance is generally only achieved when the customer approves in writing the scope and pricing of the change order. Change orders that are in dispute are effectively handled as claims.

Claims are amounts in excess of the agreed contract price that the Company seeks to collect from customers or others for customer-caused delays, errors in specifications and designs, contract terminations, change orders in dispute or unapproved as to both scope and price. Costs attributable to claims are treated as contract costs as incurred.

The Company recognizes certain significant claims for recovery of incurred costs when it is probable that the claim will result in additional contract revenue and when the amount of the claim can be reliably estimated. When the customer or other parties agree in writing to the amount of the claim to be recovered by the Company, the amount of the claim becomes contractual and is accounted for as an increase in the contract’s total estimated revenue and estimated cost. As actual costs are incurred and revenues are recognized over time, a corresponding percentage of the revised total estimated profit will therefore be recognized.

Should it become probable that the claim will not result in additional contract revenue, the Company removes the related contract revenues from its previous estimate of total revenues, which effectively reduces the estimated profit margin on the job and negatively impacts profit for the period.

Pre-contract costs—Pre-contract costs are not significant and are primarily internal costs. As most of the Company’s contracts are one year or less, the Company expenses all pre-contract costs as incurred regardless of whether or not the bids are successful. A majority of the Company's business is obtained through a bidding process and this activity is on-going with multiple bids in process at any one time. These costs consist primarily of engineering, sales and project manager wages, fringes and general corporate overhead and it is deemed impractical to track activities related to any one specific contract.

Selling and administrative expenses—Selling and administrative expenses on the Consolidated Statements of Income include sales and administrative wages and associated benefits, selling and office expenses, professional fees, bad debt expense and depreciation. Selling and administrative expenses are charged to expense as incurred.

Acquisition and integration expenses—Acquisition and integration expenses on the Consolidated Statements of Income are related to acquisition activities, which include, legal, accounting, and other expenses.

Amortization and earnout expenses—Amortization and earnout expenses on the Consolidated Statements of Income include amortization of intangible assets, and changes to earnout and contingent compensation amounts related to acquisitions.

Restructuring expenses—Restructuring expenses on the Consolidated Statements of Income include expenses related to an ongoing restructuring program to reduce operating costs in the future. Within restructuring expenses are charges related to severance, facility exit, legal and property, plant and equipment impairment. The Company’s policy is to recognize restructuring expenses in accordance with the accounting rules related to exit or disposal activities.

Executive transition expenses—Executive transition expenses on the Consolidated Statements of Income include expenses related to the severance for the Company’s former executives, as well as fees and expenses incurred in the search for, and hiring of, new executives.

Product Warranties—The Company’s warranty reserve is to cover the products sold. The warranty accrual is based on historical claims information. The warranty reserve is reviewed and adjusted as necessary on a quarterly basis and is presented within Note 7.

Research and Development—Although not technically defined as research and development, a significant amount of time, effort and expense is devoted to (a) custom engineering which qualifies products for specific customer applications, (b) developing proprietary process technology and (c) partnering with customers to develop new products.

Income taxes - Income taxes are determined using the asset and liability method of accounting for income taxes in accordance with Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) Topic 740, “Income Taxes”. Income tax expense includes federal, state and foreign income taxes.

Deferred income taxes are provided using the asset and liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases and are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Tax credits and other incentives reduce income tax expense in the year the credits are claimed.

Management must assess the need to accrue or disclose uncertain tax positions for proposed potential adjustments from various federal, state and foreign tax authorities who regularly audit the Company in the normal course of business. In making these assessments, management must often analyze complex tax laws of multiple jurisdictions, including many foreign jurisdictions. The accounting guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company records the related interest expense and penalties, if any, as tax expense in the tax provision.

Management must assess the realizability of the Company’s deferred tax assets. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carry forward periods), projected future taxable income, and tax-planning strategies in making this

assessment. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.

The Company has made an accounting policy election to record the U.S. income tax effect of future global intangible low-taxed income (“GILTI”) inclusions in the period in which they arise, rather than establishing deferred taxes with respect to the expected future tax liabilities associated with future GILTI inclusion.

Certain of the Company’s undistributed earnings of its foreign subsidiaries are not permanently reinvested. A liability has been recorded for the deferred taxes on such undistributed foreign earnings. The amount is attributable primarily to the foreign withholding taxes that would become payable should the Company repatriate cash held in its foreign operations.

Earnings per share—The following table reconciles the numerators and denominators used to calculate basic and diluted earnings per share for 2022, 2021 and 2020.


	For the Year Ended December 31
	2022		2021		2020
(table only in thousands)
Numerator (for basic and diluted earnings per share)
Net income attributable to CECO Environmental Corp.	$	17,417	$	1,426	$	8,211

Denominator
Basic weighted-average shares outstanding		34,672		35,346		35,290
Common stock equivalents arising from stock options and restricted stock awards		333		249		231
Diluted weighted-average shares outstanding		35,005		35,595		35,521

Options and unvested restricted stock units are included in the computation of diluted earnings per share using the treasury stock method. For 2022, 2021 and 2020, outstanding options and unvested restricted stock units of 1.1 million, 1.8 million and 1.0 million, respectively, were excluded from the computation of diluted earnings per share due to their having an anti-dilutive effect.

Once a restricted stock award vests, it is included in the computation of weighted average shares outstanding for purposes of basic and diluted earnings per share.

Foreign Currency Translation—The functional currencies of the Company’s foreign subsidiaries are their local currencies and their books and records are maintained in the local currency. The assets and liabilities of these foreign subsidiaries are translated into United States Dollars (“USD”) based on the end-of period exchange rates and the resultant translation adjustments are reported in Accumulated Other Comprehensive Loss in Shareholders’ equity on the Consolidated Balance Sheets.

Income and expenses are translated into USD at average exchange rates in effect during the period.

Transactions denominated in other than the local currency are remeasured into the local currency and the resulting exchange gains or losses are included in “Other income (expense), net” line of the Consolidated Statements of Income. Transaction gains (losses) were $6.3 million, $(3.1) million and $1.3 million in 2022, 2021 and 2020, respectively.

Accounting Standards Adopted in 2022

None.

Accounting Standards to be Adopted

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which addresses how an acquirer should recognize and measure revenue contracts acquired in a business combination. The ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position and/or results of operations.

Financial Instruments

12 Months Ended

Dec. 31, 2022

Investments, All Other Investments [Abstract]

Financial Instruments

The Company's financial instruments consist primarily of cash and cash equivalents, receivables and certain other assets, and accounts payable, which approximate fair value at December 31, 2022 and 2021, due to their short-term nature or variable, market-driven interest rates.

The fair value of the debt issued under the Credit Facility and joint venture term loan was $112.7 million and $65.5 million at December 31, 2022 and 2021, respectively. The fair value was determined considering market conditions, credit worthiness and the current terms of debt, which is considered Level 2 on the fair value hierarchy.

At December 31, 2022 and 2021, the Company had cash and cash equivalents of $45.5 million and $29.9 million, respectively, of which $31.7 million and $24.8 million, respectively, was held outside of the United States, principally in the Netherlands, United Kingdom, China, and Canada.

Concentrations of credit risk

Financial instruments that potentially subject us to credit risk consist principally of cash and cash equivalents, and accounts receivable. The Company maintains cash and cash equivalents with various major financial institutions. The Company perform periodic evaluations of the financial institutions in which its cash is invested. Concentrations of credit risk with respect to trade and contract receivables are limited due to the large number of customers and various geographic areas. Additionally, the Company performs ongoing credit evaluations of its customers’ financial condition.

Accounts Receivable

12 Months Ended

Dec. 31, 2022

Receivables [Abstract]

Accounts Receivable

Accounts receivable consisted of the following:


	December 31,
(table only in thousands)	2022			2021
Contract receivables	$	71,363		$	65,932
Trade receivables		15,943			12,537
Allowance for credit losses		(4,220	)		(3,478	)
Total accounts receivable	$	83,086		$	74,991

Balances billed, but not paid by customers under retainage provisions in contracts, amounted to approximately $1.6 million and $1.8 million at December 31, 2022 and 2021, respectively. Retainage receivables on contracts in progress are generally collected within a year or two subsequent to contract completion, and are recorded in either accounts receivable, net or deferred charges and other assets within the Consolidated Balance Sheets depending on timing of expected collection.

Provision for credit losses was $1.3 million, $0.7 million and $0.9 million during 2022, 2021 and 2020, respectively, while accounts charged to the allowance were $0.6 million, $0.3 million and $0.4 million during 2022, 2021 and 2020, respectively.

Inventories

12 Months Ended

Dec. 31, 2022

Inventory Disclosure [Abstract]

Inventories

Inventories consisted of the following:


	December 31,
(table only in thousands)	2022			2021
Raw materials	$	19,774		$	13,405
Work in process		7,183			5,147
Finished goods		2,436			674
Obsolescence allowance		(2,867	)		(2,174	)
Total inventories	$	26,526		$	17,052

Amounts credited to the allowance for obsolete inventory and charged to cost of sales amounted to $0.1 million, $0.1 million and $0.5 million during 2022, 2021 and 2020, respectively. Items charged to the allowance for inventory write-offs were zero, $0.9 million and $0.1 million, during 2022, 2021 and 2020, respectively.

Property, Plant and Equipment

12 Months Ended

Dec. 31, 2022

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

Property, plant and equipment consisted of the following:


	December 31,
(table only in thousands)	2022			2021
Land, building and improvements	$	11,986		$	7,524
Machinery and equipment		33,521			29,306
Property, plant and equipment, gross		45,507			36,830
Less accumulated depreciation		(24,679	)		(20,882	)
Property, plant and equipment, net	$	20,828		$	15,948

Depreciation expense was $3.6 million, $3.2 million and $2.5 million for 2022, 2021 and 2020, respectively.

Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets


(table only in thousands)	Engineered Systems segment			Industrial Process Solutions segment			Totals
Balance of goodwill at December 31, 2020	$	99,785		$	62,035		$	161,820
Foreign currency translation		(482	)		(155	)		(637	)
Balance of goodwill at December 31, 2021		99,303			61,880			161,183
Acquisitions		15,968			7,344			23,312
Foreign currency translation		(525	)		(773	)		(1,298	)
Balance of goodwill at December 31, 2022	$	114,746		$	68,451		$	183,197

As of December 31, 2022 and 2021, the Company has an aggregate amount of goodwill acquired of $243.9 million and $221.9 million, respectively, and an aggregate amount of impairment losses of $60.7 million which was recognized in 2017.

The Company’s indefinite lived intangible assets as of December 31, 2022 and 2021 consisted of the following:


	Tradenames
(table only in thousands)	2022			2021
Balance beginning of year	$	9,629		$	12,937
Transfer to finite life classification		—			(3,150	)
Foreign currency adjustments		(121	)		(158	)
Balance end of year	$	9,508		$	9,629

During 2021, the Company reassessed the useful lives of certain tradenames and determined that $3.2 million of tradenames would have useful lives of 10 years versus indefinite.

The Company completes an annual (or more often if circumstances require) impairment assessment of its goodwill and indefinite life intangible assets on October 1 at the reporting unit level.

The Company bases its measurement of the fair value of a reporting unit using a 50/50 weighting of the income method and the market method. The income method is based on a discounted future cash flow approach that uses the significant assumptions of projected revenue, projected operational profit, terminal growth rates, and the cost of capital. Projected revenue and operational profit, and terminal growth rates were determined to be significant assumptions because they are three primary drivers of the projected cash flows in the discounted future cash flow approach. Cost of capital was also determined to be a significant assumption as it is the discount rate used to calculate the current fair value of those projected cash flows. The market method is based on financial multiples of comparable companies and applies a control premium. Significant estimates in the market approach include identifying similar companies with comparable business factors such as size, growth, profitability, risk and return on investment and assessing comparable revenue and operating income multiples in estimating the fair value of a reporting unit. Based on this analysis, the estimated fair value of all of the Company's reporting units exceeded their carrying value as of October 1, 2022. There was no goodwill impairment in 2022, 2021 and 2020.

The Company also performed an impairment analysis for all indefinite life intangible assets, which consists of tradenames, as of October 1, 2022. The Company based its measurement of the fair value of the indefinite life intangible assets utilizing the relief from royalty method. The significant assumptions used under the relief from royalty method are projected revenue, royalty rates, terminal

growth rates, and the cost of capital. Projected revenue, royalty rates and terminal growth rates were determined to be significant assumptions because they are three primary drivers of the projected royalty cash flows in the relief from royalty method. Cost of capital was also determined to be a significant assumption as it is the discount rate used to calculate the current fair value of those projected royalty cash flows. Changes in any of the significant assumptions used can materially affect the expected cash flows, and such impacts can result in material non-cash impairment charges. Under this approach, the estimated fair value of the indefinite life intangible assets exceeded their carrying value for segments as of the testing date. Accordingly, the Company recognized no impairment charges in its financial results for the years ended December 31, 2022 and 2021. In 2020, the Company recognized impairment charges of $0.9 million.

As described above, the fair value measurement methods used in the Company’s goodwill and indefinite life intangible assets impairment analyses utilizes a number of significant unobservable inputs or Level 3 assumptions. These assumptions include, among others, projections of the Company's future operating results, the implied fair value of these assets using an income approach by preparing a discounted cash flow analysis and other subjective assumptions.

The Company’s finite lived intangible assets consisted of the following:


	December 31,
	2022						2021
(table only in thousands) Intangible assets – finite life	Cost			Accum. Amort.			Cost			Accum. Amort.
Technology	$	14,457		$	13,729		$	14,457		$	13,704
Customer lists		85,719			57,540			73,199			53,970
Tradenames		11,604			3,768			9,728			2,745
Foreign currency adjustments		(1,864	)		(372	)		(2,149	)		(1,025	)
Total finite life intangible assets	$	109,916		$	74,665		$	95,235		$	69,394

Amortization expense of finite life intangible assets was $7.0 million, $6.7 million and $7.4 million for 2022, 2021 and 2020, respectively. Amortization over the next five years for finite life intangibles is $6.6 million in 2023, $5.9 million in 2024, $4.9 million in 2025, $3.5 million in 2026, and $3.4 million in 2027.

Accounts Payable and Accrued Expenses

12 Months Ended

Dec. 31, 2022

Payables and Accruals [Abstract]

Accounts Payable and Accrued Expenses

Accounts payable and accrued expense consisted of the following:


	December 31,
(table only in thousands)	2022		2021
Trade accounts payable, including amounts due to subcontractors	$	73,407	$	56,242
Compensation and related benefits		9,577		6,065
Accrued warranty		3,691		3,074
Contract liability		4,516		4,405
Short-term operating lease liability		3,228		2,414
Other		12,779		11,881
Total accounts payable and accrued expenses	$	107,198	$	84,081

The activity in the Company’s current portion of earnout liability is recorded in Accounts payable and accrued expenses on its Consolidated Balance Sheets, consisted of the following:


	December 31,
(table only in thousands)	2022			2021
Earnout accrued at beginning of year	$	1,037		$	1,743
Fair value of earnout at acquisition date		1,429			—
Fair value adjustment		(229	)		704
Payments and other		(1,037	)		(1,410	)
Earnout accrued at end of year	$	1,200		$	1,037

As additional consideration in the acquisition of Compass Water Solutions, Inc. ("Compass"), the former owners of Compass are entitled to earn-out payments based upon specified financial results through April 30, 2023. Based on projections at the acquisition date of May 3, 2022, the Company estimated the fair value of the earnout to be $1.4 million. During the year ended December 31, 2022 the Company decreased the earnout by $0.2 million based on the estimated fair value at December 31, 2022. The fair value adjustment is recorded in "Amortization and earnout expenses" on the Consolidated Statement of Income.

As additional consideration in the acquisition of Environmental Integrated Solution (“EIS”), the former owners were entitled to earnout payments based upon a multiple of specified financial results through December 31, 2021. During 2021, the Company increased the earnout by $0.7 million based on the estimated fair value at December 31, 2021. The fair value adjustment is recorded in “Amortization and earnout expenses” on the Consolidated Statements of Income. The change in fair value was a result of EIS performing above initial acquisition operational expectations. Earnout payments of $1.0 million and $1.4 million were paid during the years ended December 31, 2022 and 2021, respectively.

Senior Debt

12 Months Ended

Dec. 31, 2022

Debt Disclosure [Abstract]

Senior Debt

Senior debt

Debt consisted of the following:


	December 31,
(table only in thousands)	2022			2021
Outstanding borrowings under Credit Facility (defined below) Term loan payable in quarterly principal installments of $550 through September 2023, $825 through September 2025 and $1,100 thereafter with balance due upon maturity in December 2026.
– Term loan	$	41,309		$	43,511
– Revolving Credit Loan		61,300			22,000
Total outstanding borrowings under Credit Facility		102,609			65,511
Outstanding borrowings under the joint venture term debt		10,083			—
Unamortized debt discount		(1,488	)		(1,731	)
Total outstanding borrowings		111,204			63,780
Less: current portion		(3,579	)		(2,203	)
Total debt, less current portion	$	107,625		$	61,577

Scheduled principal payments under the Credit Facility and joint venture term debt are $3.6 million in 2023, $4.9 million in 2024, $5.2 million in 2025, $95.1 million in 2026, and $3.9 million in 2027.

Credit Facility

On December 17, 2021, the Company entered into Amendment No. 2 to the Second Amended and Restated Credit Agreement (the “Credit Facility”). The Credit Facility amended and restated the Company’s prior credit agreement. Pursuant to the Credit Facility, the lenders provided a term loan in the aggregate principal amount of $44.1 million and a senior secured revolving credit commitment up to an aggregate principal amount of $140.0 million. This revolving credit commitment allows the Company the ability to borrow loans denominated in different currencies. Additionally, the Credit Facility extended the maturity date to December 17, 2026, replaces LIBOR interest with Secured Overnight Financing Rate ("SOFR") interest for USD loans, Sterling Overnight Interbank Average Rate ("SONIA") for GBP loans, and Canadian Dollar Offered Rate ("CDOR") for CAD loans, and redefined certain financial covenants.

As of December 31, 2022 and 2021, $18.9 million and $14.5 million of letters of credit were outstanding, respectively. Total unused credit availability under the Company’s senior secured term loan and senior secured revolver loan with sub-facilities for letters of credit, swing-line loans and senior secured multi-currency loans was $59.8 million and $45.9 million at December 31, 2022 and 2021, respectively. Revolving loans may be borrowed, repaid and reborrowed until December 17, 2026, at which time all outstanding balances of the Credit Facility must be repaid.

At the Company’s option, revolving loans and the term loans accrue interest at a per annum rate based on (a) either the highest of (i) the federal funds rate plus 0.5%, or (ii) the Agent’s prime lending rate, (b) Daily Simple SOFR plus the Daily Simple SOFR Adjustment of 0.11448% plus 1.0%, (c) 1.0%, plus a margin ranging from 1.75% to 2.75% depending on the Company’s Consolidated Leverage Ratio, or (d) a one/three/six-month Term SOFR Rate (as defined in the Credit Agreement) plus the Term SOFR Adjustment ranging from 0.11% to 0.43% plus 1.75% to 2.75% depending on the Company’s Consolidated Leverage Ratio. Interest on swing line loans is the Base Rate.

Interest on Base Rate loans is payable quarterly in arrears on the last day of each calendar quarter and at maturity. Interest on Term SOFR rate loans is payable on the last date of each applicable Interest Period (as defined in the agreement), but in no event less than once every three months and at maturity. The weighted average stated interest rate on outstanding borrowings was 6.75% and 2.54% at December 31, 2022 and 2021, respectively.

Under the terms of the Credit Facility, the Company is required to maintain certain financial covenants, including the maintenance of a Consolidated Net Leverage Ratio (as defined in the Credit Facility). Through September 30, 2023, the maximum Consolidated Net Leverage Ratio is 3.75, after which time it will decrease to 3.50 until the end of the term of the Credit Facility.

The Company has granted a security interest in substantially all of its assets to secure its obligations pursuant to the Credit Facility. The Company’s obligations under the Credit Facility are guaranteed by the Company’s U.S. subsidiaries and such guaranty obligations are secured by a security interest on substantially all the assets of such subsidiaries, including certain real property. The Company’s obligations under the Credit Agreement may also be guaranteed by the Company’s material foreign subsidiaries to the extent no adverse tax consequences would result to the Company.

In connection with the Credit Facility, the Company paid $0.8 million in customary closing fees during 2021 that were deferred and classified as a debt discount, as a result of the Credit Facility being accounted for as a debt modification.

As of December 31, 2022 and 2021, the Company was in compliance with all related financial and other restrictive covenants under the Credit Facility.

Joint Venture Debt

On March 7, 2022, the Company's Effox-Flextor-Mader, Inc. joint venture ("EFM JV") entered into a loan agreement secured by the assets of the EFM JV in the aggregate principal amount of $11.0 million for the acquisition of General Rubber, LLC ("GRC"), as further described in Note 14. As of December 31, 2022, $10.0 million was outstanding under the loan. Principal will be paid back to the lender monthly with the final installment due by February 27, 2027. Interest is accrued at the per annum rate based on EFM JV's choice of the 1/3/6 month Term SOFR rate plus 3.25%, with a floor rate of 3.75%. Interest is paid monthly on the last day of each month. The interest rate at December 31, 2022 was 6.60%. As of December 31, 2022, the EFM JV was in compliance with all related financial and other restrictive covenants under this loan agreement. This loan balance does not impact the Company’s borrowing capacity or the financial covenants under the Credit Facility.

Foreign Debt

The Company has a number of bank guarantee facilities and bilateral lines of credit in various foreign countries currently supported by cash, letters of credit or pledged assets and collateral under the Credit Facility. The Credit Facility allows letters of credit and bank guarantee issuances of up to $65.0 million from the bilateral lines of credit secured by pledged assets and collateral under the Credit Facility. As of December 31, 2022, $30.4 million in bank guarantees were outstanding. In addition, a subsidiary of the Company located in the Netherlands has a Euro-denominated bank guarantee agreement secured by local assets under which $0.6 million in bank guarantees were outstanding as of December 31, 2022. As of December 31, 2022, the borrowers of these facilities and agreements were in compliance with all related financial and other restrictive covenants.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-URI https://asc.fasb.org/topic&trid=2208564

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

Shareholders' Equity

12 Months Ended

Dec. 31, 2022

Equity [Abstract]

Shareholders' Equity

Shareholders’ Equity

Share-Based Compensation

The Company’s 2021 Equity and Incentive Compensation Plan (the “2021 Plan”) was approved by the Company’s stockholders on May 25, 2021 which replaced the 2017 Equity Incentive Plan (the “2017 Plan”). No further grants will be made under the 2017 Plan, but outstanding awards under the 2017 Plan will continue to be unaffected in accordance with their terms. The 2021 Plan permits the granting of stock options with an exercise price equal to or greater than the fair market value of the Company’s common stock at the date of the grant, and other stock-based awards, including appreciation rights, restricted stock, restricted stock units, performance shares and dividend equivalents. A total of 2.6 million shares of common stock were authorized for issuance. As of December 31, 2022, 2.1 million shares remain available for future issuance. Stock options granted to employees generally vest equally over a period of four years from the date of the grant. Stock awards granted to employees generally vest over a period of three to four years from the date of the grant.

On July 6, 2020, in connection with the appointment of the Chief Executive Officer, the Company granted its Chief Executive Officer approximately 94,000 restricted stock units with a fair value of $0.6 million, which are being expensed over the vesting period of four years. The Company also granted its Chief Executive Officer approximately 1.2 million stock options with a fair value of $2.4 million that are being expensed over the vesting period of four years. These grants of restricted stock units and stock options (“2020 Inducement Awards”) were approved by the Board of Directors of the Company and are not included in any of the aforementioned Plans.

Share-based compensation expense for stock options and restricted stock awards under these plans was $3.9 million, $3.3 million and $1.8 million for 2022, 2021 and 2020, respectively. The tax benefit related to share based compensation expense was $0.5 million, $0.8 million and $0.3 million in 2022, 2021 and 2020, respectively.

Employee Stock Purchase Plan

The 2020 Employee Stock Purchase Plan (“ESPP”) was approved by shareholders on June 11, 2020. The ESPP is administered by the Compensation Committee. The ESPP allows employees to purchase shares of common stock at a 15% discount from market price and pay for the shares through payroll deductions. Eligible employees can enter the plan at specific “offering dates” that occur in six-month intervals.

The aggregate maximum number of shares of the Company’s common stock that may be granted under the ESPP is 1.3 million shares over the ten-year term of the ESPP, subject to adjustment in the event there is a reorganization, merger, consolidation, recapitalization, reclassification, stock split-up, or similar transaction with respect to the common stock. As of December 31, 2022, 1.2 million shares remain available for future issuance.

The Company recognized employee stock purchase plan expense of $60,000, $60,000 and $20,000 in 2022, 2021 and 2020, respectively.

Stock Options

The estimated weighted-average fair value of stock options granted during 2020, was $1.98 per option, using the Black-Scholes option-pricing model based on the following assumptions:

Expected Volatility: The Company utilizes a volatility factor based on the Company’s historical stock prices for a period of time equal to the expected term of the stock option utilizing weekly price observations. For 2020, the Company utilized weighted-average volatility factors of 52.5%.

Expected Term: Due to limited historical exercise data, the Company utilizes the simplified method of determining the expected term based on the vesting schedules and terms of the stock options. For 2020, the Company utilized weighted-average expected term factors of 5.0 years.

Risk-Free Interest Rate: The risk-free interest rate factor utilized is based upon the implied yields currently available on U.S. Treasury zero-coupon issues over the expected term of the stock options. For 2020, the Company utilized a weighted-average risk-free interest rate factor of 0.3%.

The fair value of stock options is recorded as compensation expense on a straight-line basis over the vesting periods (which approximates the requisite service period) of the options and forfeitures are accounted for when they occur.

Information related to all stock options under the 2021 Plan, 2017 Plan and 2007 Plan, and the 2020 Inducement Awards for 2022, 2021 and 2020 is shown in the tables below:


(Shares in thousands)	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value ($000)
Outstanding at December 31, 2021		1,514		$	11.19	4.9 years
Forfeitures		(32	)		10.55
Exercised		(42	)		8.15
Outstanding at December 31, 2022		1,440			11.30	4.0 years	$	1,766
Exercisable at December 31, 2022		833			11.47	3.6 years	$	923


(Shares in thousands)	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value ($000)
Outstanding at December 31, 2020		1,554		$	11.17	5.8 years
Forfeitures		(38	)		10.63
Exercised		(2	)		6.66
Outstanding at December 31, 2021		1,514			11.19	4.9 years	$	—
Exercisable at December 31, 2021		603			11.39	4.0 years	$	—


(Shares in thousands)	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value ($000)
Outstanding at December 31, 2019		410		$	11.45	4.7 years
Forfeitures		(71	)		10.86
Granted		1,215			11.06
Outstanding at December 31, 2020		1,554			11.17	5.8 years	$	195
Exercisable at December 31, 2020		330			11.66	3.0 years	$	6

Restricted Stock Awards

Information related to restricted stock awards under the 2021 Plan, 2017 Plan, 2007 Plan, and the 2020 Inducement Awards for 2022, 2021 and 2020 is shown in the table below. The fair value of restricted stock awards is based on the price of the stock in the open market on the date of the grant, and the fair value of performance-based restricted stock units is determined by using the Monte Carlo valuation model. The fair value of the restricted stock awards is recorded as compensation expense on a straight-line basis over the vesting periods of the awards and forfeitures are accounted for when they occur.


(Shares in thousands)	Shares			Weighted Average Grant Date Fair Value
Nonvested at December 31, 2019		1,321		$	6.80
Granted		648			5.64
Vested		(284	)		7.60
Forfeited		(638	)		5.91
Nonvested at December 31, 2020		1,047			6.00
Granted		573			8.19
Vested		(323	)		6.31
Forfeited		(264	)		5.80
Nonvested at December 31, 2021		1,033			7.17
Granted		755			5.74
Vested		(355	)		6.80
Forfeited		(255	)		6.41
Nonvested at December 31, 2022		1,178		$	6.53

The Company received $0.4 million, zero and zero of cash from employees exercising options in 2022, 2021 and 2020, respectively. The Company received approximately $13,000 from a non-employee director exercising options during 2021. The intrinsic value of options exercised during 2022, 2021 and 2020 was $0.2 million, $3,000 and zero, respectively.

Unrecognized compensation expense related to nonvested shares of stock options, restricted stock and performance units was $5.5 million at December 31, 2022 and will be recognized over a weighted average vesting period of 1.6 years.

Common Stock Repurchase

On May 10, 2022, the Company's Board of Directors authorized a share repurchase program under which the Company may purchase up to $20.0 million of its outstanding shares of common stock through April 30, 2025. The authorization permits the Company to repurchase shares in the open market, through accelerated share repurchases, block trades, Rule 10b5-1 trading plans or through privately negotiated transactions in accordance with applicable laws, rules and regulations. Through December 31, 2022, the Company has repurchased and retired approximately 1,032,000 shares of common stock at a cost of $7.0 million under the program.

On August 3, 2021, the Company's Board of Directors authorized a share repurchase program under which CECO may purchase up to $5.0 million of its outstanding shares of Company stock. The authorization permitted the Company to repurchase shares in the open market, through accelerated share repurchases, block trades, 10b5-1 plans or through privately negotiated transactions in accordance with applicable laws, rules and regulations. The Company completed its purchases authorized under the plan in October 2021, repurchasing approximately 700,000 shares of common stock at a cost of $5.0 million under the program. All treasury shares were retired following the repurchase.

Dividends

The Company's dividend policy and the payment of cash dividends under that policy are subject to the Board of Director’s continuing determination that the dividend policy and the declaration of dividends are in the best interest of the Company’s stockholders. Future dividends and the dividend policy may be changed at the Company’s discretion at any time. Payment of dividends is also subject to the continuing compliance with financial covenants under the Credit Facility. The Company has not paid a cash dividend on its common stock in any of the years ended December 31, 2022, 2021 or 2020 and currently intends to retain future earnings, if any, to finance the operations, growth and development of its business in the foreseeable future.

- Definition

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

+ References

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-Name Accounting Standards Codification
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+ Details

Pension and Employee Benefit Plans

12 Months Ended

Dec. 31, 2022

Retirement Benefits [Abstract]

Pension and Employee Benefit Plans

ension and Employee Benefit Plans

The Company sponsors a non-contributory defined benefit pension plan for certain union employees. The accrual of future benefits for all participants who are non-union employees was frozen effective December 31, 2008. The plan is funded in accordance with the funding requirements of the Employee Retirement Income Security Act of 1974.

The following tables set forth the plan changes in benefit obligations, plan assets and funded status on the measurement dates:


	December 31,
(table only in thousands)	2022			2021			2020
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	35,035		$	38,272		$	35,985
Interest cost		877			775			1,034
Actuarial (gain) loss		(6,540	)		(1,936	)		3,323
Benefits paid		(2,022	)		(2,076	)		(2,070	)
Projected benefit obligation at end of year		27,350			35,035			38,272
Change in plan assets:
Fair value of plan assets at beginning of year		29,474			28,545			27,099
Actual return on plan assets		(5,631	)		3,005			1,629
Employer contribution		—			—			1,887
Benefits paid		(2,022	)		(2,076	)		(2,070	)
Fair value of plan assets at end of year		21,821			29,474			28,545
Funded status at end of year	$	(5,529	)	$	(5,561	)	$	(9,727	)
Weighted-average assumptions used to determine benefit obligations for the year ended December 31:
Discount rate		4.90	%		2.55	%		2.10	%

The funded status as of December 31, 2022, 2021 and 2020, was $5.5 million, $5.6 million and $9.7 million, respectively and is recognized in the accompanying Consolidated Balance Sheets within other long-term liabilities.

The details of net periodic benefit cost for pension benefits included in the accompanying Consolidated Statements of Income are as follows:


	December 31,
(table only in thousands)	2022			2021			2020
Interest cost	$	877		$	775		$	1,034
Expected return on plan assets		(1,560	)		(1,510	)		(1,594	)
Amortization of net loss		263			411			266
Net periodic benefit income	$	(420	)	$	(324	)	$	(294	)

Other changes in plan assets and benefit obligations recognized in other comprehensive income:


	December 31,
(table only in thousands)	2022			2021			2020
Net loss (gain)	$	651		$	(3,432	)	$	3,287
Amortization of net actuarial loss		(263	)		(411	)		(266	)
Total recognized in other comprehensive income (loss)	$	388		$	(3,843	)	$	3,021
Total recognized in net periodic benefit cost and other comprehensive income (loss)	$	(32	)	$	(4,167	)	$	2,727

Weighted-average assumptions used to determine net periodic benefit costs


	December 31,
	2022	2021	2020
Discount Rate	2.55%	2.10%	2.95%
Expected return on assets	5.50%	5.50%	6.00%

The basis of the long-term rate of return assumption reflects the current asset mix for the pension plan of approximately 30% to 40% debt securities and 60% to 70% equity securities with assumed average annual returns of approximately 4% to 6% for debt securities and 8% to 12% for equity securities. The investment portfolio for the pension plan will be adjusted periodically to maintain the current ratios of debt securities and equity securities. Additional consideration is given to the historical returns for the pension plan as well as future long range projections of investment returns for each asset category. The long-term rate of return also considers administrative expenses of the plan.

Benefits under the plan is not based on wages and, therefore, future wage adjustments have no effect on the projected benefit obligation.

During 2022, 2021 and 2020, the Company updated the mortality tables (RP-2021 Total Mortality Table, RP-2020 Total Mortality Table, and RP-2019 Total Mortality Table for each respective year) in the underlying assumptions used to determine the benefit obligation.

Pension plan assets are invested in trusts comprised primarily of investments in various debt and equity funds. A fiduciary committee establishes the target asset mix and monitors asset performance. The expected rate of return on assets includes the determination of a real rate of return for equity and fixed income investment applied to the portfolio based on their relative weighting, increased by an underlying inflation rate.

The Company's defined benefit pension plan asset allocation by asset category is as follows:


	Target Allocation	Percentage of Plan Assets
	2022	2022	2021
Asset Category:
Cash and cash equivalents	0%	2%	1%
Equity securities	70%	73%	77%
Debt securities	30%	25%	22%
Total	100%	100%	100%

Estimated pension plan cash obligations are $2.2 million, $2.2 million, $2.2 million, $2.2 million, and $2.1 million for 2023 through 2027, respectively, and a total of $10.0 million for the years 2028 through 2032.

Fair Value Measurements of Pension Plan Assets

Following is a description of the valuation methodologies used for pension assets measured at fair value:

Cash and cash equivalents: Cash and cash equivalents consist primarily of cash on deposit in money market funds. Cash and cash equivalents are stated at cost, which approximates fair value.

Equity securities: Equity securities consist of various managed funds that invest primarily in common stocks. These securities are valued at the net asset value of shares held by the plan at year end. The net asset value is calculated based on the underlying shares and investments held by the funds.

Debt securities: Debt securities consist of U.S. government and agency securities, corporate bonds and notes, and managed funds that invest in fixed income securities. U.S governmental and agency securities are valued at closing prices reported in the active market in which the individual securities are traded. Corporate bonds and notes are valued using market inputs including benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data including market research publications. Inputs may be prioritized differently at certain times based on market conditions. Managed funds are valued at the net asset value of shares held by the plan at year end. The net asset value is calculated based on the underlying investments held by the fund.

The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.

The levels assigned to the defined benefit plan assets as of December 31, 2022, are summarized in the tables below:


(table only in thousands)	Level 1		Level 2		Level 3		Total
Pension assets, at fair value:
Cash and cash equivalents	$	354	$	—	$	—	$	354
Equity securities		15,984		—		—		15,984
Debt securities		5,483		—		—		5,483
Total assets	$	21,821	$	—	$	—	$	21,821

The levels assigned to the defined benefit plan assets as of December 31, 2021, are summarized in the tables below:


(table only in thousands)	Level 1		Level 2		Level 3		Total
Pension assets, at fair value:
Cash and cash equivalents	$	208	$	—	$	—	$	208
Equity securities		22,687		—		—		22,687
Debt securities		6,579		—		—		6,579
Total assets	$	29,474	$	—	$	—	$	29,474

The Company contributes to a number of multiemployer defined benefit pension plans under the terms of collective-bargaining agreements that cover its union-represented employees. The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects:

•

Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers.

•

If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.

•

If the Company chooses to stop participating in some of its multiemployer plans, CECO may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

The Company’s participation in these plans for the year ended December 31, 2022, is outlined in the table below. The “EIN/Pension Plan Number” column provides the Employer Identification Number and the three-digit plan number, if applicable. Unless otherwise noted, the most recent Pension Protection Act zone status available in 2022 is for the plan’s year-end at December 31, 2021. The zone status is based on information that the Company received from the plan and is certified by the plan’s actuary. Among other factors, plans in the red zone are generally less than 65% funded, plans in the yellow zone are less than 80% funded, and plans in the green zone are at least 80% funded. The “FIP/RP Status Pending/Implemented” column indicates plans for which a financial improvement plan (FIP) or a rehabilitation plan (RP) is either pending or has been implemented. The last column lists the expiration date(s) of the collective-bargaining agreement(s) to which the plans are subject.


Pension Fund	EIN/Pension Plan Number	Pension Protection Act Zone Status 2012	FIF/RP Status Pending/Implemented	Surcharge Imposed	Expiration of Collective Bargaining Agreement
Sheet Metal Workers’ National Pension Fund	52-6112463/001	Green	FIF: Yes - Implemented RP: Yes - Implemented	No	Various
Sheet Metal Workers Local 224 Pension Plan	31-6171353/001	Yellow	FIF: Yes - Implemented	No	n/a
Sheet Metal Workers Local No. 177 Pension Fund	62-6093256/001	Green	Is not subject	No	April 30, 2023

Kirk and Blum was listed in the Sheet Metal Workers Local No. 177 Pension Fund’s Form 5500 as providing more than five percent of total contributions for the year ended December 31, 2021. The Company was not listed in any of the other plans’ Forms 5500 as providing more than five percent of the total contributions for the plans and plan years. At the date the financial statements were issued, Forms 5500 were not available for the plan years ended December 31, 2022.

The Company has no current intention of withdrawing from any plan and, therefore, no liability has been provided in the accompanying consolidated financial statements.

Amounts charged to pension expense under the above plans including the multi-employer plans totaled $0.4 million, $0.6 million and $1.0 million in 2022, 2021 and 2020, respectively.

The Company has a 401(k) savings retirement plan for employees of certain of its subsidiaries. The plan covers substantially all employees who have 30 days of service, and who have attained 18 years of age. The plan allows the Company to make discretionary contributions and provides for employee salary deferrals of up to 100%. The Company made aggregate matching contributions and discretionary contributions of $1.5 million, $0.9 million, and $1.6 million during 2022, 2021 and 2020, respectively.

- Definition

The entire disclosure for retirement benefits.

+ References

Reference 1: http://www.xbrl.org/2003/role/exampleRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 715
-SubTopic 20
-Section 55
-Paragraph 17
-URI https://asc.fasb.org/extlink&oid=123450688&loc=d3e4179-114921

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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-Section S99
-Paragraph 2
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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-Publisher FASB
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Reference 14: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

Leases

12 Months Ended

Dec. 31, 2022

Leases [Abstract]

Leases

11.

Leases

The lease accounting guidance under ASC 842 establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. The Company's leasing activity is primarily related to buildings used for manufacturing, warehousing, sales, and administrative activities. The Company determines if an arrangement is a lease at inception. Many of the Company's lease agreements contain renewal options; however, the Company does not recognize ROU assets or lease liabilities for renewal periods unless it is determined that lease renewal is reasonably certain at inception or when a triggering event occurs. Some of the Company's lease agreements contain rent escalation clauses, free-rent periods, or other lease concessions. The Company recognizes its minimum rental expense on a straight-line basis based on the fixed components of a lease arrangement. Variable lease costs represent amounts that are not fixed in nature and are not tied to an index or rate, and are recognized as incurred. The Company's variable lease costs are not material.

In determining its ROU assets and lease liabilities, the Company applies a discount rate to the minimum lease payments within each lease agreement. ASC 842 requires the Company to use the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. When the Company cannot readily determine the discount rate implicit in the lease agreement, it utilizes its fully collateralized incremental borrowing rate. To estimate its specific incremental borrowing rates the Company considers, among other factors, interest rates on its existing credit facilities, risk-free rates, the types of assets being leased, and the term of the leases.

The components of lease expense were as follows:


	December 31,
(table only in thousands)	2022		2021		2020
Operating lease cost (a)	$	3,558	$	3,232	$	3,450
Finance lease cost:
Amortization of right-of-use assets		309		308		308
Interest on lease liability		289		315		338
Total finance lease cost		598		623		646
Total lease cost	$	4,156	$	3,855	$	4,096
(a) includes variable lease costs which are immaterial

Supplemental cash flow information related to leases was as follows:


	December 31,
(table only in thousands)	2022		2021		2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	3,637	$	3,171	$	3,338
Operating cash flows from finance leases	$	289	$	315	$	338
Financing cash flows from finance leases	$	600	$	603	$	467
Right of use assets obtained in exchange for lease obligations
Operating leases	$	3,487	$	2,206	$	545

Supplemental balance sheet information related to leases was as follows:


	December 31,
(table only in thousands)	2022		2021
Operating leases
Right-of-use assets from operating leases	$	11,373	$	10,893

Accounts payable and accrued expenses	$	3,228	$	2,414
Operating lease liabilities		8,453		8,762
Total operating lease liabilities	$	11,681	$	11,176

Finance leases
Property, plant and equipment, net	$	2,329	$	2,619

Accounts payable and accrued expenses	$	645	$	600
Other liabilities		5,537		6,183
Total finance lease liabilities	$	6,182	$	6,783


Weighted-average remaining lease term as of December 31, 2022 were as follows:
Operating leases		10 years
Finance leases		8 years
Weighted-average discount rate
Operating leases		4.7%
Finance leases		4.6%

As of December 31, 2022, maturities of lease liabilities were as follows:


(table only in thousands)	Operating Leases			Finance Leases
2023		3,405			907
2024		2,979			925
2025		2,375			943
2026		1,543			962
2027		668			982
Thereafter		1,891			2,597
Total minimum lease payments	$	12,861		$	7,316
Less imputed interest		(1,180	)		(1,134	)
Lease liability	$	11,681		$	6,182

Commitments and Contingencies

12 Months Ended

Dec. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

12.

Commitments and Contingencies

Legal Proceedings

Asbestos cases

The Company's subsidiary, Met-Pro, beginning in 2002 began to be named in asbestos-related lawsuits filed against a large number of industrial companies including, in particular, those in the pump and fluid handling industries. In management’s opinion, the complaints typically have been vague, general and speculative, alleging that Met-Pro, along with the numerous other defendants, sold unidentified asbestos-containing products and engaged in other related actions which caused injuries (including death) and loss to the plaintiffs. Counsel has advised that more recent cases typically allege more serious claims of mesothelioma. The Company’s insurers have hired attorneys who, together with the Company, are vigorously defending these cases. Many cases have been dismissed after the plaintiff fails to produce evidence of exposure to Met-Pro’s products. In those cases, where evidence has been produced, the Company’s experience has been that the exposure levels are low and the Company’s position has been that its products were not a cause of death, injury or loss. The Company has been dismissed from or settled a large number of these cases. Cumulative settlement payments from 2002 through December 31, 2022 for cases involving asbestos-related claims were $6.2 million which together with all

legal fees other than corporate counsel expenses have substantially been paid by the Company’s insurers. The average cost per settled claim, excluding legal fees, was approximately $42,000.

Based upon the most recent information available to the Company regarding such claims, there were a total of 247 cases pending against the Company as of December 31, 2022 (with Illinois, New York, Pennsylvania and West Virginia having the largest number of cases), as compared with 223 cases that were pending as of December 31, 2021. During 2022, 139 new cases were filed against the Company, and the Company was dismissed from 84 cases and settled 31 cases. Most of the pending cases have not advanced beyond the early stages of discovery, although a number of cases are on schedules leading to or are scheduled for trial. The Company believes that its insurance coverage is adequate for the cases currently pending against the Company and for the foreseeable future, assuming a continuation of the current volume, nature of cases and settlement amounts. However, the Company has no control over the number and nature of cases that are filed against it, nor as to the financial health of its insurers or their position as to coverage. The Company also presently believes that none of the pending cases will have a material adverse impact upon the Company’s results of operations, liquidity or financial condition.

Other

The Company is also a party to routine contract and employment-related litigation matters and routine audits of state and local tax returns arising in the ordinary course of its business.

The final outcome and impact of open matters, and related claims and investigations that may be brought in the future, are subject to many variables, and cannot be predicted. In accordance with ASC 450, “Contingencies,” and related guidance, the Company records reserves for estimated losses relating to claims and lawsuits when available information indicates that a loss is probable and the amount of the loss, or range of loss, can be reasonably estimated. The Company expenses legal costs as they are incurred.

The Company is not aware of pending claims or assessments, other than as described above, which may have a material adverse impact on its liquidity, financial position, results of operations, or cash flows.

Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

13.

Income Taxes

Income before income taxes was generated in the United States and globally as follows:


(table only in thousands)	2022		2021		2020
Domestic	$	11,971	$	771	$	3,495
Foreign		11,718		3,903		8,349
	$	23,689	$	4,674	$	11,844

Certain of the Company’s undistributed earnings of its foreign subsidiaries are not permanently reinvested, as management intends to repatriate foreign-held cash as needed to meet domestic cash needs for operating, investing, and financing activities. A liability of $1.3 million has been recorded for the deferred taxes on such undistributed foreign earnings as of December 31, 2022. The deferred taxes are attributable primarily to the foreign withholding taxes that would become payable should the Company repatriate cash held in its foreign operations.

Income tax expense (benefit) consisted of the following for the years ended December 31:


(table only in thousands)	2022			2021			2020
Current:
Federal	$	5,009		$	354		$	(239	)
State		836			278			241
Foreign		1,755			1,972			2,632
		7,600			2,604			2,634
Deferred:
Federal		(3,001	)		426			1,638
State		(231	)		45			313
Foreign		1,058			(384	)		(913	)
		(2,174	)		87			1,038
	$	5,426		$	2,691		$	3,672

The income tax expense (benefit) differs from the statutory rate due to the following:


(table only in thousands)	2022			2021			2020
Tax expense at statutory rate	$	4,975		$	981		$	2,487
Increase (decrease) in tax resulting from:
State income tax, net of federal benefit		340			334			503
Change in uncertain tax position reserves		3			2			(115	)
Other permanent differences		383			22			601
Impact of rate differences and adjustments		376			1,003			101
United States tax credits and incentives		(626	)		300			153
Foreign tax credits and incentives		(895	)		(265	)		(794	)
Change in valuation allowance		(526	)		(489	)		(218	)
Foreign withholding taxes on repatriation of foreign earnings		139			244			242
Earnout expense (income)		(48	)		233			293
Investment in joint venture		375			237			(1,341	)
Net effect GILTI and FDII		565			—			1,598
Other		365			89			162
	$	5,426		$	2,691		$	3,672

Deferred income taxes reflect the future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and tax credit carry forwards. The net deferred tax liabilities consisted of the following at December 31:


(table only in thousands)	2022			2021
Gross deferred tax assets:
Accrued expenses	$	692		$	775
Reserves on assets		2,228			1,576
Share-based compensation awards		452			400
Minimum pension		1,247			1,239
Net operating loss carry-forwards		3,142			3,001
Tax credit carry-forwards		2,349			2,464
Investment in joint venture		815			1,226
Leases		2,564			2,424
Research and development costs		3,224			—
Other		69			582
Valuation allowances		(4,950	)		(5,476	)
	$	11,832		$	8,211
Gross deferred tax liabilities:
Depreciation		(727	)		(881	)
Goodwill and intangibles		(13,310	)		(11,501	)
Prepaid expenses and inventory		(783	)		(132	)
Withholding tax on unremitted foreign earnings		(1,254	)		(1,114	)
Leases		(2,564	)		(2,424	)
Revenue recognition		(1,031	)		(44	)
		(19,669	)		(16,096	)
Net deferred tax liabilities	$	(7,837	)	$	(7,885	)

As of December 31, 2022, state and local net operating loss carry forwards total $48.3 million, which expire from 2023 to 2042. The Company has recorded a valuation allowance on certain of these net operating loss carry forwards to reflect expected realization. The Company also has net operating loss carry forwards in foreign jurisdictions totaling $8.8 million. A valuation allowance of $6.1 million has been established against these losses in foreign jurisdictions. As of December 31, 2022 and 2021, the Company has recorded a valuation reserve in the amount of $5.0 million and $5.5 million, respectively. The changes in the valuation allowance resulted in additional income tax expense (benefit) of $(0.5) million, $(0.5) million, and $(0.2) million in 2022, 2021, and 2020, respectively.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carry forward periods), projected future taxable

income, and tax-planning strategies in making this assessment. Based on this assessment, management believes it is more likely than not that the Company will realize the benefits of these deductible differences, net of the existing valuation allowances at December 31, 2022. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.

The Company accounts for uncertain tax positions pursuant to FASB ASC Topic 740. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. A reconciliation of the beginning and ending amount of uncertain tax position reserves included in other liabilities on the Consolidated Balance Sheets is as follows:


(table only in thousands)	2022		2021
Balance as of January 1,	$	141	$	139
Additions for tax positions taken in prior years		3		2
Reductions of tax positions taken in prior years		—		—
Reductions for settlements on tax positions of prior years		—		—
Balance as of December 31,	$	144	$	141

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. The reserve for uncertain tax positions includes $0.1 million of interest and penalties as of December 31, 2022 and 2021. The favorable settlement of all uncertain tax positions would impact the Company’s effective income tax rate. Tax years going back to 2017 remain open for all significant state and foreign authorities.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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+ Details

Acquisitions and Joint Ventures

12 Months Ended

Dec. 31, 2022

Business Combinations [Abstract]

Acquisitions and Joint Ventures

14.

Acquisitions and Joint Ventures

General Rubber LLC

On March 7, 2022, the Company, through the EFM JV, acquired 100% of the equity interests of General Rubber LLC ("GRC") for $19.7 million in cash, which was financed with a combination of a draw on the Company's revolving credit facility and issuance of term debt by the EFM JV. As additional consideration, the former owners of GRC were issued 10% of the equity interest in the EFM JV, resulting in the Company holding 63% of the equity in the joint venture. The fair value ascribed to the equity interest of the former owners of GRC was approximately $4.1 million. As of December 31, 2022, there were $13.4 million in current assets, $27.7 million in long-lived assets, and $29.8 million in total liabilities related to the EFM JV included in the Consolidated Balance Sheets. For the year ended December 31, 2022, EFM JV accounted for $35.8 million in revenue.

GRC engineers and manufactures non-metallic expansion joints and flow control products including rubber expansion joints, ducting expansion joints, and industrial pinch and duck bill valves, serving the industrial water and wastewater markets. The acquisition diversifies and expands the EFM JV product offerings within the Engineered Systems segment. The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of closing.


(in thousands)
Current assets (including cash of $137)	$	4,963
Property and equipment		459
Goodwill		11,120
Intangible - finite life		8,380
Total assets acquired		24,922
Current liabilities assumed		(714	)
Deferred income tax liability		(388	)
Net assets acquired	$	23,820

The Company acquired customer lists and tradename intangible assets valued at $7.7 million and $0.7 million, respectively. These assets were determined to have useful lives of 10 years.

During the year ended December 31, 2022, GRC accounted for $11.7 million in revenue and $2.1 million of net income included in the Company’s results.

Compass Water Solutions, Inc.

On May 3, 2022, the Company acquired 100% of the equity interests of Compass Water Solutions, Inc. ("Compass") for $9.0 million in cash, which was financed with a draw on the Company’s revolving credit facility, and $2.0 million in notes payable to the former owners over two years. As additional consideration, the former owners are entitled to earn-out payments based upon a multiple of specified financial results through April 30, 2023. Based on projections at the acquisition date, the Company estimated the fair value of the earn-out to be $1.4 million. As of December 31, 2022, the earnout liability recorded in “Accounts payable and accrued expenses” on the Consolidated Balance Sheets is $1.2 million.

Compass is a leading global supplier of membrane-based industrial water and wastewater treatment systems that help customers achieve regulatory compliance of water discharge at the lowest lifecycle cost. The acquisition diversifies and expands the Company's industrial water product offerings within the Engineered Systems segment. The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of closing.


(in thousands)
Current assets (including cash of $334)	$	4,796
Property and equipment		101
Goodwill		4,848
Intangible - finite life		4,900
Total assets acquired		14,645
Current liabilities assumed		(623	)
Deferred income tax liability		(1,627	)
Net assets acquired	$	12,395

The Company acquired customer lists and tradename intangible assets valued at $4.4 million and $0.5 million, respectively. These assets were determined to have useful lives of 10 years.

During the year ended December 31, 2022, Compass accounted for $3.7 million in revenue and $0.1 million of net loss included in the Company’s results.

Western Air Ducts Ltd.

On June 22, 2022, the Company acquired 100% of the equity interests of Western Air Ducts Limited for $10.7 million in cash, which was financed with a draw on the Company’s revolving credit facility, and deferred cash consideration of $0.8 million payable in one year. The deferred consideration is recorded in “Accounts payable and accrued expenses” on the Consolidated Balance Sheets.

Western Air Ducts is a leading European supplier of dust and fume extraction solutions, providing consultation, design, manufacturing, installation, and service. The acquisition diversifies and expands the Company's industrial air product offerings within the Industrial Process Solutions segment. The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of closing.


(in thousands)
Current assets (including cash of $1,557)	$	2,711
Property and equipment		188
Goodwill		7,344
Intangible - finite life		3,158
Total assets acquired		13,401
Current liabilities assumed		(1,127	)
Deferred income tax liability		(824	)
Net assets acquired	$	11,450

The Company acquired customer lists and tradename intangible assets valued at $2.8 million and $0.4 million, respectively. These assets were determined to have useful lives of 10 years.

During the year ended December 31, 2022, Western Air Ducts accounted for $1.5 million in revenue and $0.3 million of net loss included in the Company's results.

DS21 Co., Ltd.

On September 19, 2022, the Company acquired 100% of the equity interests of DS21 Co., Ltd. ("DS21") for $9.2 million, including $8.9 million in cash, which was financed with a draw on the Company’s revolving credit facility, and deferred cash consideration of $0.3 million payable in one year.

DS21 is a South Korean-based design and manufacturing firm specializing in innovative water and wastewater treatment solutions. The addition of DS21 advances the Company's leadership position in niche oily water and produced water treatment, demineralization water treatment and ultra-pure water supply applications within the Company's Engineered Systems segment. The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of closing.


(in thousands)
Current assets (including cash of $1,453)	$	5,099
Property and equipment		4,112
Intangible - finite life		422
Deferred income taxes		557
Other assets		169
Total assets acquired		10,359
Current liabilities assumed		(1,008	)
Other liabilities		(113	)
Net assets acquired	$	9,238

The Company acquired customer lists and tradename intangible assets valued at $0.1 million and $0.3 million, respectively. These assets were determined to have useful lives of 10 years.

During the year ended December 31, 2022, DS21 accounted for $1.9 million in revenue and $0.5 million of net loss included in the Company's results.

Environmental Integrated Solutions

On June 4, 2020, the Company acquired 100% of the equity interests of Environmental Integrated Solutions (“EIS”) for $10.3 million in cash, which was financed through the revolving credit facility. As additional consideration, the former owners were entitled to earn-out payments based upon a multiple of specified financial results through December 31, 2021, which was estimated to be $0.6 million at the acquisition date. See Note 7 for additional information on the earnout.

EIS engineers products that clean air through a variety of technologies including volatile organic compounds (“VOC”) abatement, odor control, regenerative thermal oxidizers, and other air pollution control solutions, which complements the Industrial Process Solutions segment businesses. 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 $4,212)	$	6,416
Property and equipment		26
Other assets		44
Goodwill		7,022
Intangible - finite life		4,840
Total assets acquired		18,348
Current liabilities assumed		(6,514	)
Deferred income tax liability		(920	)
Net assets acquired	$	10,914

The Company acquired customer lists and tradename intangible assets valued at $4.2 million and $0.6 million, respectively. These assets were determined to have useful lives of 10 years.

Mader

On July 31, 2020, the Company entered into the JV Agreement with Mader in which CECO contributed the net assets of its Effox-Flextor damper business and Mader contributed the net assets of its damper business. Under the terms of the JV Agreement, CECO will hold 70% of the equity in the joint venture, and 50% voting interest. The Company determined CECO was the primary beneficiary of this variable interest entity and therefore the 30% noncontrolling equity interest is in the Consolidated Balance Sheet.

The results of the EFM JV are included in the Engineered Systems segment. The fair value of Mader’s net assets contributed was $1.0 million.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the JV agreement date.


(in thousands)
Current assets (including cash of $229)	$	2,040
Property and equipment		103
Goodwill		2,085
Deferred income tax asset		287
Total assets assumed		4,515
Current liabilities assumed		(515	)
Other liabilities		(500	)
Long term debt		(2,508	)
Net assets acquired	$	992

The approximate fair values of the assets acquired and liabilities assumed related to the acquisitions occurring in 2022 are based on preliminary estimates and assumptions. 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 between 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 the GRC, Compass, Western Air Ducts, and DS21 acquisitions had occurred on January 1, 2021:


	December 31,
(table only in thousands, except per share data)	2022		2021
Net sales	$	435,216	$	358,724
Net income attributable to CECO Environmental Corp.		18,074		4,466
Earnings per share:
Basic	$	0.52	$	0.13
Diluted	$	0.52	$	0.13

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.

Business Segment Information

12 Months Ended

Dec. 31, 2022

Segment Reporting [Abstract]

Business Segment Information

15.

Business Segment Information

The Company’s operations are organized and reviewed by management along its product lines or end markets that the segment serves and are presented in two reportable segments. The results of the segments are reviewed through to the “Income from operations” line on the Consolidated Statements of Income. The accounting policies of the segments are the same as those in the consolidated financial statements.

The Company’s reportable segments are organized as groups of similar products and services, as described as follows:

•

Engineered Systems segment: The Company's Engineered Systems segment serves the power generation, hydrocarbon processing, water/wastewater treatment, oily water separation and treatment, marine and naval vessels, and midstream oil & gas sectors. The Company is a key part of helping meet the global demand for environmental and equipment protection solutions with its highly engineered platforms including emissions control, fluid bed cyclones, thermal acoustics, separation & filtration, and dampers & expansion joints.

•

Industrial Process Solutions segment: The Company's Industrial Process Solutions segment serves the broad industrial sector with solutions for air pollution and contamination control, fluid handling, and process filtration in applications such as aluminum beverage can production, automobile production, food and beverage processing, semiconductor fabrication, electronics production, steel and aluminum mill processing, wood manufacturing, desalination, and aquaculture markets. For Industrial Air applications, the Company assists companies maintain clean and safe operations for employees, reduce energy consumption, minimize waste for customers, and ensure they meet regulatory standards for toxic emissions, fumes, volatile organic compounds, and odor elimination through the Company's platforms including duct fabrication & installation, industrial air, and fluid handling.


(table only in thousands)	2022		2021		2020
Net Sales (less intra-, inter-segment sales)
Engineered Systems segment	$	263,224	$	186,926	$	205,494
Industrial Process Solutions segment		159,403		137,214		110,517
Total net sales	$	422,627	$	324,140	$	316,011


(table only in thousands)	2022			2021			2020
Income from Operations
Engineered Systems segment	$	36,200		$	25,770		$	34,170
Industrial Process Solutions segment		22,705			15,054			7,220
Corporate and Other (1)		(36,744	)		(30,967	)		(28,044	)
Income from operations	$	22,161		$	9,857		$	13,346

(1)

Includes corporate compensation, professional services, information technology, acquisition and integration expenses, and other general, administrative corporate expenses.


(table only in thousands)	2022		2021		2020
Property and Equipment Additions
Engineered Systems segment	$	203	$	100	$	550
Industrial Process Solutions segment		879		721		1,349
Corporate and Other		2,294		1,795		2,046
Property and equipment additions	$	3,376	$	2,616	$	3,945


(table only in thousands)	2022		2021		2020
Depreciation and Amortization
Engineered Systems segment	$	4,672	$	4,249	$	4,957
Industrial Process Solutions segment		4,388		4,299		4,199
Corporate and Other		1,554		1,305		765
Depreciation and amortization	$	10,614	$	9,853	$	9,921


	December 31,
(table only in thousands)	2022		2021
Identifiable Assets
Engineered Systems segment	$	332,820	$	262,558
Industrial Process Solutions segment		150,458		141,975
Corporate and Other (2)		21,443		11,664
Identifiable assets	$	504,721	$	416,197

(2)

Corporate assets primarily consist of cash, property, plant and equipment, and income tax related assets.


	December 31,
(table only in thousands)	2022		2021
Goodwill
Engineered Systems segment	$	114,746	$	99,303
Industrial Process Solutions segment		68,451		61,880
Goodwill	$	183,197	$	161,183

Intra-segment and Inter-segment Revenues

The Company has divisions that sell to each other within segments (intra-segment sales) and between segments (inter-segment sales) as indicated in the following tables:


	Year Ended December 31, 2022
						Less Inter-Segment Sales
(table only in thousands)	Total Sales		Intra-Segment Sales			Industrial Process Solutions			Engineered Systems			Net Sales to Outside Customers
Net Sales
Engineered Systems segment	$	278,354	$	(14,088	)	$	(1,042	)	$	—		$	263,224
Industrial Process Solutions segment		165,220		(5,536	)		—			(281	)		159,403
Total net sales	$	443,574	$	(19,624	)	$	(1,042	)	$	(281	)	$	422,627


	Year Ended December 31, 2021
						Less Inter-Segment Sales
(table only in thousands)	Total Sales		Intra-Segment Sales			Industrial Process Solutions			Engineered Systems			Net Sales to Outside Customers
Net Sales
Engineered Systems segment	$	197,380	$	(9,483	)	$	(971	)	$	—		$	186,926
Industrial Process Solutions segment		152,886		(14,533	)		—			(1,139	)		137,214
Total net sales	$	350,266	$	(24,016	)	$	(971	)	$	(1,139	)	$	324,140


	Year Ended December 31, 2020
						Less Inter-Segment Sales
(table only in thousands)	Total Sales		Intra-Segment Sales			Industrial Process Solutions			Engineered Systems			Net Sales to Outside Customers
Net Sales
Engineered Systems segment	$	218,290	$	(11,333	)	$	(1,463	)	$	—		$	205,494
Industrial Process Solutions segment		124,547		(12,798	)		—			(1,232	)		110,517
Total net sales	$	342,837	$	(24,131	)	$	(1,463	)	$	(1,232	)	$	316,011

No single customer represented greater than 10% of consolidated net sales or accounts receivable for 2022, 2021, or 2020.

For 2022, 2021, and 2020, sales outside the United States accounted for approximately 35%, 38%, and 35%, respectively, of consolidated net sales. The largest portions of sales outside the United States in 2022 were in Europe (20%), and Asia (11%). Of consolidated long-lived assets, $39.9 million and $26.7 million were located outside of the United States as of December 31, 2022 and 2021, respectively. The largest portion of long-lived assets located outside the United States at December 31, 2022 were in Europe ($30.5 million).

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 31
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8924-108599

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 34
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8981-108599

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 21
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8721-108599

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 40
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e9031-108599

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 32
-Subparagraph (f)
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8933-108599

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 32
-Subparagraph (e)
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8933-108599

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 26
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8844-108599

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 41
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e9038-108599

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 32
-Subparagraph (d)
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8933-108599

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 22
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8736-108599

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 42
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e9054-108599

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 15
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8657-108599

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 21
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8721-108599

Reference 14: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-URI https://asc.fasb.org/topic&trid=2134510

+ Details

Subsequent events

12 Months Ended

Dec. 31, 2022

Subsequent Events [Abstract]

Subsequent Events

16. Subsequent Events

On January 10, 2023, the Company completed the acquisition of Wakefield Acoustics, Ltd. ("Wakefield"), based in the United Kingdom. Wakefield is a leading 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 leadership position within the industrial silencing and noise attenuation market by adding a range of solutions and access to new geographic markets and industrial segments. The purchase price is approximately $5 million and was financed using a combination of cash and debt under the Company's existing Credit Facility, as well as a potential earnout payment to the sellers. The impact for this acquisition is not included in the Company's results for the year ended December 31, 2022. The initial accounting for the acquisition was not complete at the time the financial statements were issued due to the timing of the acquisition and the filing of this Annual Report on Form 10-K. As a result, complete disclosures required under ASC 805, Business Combinations cannot be made at this time.

Nature of Business and Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2022

Accounting Policies [Abstract]

Nature of business

Principles of consolidation

Principles of consolidation—The consolidated financial statements include the Company and its controlled subsidiaries. All intercompany balances and transactions have been eliminated.

Unless indicated, all balances within tables are in thousands except per share amounts.

Use of estimates

Cash equivalents

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Statements of Cash Flows.


	December 31,
	2022		2021
Cash and cash equivalents	$	45,522	$	29,902
Restricted cash		1,063		2,093
Total cash, cash equivalents and restricted cash	$	46,585	$	31,995

Accounts Receivable

Inventories

Property, plant and equipment

Selling and administrative expenses

Acquisition and integration expenses

Amortization and earnout expenses

Restructuring expenses

Executive transition expenses

Product Warranties

Research and Development

Income taxes

assessment. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.

Earnings per share

Earnings per share—The following table reconciles the numerators and denominators used to calculate basic and diluted earnings per share for 2022, 2021 and 2020.


	For the Year Ended December 31
	2022		2021		2020
(table only in thousands)
Numerator (for basic and diluted earnings per share)
Net income attributable to CECO Environmental Corp.	$	17,417	$	1,426	$	8,211

Denominator
Basic weighted-average shares outstanding		34,672		35,346		35,290
Common stock equivalents arising from stock options and restricted stock awards		333		249		231
Diluted weighted-average shares outstanding		35,005		35,595		35,521

Once a restricted stock award vests, it is included in the computation of weighted average shares outstanding for purposes of basic and diluted earnings per share.

Foreign Currency Translation

Income and expenses are translated into USD at average exchange rates in effect during the period.

New Financial Accounting Pronouncements

ccounting Standards Adopted in 2022

None.

Accounting Standards to be Adopted

Nature of Business and Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2022

Accounting Policies [Abstract]

Schedule of Reconciliation of Cash, Cash Equivalents and Restricted Cash Reported within Consolidated Statements of Cash Flows

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Statements of Cash Flows.


	December 31,
	2022		2021
Cash and cash equivalents	$	45,522	$	29,902
Restricted cash		1,063		2,093
Total cash, cash equivalents and restricted cash	$	46,585	$	31,995

Schedule of Numerators and Denominators Used to Calculate Basic and Diluted Earnings Per Share

Earnings per share—The following table reconciles the numerators and denominators used to calculate basic and diluted earnings per share for 2022, 2021 and 2020.


	For the Year Ended December 31
	2022		2021		2020
(table only in thousands)
Numerator (for basic and diluted earnings per share)
Net income attributable to CECO Environmental Corp.	$	17,417	$	1,426	$	8,211

Denominator
Basic weighted-average shares outstanding		34,672		35,346		35,290
Common stock equivalents arising from stock options and restricted stock awards		333		249		231
Diluted weighted-average shares outstanding		35,005		35,595		35,521

Accounts Receivable (Tables)

12 Months Ended

Dec. 31, 2022

Receivables [Abstract]

Summary of Accounts Receivable

Accounts receivable consisted of the following:


	December 31,
(table only in thousands)	2022			2021
Contract receivables	$	71,363		$	65,932
Trade receivables		15,943			12,537
Allowance for credit losses		(4,220	)		(3,478	)
Total accounts receivable	$	83,086		$	74,991

Inventories (Tables)

12 Months Ended

Dec. 31, 2022

Inventory Disclosure [Abstract]

Summary of Inventories

Inventories consisted of the following:


	December 31,
(table only in thousands)	2022			2021
Raw materials	$	19,774		$	13,405
Work in process		7,183			5,147
Finished goods		2,436			674
Obsolescence allowance		(2,867	)		(2,174	)
Total inventories	$	26,526		$	17,052

Property, Plant and Equipment (Tables)

12 Months Ended

Dec. 31, 2022

Property, Plant and Equipment [Abstract]

Summary of Property, Plant and Equipment

Property, plant and equipment consisted of the following:


	December 31,
(table only in thousands)	2022			2021
Land, building and improvements	$	11,986		$	7,524
Machinery and equipment		33,521			29,306
Property, plant and equipment, gross		45,507			36,830
Less accumulated depreciation		(24,679	)		(20,882	)
Property, plant and equipment, net	$	20,828		$	15,948

Goodwill and Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill / Tradename


(table only in thousands)	Engineered Systems segment			Industrial Process Solutions segment			Totals
Balance of goodwill at December 31, 2020	$	99,785		$	62,035		$	161,820
Foreign currency translation		(482	)		(155	)		(637	)
Balance of goodwill at December 31, 2021		99,303			61,880			161,183
Acquisitions		15,968			7,344			23,312
Foreign currency translation		(525	)		(773	)		(1,298	)
Balance of goodwill at December 31, 2022	$	114,746		$	68,451		$	183,197

The Company’s indefinite lived intangible assets as of December 31, 2022 and 2021 consisted of the following:


	Tradenames
(table only in thousands)	2022			2021
Balance beginning of year	$	9,629		$	12,937
Transfer to finite life classification		—			(3,150	)
Foreign currency adjustments		(121	)		(158	)
Balance end of year	$	9,508		$	9,629

Intangible Assets - Finite Life


	December 31,
	2022						2021
(table only in thousands) Intangible assets – finite life	Cost			Accum. Amort.			Cost			Accum. Amort.
Technology	$	14,457		$	13,729		$	14,457		$	13,704
Customer lists		85,719			57,540			73,199			53,970
Tradenames		11,604			3,768			9,728			2,745
Foreign currency adjustments		(1,864	)		(372	)		(2,149	)		(1,025	)
Total finite life intangible assets	$	109,916		$	74,665		$	95,235		$	69,394

Accounts Payable and Accrued Expenses (Tables)

12 Months Ended

Dec. 31, 2022

Payables and Accruals [Abstract]

Summary of Accounts Payable and Accrued Expenses

Accounts payable and accrued expense consisted of the following:


	December 31,
(table only in thousands)	2022		2021
Trade accounts payable, including amounts due to subcontractors	$	73,407	$	56,242
Compensation and related benefits		9,577		6,065
Accrued warranty		3,691		3,074
Contract liability		4,516		4,405
Short-term operating lease liability		3,228		2,414
Other		12,779		11,881
Total accounts payable and accrued expenses	$	107,198	$	84,081

Summary of Activity of Current Portion of Earnout Liability

The activity in the Company’s current portion of earnout liability is recorded in Accounts payable and accrued expenses on its Consolidated Balance Sheets, consisted of the following:


	December 31,
(table only in thousands)	2022			2021
Earnout accrued at beginning of year	$	1,037		$	1,743
Fair value of earnout at acquisition date		1,429			—
Fair value adjustment		(229	)		704
Payments and other		(1,037	)		(1,410	)
Earnout accrued at end of year	$	1,200		$	1,037

Senior Debt (Tables)

12 Months Ended

Dec. 31, 2022

Debt Disclosure [Abstract]

Summary of Debt

Debt consisted of the following:


	December 31,
(table only in thousands)	2022			2021
Outstanding borrowings under Credit Facility (defined below) Term loan payable in quarterly principal installments of $550 through September 2023, $825 through September 2025 and $1,100 thereafter with balance due upon maturity in December 2026.
– Term loan	$	41,309		$	43,511
– Revolving Credit Loan		61,300			22,000
Total outstanding borrowings under Credit Facility		102,609			65,511
Outstanding borrowings under the joint venture term debt		10,083			—
Unamortized debt discount		(1,488	)		(1,731	)
Total outstanding borrowings		111,204			63,780
Less: current portion		(3,579	)		(2,203	)
Total debt, less current portion	$	107,625		$	61,577

Shareholders' Equity (Tables)

12 Months Ended

Dec. 31, 2022

Equity [Abstract]

Summary of Stock Option

Information related to all stock options under the 2021 Plan, 2017 Plan and 2007 Plan, and the 2020 Inducement Awards for 2022, 2021 and 2020 is shown in the tables below:


(Shares in thousands)	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value ($000)
Outstanding at December 31, 2021		1,514		$	11.19	4.9 years
Forfeitures		(32	)		10.55
Exercised		(42	)		8.15
Outstanding at December 31, 2022		1,440			11.30	4.0 years	$	1,766
Exercisable at December 31, 2022		833			11.47	3.6 years	$	923


(Shares in thousands)	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value ($000)
Outstanding at December 31, 2020		1,554		$	11.17	5.8 years
Forfeitures		(38	)		10.63
Exercised		(2	)		6.66
Outstanding at December 31, 2021		1,514			11.19	4.9 years	$	—
Exercisable at December 31, 2021		603			11.39	4.0 years	$	—


(Shares in thousands)	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value ($000)
Outstanding at December 31, 2019		410		$	11.45	4.7 years
Forfeitures		(71	)		10.86
Granted		1,215			11.06
Outstanding at December 31, 2020		1,554			11.17	5.8 years	$	195
Exercisable at December 31, 2020		330			11.66	3.0 years	$	6

Summary of Restricted Stock Awards


(Shares in thousands)	Shares			Weighted Average Grant Date Fair Value
Nonvested at December 31, 2019		1,321		$	6.80
Granted		648			5.64
Vested		(284	)		7.60
Forfeited		(638	)		5.91
Nonvested at December 31, 2020		1,047			6.00
Granted		573			8.19
Vested		(323	)		6.31
Forfeited		(264	)		5.80
Nonvested at December 31, 2021		1,033			7.17
Granted		755			5.74
Vested		(355	)		6.80
Forfeited		(255	)		6.41
Nonvested at December 31, 2022		1,178		$	6.53

Pension and Employee Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2022

Retirement Benefits [Abstract]

Schedule of Changes in Projected Benefit Obligations

The following tables set forth the plan changes in benefit obligations, plan assets and funded status on the measurement dates:


	December 31,
(table only in thousands)	2022			2021			2020
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	35,035		$	38,272		$	35,985
Interest cost		877			775			1,034
Actuarial (gain) loss		(6,540	)		(1,936	)		3,323
Benefits paid		(2,022	)		(2,076	)		(2,070	)
Projected benefit obligation at end of year		27,350			35,035			38,272
Change in plan assets:
Fair value of plan assets at beginning of year		29,474			28,545			27,099
Actual return on plan assets		(5,631	)		3,005			1,629
Employer contribution		—			—			1,887
Benefits paid		(2,022	)		(2,076	)		(2,070	)
Fair value of plan assets at end of year		21,821			29,474			28,545
Funded status at end of year	$	(5,529	)	$	(5,561	)	$	(9,727	)
Weighted-average assumptions used to determine benefit obligations for the year ended December 31:
Discount rate		4.90	%		2.55	%		2.10	%

Schedule of Net Periodic Benefit Cost For Pension Benefits Included in the Accompanying Consolidated Statements of Operations

The details of net periodic benefit cost for pension benefits included in the accompanying Consolidated Statements of Income are as follows:


	December 31,
(table only in thousands)	2022			2021			2020
Interest cost	$	877		$	775		$	1,034
Expected return on plan assets		(1,560	)		(1,510	)		(1,594	)
Amortization of net loss		263			411			266
Net periodic benefit income	$	(420	)	$	(324	)	$	(294	)

Schedule of Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income

Other changes in plan assets and benefit obligations recognized in other comprehensive income:


	December 31,
(table only in thousands)	2022			2021			2020
Net loss (gain)	$	651		$	(3,432	)	$	3,287
Amortization of net actuarial loss		(263	)		(411	)		(266	)
Total recognized in other comprehensive income (loss)	$	388		$	(3,843	)	$	3,021
Total recognized in net periodic benefit cost and other comprehensive income (loss)	$	(32	)	$	(4,167	)	$	2,727

Weighted-average Assumptions Used to Determine Net Periodic Benefit Cost

Weighted-average assumptions used to determine net periodic benefit costs


	December 31,
	2022	2021	2020
Discount Rate	2.55%	2.10%	2.95%
Expected return on assets	5.50%	5.50%	6.00%

Details of Defined Benefit Pension Plan Asset Allocation by Asset Category

defined benefit pension plan asset allocation by asset category is as follows:


	Target Allocation	Percentage of Plan Assets
	2022	2022	2021
Asset Category:
Cash and cash equivalents	0%	2%	1%
Equity securities	70%	73%	77%
Debt securities	30%	25%	22%
Total	100%	100%	100%

Disclosure of Fair Value Measurements of Pension Plan Assets

The levels assigned to the defined benefit plan assets as of December 31, 2022, are summarized in the tables below:


(table only in thousands)	Level 1		Level 2		Level 3		Total
Pension assets, at fair value:
Cash and cash equivalents	$	354	$	—	$	—	$	354
Equity securities		15,984		—		—		15,984
Debt securities		5,483		—		—		5,483
Total assets	$	21,821	$	—	$	—	$	21,821

The levels assigned to the defined benefit plan assets as of December 31, 2021, are summarized in the tables below:


(table only in thousands)	Level 1		Level 2		Level 3		Total
Pension assets, at fair value:
Cash and cash equivalents	$	208	$	—	$	—	$	208
Equity securities		22,687		—		—		22,687
Debt securities		6,579		—		—		6,579
Total assets	$	29,474	$	—	$	—	$	29,474

Summary of Pension Fund General Information


Pension Fund	EIN/Pension Plan Number	Pension Protection Act Zone Status 2012	FIF/RP Status Pending/Implemented	Surcharge Imposed	Expiration of Collective Bargaining Agreement
Sheet Metal Workers’ National Pension Fund	52-6112463/001	Green	FIF: Yes - Implemented RP: Yes - Implemented	No	Various
Sheet Metal Workers Local 224 Pension Plan	31-6171353/001	Yellow	FIF: Yes - Implemented	No	n/a
Sheet Metal Workers Local No. 177 Pension Fund	62-6093256/001	Green	Is not subject	No	April 30, 2023

- Definition

Tabular disclosure of information about multiemployer plan.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 715
-SubTopic 80
-Section 50
-Paragraph 5
-Subparagraph (f)(2)
-URI https://asc.fasb.org/extlink&oid=65877416&loc=SL14450657-114947

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 715
-SubTopic 80
-Section 50
-Paragraph 5
-Subparagraph (d)
-URI https://asc.fasb.org/extlink&oid=65877416&loc=SL14450657-114947

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 715
-SubTopic 80
-Section 50
-Paragraph 5
-Subparagraph (c)
-URI https://asc.fasb.org/extlink&oid=65877416&loc=SL14450657-114947

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 715
-SubTopic 80
-Section 50
-Paragraph 5
-Subparagraph (e)(1)
-URI https://asc.fasb.org/extlink&oid=65877416&loc=SL14450657-114947

Reference 5: http://www.xbrl.org/2003/role/exampleRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 715
-SubTopic 80
-Section 55
-Paragraph 8
-URI https://asc.fasb.org/extlink&oid=35742348&loc=SL14450788-114948

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 715
-SubTopic 80
-Section 50
-Paragraph 5
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=65877416&loc=SL14450657-114947

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 715
-SubTopic 80
-Section 50
-Paragraph 9
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=65877416&loc=SL14450691-114947

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 715
-SubTopic 80
-Section 50
-Paragraph 5
-Subparagraph (e)(2)
-URI https://asc.fasb.org/extlink&oid=65877416&loc=SL14450657-114947

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 715
-SubTopic 80
-Section 50
-Paragraph 9
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=65877416&loc=SL14450691-114947

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 715
-SubTopic 80
-Section 50
-Paragraph 5
-Subparagraph (f)(1)
-URI https://asc.fasb.org/extlink&oid=65877416&loc=SL14450657-114947

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 715
-SubTopic 80
-Section 50
-Paragraph 5
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=65877416&loc=SL14450657-114947

+ Details

Leases (Tables)

12 Months Ended

Dec. 31, 2022

Leases [Abstract]

Schedule of Components of Lease Expense

The components of lease expense were as follows:


	December 31,
(table only in thousands)	2022		2021		2020
Operating lease cost (a)	$	3,558	$	3,232	$	3,450
Finance lease cost:
Amortization of right-of-use assets		309		308		308
Interest on lease liability		289		315		338
Total finance lease cost		598		623		646
Total lease cost	$	4,156	$	3,855	$	4,096
(a) includes variable lease costs which are immaterial

Summary of Supplemental Cash Flow Information Related to Leases

Supplemental cash flow information related to leases was as follows:


	December 31,
(table only in thousands)	2022		2021		2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	3,637	$	3,171	$	3,338
Operating cash flows from finance leases	$	289	$	315	$	338
Financing cash flows from finance leases	$	600	$	603	$	467
Right of use assets obtained in exchange for lease obligations
Operating leases	$	3,487	$	2,206	$	545

Summary of Supplemental Balance Sheet Information Related to Leases

Supplemental balance sheet information related to leases was as follows:


	December 31,
(table only in thousands)	2022		2021
Operating leases
Right-of-use assets from operating leases	$	11,373	$	10,893

Accounts payable and accrued expenses	$	3,228	$	2,414
Operating lease liabilities		8,453		8,762
Total operating lease liabilities	$	11,681	$	11,176

Finance leases
Property, plant and equipment, net	$	2,329	$	2,619

Accounts payable and accrued expenses	$	645	$	600
Other liabilities		5,537		6,183
Total finance lease liabilities	$	6,182	$	6,783

Schedule of Lease Terms and Discount Rate


Weighted-average remaining lease term as of December 31, 2022 were as follows:
Operating leases		10 years
Finance leases		8 years
Weighted-average discount rate
Operating leases		4.7%
Finance leases		4.6%

Schedule of Maturities of Lease Liabilities

As of December 31, 2022, maturities of lease liabilities were as follows:


(table only in thousands)	Operating Leases			Finance Leases
2023		3,405			907
2024		2,979			925
2025		2,375			943
2026		1,543			962
2027		668			982
Thereafter		1,891			2,597
Total minimum lease payments	$	12,861		$	7,316
Less imputed interest		(1,180	)		(1,134	)
Lease liability	$	11,681		$	6,182

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Schedule of Income (Loss) Before Income Taxes

Income before income taxes was generated in the United States and globally as follows:


(table only in thousands)	2022		2021		2020
Domestic	$	11,971	$	771	$	3,495
Foreign		11,718		3,903		8,349
	$	23,689	$	4,674	$	11,844

Schedule of Income Tax Provision

Income tax expense (benefit) consisted of the following for the years ended December 31:


(table only in thousands)	2022			2021			2020
Current:
Federal	$	5,009		$	354		$	(239	)
State		836			278			241
Foreign		1,755			1,972			2,632
		7,600			2,604			2,634
Deferred:
Federal		(3,001	)		426			1,638
State		(231	)		45			313
Foreign		1,058			(384	)		(913	)
		(2,174	)		87			1,038
	$	5,426		$	2,691		$	3,672

The income tax expense (benefit) differs from the statutory rate due to the following:


(table only in thousands)	2022			2021			2020
Tax expense at statutory rate	$	4,975		$	981		$	2,487
Increase (decrease) in tax resulting from:
State income tax, net of federal benefit		340			334			503
Change in uncertain tax position reserves		3			2			(115	)
Other permanent differences		383			22			601
Impact of rate differences and adjustments		376			1,003			101
United States tax credits and incentives		(626	)		300			153
Foreign tax credits and incentives		(895	)		(265	)		(794	)
Change in valuation allowance		(526	)		(489	)		(218	)
Foreign withholding taxes on repatriation of foreign earnings		139			244			242
Earnout expense (income)		(48	)		233			293
Investment in joint venture		375			237			(1,341	)
Net effect GILTI and FDII		565			—			1,598
Other		365			89			162
	$	5,426		$	2,691		$	3,672

Schedule of Net Deferred Tax Assets and Liabilities


(table only in thousands)	2022			2021
Gross deferred tax assets:
Accrued expenses	$	692		$	775
Reserves on assets		2,228			1,576
Share-based compensation awards		452			400
Minimum pension		1,247			1,239
Net operating loss carry-forwards		3,142			3,001
Tax credit carry-forwards		2,349			2,464
Investment in joint venture		815			1,226
Leases		2,564			2,424
Research and development costs		3,224			—
Other		69			582
Valuation allowances		(4,950	)		(5,476	)
	$	11,832		$	8,211
Gross deferred tax liabilities:
Depreciation		(727	)		(881	)
Goodwill and intangibles		(13,310	)		(11,501	)
Prepaid expenses and inventory		(783	)		(132	)
Withholding tax on unremitted foreign earnings		(1,254	)		(1,114	)
Leases		(2,564	)		(2,424	)
Revenue recognition		(1,031	)		(44	)
		(19,669	)		(16,096	)
Net deferred tax liabilities	$	(7,837	)	$	(7,885	)

Schedule of Reconciliation of Uncertain Tax Position

A reconciliation of the beginning and ending amount of uncertain tax position reserves included in other liabilities on the Consolidated Balance Sheets is as follows:


(table only in thousands)	2022		2021
Balance as of January 1,	$	141	$	139
Additions for tax positions taken in prior years		3		2
Reductions of tax positions taken in prior years		—		—
Reductions for settlements on tax positions of prior years		—		—
Balance as of December 31,	$	144	$	141

Acquisitions and Joint Ventures (Tables)

12 Months Ended

Dec. 31, 2022

Schedule of Unaudited Pro Forma Financial Information


	December 31,
(table only in thousands, except per share data)	2022		2021
Net sales	$	435,216	$	358,724
Net income attributable to CECO Environmental Corp.		18,074		4,466
Earnings per share:
Basic	$	0.52	$	0.13
Diluted	$	0.52	$	0.13

Mader Holdings L.P.

Schedule of Estimated Fair Values of Assets Acquired and Liabilities Assumed

The fair value of Mader’s net assets contributed was $1.0 million.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the JV agreement date.


(in thousands)
Current assets (including cash of $229)	$	2,040
Property and equipment		103
Goodwill		2,085
Deferred income tax asset		287
Total assets assumed		4,515
Current liabilities assumed		(515	)
Other liabilities		(500	)
Long term debt		(2,508	)
Net assets acquired	$	992

Environmental Integrated Solutions [Member]

Schedule of Estimated Fair Values of Assets Acquired and Liabilities Assumed