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): August 6, 2015
CECO Environmental Corp.
(Exact Name of registrant as specified in its charter)
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Delaware |
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000-7099 |
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13-2566064 |
(State or other jurisdiction
of in corporation) |
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(Commission
File Number) |
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(IRS Employer
Identification No.) |
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4625 Red Bank Road
Cincinnati, OH |
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45227 |
(Address of principal executive offices) |
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(Zip Code) |
Registrants telephone number, including area code: (513) 458-2600
Not applicable
(Former
Name or Former Address, if Changed Since Last Report)
Check the appropriate box below
if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
x |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. |
Results of Operations and Financial Condition. |
On August 6, 2015, CECO
Environmental Corp., a Delaware corporation (CECO) issued a press release announcing its financial results for the three and six months ended June 30, 2015. A copy of the press release is furnished as Exhibit 99.1 to this
report and is incorporated herein by reference. Additionally, on August 6, 2015, CECO held a conference call for investors to discuss its financial results for the three and six months ended June 30, 2015. A copy of investor presentation
is furnished as Exhibit 99.2 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.
The information set forth under Item 2.02 of this Current Report on
Form 8-K is incorporated by reference in this Item 8.01.
Important Information for Investors and Stockholders
This Current Report on Form 8-K is not a substitute for the final prospectus/proxy statement that CECO Environmental Corp. (CECO)
filed with the U.S. Securities and Exchange Commission (the SEC) on July 31, 2015, which includes a prospectus with respect to shares of CECO common stock to be issued in the merger and a proxy statement of each of CECO and PMFG,
Inc. (PMFG) in connection with the merger between CECO and PMFG. The prospectus/proxy statement has been sent or given to the stockholders of record as of the close of business on July 30, 2015 of each of CECO and PMFG and contains
important information about the merger and related matters, including detailed risk factors. CECOs AND PMFGs SECURITY HOLDERS ARE URGED TO CAREFULLY READ THE FINAL PROSPECTUS/PROXY STATEMENT AND OTHER DOCUMENTS RELATING TO THE MERGER
THAT HAVE BEEN FILED WITH THE SEC IN THEIR ENTIRETY AND CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. The prospectus/proxy statement and other documents that have been filed with the SEC by CECO and PMFG are available without charge at
the SECs website, www.sec.gov, or by directing a request to (1) CECO Environmental Corp. by mail at 4625 Red Bank Road Suite 200, Cincinnati, Ohio 45227, Attention: Investor Relations, by telephone at 800-333-5475 or by going to
CECOs Investor page on its corporate website at www.cecoenviro.com; or (2) PMFG, Inc. by mail at 14651 North Dallas Parkway Suite 500, Dallas, Texas 75254, Attention: Investor Relations, by telephone at 877-879-7634, or by going to PMFG,
Inc.s Investors page on its corporate website at www.pmfginc.com.
This communication is for informational purposes only and is
neither an offer to sell nor the solicitation of an offer to sell, subscribe for or buy any securities, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of such jurisdiction. This communication is also not a solicitation of any vote in any jurisdiction pursuant to the proposed transactions or otherwise. No offer of securities or
solicitation will be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
Proxy
Solicitation
CECO and PMFG, and certain of their respective directors and executive officers may be deemed to be participants in the
solicitation of proxies in connection with the proposed transactions and may have direct or indirect interests in the proposed transactions. Information about the directors and executive officers of CECO is set forth in its prospectus/proxy
statement filed on July 31, 2015, the proxy statement for its 2015 annual meeting of shareholders and CECOs Annual Report on Form 10-K for the year ended December 31, 2014, which were filed
with the SEC on April 10, 2015 and March 18, 2015, respectively. Information about the directors and executive officers of PMFG is set forth in its proxy statement filed on
July 31, 2015, and the proxy statement for its 2014 annual meeting of shareholders and PMFGs Annual Report on Form 10-K for the year ended June 28, 2014, which were filed with the SEC on October 16, 2014 and September 10,
2014, respectively. Investors may obtain additional information regarding the interests of such participants in the proposed transactions by reading the prospectus/proxy statement for such proposed transactions when it becomes available.
Non-GAAP
CECO is providing non-GAAP
historical financial measures within this Form 8-K as the Company believes that these figures are helpful in allowing individuals to better assess the ongoing nature of CECOs core operations. A non-GAAP financial measure is a
numerical measure of a companys historical financial performance that excludes amounts that are included in the most directly comparable measure calculated and presented in the GAAP statement of operations.
Non-GAAP gross margin, non-GAAP operating income, non-GAAP net income, non-GAAP gross profit margin, non-GAAP operating margin, non-GAAP
earnings per basic and diluted share and non-GAAP Adjusted EBITDA, as we present them in the financial data included in this press release, have been adjusted to exclude the effects of expenses related to property, plant equipment valuation
adjustments, acquisition and integration expense activities including retention, legal, accounting, banking, amortization and contingent earn-out expenses, foreign currency re-measurement, legal reserves and the associated tax benefit of these
charges. Management believes that these items are not necessarily indicative of the Companys ongoing operations and their exclusion provides individuals with additional information to compare the companys results over multiple periods.
Management utilizes this information to evaluate its ongoing financial performance. Our financial statements may continue to be affected by items similar to those excluded in the non-GAAP adjustments described above, and exclusion of these items
from our non-GAAP financial measures should not be construed as an inference that all such costs are unusual or infrequent.
Non-GAAP
gross margin, non-GAAP operating income, non-GAAP net income, non-GAAP gross profit margin, non-GAAP operating margin, non-GAAP earnings per basic and diluted shares and non-GAAP Adjusted EBITDA are not calculated in accordance with GAAP, and should
be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Non-GAAP financial measures have limitations in that they do not reflect all of the costs associated with the
operations of our business as determined in accordance with GAAP. As a result, you should not consider these measures in isolation or as a substitute for analysis of CECOs results as reported under GAAP.
In accordance with the requirements of Regulation G issued by the Securities and Exchange Commission, non-GAAP gross margin, non-GAAP
operating income, non-GAAP net income, non-GAAP gross profit margin, non-GAAP operating margin, non-GAAP earnings per basic and diluted share and non-GAAP Adjusted EBITDA, stated in this Form 8-K present the most directly comparable GAAP financial
measure and reconcile to the most directly comparable GAAP financial measures.
Safe Harbor for Forward-Looking Statements
Any statements contained in this Current Report on Form 8-K other than statements of historical fact, including statements about
managements beliefs and expectations of the proposed merger and related transactions and future results, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and should be
evaluated accordingly. These statements are made on the basis of managements views and assumptions regarding future events and business performance. Words such as estimate, believe, anticipate,
expect, intend, target, should, may, will and similar expressions and their negative forms are intended 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. These risks and uncertainties include the ability to complete the proposed merger and related transactions between CECO and
PMFG; the receipt of shareholder approvals; the availability of financing to be obtained by CECO; the ability to successfully integrate CECOs and PMFGs operations, product lines,
technologies and employees; the ability to realize revenue and customer growth opportunities, combined revenue goals, marketing and cost synergies from the proposed merger between CECO and PMFG in a timely manner or at all; factors related to the
businesses of CECO and PMFG including economic, political and financial market conditions generally and economic conditions in CECOs and PMFGs target markets; dependence on fixed-price contracts and the risks associated with those
contracts, including actual costs exceeding estimates and method of accounting for contract revenue; fluctuations in operating results from period-to-period due to cyclicality of the businesses; the effect of the merger and related transactions on
each of CECOs and PMFGs infrastructure, resources, and existing sales; the ability to expand operations in both new and existing markets; the potential for contract delay or cancellation; changes in or developments with respect to any
litigation or investigation; unknown, underestimated or undisclosed commitments or liabilities; the potential for fluctuations in prices for manufactured components and raw materials; the potential impact of the announcement or consummation of the
proposed transactions on the parties relationships with third parties, which may make it more difficult to maintain business and operational relationships; the substantial amount of debt expected to be incurred in connection with the proposed
merger and CECOs ability to repay or refinance it, incur additional debt in the future or obtain a certain debt coverage ratio; diversion of management time from each of CECOs and PMFGs ongoing operations; the impact of federal,
state or local government regulations; and the effect of competition in the air pollution control and industrial ventilation industry.
These and other risks and uncertainties are discussed in more detail in CECOs and PMFGs current and future filings with the SEC,
including the final prospectus/proxy statement under the heading Risk Factors, which was filed by each of CECO and PMFG on July 31, 2015, CECOs Annual Report on Form 10-K for the fiscal year ended December 31, 2014 under
the heading Item 1A. Risk Factors, which was filed with the SEC on March 18, 2015 and PMFGs Annual Report on Form 10-K for the fiscal year ended June 28, 2014 under the heading Item 1A. Risk Factors, which was
filed with the SEC on September 10, 2014. Many of these risks are beyond managements ability to control or predict. Should one or more of these risks or uncertainties materialize, or should the assumptions prove incorrect, actual results
may vary in material aspects from those currently anticipated. Investors are cautioned not to place undue reliance on such forward-looking statements as they speak only as of the date the statement is made. All forward-looking statements
attributable to CECO or PMFG or persons acting on behalf of either CECO or PMFG are expressly qualified in their entirety by the cautionary statements and risk factors contained in this Current Report on Form 8-K and CECOs and PMFGs
respective filings with the SEC. Forward-looking statements speak only as of the date they are made. Except as required under the federal securities laws or the rules and regulations of the SEC, neither CECO nor PMFG undertakes any obligation to
update or review any forward-looking statement or information, whether as a result of new information, future events or otherwise, except as required by law.
Item 9.01. |
Financial Statements and Exhibits. |
(d) Exhibits
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Exhibit
Number |
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Exhibit Title |
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99.1 |
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Press Release, dated August 6, 2015. |
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99.2 |
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Investor Presentation Slides, dated August 6, 2015. |
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
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Date: August 6, 2015 |
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CECO Environmental Corp. |
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By: |
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/s/ Edward J. Prajzner |
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Edward J. Prajzner |
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Chief Financial Officer |
Exhibit 99.1
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NasdaqGS:CECE |
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NEWS RELEASE |
CECO Environmental Corp. Reports Second Quarter and Six Months 2015 Results
Achieves record quarterly revenue of $87 million and non-GAAP EPS of $0.32
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Revenue of $87.0 million for the second quarter of 2015 was up 30.5% from the same period last year; organic revenue was flat on a constant currency basis compared to the same period last year. |
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Revenue of $167.9 million for the first six months of 2015 was up 35.6% from the same period last year; organic revenue was up 4.5% on a constant currency basis compared to the same period last year. |
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Gross profit of $26.6 million, or 30.6% gross margin for the second quarter, was up 24.1%, from $21.4 million, or 32.1% gross margin, in the prior-year period. The second quarter gross margin of 30.6% was also up from
the first quarter gross margin of 25.9%. |
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Operating income of $4.5 million, or 5.2% operating margin for the second quarter, was down 37.6%, from $7.2 million, or 10.8% operating margin, in the prior-year period. |
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Non-GAAP operating income was $12.3 million, or 14.2% margin, for the second quarter, up 24.2% from $9.9 million, or 14.9% margin, in the prior-year period. |
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Adjusted EBITDA was $13.5 million for the second quarter, up from $11.0 million in the prior- year period and up from $8.6 million the first quarter of 2015. |
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Net income per diluted share was $0.08 for the second quarter, compared with net income per diluted share of $0.17 in the prior-year period. Non-GAAP net income per diluted share was $0.32 for the second quarter of
2015, compared with $0.25 for the prior-year period. |
CINCINNATI, Ohio, August 6, 2015 CECO Environmental Corp. (NasdaqGS:CECE),
a leading global environmental, energy and fluid handling technology company, today reported its financial results for the second quarter of 2015.
Revenue in the second quarter of 2015 was $87.0 million, up 30.5% from revenue of $66.6 million in the prior-years second quarter. Recent acquisitions
contributed $21.2 million of revenue in the second quarter of 2015. Organic revenue was flat on a constant currency basis compared to second quarter last year.
Revenue in the first six months of 2015 was $167.9 million, up 35.6% from revenue of $123.8 million in the prior-year period. Recent acquisitions contributed
$41.7 million of revenue in the first six months of 2015. Organic revenue was up 4.5% for the first six months of 2015 compared to the prior-year period.
Operating income was $4.5 million for the second quarter of 2015 compared to $7.2 million in the prior- year period, and $3.0 million sequentially for the
first quarter of 2015. Operating income on a non-GAAP basis was $12.3 million for the second quarter of 2015 compared to $9.9M in the prior-year period.
Operating income in the first six months of 2015 was $7.5 million compared to $12.7 million in the prior- year period. Operating income on a non-GAAP basis in
the first six months of 2015 was $19.8 million compared to $18.1 million in the prior-year period.
Cash and cash equivalents were $17.1 million and bank
debt was $111.7 million as of June 30, 2015 compared to $19.4 million and $114.2 million, respectively, as of December 31, 2014.
BACKLOG AND BOOKINGS
Total backlog at June 30, 2015 was $140.3 million as compared with $140.1 million on December 31, 2014, and $153.0 million on March 31, 2015.
Bookings were $168.5 million in the first six months of 2015, compared to $121.3 million in the first six months of 2014, an increase of 38.9%. Bookings
increased 4% on an organic basis versus last year. Bookings were $74.6 million in the second quarter of 2015, compared to $57.7 million in the prior-year period.
QUARTERLY DIVIDEND
On August 5, 2015, CECOs
Board of Directors approved a quarterly dividend of $0.066 per share. The dividend will be paid on September 30, 2015 to all stockholders of record at the close of business on September 18, 2015. CECO initiated a Dividend Reinvestment Plan
(DRIP) in 2012 that provides for the voluntary reinvestment of dividends by its stockholders.
OPERATIONAL SUMMARY
We are pleased with CECOs overall results for the second quarter 2015 as we executed on our core objectives and drove a meaningful improvement in
margins compared to the first quarter of 2015. Our margins benefited from solid performances in many areas of our businesses including better aftermarket mix in all areas and solid performances from our Fluid Handling and Energy segments. said
Jeff Lang, Chief Executive Officer of CECO. We continue to focus on our Sales Excellence and OneCECO initiatives, which helped drive year-to-date organic revenue growth on a constant currency basis. We achieved several important milestones in
the second quarter of 2015 including significant margin improvement, non-GAAP EPS growth and successfully completing the integration of our 2014 acquisitions.
Jeff Lang also commented, I am especially encouraged by the performance of the businesses we acquired in 2014 which have generated strong results for
the first half of 2015. CECO China also remains a key part of our plan and despite their slower economy, we have excellent growth opportunities including expanding our product offering in existing sales channels, pursuing aftermarket revenue and
developing a stronger design presence in the region. Overall, I am excited about the growth opportunities in 2015 and beyond as we leverage our strengthened platform to drive shareholder value and grow our business. I am also very excited in
anticipation of the closing of the PMFG transaction, which is expected to occur in September 2015 and which we expect to further enhance shareholder value.
Jeff Lang, Chief Executive Officer, and Ed Prajzner, Chief Financial Officer, will discuss the Companys second quarter results during a conference call
scheduled for Thursday, August 6, 2015 at 8:30 a.m. EST (7:30 a.m. Central Time).
CLICK HERE (or copy and paste this link
http://public.viavid.com/index.php?id=115759 ) to register for, and listen to the live Earnings Call Webcast. The webcast of the live call and a copy of the presentation to be used during the call can also be accessed from the homepage of
CECOs website at http://www.cecoenviro.com.
You may also participate by calling the US/Canada Dial-In # 1-888-299-7209 (Toll-Free) or the
International Dial-In # 1-719-325-2420 (Conference ID 8181879) at 8:20 AM ET.
A taped replay of the conference call will be available from 10:30 AM ET on
the day of the call until Thursday, August 20, 2015 at 11:59 PM ET. To access the taped replay, call the US/Canada Dial-In # 1-877-870-5176 or the International Dial-In # 1-858-384-5517 and enter conference ID 8181879.
ABOUT CECO ENVIRONMENTAL
CECO Environmental is a leading global environmental, energy and fluid handling technology company. Through its well-known brands, CECO provides a wide
spectrum of products and services including dampers & diverters, cyclonic technology, thermal oxidizers, filtration systems, scrubbers, exhaust systems, fluid handling equipment and plant engineered services and engineered design build
fabrication. These products play a vital role in helping companies achieve exacting production standards, meeting increasing plant needs and stringent emissions control regulations around the globe. CECO believes that it globally serves the broadest
range of markets and industries including power, municipalities, chemical, industrial manufacturing, refining, petrochemical, metals, minerals & mining, hospitals and universities. CECO is focused on building long-term shareholder value by
bringing its unique technology, portfolio and operational excellence to strategic key growth markets around the world, while maintaining the highest standards of employee development, project execution and safety leadership. CECO is listed on NASDAQ
under the ticker symbol CECE and is a member company of the Russell 2000 Index. For more information on CECO Environmental, please visit the companys website at http://www.cecoenviro.com.
Contact:
Corporate Information
Jeff Lang, Chief Executive Officer
Edward Prajzner,
Chief Financial Officer
1-800-333-5475
or
Investor Relations:
Shawn Severson
The Blueshirt Group
Phone: (415) 489-2198
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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(dollars in thousands, except per share data) |
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(unaudited) JUNE 30, 2015 |
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DECEMBER 31, 2014 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
17,089 |
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$ |
19,362 |
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Accounts receivable, net |
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65,767 |
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58,394 |
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Costs and estimated earnings in excess of billings on uncompleted contracts |
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31,810 |
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24,371 |
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Inventories, net |
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22,752 |
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23,416 |
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Prepaid expenses and other current assets |
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8,185 |
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9,046 |
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Prepaid income taxes |
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4,870 |
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4,190 |
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Assets held for sale |
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1,544 |
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4,188 |
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Total current assets |
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152,017 |
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142,967 |
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Property, plant and equipment, net |
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17,165 |
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18,961 |
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Goodwill |
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169,324 |
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167,547 |
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Intangible assets-finite life, net |
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52,420 |
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58,398 |
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Intangible assets-indefinite life |
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19,528 |
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19,766 |
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Deferred charges and other assets |
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6,287 |
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6,726 |
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$ |
416,741 |
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$ |
414,365 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Current liabilities: |
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Current portion of debt |
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$ |
12,317 |
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$ |
8,887 |
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Accounts payable and accrued expenses |
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56,504 |
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51,462 |
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Billings in excess of costs and estimated earnings on uncompleted contracts |
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14,177 |
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14,597 |
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Income taxes payable |
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759 |
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405 |
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Total current liabilities |
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83,757 |
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75,351 |
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Other liabilities |
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27,584 |
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27,884 |
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Debt, less current portion |
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99,373 |
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103,541 |
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Deferred income tax liability, net |
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25,471 |
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26,365 |
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Total liabilities |
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236,185 |
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233,141 |
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Commitments and contingencies |
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Shareholders equity: |
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Preferred stock, $.01 par value; 10,000 shares authorized, none issued |
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Common stock, $.01 par value; 100,000,000 shares authorized, 26,432,447 and 26,404,869 shares issued in 2015 and 2014,
respectively |
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264 |
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264 |
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Capital in excess of par value |
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169,935 |
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168,886 |
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Accumulated earnings |
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17,863 |
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19,051 |
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Accumulated other comprehensive loss |
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(7,150 |
) |
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(6,621 |
) |
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180,912 |
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181,580 |
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Less treasury stock, at cost, 137,920 shares in 2015 and 2014 |
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(356 |
) |
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(356 |
) |
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Total shareholders equity |
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180,556 |
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181,224 |
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$ |
416,741 |
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$ |
414,365 |
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CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
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THREE MONTHS ENDED |
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SIX MONTHS ENDED |
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JUNE 30, |
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JUNE 30, |
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(dollars in thousands, except per share data) |
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2015 |
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2014 |
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2015 |
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2014 |
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Net sales |
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$ |
86,961 |
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$ |
66,641 |
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$ |
167,946 |
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$ |
123,811 |
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Cost of sales |
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60,333 |
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45,192 |
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120,343 |
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82,633 |
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Gross profit |
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26,628 |
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21,449 |
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47,603 |
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41,178 |
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Selling and administrative expenses |
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14,443 |
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11,685 |
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28,104 |
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23,364 |
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Acquisition and integration expenses |
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962 |
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|
170 |
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1,293 |
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|
240 |
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Amortization and earn-out expenses |
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6,735 |
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2,406 |
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10,739 |
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4,894 |
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Income from operations |
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4,488 |
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7,188 |
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|
|
7,467 |
|
|
|
12,680 |
|
Other income (expense), net |
|
|
562 |
|
|
|
(121 |
) |
|
|
(1,174 |
) |
|
|
(227 |
) |
Interest expense |
|
|
(1,174 |
) |
|
|
(746 |
) |
|
|
(2,134 |
) |
|
|
(1,488 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
3,876 |
|
|
|
6,321 |
|
|
|
4,159 |
|
|
|
10,965 |
|
Income tax expense |
|
|
1,772 |
|
|
|
1,828 |
|
|
|
1,857 |
|
|
|
3,451 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
2,104 |
|
|
$ |
4,493 |
|
|
$ |
2,302 |
|
|
$ |
7,514 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.08 |
|
|
$ |
0.18 |
|
|
$ |
0.09 |
|
|
$ |
0.29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
$ |
0.08 |
|
|
$ |
0.17 |
|
|
$ |
0.09 |
|
|
$ |
0.29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
26,283,529 |
|
|
|
25,643,508 |
|
|
|
26,277,456 |
|
|
|
25,625,033 |
|
Diluted |
|
|
26,627,051 |
|
|
|
26,107,648 |
|
|
|
26,643,857 |
|
|
|
26,111,683 |
|
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
(dollars in millions) |
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
Gross profit as reported in accordance with GAAP |
|
$ |
26.6 |
|
|
$ |
21.4 |
|
|
$ |
47.6 |
|
|
$ |
41.2 |
|
Gross profit margin in accordance with GAAP |
|
|
30.6 |
% |
|
|
32.1 |
% |
|
|
28.4 |
% |
|
|
33.3 |
% |
Plant, property and equipment valuation adjustment |
|
|
0.1 |
|
|
|
0.1 |
|
|
|
0.3 |
|
|
|
0.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP gross margin |
|
$ |
26.7 |
|
|
$ |
21.5 |
|
|
$ |
47.9 |
|
|
$ |
41.5 |
|
Non-GAAP Gross profit margin |
|
|
30.7 |
% |
|
|
32.3 |
% |
|
|
28.5 |
% |
|
|
33.3 |
% |
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
(dollars in millions) |
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
Operating income as reported in accordance with GAAP |
|
$ |
4.5 |
|
|
$ |
7.2 |
|
|
$ |
7.5 |
|
|
$ |
12.7 |
|
Operating margin in accordance with GAAP |
|
|
5.2 |
% |
|
|
10.8 |
% |
|
|
4.5 |
% |
|
|
10.3 |
% |
Plant, property and equipment valuation adjustment |
|
|
0.1 |
|
|
|
0.1 |
|
|
|
0.3 |
|
|
|
0.3 |
|
Acquisition and integration expenses |
|
|
1.0 |
|
|
|
0.2 |
|
|
|
1.3 |
|
|
|
0.2 |
|
Amortization and earn-out expenses |
|
|
6.7 |
|
|
|
2.4 |
|
|
|
10.7 |
|
|
|
4.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP operating income |
|
$ |
12.3 |
|
|
$ |
9.9 |
|
|
$ |
19.8 |
|
|
$ |
18.1 |
|
Non-GAAP Operating margin |
|
|
14.2 |
% |
|
|
14.9 |
% |
|
|
11.8 |
% |
|
|
14.6 |
% |
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
(dollars in millions) |
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
Net income as reported in accordance with GAAP |
|
$ |
2.1 |
|
|
$ |
4.5 |
|
|
$ |
2.3 |
|
|
$ |
7.5 |
|
Plant, property and equipment valuation adjustment |
|
|
0.1 |
|
|
|
0.1 |
|
|
|
0.3 |
|
|
|
0.3 |
|
Acquisition and integration expenses |
|
|
1.0 |
|
|
|
0.2 |
|
|
|
1.3 |
|
|
|
0.2 |
|
Amortization and earn-out expenses |
|
|
6.7 |
|
|
|
2.4 |
|
|
|
10.7 |
|
|
|
4.9 |
|
Foreign currency remeasurement |
|
|
(0.6 |
) |
|
|
|
|
|
|
2.1 |
|
|
|
|
|
Tax benefit of expenses |
|
|
(0.8 |
) |
|
|
(0.7 |
) |
|
|
(2.5 |
) |
|
|
(1.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income |
|
$ |
8.5 |
|
|
$ |
6.5 |
|
|
$ |
14.2 |
|
|
$ |
11.4 |
|
Depreciation |
|
|
0.6 |
|
|
|
0.7 |
|
|
|
1.3 |
|
|
|
1.5 |
|
Non-cash stock compensation |
|
|
0.5 |
|
|
|
0.4 |
|
|
|
0.9 |
|
|
|
0.8 |
|
Other (income)/expense |
|
|
0.1 |
|
|
|
0.1 |
|
|
|
(0.9 |
) |
|
|
0.2 |
|
Interest expense |
|
|
1.2 |
|
|
|
0.8 |
|
|
|
2.2 |
|
|
|
1.5 |
|
Income tax expense |
|
|
2.6 |
|
|
|
2.5 |
|
|
|
4.4 |
|
|
|
5.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted EBITDA |
|
$ |
13.5 |
|
|
$ |
11.0 |
|
|
$ |
22.1 |
|
|
$ |
20.4 |
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.08 |
|
|
$ |
0.18 |
|
|
$ |
0.09 |
|
|
$ |
0.29 |
|
|
|
|
|
|
Diluted |
|
$ |
0.08 |
|
|
$ |
0.17 |
|
|
$ |
0.09 |
|
|
$ |
0.29 |
|
|
|
|
|
|
Non-GAAP net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.32 |
|
|
$ |
0.25 |
|
|
$ |
0.54 |
|
|
$ |
0.45 |
|
|
|
|
|
|
Diluted |
|
$ |
0.32 |
|
|
$ |
0.25 |
|
|
$ |
0.53 |
|
|
$ |
0.44 |
|
NOTE REGARDING NON-GAAP FINANCIAL MEASURES
CECO is providing the non-GAAP historical financial measures presented above as the Company believes that these figures are helpful in allowing individuals to
better assess the ongoing nature of CECOs core operations. A non-GAAP financial measure is a numerical measure of a companys historical financial performance that excludes amounts that are included in the most directly
comparable measure calculated and presented in the GAAP statement of operations.
Non-GAAP gross margin, non-GAAP operating income, non-GAAP net income,
non-GAAP gross profit margin, non-GAAP operating margin, non-GAAP earnings per basic and diluted share and non-GAAP adjusted EBITDA, as we present them in the financial data included in this press release, have been adjusted to exclude the effects
of expenses related to property, plant equipment valuation adjustments, acquisition and integration expense activities including retention, legal, accounting, banking, amortization and contingent earnout expenses, foreign currency re-measurement,
legal reserves and the associated tax benefit of these charges. Management believes that these items are not necessarily indicative of the Companys ongoing operations and their exclusion provides individuals with additional information to
compare the companys results over multiple periods. Management utilizes this information to evaluate its ongoing financial performance. Our financial statements may continue to be affected by items similar to those excluded in the non-GAAP
adjustments described above, and exclusion of these items from our non-GAAP financial measures should not be construed as an inference that all such costs are unusual or infrequent.
Non-GAAP gross margin, non-GAAP operating income, non-GAAP net income, non-GAAP gross profit margin, non-GAAP operating margin, non-GAAP earnings per basic
and diluted shares and non-GAAP Adjusted EBITDA are not calculated in accordance with GAAP, and should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Non-GAAP
financial measures have limitations in that they do not reflect all of the costs associated with the operations of our business as determined in accordance with GAAP. As a result, you should not consider these measures in isolation or as a
substitute for analysis of CECOs results as reported under GAAP.
In accordance with the requirements of Regulation G issued by the Securities and
Exchange Commission, non-GAAP gross margin, non-GAAP operating income, non-GAAP net income, non-GAAP gross profit margin, non-GAAP operating margin, non-GAAP earnings per basic and diluted share and non-GAAP Adjusted EBITDA, stated in the tables
above present the most directly comparable GAAP financial measure and reconcile to the most directly comparable GAAP financial measures.
Safe Harbor
Any statements contained in this press release other than statements of historical fact, including statements about managements beliefs and
expectations, are forward-looking statements and should be evaluated as such. These statements are made on the basis of managements views and assumptions regarding future events and business performance. Words such as estimate,
believe, anticipate, expect, intend, plan, target, project, should, may, will and similar expressions are intended to identify
forward-looking statements. Forward-looking statements (including oral representations) involve risks and uncertainties that may cause actual results to differ materially from any future results, performance or achievements expressed or implied by
such statements. These risks and uncertainties include, but are not limited to: our ability to successfully complete the acquisition of PMFG; our ability to successfully integrate acquired businesses and realize the synergies from acquisitions,
including PMFG, as well as a number of factors related to our business including economic and financial market conditions generally and economic conditions in CECOs service areas; dependence on fixed price contracts and the risks associated
therewith, including actual costs exceeding estimates and method of accounting for contract revenue; fluctuations in operating results from period to period due to seasonality of the business; the effect of growth on CECOs infrastructure,
resources, and existing sales; the ability to expand operations in both new and existing markets; the potential for contract delay or cancellation; changes in or developments with respect to any litigation or investigation; the potential for
fluctuations in prices for manufactured components and raw materials; the substantial amount of debt incurred in connection with our recent acquisitions and our ability to repay or refinance it or incur additional debt in the future; the impact of
federal, state or local government regulations; economic and political conditions generally; and the effect of competition in the product recovery, air pollution control and fluid handling and filtration industries. These and other risks and
uncertainties are discussed in more detail in CECOs filings with the Securities and Exchange Commission, including our reports on Form 10-K and Form 10-Q. Many of these risks are beyond managements ability to control or predict. Should
one or more of these risks or uncertainties materialize, or should the assumptions prove incorrect, actual results may vary in material aspects from those currently anticipated. Investors are cautioned not to place undue reliance on such
forward-looking statements as they speak only to our views as of the date the statement is made. All forward-looking statements attributable to CECO or persons acting on behalf of CECO are expressly qualified in their entirety by the cautionary
statements and risk factors contained in this press release and CECOs respective filings with the Securities and Exchange Commission. Furthermore, forward-looking statements speak only as of the date they are made. Except as required under the
federal securities laws or the rules and regulations of the Securities and Exchange Commission, CECO undertakes no obligation to update or review any forward-looking statements, whether as a result of new information, future events or otherwise.
Important Information for Investors and Stockholders
This communication does not constitute an offer to sell or the solicitation of an offer to buy securities or a solicitation of any vote or approval. This
communication is not a substitute for the prospectus/proxy statement that CECO and PMFG will file with the SEC. Investors in CECO or PMFG are urged to read the prospectus/proxy statement, which will contain important information, including detailed
risk factors, when it becomes available. The prospectus/proxy statement and other documents that will be filed by CECO and PMFG with the SEC will be available free of charge at the SECs website, www.sec.gov, or by directing a request when such
a filing is made to (1) CECO Environmental Corp., by mail at 4625 Red Bank Road Suite 200, Cincinnati, Ohio 45227, Attention: Investor Relations, by telephone at 800-333-5475 or by going to CECOs Investor page on its corporate website at
www.cecoenviro.com; or (2) PMFG, Inc. by mail at 14651 North Dallas Parkway Suite 500, Dallas, Texas 75254, Attention: Investor Relations, by telephone at 877-879-7634, or by going to PMFG, Inc.s Investors page on its corporate website at
www.pmfginc.com. A final prospectus/proxy statement will be mailed to CECOs stockholders and shareholders of PMFG.
Proxy
Solicitation
CECO and PMFG, and certain of their respective directors, executive officers and other members of management and employees may be deemed
participants in the solicitation of proxies in connection with the proposed transactions. Information about the directors and executive officers of CECO is set forth in the proxy statement for CECOs 2015 annual meeting of stockholders and
CECOs 10-K for the year ended December 31, 2014. Information about the directors and executive officers of PMFG is set forth in the proxy statement for PMFGs 2014 annual meeting of shareholders and PMFGs Form 10-K for the year
ended June 28, 2014. Investors may obtain additional information regarding the interests of such participants in the proposed transactions by reading the prospectus/proxy statement for such proposed transactions when it becomes available.
Non-GAAP Financial Information
CECO is providing the non-GAAP historical financial measures in this presentation, as the Company believes that these figures are helpful in allowing individuals to better assess the ongoing nature of CECOs core operations. A "non-GAAP financial measure" is a numerical measure of a 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 gross margin, non-GAAP operating income, non-GAAP net income, non-GAAP adjusted EBITDA, non-GAAP gross profit margin, non-GAAP operating margin, non-GAAP earnings per basic and diluted share, as we present them in the financial data included in this presentation, have been adjusted to exclude the effects of expenses related to property, plant, and equipment valuation adjustments, acquisition and integration expense activities including retention, legal, accounting, banking, amortization and earnout expenses, the impact of foreign currency remeasurement and the associated tax benefit of these charges. Management believes that these items are not necessarily indicative of the Companys ongoing operations and their exclusion provides individuals with additional information to compare the Company's results over multiple periods. Additionally, management utilizes this information to evaluate its ongoing financial performance. Our financial statements may continue to be affected by items similar to those excluded in the non-GAAP adjustments described above, and exclusion of these items from our non-GAAP financial measures should not be construed as an inference that all such costs are unusual or infrequent. Non-GAAP gross margin, non-GAAP operating income, non-GAAP net income, non-GAAP adjusted EBITDA, non-GAAP gross profit margin, non-GAAP operating margin, and non-GAAP earnings per basic and diluted shares are not calculated in accordance with GAAP, and should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Non-GAAP financial measures have limitations in that they do not reflect all of the costs associated with the operations of our business as determined in accordance with GAAP. As a result, you should not consider these measures in isolation or as a substitute for analysis of CECOs results as reported under GAAP. In accordance with the requirements of Regulation G issued by the Securities and Exchange Commission, non-GAAP gross margin, non- GAAP operating income, non-GAAP net income, non-GAAP adjusted EBITDA, non-GAAP gross profit margin, non-GAAP operating margin, and non-GAAP earnings per basic and diluted share stated in the tables above are reconciled to the most directly comparable GAAP financial measures. Free cash flow has limitations due to the fact that it does not represent the residual cash flow available for discretionary expenditures, since it does not take into account debt service requirements or other non-discretionary expenditures that are not deducted from the measure. Adjusted EBITDA and Free Cash Flow 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 Additionally, CECO cautions investors that the non-GAAP financial measures used by the Company may not be comparable to similarly titled measures of other companies. Safe Harbor Statement 2 |
Forward-looking Statements
Any statements contained in this presentation other than statements of historical fact, including statements about managements beliefs and expectations, are forward-looking statements and should be evaluated as such. These statements are made on the basis of managements views and assumptions regarding future events and business performance. Words such as estimate, believe, anticipate, expect, intend, plan, target, project, should, may, will and similar expressions are intended to identify forward- looking statements. Forward-looking statements (including oral representations) involve risks and uncertainties that may cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. These risks and uncertainties include, but are not limited to: our ability to successfully complete the acquisition of PMFG; our ability to successfully integrate acquired businesses and realize the synergies from acquisitions, including PMFG, as well as a number of factors related to our business including economic and financial market conditions generally and economic conditions in CECOs service areas; dependence on fixed price contracts and the risks associated therewith, including actual costs exceeding estimates and method of accounting for contract revenue; fluctuations in operating results from period to period due to seasonality of the business; the effect of growth on CECOs infrastructure, resources, and existing sales; the ability to expand operations in both new and existing markets; the potential for contract delay or cancellation; changes in or developments with respect to any litigation or investigation; the potential for fluctuations in prices for manufactured components and raw materials; the substantial amount of debt incurred in connection with our recent acquisitions and our ability to repay or refinance it or incur additional debt in the future; the impact of federal, state or local government regulations; economic and political conditions generally; and the effect of competition in the product recovery, air pollution control and fluid handling and filtration industries. These and other risks and uncertainties are discussed in more detail in CECOs filings with the Securities and Exchange Commission, including our reports on Form 10-K and Form 10-Q. Many of these risks are beyond managements ability to control or predict. Should one or more of these risks or uncertainties materialize, or should the assumptions prove incorrect, actual results may vary in material aspects from those currently anticipated. Investors are cautioned not to place undue reliance on such forward-looking statements as they speak only to our views as of the date the statement is made. All forward-looking statements attributable to CECO or persons acting on behalf of CECO are expressly qualified in their entirety by the cautionary statements and risk factors contained in this presentation and CECOs respective filings with the Securities and Exchange Commission. Furthermore, forward-looking statements speak only as of the date they are made. Except as required under the federal securities laws or the rules and regulations of the Securities and Exchange Commission, CECO undertakes no obligation to update or review any forward-looking statements, whether as a result of new information, future events or otherwise. Safe Harbor Statement 3 |
Important
Information for Investors and Stockholders This
communication does not constitute an offer to sell or the solicitation of an offer to buy securities or a solicitation of any vote or approval. This communication is not a substitute for the prospectus/proxy statement that CECO and PMFG will file with the SEC. Investors in CECO or PMFG are urged to read the prospectus/proxy statement, which will contain important information, including detailed risk factors, when it becomes available. The prospectus/proxy statement and other documents that will be filed by CECO and PMFG with the SEC will be available free of charge at the SECs website, www.sec.gov, or by directing a request when such a filing is made to (1) CECO Environmental Corp., by mail at 4625 Red Bank Road Suite 200, Cincinnati, Ohio 45227, Attention: Investor Relations, by telephone at 800-333-5475 or by going to CECOs Investor page on its corporate website at www.cecoenviro.com; or (2) PMFG, Inc. by mail at 14651 North Dallas Parkway Suite 500, Dallas, Texas 75254, Attention: Investor Relations, by telephone at 877- 879-7634, or by going to PMFG, Inc.s Investors page on its corporate website at www.pmfginc.com. A final prospectus/proxy statement will be mailed to CECOs stockholders and shareholders of PMFG. Safe Harbor Statement 4 Proxy Solicitation CECO and PMFG, and certain of their respective directors, executive officers and other members of management and employees may be deemed participants in the solicitation of proxies in connection with the proposed transactions. Information about the directors and executive officers of CECO is set forth in the proxy statement for CECOs 2015 annual meeting of stockholders and CECOs 10-K for the year ended December 31, 2014. Information about the directors and executive officers of PMFG is set forth in the proxy statement for PMFGs 2014 annual meeting of shareholders and PMFGs Form 10-K for the year ended June 28, 2014. Investors may obtain additional information regarding the interests of such participants in the proposed transactions by reading the prospectus/proxy statement for such proposed transactions when it becomes available. |
6 Revenue Growth Revenue of $87 million, up 31% year-over-year Organic revenue is up 4.5% in 1H15 using constant FX
Organic revenue was flat for Q215 vs last year 1H15 revenue $168 million vs $123 million in prior year Bookings / Backlog Trends 2Q15 bookings of $75 million up 29% year-over-year Organic bookings up 4% for 1H15 Organic bookings in 2Q15 are flat Backlog of $140 consistent with at year end EPS Growth GAAP EPS for 2Q15 of $0.08 compared with $0.17 in 2Q14 Non-GAAP EPS for 2Q15 of $0.32 vs. $0.25 in 2Q14 2Q15 Financial Highlights |
7 Non-GAAP Gross Margin Gross margin of 31% in Q215 compared with 26% in Q1, primarily attributable to: Aftermarket mix, higher OE GP, business improvement and project execution Non-GAAP Operating Margin Operating margins improved to 14.2% in Q215 vs 9.3% in Q1 and 10.4% in Q414 SG&A betterment at 16.6% and will increase slightly in Q3 and Q4 Adjusted EBITDA Adjusted EBITDA of $13.5 million, up from $11.0 million in prior year 1H15 adjusted EBITDA of $22.1 million, up from $20.4 million in prior year 2Q15 Quarterly Financial Highlights |
Business
Conditions & Strategic Review 8
Overall end markets are unchanged with the exception of China and we are executing on our Sales Excellence
and initiatives Environmental segment continues to gain momentum; China has slowed Global refinery activity is strong Energy segment ; global natural gas power generation business is strong and traditional power is picking up internationally, but remains soft domestically Fluid Handling and Filtration segment is on track with a strong 2H expected Aftermarket sales strategies continue to gain momentum Integration of Zhongli, Emtrol-Buell, and HEE-Duall are 100% complete and we are very pleased with the performance of these businesses The team is now ready for the CECO-PMFG total integration process The acquisition of PMFG is a significant strategic event, closing in September |
9 Strong strategic fit, environmental and energy related portfolios 1. Key step towards becoming the market leader in natural gas power gen 3. Enhances global footprint, particularly in China, Europe and the Middle East 5. 4. Provides access to attractive end markets to drive long-term growth 6. Brings a leading portfolio of highly engineered product offerings 8. Poised to benefit from a balanced portfolio and diverse end markets 7. Grows aftermarket & recurring revenue opportunity with $5B installed base 2. Poised to achieve significant sales and $15 million in cost synergies Announcement of Proposed Acquisition of PMFG, Inc. - Key Transaction Benefits & Strategic Rationale 9. We anticipate the acquisition will close in Q3 |
CECO and
PMFG Technology Leaders in
Comprehensive Solutions for the Natural
Gas Turbine Peerless Mfg. Co. Emission Control Systems 64MW Simple-Cycle CT 10 Peerless SCRs is a world
leader in selective catalytic
reduction emission control
systems Aarding-Effox are experts in exhaust systems, dampers, diverters & acoustical abatement systems Aarding Stack & Silencer Peerless Emissions Control Systems Aarding-Effox Diverter Damper & Expansion Joints Aarding Steam Vent Silencer Gas Turbine Exhaust Aarding Bypass System Including Silencers |
11 CECO and PMFG Technology Leaders in Environmental-Industrial Silencers Design, Engineering and Manufacturing of Silencers for Full Range of Industrial Applications |
12 CECO-PMFG Combination Will Provide a Stronger-Larger- More Profitable Asian Region Platform for the Future |
$66.6 $63.3 $76.1 $81.0 $86.9 2Q14 3Q14 4Q14 1Q15 2Q15 14 Record revenue of $87 million, up 31% y/y and 8% sequentially 1H15 organic growth was up 4.5% and on a constant currency basis, organic revenue was flat for 2Q15 Gains in revenue are driven by a combination of organic growth, sales excellence, and revenue from acquisitions ($ in millions) 2Q15 Quarterly Financial Highlights Revenue |
Backlog $96.0 $106.2 $140.1 $153.0 $140.3 2Q14 3Q14 4Q14 1Q15 2Q15 ($ in millions) 15 2Q15 Quarterly Financial Highlights $57.7 $69.9 $63.7 $93.9 $74.6 2Q14 3Q14 4Q14 1Q15 2Q15 Bookings Organic bookings are up 4.5% 1H and flat in Q2, following a very strong 1Q15 Solid 2Q15 backlog of $140.3 million 2Q15 bookings of $75 million vs $57.7 million a year ago |
32.3% 33.6% 29.8% 26.2% 30.7% 2Q14 3Q14 4Q14 1Q15 2Q15 16 2Q15 Financial Highlights Non-GAAP Gross Margin Gross margin increased to 30.7% in Q2 due to mix changes, operational excellence, and aftermarket Operating margin of 14.2% in Q2 vs. 9.3% in Q1 showing excellent improvement Exceeded Q2 margin expectations due to various favorable factors Good SG&A control at 16.6% for 1H15 14.9% 12.9% 10.9% 9.3% 14.2% 2Q14 3Q14 4Q14 1Q15 2Q15 Non-GAAP Operating Margin |
$11.0 $9.4 $8.9 $8.6 $13.5 2Q14 3Q14 4Q14 1Q15 2Q15 17 Adjusted EBITDA Adjusted EBITDA of $13.5 million in 2Q15 vs $8.6 million 1Q15 and $11.0 million in the prior year Non-GAAP EPS of $0.32, up from $0.21 in 1Q15 and up from $0.25 in 2Q14 1H15 Non-GAAP EPS $0.53 vs $0.44 in 1H14 We have consistently excluded FX re-measurement in 2015 and 2014 Non-GAAP EPS Note: See supplemental slide for adjusted EBITDA reconciliation and important disclosures
regarding CECOs use of adjusted EBITDA. ($ in
millions) 2Q15 Quarterly Financial Highlights
$0.25 $0.25 $0.22 $0.21 $0.32 2Q14 3Q14 4Q14 1Q15 2Q15 |
$32.9 $27.7 $40.3 $41.7 $41.8 2Q14 3Q14 4Q14 1Q15 2Q15 18 Environmental Segment Revenue Revenue of $41.8 million was up 27% y/y Bookings of $31.0 million in 2Q15, up 17.4% y/y Aftermarket continues to gain momentum July booking of U.S. Refinery project totaling $14.5 million Expect a stronger 2H both domestically and in Asia $26.4 $24.6 $33.3 $51.2 $31.0 2Q14 3Q14 4Q14 1Q15 2Q15 Bookings ($ in millions) 2nd Quarter Results |
19 Revenue Revenue of $27.3 million was up 62.5% y/y Revenue is up 12% sequentially Aftermarket and retrofit opportunities continue to grow The Energy segment continues to expand globally Aarding, Effox and Zhongli are all on track and doing well Bookings Energy Segment ($ in millions) 2nd Quarter Results $16.8 $18.0 $20.2 $24.3 $27.3 2Q14 3Q14 4Q14 1Q15 2Q15 $14.8 $28.4 $14.6 $26.5 $25.0 2Q14 3Q14 4Q14 1Q15 2Q15 |
20 Revenue Organic revenue of $17.7 million, up 16.4% sequentially, 6.0% y/y Organic bookings of $18.6 million, up 14.8% sequentially Margin expansion and operational excellence continuing on plan Aftermarket is accelerating Added strategic sales leadership resources in 1H Bookings Fluid Handling & Filtration Segment ($ in millions) 2nd Quarter Results $16.7 $17.6 $15.9 $15.2 $17.7 2Q14 3Q14 4Q14 1Q15 2Q15 $16.6 $16.7 $15.8 $16.2 $18.6 2Q14 3Q14 4Q14 1Q15 2Q15 |
21 12/31/2011 12/31/2012 12/31/2013 12/31/2014 6/30/2015 Cash & Equivalents $ 12.7 $ 23.0 $ 22.7 $ 19.4 $ 17.1 Total Assets $ 79.3 $ 94.1 $348.5 $414.4 $416.7 Total Bank Debt $ 0.0 $ 0.0 $ 89.1 $112.4 $111.7 ShareholdersEquity $ 43.0 $ 62.0 $170.4 $181.2 $180.6 Current Assets Current Liabilities Net Working Capital $ 53.5 $(23.6) $ 29.9 $ 64.3 $(27.5) $ 36.8 $124.8 $(59.3) $ 65.5 $143.0 $(75.4) $ 67.6 Balance Sheet . Selected Balance Sheet Information Note: Balance Sheet figures presented as reported in Company filings $152.0 $(83.8) $ 68.2 Balance Sheet Detail ($ in millions) Net Debt to Pro Forma EBITDA = 2.00 Leverage Ratio |
23 Non-GAAP Gross Margin ($ in millions) Annual Q1 Q2 Q3 Q4 Annual Q1 Q2 YTD TTM 2013 2014 2014 2014 2014 2014 2015 2015 2015 2015 Gross profit as reported in accordance with GAAP $61.6 $19.7 $21.4 $21.1 $22.6 $84.8 $21.0 $26.6 $47.6 $91.3 Gross profit margin in accordance with GAAP 31.2% 34.4% 32.1% 33.3% 29.7% 32.2% 25.9% 30.6% 28.4% 29.7% Inventory valuation adjustment 1.1 - - - - - - - - - Plant, property and equipment valuation adjustment 0.2 0.2 0.1 0.2 0.1 $0.6 0.2 0.1 0.3 0.6 Non-GAAP gross margin $62.9 $19.9 $21.5 $21.3 $22.7 $85.4 $21.2 $26.7 $47.9 $91.9 Non- GAAP Gross profit margin 31.9% 34.8% 32.3% 33.6% 29.8% 32.4% 26.2% 30.7% 28.5% 29.9% |
24 Non-GAAP Operating Margin ($ in millions) Annual Q1 Q2 Q3 Q4 Annual Q1 Q2 YTD TTM 2013 2014 2014 2014 2014 2014 2015 2015 2015 2015 Operating income as reported in accordance with GAAP $7.0 $5.5 $7.2 $5.2 $3.8 $21.7 $3.0 $4.5 $7.5 $16.5 Operating margin in accordance with GAAP 3.5% 9.6% 10.8% 8.2% 5.0% 8.2% 3.7% 5.2% 4.5% 5.4% Inventory valuation adjustment 1.1 - - - - - - - - - Plant, property and equipment valuation adjustment 0.2 0.2 0.1 0.2 0.1 0.6 0.2 0.1 0.3 0.6 Acquisition and integration expenses 7.2 0.1 0.2 0.1 0.9 1.3 0.3 1.0 1.3 2.3 Amortization and earn-out expenses 6.8 2.5 2.4 2.4 2.8 10.1 4.0 6.7 10.7 15.9 Legal reserves 3.5 - - 0.3 - 0.3 - - - 0.3 Non-GAAP operating income $25.8 $8.3 $9.9 $8.2 $7.6 $34.0 $7.5 $12.3 $19.8 $35.6 Non-GAAP Operating margin 13.1% 14.5% 14.9% 12.9% 10.0% 12.9% 9.3% 14.2% 11.8% 11.6% |
25 Non-GAAP NI & EBITDA ($ in millions) Annual Annual Annual Annual Annual Q1 Q2 Q3 Q4 Annual Q1 Q2 YTD TTM 2009 2010 2011 2012 2013 2014 2014 2014 2014 2014 2015 2015 2015 2015 Net income as reported in accordance with GAAP $(15.0) $2.1 $8.3 $10.9 $6.6 $3.0 $4.5 $3.7 $1.9 $13.1 $0.2 $2.1 $2.3 $7.9 Inventory valuation adjustment - - - - 1.1 - - - - - - - $- $- Plant, property and equipment valuation adjustment - - - - 0.2 0.2 0.1 0.2 0.1 0.6 0.2 0.1 $0.3 $0.6 Acquisition and integration expenses - - - - 7.2 0.1 0.2 0.1 0.9 1.3 0.3 1.0 $1.3 $2.3 Amortization and earn-out expenses - - - - 6.8 2.5 2.4 2.4 2.8 10.1 4.0 6.7 $10.7 $15.9 Legal reserves - - - - 3.5 - - 0.3 - 0.3 - - $- $0.3 Foreign currency remeasurement - - - - (1.1) - - 1.7 1.2 2.9 2.7 (0.6) $2.1 $5.0 Tax benefit of expenses - - - - (4.6) (0.8) (0.7) (1.2) (1.0) (3.7) (1.7) (0.8) $(2.5) $(4.7) Non-GAAP net income $(15.0) $2.1 $8.3 $10.9 $19.7 $5.0 $6.5 $7.2 $5.9 $24.6 $5.7 $8.5 $14.2 $27.3 Depreciation 2.5 1.8 1.4 1.2 1.6 0.8 0.7 0.8 0.8 3.1 0.7 0.6 $1.3 $2.9 Non-cash stock compensation 1.0 0.9 0.7 0.7 1.1 0.3 0.4 0.5 0.5 1.7 0.4 0.5 $0.9 $1.9 Goodwill impairment 17.1 - - - - - - - - - - - $- $- Other (income)/expense 0.8 0.1 (0.5) 0.1 0.1 0.1 0.1 (0.2) (0.6) (0.6) (1.0) 0.1 $(0.9) $(1.7) Interest expense 1.3 1.2 1.1 1.2 1.5 0.7 0.8 0.7 0.9 3.1 1.0 1.2 $2.2 $3.8 Income tax expense (3.1) 1.4 3.4 4.5 4.5 2.5 2.5 0.4 1.4 6.8 1.8 2.6 $4.4 $6.2 Non-GAAP EBITDA $4.6 $7.5 $14.4 $18.6 $28.5 $9.4 $11.0 $9.4 $8.9 $38.7 $8.6 $13.5 $22.1 $40.4 Basic Shares Outstanding 20,116,991 25,606,352 25,643,508 25,691,884 26,057,831 25,750,972 26,271,316 26,283,529 26,277,456 26,076,140 Diluted Shares Outstanding 20,719,951 26,115,512 26,107,648 26,129,427 26,467,984 26,196,901 26,598,799 26,627,051 26,643,857 26,455,815 Earnings (loss) per share: Basic $0.33 $0.12 $0.18 $0.14 $0.07 $0.51 $0.01 $0.08 $0.09 $0.30 Diluted $0.32 $0.12 $0.17 $0.14 $0.07 $0.50 $0.01 $0.08 $0.09 $0.30 Non-GAAP earnings per share: Basic $0.98 $0.20 $0.25 $0.28 $0.22 $0.95 $0.22 $0.32 $0.54 $1.04 Diluted $0.95 $0.19 $0.25 $0.28 $0.22 $0.94 $0.21 $0.32 $0.53 $1.03 |
26 ($ in Millions) CECO Reported Pro-forma (Recent Acquisitions) CECO Standalone PMFG Pro-forma CECO Combined GAAP Revenues $263.2 $64.7 $327.9 $158.1 $ 486.0 GAAP Gross profit $84.8 $13.6 $98.4 $45.7 $144.1 SG&A as reported in accordance with GAAP $51.4 $6.6 $58.0 $51.5 $109.5 GAAP Net income $13.1 $8.1 $21.2 ($33.1) ($11.9) Amortization and earn-out expenses $10.1 - $10.1 $0.9 $11.0 Other (1) $5.1 $0.3 $5.4 $26.5 $31.9 Tax benefit of expenses ($3.7) - ($3.7) ($2.2) ($5.9) Non-GAAP net income $24.6 $8.4 $33.0 ($7.8) $25.2 Depreciation $3.1 - $3.1 $1.8 $4.9 Non-cash stock compensation $1.7 - $1.7 $1.1 $2.8 Other (income)/expense ($0.6) - ($0.6) ($0.1) ($0.7) Interest expense $3.1 - $3.1 $1.8 $4.9 Income tax expense $6.8 - $6.8 1.1 $7.9 Non GAAP Adjusted EBITDA $38.7 $8.4 $47.1 ($2.1) $45.0 Non-GAAP Adjusted EBITDA (with Synergies) $60.0 GAAP to Non-GAAP Adjusted EBITDA Reconciliation (Twelve Months ended 12/31/2014) (1) Includes plant, property and equipment (PPE) valuation adjustments, acquisition and integration expenses, legal reserves and
foreign currency re-measurement |
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