cece-8k_20210303.htm
false 0000003197 0000003197 2021-03-03 2021-03-03

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 3, 2021

 

CECO ENVIRONMENTAL CORP.

(Exact Name of registrant as specified in its charter)

 

 

Delaware

 

000-7099

 

13-2566064

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

14651 North Dallas Parkway

Suite 500

Dallas, TX

 

75254

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (214357-6181

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.01 per share

CECE

The NASDAQ Stock Market LLC

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

Emerging growth company 

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

 

 


 

Item 2.02. Results of Operations and Financial Condition.

On March 3, 2021, CECO Environmental Corp., a Delaware corporation, issued a press release announcing its financial results for its fourth quarter 2020 and year ended December 31, 2020. A copy of the press release is furnished as Exhibit 99.1 to this report and is incorporated herein by reference.

The information in this Item 2.02, including the exhibit, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits.

(d)

Exhibits

 

Exhibit
Number

  

Exhibit Title

 

 

99.1

 

104

 

 

  

Press Release, dated March 3, 2021

 

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

 

 

 


 

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

Date: March 3, 2021

 

 

 

CECO Environmental Corp.

 

 

 

 

 

 

 

 

 

By:

 

/s/ Matthew Eckl

 

 

 

 

 

 

Matthew Eckl

 

 

 

 

 

 

Chief Financial Officer

 

cece-ex991_6.htm

Exhibit 99.1

 

 

 

 

 

CECO Environmental Corp. Reports Fourth Quarter and Full Year 2020 Results;

Sequential Increases in Revenue, Adjusted EBITDA and Bookings Demonstrate Continued Execution and Improved Momentum

 

DALLAS, Texas, March 3, 2021 -- CECO Environmental Corp. (Nasdaq: CECE), a leading global air quality and fluid handling company serving the energy, industrial and other niche markets, today reported its financial results for the fourth quarter and full year of 2020.

 

Results of the Fourth Quarter 2020*

 

Revenue of $82.9 million, compared with $89.4 million

 

 

Gross profit of $26.2 million (31.6% margin), compared with $30.0 million (33.6% margin)

 

 

Operating income of $3.7 million, compared with $7.0 million

 

 

Non-GAAP operating income of $8.8 million, compared with $9.6 million  

 

 

Net income of $1.8 million, compared with $8.4 million

 

 

Non-GAAP net income of $5.6 million, compared with $9.6 million

 

 

Adjusted EBITDA of $9.9 million, compared with $10.1 million

 

 

Earnings per diluted share was $0.05, compared with $0.24

 

 

Non-GAAP earnings per diluted share of $0.16, compared with $0.27

 

 

Bookings of $77.2 million, compared with $67.7 million

 

 

Backlog of $183.1 million, compared with $189.1 million as of September 30, 2020

 

 

Cash and Cash equivalents of $36.0 million, compared with $35.6 million

 

 

Bank Debt of $74.0 million, compared with $67.3 million

 

 

Results of the Full Year 2020*

 

Revenue of $316.0 million, compared with $341.9 million

 

 

Gross profit of $105.1 million (33.3% margin), compared with $114.1 million (33.4% margin)

 

 

Operating income of $13.3 million, compared with $18.0 million

 

 

Non-GAAP operating income was $28.2 million in both 2020 and 2019

 

 

Net income of $8.2 million, compared with $17.7 million

 

 

Non-GAAP net income of $19.5 million, compared with $20.9 million

 

 

Adjusted EBITDA of $32.8 million, compared with $33.0 million

 

 

Earnings per diluted share was $0.23, compared with $0.50

 

 

Non-GAAP earnings per diluted share of $0.55, compared with $0.59

 

 

Bookings of $279.6 million, compared with $383.7 million

 

 

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

 

Todd Gleason, CECO’s Chief Executive Officer, commented, “We are pleased with the strong finish to a very challenging 2020.  We delivered sequential improvements in bookings, revenue, adjusted EBITDA and operating margin expansion.  Our focus on delivering differentiated solutions in key environmental categories drove double-digit bookings growth in the fourth quarter.  We continued to prudently manage our cost structure which yielded steady EBITDA despite year-over-year decline in revenues.”  

 

Mr. Gleason added, “I am very proud of the way CECO responded to the crisis in 2020.  We focused on operational items we can control and maintained our customer-focused execution.  CECO enters 2021 with a healthy balance sheet, improving end markets and a continued focus on operational costs and execution.  We are advancing our strategic growth process which will leverage our improved cost structure to drive sustainable shareholder value.”


 

1 | Page

 


Exhibit 99.1

 

CONFERENCE CALL

 

A conference call is scheduled for today at 8:30 a.m. ET to discuss the Company’s fourth quarter and fiscal 2020 financial results.  

 

The live webcast and slides can also be accessed at https://investors.cecoenviro.com/events-webcasts-and-presentations.  In addition, the conference call may also be accessed by dialing (888) 346-4547 (Toll-Free) within the U.S., (855) 669-9657 (Toll-Free) within Canada or Toll/International (412) 317-5251.

 

A replay of the conference call will be available on the Company’s website for 7 days.  The replay may be accessed by dialing toll free (877) 344-7529 within North America or Toll/International (412) 317-0088 and entering passcode 10152419.

 

 

ABOUT CECO ENVIRONMENTAL

 

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

 

Contact:

 

Matthew Eckl, Chief Financial Officer

(888) 990-6670

investor.relations@onececo.com

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2 | Page

 


Exhibit 99.1

 

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

 

December 31,

 

(dollars in thousands, except per share data)

 

2020

 

 

2019

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

35,992

 

 

$

35,602

 

Restricted cash

 

 

1,819

 

 

 

1,356

 

Accounts receivable, net

 

 

63,046

 

 

 

68,434

 

Costs and estimated earnings in excess of billings on uncompleted contracts

 

 

45,498

 

 

 

34,805

 

Inventories, net

 

 

17,343

 

 

 

20,578

 

Prepaid expenses and other current assets

 

 

11,530

 

 

 

9,899

 

Prepaid income taxes

 

 

7,790

 

 

 

8,231

 

Assets held for sale

 

 

467

 

 

 

593

 

Total current assets

 

 

183,485

 

 

 

179,498

 

Property, plant and equipment, net

 

 

16,228

 

 

 

15,274

 

Right-of-use assets from operating leases

 

 

11,376

 

 

 

13,607

 

Goodwill

 

 

161,820

 

 

 

152,020

 

Intangible assets – finite life, net

 

 

29,637

 

 

 

31,283

 

Intangible assets – indefinite life

 

 

12,937

 

 

 

14,291

 

Deferred charges and other assets

 

 

3,831

 

 

 

2,664

 

Total assets

 

$

419,314

 

 

$

408,637

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of debt

 

$

3,125

 

 

$

2,500

 

Accounts payable and accrued expenses

 

 

84,997

 

 

 

78,319

 

Billings in excess of costs and estimated earnings on uncompleted contracts

 

 

20,691

 

 

 

34,369

 

Income taxes payable

 

 

543

 

 

 

 

Total current liabilities

 

 

109,356

 

 

 

115,188

 

Other liabilities

 

 

20,576

 

 

 

20,372

 

Debt, less current portion

 

 

69,491

 

 

 

63,001

 

Deferred income tax liability, net

 

 

6,970

 

 

 

5,943

 

Operating lease liabilities

 

 

9,310

 

 

 

11,116

 

Total liabilities

 

 

215,703

 

 

 

215,620

 

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, 35,504,757

and 35,275,465 shares issued and outstanding at September 30, 2020

and December 31, 2019, respectively

 

 

355

 

 

 

353

 

Capital in excess of par value

 

 

255,296

 

 

 

253,869

 

Accumulated loss

 

 

(38,141

)

 

 

(46,344

)

Accumulated other comprehensive loss

 

 

(14,496

)

 

 

(14,505

)

 

 

 

203,014

 

 

 

193,373

 

Less treasury stock, at cost, 137,920 shares at December 31, 2020 and 2019

 

 

(356

)

 

 

(356

)

Shareholders’ equity less NCI

 

 

202,658

 

 

 

193,017

 

Noncontrolling interest

 

 

953

 

 

 

 

Total shareholders' equity

 

 

203,611

 

 

 

193,017

 

Total liabilities and shareholders' equity

 

$

419,314

 

 

$

408,637

 

 


 

3 | Page

 


Exhibit 99.1

 

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

 

 

Three Months Ended December 31,

 

 

For the Year Ended December 31,

 

(dollars in thousands, except per share data)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net sales

 

$

82,930

 

 

$

89,413

 

 

$

316,011

 

 

$

341,869

 

Cost of sales

 

 

56,707

 

 

 

59,369

 

 

 

210,883

 

 

 

227,770

 

Gross profit

 

 

26,223

 

 

 

30,044

 

 

 

105,128

 

 

 

114,099

 

Selling and administrative expenses

 

 

17,561

 

 

 

20,406

 

 

 

76,926

 

 

 

85,978

 

Amortization and earnout expenses

 

 

3,253

 

 

 

2,019

 

 

 

8,799

 

 

 

8,499

 

Restructuring expenses

 

 

578

 

 

 

129

 

 

 

2,331

 

 

 

1,097

 

Acquisition and integration expenses

 

 

287

 

 

 

465

 

 

 

1,354

 

 

 

465

 

Executive transition expenses

 

 

 

 

 

 

 

 

1,522

 

 

 

 

Loss on divestitures, net of selling costs

 

 

 

 

 

 

 

 

 

 

 

70

 

Intangible asset impairment

 

 

850

 

 

 

 

 

 

850

 

 

 

 

Income from operations

 

 

3,694

 

 

 

7,025

 

 

 

13,346

 

 

 

17,990

 

Other income

 

 

976

 

 

 

656

 

 

 

2,033

 

 

 

751

 

Interest expense

 

 

(795

)

 

 

(1,078

)

 

 

(3,535

)

 

 

(5,397

)

Income before income taxes

 

 

3,875

 

 

 

6,603

 

 

 

11,844

 

 

 

13,344

 

Income tax expense (benefit)

 

 

2,123

 

 

 

(1,794

)

 

 

3,672

 

 

 

(4,363

)

Net income

 

$

1,752

 

 

$

8,397

 

 

$

8,172

 

 

$

17,707

 

Less net loss attributable to noncontrolling interest

 

 

28

 

 

 

 

 

 

39

 

 

 

 

Net income attributable to CECO Environmental Corp.

 

$

1,780

 

 

$

8,397

 

 

$

8,211

 

 

$

17,707

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.05

 

 

$

0.24

 

 

$

0.23

 

 

$

0.51

 

Diluted

 

$

0.05

 

 

$

0.24

 

 

$

0.23

 

 

$

0.50

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

35,366,837

 

 

 

35,117,916

 

 

 

35,289,616

 

 

 

34,987,878

 

Diluted

 

 

35,655,014

 

 

 

35,352,957

 

 

 

35,520,670

 

 

 

35,484,273

 

 

 


 

4 | Page

 


Exhibit 99.1

 

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

 

 

 

 

Three Months Ended December 31,

 

 

For the Year Ended December 31,

 

(dollars in millions)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Operating income as reported in accordance with GAAP

 

$

3.7

 

 

$

7.0

 

 

$

13.3

 

 

$

18.0

 

Operating margin in accordance with GAAP

 

 

4.5

%

 

 

7.8

%

 

 

4.2

%

 

 

5.3

%

Amortization and earnout expenses

 

 

3.3

 

 

 

2.0

 

 

 

8.8

 

 

 

8.5

 

Restructuring expenses

 

 

0.6

 

 

 

0.1

 

 

 

2.3

 

 

 

1.1

 

Acquisition and integration expenses

 

 

0.3

 

 

 

0.5

 

 

 

1.4

 

 

 

0.5

 

Executive transition expenses

 

 

 

 

 

 

 

 

1.5

 

 

 

 

Loss on divestitures, net of selling costs

 

 

 

 

 

 

 

 

 

 

 

0.1

 

Intangible asset impairment

 

 

0.9

 

 

 

 

 

 

0.9

 

 

 

 

Non-GAAP operating income

 

$

8.8

 

 

$

9.6

 

 

$

28.2

 

 

$

28.2

 

Non-GAAP operating margin

 

 

10.6

%

 

 

10.7

%

 

 

8.9

%

 

 

8.2

%

 

 

 

 

 

Three Months Ended December 31,

 

 

For the Year Ended December 31,

 

(dollars in millions)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income as reported in accordance with GAAP

 

$

1.8

 

 

$

8.4

 

 

$

8.2

 

 

$

17.7

 

Amortization and earnout expenses

 

 

3.3

 

 

 

2.0

 

 

 

8.8

 

 

 

8.5

 

Restructuring expenses

 

 

0.6

 

 

 

0.1

 

 

 

2.3

 

 

 

1.1

 

Acquisition and integration expenses

 

 

0.3

 

 

 

0.5

 

 

 

1.4

 

 

 

0.5

 

Executive transition expenses

 

 

 

 

 

 

 

 

1.5

 

 

 

 

Loss on divestitures, net of selling costs

 

 

 

 

 

 

 

 

 

 

 

0.1

 

Intangible asset impairment

 

 

0.9

 

 

 

 

 

 

0.9

 

 

 

 

Deferred financing fee adjustment

 

 

 

 

 

 

 

 

 

 

 

0.4

 

Foreign currency remeasurement

 

 

 

 

 

(1.0

)

 

 

0.3

 

 

 

(0.5

)

Tax benefit of adjustments

 

 

(1.3

)

 

 

(0.4

)

 

 

(3.9

)

 

 

(2.5

)

Zhongli tax benefit

 

 

 

 

 

 

 

 

 

 

 

(4.4

)

Non-GAAP net income

 

$

5.6

 

 

$

9.6

 

 

$

19.5

 

 

$

20.9

 

Depreciation

 

 

0.6

 

 

 

0.5

 

 

 

2.5

 

 

 

2.1

 

Non-cash stock compensation

 

 

0.5

 

 

 

 

 

 

2.0

 

 

 

2.8

 

Other (income) expense, net

 

 

(1.0

)

 

 

0.3

 

 

 

(2.3

)

 

 

(0.3

)

Interest expense

 

 

0.8

 

 

 

1.1

 

 

 

3.5

 

 

 

5.0

 

Income tax expense

 

 

3.4

 

 

 

(1.4

)

 

 

7.6

 

 

 

2.5

 

Adjusted EBITDA

 

$

9.9

 

 

$

10.1

 

 

$

32.8

 

 

$

33.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.05

 

 

$

0.24

 

 

$

0.23

 

 

$

0.51

 

Diluted

 

$

0.05

 

 

$

0.24

 

 

$

0.23

 

 

$

0.50

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.16

 

 

$

0.27

 

 

$

0.55

 

 

$

0.60

 

Diluted

 

$

0.16

 

 

$

0.27

 

 

$

0.55

 

 

$

0.59

 

 

5 | Page

 


Exhibit 99.1

 

 

NOTE REGARDING NON-GAAP FINANCIAL MEASURES

 

CECO is providing certain non-GAAP historical financial measures as presented above as the Company believes that these figures are helpful in allowing individuals to better assess the ongoing nature of CECO’s core operations.  A "non-GAAP financial measure" is a numerical measure of a company's historical financial performance that excludes amounts that are included in the most directly comparable measure calculated and presented in the GAAP statement of operations.

 

Non-GAAP operating income, non-GAAP net income, non-GAAP operating margin, non-GAAP net income per basic and diluted share and adjusted EBITDA, as we present them in the financial data included in this press release, have been adjusted to exclude the effects of amortization expenses for acquisition related intangible assets, contingent retention and earnout expenses, restructuring expenses primarily relating to severance and legal expenses, acquisition and integration expenses which include retention, legal, accounting, banking, and other expenses, executive transition expenses, loss on divestitures, net of selling costs necessary to complete the divestiture such as legal, accounting and compliance, intangible asset impairment and other nonrecurring or infrequent items and the associated tax benefit of these items.  Management believes that these items are not necessarily indicative of the Company’s ongoing operations and their exclusion provides individuals with additional information to compare the Company's results over multiple periods.  Management utilizes this information to evaluate its ongoing financial performance. Our financial statements may continue to be affected by items similar to those excluded in the non-GAAP adjustments described above, and exclusion of these items from our non-GAAP financial measures should not be construed as an inference that all such costs are unusual or infrequent.

 

Non-GAAP operating income, non-GAAP net income, non-GAAP operating margin, non-GAAP net income per basic and diluted share and adjusted EBITDA are not calculated in accordance with GAAP, and should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Non-GAAP financial measures have limitations in that they do not reflect all of the costs associated with the operations of our business as determined in accordance with GAAP. As a result, you should not consider these measures in isolation or as a substitute for analysis of CECO’s results as reported under GAAP.  Additionally, CECO cautions investors that non-GAAP financial measures used by the Company may not be comparable to similarly titled measures of other companies.

 

In accordance with the requirements of Regulation G issued by the Securities and Exchange Commission, non-GAAP operating income, non-GAAP net income, non-GAAP operating margin and non-GAAP net income per basic and diluted share and adjusted EBITDA stated in the tables above are reconciled to the most directly comparable GAAP financial measures.  


 

6 | Page

 


Exhibit 99.1

 

SAFE HARBOR

Any statements contained in this Press Release, other than statements of historical fact, including statements about management’s beliefs and expectations, are forward-looking statements and should be evaluated as such. These statements are made on the basis of management’s views and assumptions regarding future events and business performance. We use words such as “believe,” “expect,” “anticipate,” “intends,” “estimate,” “forecast,” “project,” “will,” “plan,” “should” and similar expressions to identify forward-looking statements. Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. Potential risks and uncertainties, among others, that could cause actual results to differ materially are discussed under “Part I – Item 1A. Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and include, but are not limited to: the sensitivity of our business to economic and financial market conditions generally and economic conditions in our service areas; dependence on fixed price contracts and the risks associated therewith, including actual costs exceeding estimates and method of accounting for revenue; the effect of growth on our infrastructure, resources, and existing sales; the ability to expand operations in both new and existing markets; the potential for contract delay or cancellation; liabilities arising from faulty services or products that could result in significant professional or product liability, warranty, or other claims; changes in or developments with respect to any litigation or investigation; failure to meet timely completion or performance standards that could result in higher cost and reduced profits or, in some cases, losses on projects; the potential for fluctuations in prices for manufactured components and raw materials, including as a result of tariffs and surcharges; the substantial amount of debt incurred in connection with our strategic transactions and our ability to repay or refinance it or incur additional debt in the future; the impact of federal, state or local government regulations; economic and political conditions generally; our ability to successfully realize the expected benefits of our restructuring program; our ability to successfully integrate acquired businesses and realize the synergies from strategic transactions; unpredictability and severity of catastrophic events, including cyber-security threats, acts of terrorism or outbreak of war or hostilities or public health crises, such as uncertainties regarding the extent and duration of impacts of matters associated with the novel coronavirus (“COVID-19”), as well as management’s response to any of the aforementioned factors. Many of these risks are beyond management’s ability to control or predict. Should one or more of these risks or uncertainties materialize, or should the assumptions prove incorrect, actual results may vary in material aspects from those currently anticipated. Investors are cautioned not to place undue reliance on such forward-looking statements as they speak only to our views as of the date the statement is made. Furthermore, forward-looking statements speak only as of the date they are made. Except as required under the federal securities laws or the rules and regulations of the Securities and Exchange Commission, we undertake no obligation to update or review any forward-looking statements, whether as a result of new information, future events or otherwise.

 

 

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