Exhibit 99.1
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
On March 30, 2018, CECO Environmental Corp. (the “Company”), Met-Pro Technologies LLC, the Company’s indirect wholly-owned subsidiary (the “Seller”), Cincinnati Fan & Ventilator Company, Inc. (the “Purchaser”) and Strobic Air Corporation (“Strobic”) entered into a Stock Purchase Agreement (the “Purchase Agreement”) pursuant to which the Company agreed to sell Strobic to the Purchaser. Pursuant to the Purchase Agreement, the Purchaser acquired all of the capital stock of Strobic on March 30, 2018 for an aggregate purchase price of $28.5 million, subject to post-close purchase price adjustments.
The following unaudited pro forma condensed consolidated financial statements are based upon the historical financial statements of the Company, adjusted to reflect the sale of Strobic. The following unaudited pro forma condensed consolidated financial statements of the Company should be read in conjunction with the related notes and with the historical consolidated financial statements of the Company and the related notes included in its Annual Report on Form 10-K for the year ended December 31, 2017. The unaudited pro forma condensed consolidated balance sheet reflects the sale of Strobic as if it had occurred on December 31, 2017. The unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2017 gives effect to the sale as if it had occurred at the beginning of the period presented. The pro forma adjustments, described in Note 2, are based on the best available information and certain assumptions that the Company’s management believes to be reasonable.
The unaudited pro forma condensed consolidated financial statements are provided for illustrative purposes only and are not necessarily indicative of the financial position or results of operations that would have been achieved had the sale of Strobic closed on December 31, 2017 for the unaudited pro forma condensed consolidated balance sheet or closed at the beginning of the period presented for the unaudited pro forma condensed consolidated statement of operations, nor are they necessarily indicative of the Company’s future operating results. The adjustments and pro forma balances presented may be impacted by rounding.
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2017
(unaudited)
| | Reported | | | Pro Forma | | | Pro Forma | |
($ in thousands, except share data) | | December 31, 2017 | | | Adjustments (f) | | | December 31, 2017 | |
ASSETS | | | | | | | | | | | | |
Current assets: | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 29,902 | | | $ | 26,750 | | (a) | $ | 56,652 | |
Restricted cash | | | 591 | | | | — | | | | 591 | |
Accounts receivable, net | | | 67,990 | | | | (3,324 | ) | | | 64,666 | |
Costs and estimated earnings in excess of billings on uncompleted contracts | | | 33,947 | | | | — | | | | 33,947 | |
Inventories, net | | | 20,969 | | | | (942 | ) | | | 20,027 | |
Prepaid expenses and other current assets | | | 10,760 | | | | (4 | ) | | | 10,756 | |
Prepaid income taxes | | | 1,930 | | | | (97 | ) | | | 1,833 | |
Assets held for sale | | | 7,853 | | | | — | | | | 7,853 | |
Total current assets | | | 173,942 | | | | 22,383 | | | | 196,325 | |
Property, plant and equipment, net | | | 23,400 | | | | (203 | ) | | | 23,197 | |
Goodwill | | | 166,951 | | | | (12,966 | ) | | | 153,985 | |
Intangible assets – finite life, net | | | 49,956 | | | | (2,407 | ) | | | 47,549 | |
Intangible assets – indefinite life | | | 19,691 | | | | (1,220 | ) | | | 18,471 | |
Deferred charges and other assets | | | 4,609 | | | | — | | | | 4,609 | |
Total assets | | $ | 438,549 | | | $ | 5,587 | | | $ | 444,136 | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | | |
Current portion of debt | | $ | 11,296 | | | $ | — | | | $ | 11,296 | |
Accounts payable and accrued expenses | | | 70,786 | | | | (1,362 | ) | | | 69,424 | |
Billings in excess of costs and estimated earnings on uncompleted contracts | | | 20,469 | | | | (110 | ) | | | 20,359 | |
Note payable | | | 5,300 | | | | — | | | | 5,300 | |
Income taxes payable | | | — | | | | 6,145 | | (b) | | 6,145 | |
Total current liabilities | | | 107,851 | | | | 4,673 | | | | 112,524 | |
Other liabilities | | | 30,382 | | | | — | | | | 30,382 | |
Debt, less current portion | | | 103,537 | | | | — | | | | 103,537 | |
Deferred income tax liability, net | | | 10,210 | | | | — | | | | 10,210 | |
Total liabilities | | | 251,980 | | | | 4,673 | | | | 256,653 | |
Commitments and contingencies | | | | | | | | | | | | |
Shareholders’ equity: | | | | | | | | | | | | |
Preferred stock, $.01 par value; 10,000 shares authorized, none issued | | | — | | | | — | | | | — | |
Common stock, $.01 par value; 100,000,000 shares authorized, 34,707,924 shares issued and outstanding at December 31, 2017 | | | 347 | | | | — | | | | 347 | |
Capital in excess of par value | | | 248,170 | | | | — | | | | 248,170 | |
Accumulated loss | | | (52,673 | ) | | | 914 | | (c) | | (51,759 | ) |
Accumulated other comprehensive loss | | | (8,919 | ) | | | — | | | | (8,919 | ) |
| | | 186,925 | | | | 914 | | | | 187,839 | |
Less treasury stock, at cost, 137,920 shares at December 31, 2017 | | | (356 | ) | | | — | | | | (356 | ) |
Total shareholders’ equity | | | 186,569 | | | | 914 | | | | 187,483 | |
Total liabilities and shareholders' equity | | $ | 438,549 | | | $ | 5,587 | | | $ | 444,136 | |
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CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
DECEMBER 31, 2017
(unaudited)
| | Reported | | | Pro Forma | | | Pro Forma | |
($ in thousands, except share and per share data) | | December 31, 2017 | | | Adjustments (e) | | | December 31, 2017 | |
Net sales | | $ | 345,051 | | | $ | (17,744 | ) | | $ | 327,307 | |
Cost of sales | | | 231,857 | | | | (12,285 | ) | | | 219,572 | |
Gross profit | | | 113,194 | | | | (5,459 | ) | | | 107,735 | |
Selling and administrative expenses | | | 88,975 | | | | (3,242 | ) | | | 85,733 | |
Amortization and earnout expenses | | | 7,132 | | | | (621 | ) | | | 6,511 | |
Intangible asset and goodwill impairment | | | 7,168 | | | | — | | | | 7,168 | |
Restructuring expenses | | | 1,895 | | | | — | | | | 1,895 | |
Income from operations | | | 8,024 | | | | (1,596 | ) | | | 6,428 | |
Other income (expense), net | | | 106 | | | | (4 | ) | | | 102 | |
Interest expense | | | (6,721 | ) | | | — | | | | (6,721 | ) |
Income (loss) before income taxes | | | 1,409 | | | | (1,600 | ) | | | (191 | ) |
Income tax expense | | | 4,438 | | | | (624 | ) | (d) | | 3,814 | |
Net loss | | $ | (3,029 | ) | | $ | (976 | ) | | $ | (4,005 | ) |
Net loss attributable to noncontrolling interest | | $ | — | | | $ | — | | | $ | — | |
Net loss attributable to CECO Environmental Corp. | | $ | (3,029 | ) | | $ | (976 | ) | | $ | (4,005 | ) |
Loss per share: | | | | | | | | | | | | |
Basic | | $ | (0.09 | ) | | | | | | $ | (0.12 | ) |
Diluted | | $ | (0.09 | ) | | | | | | $ | (0.12 | ) |
Weighted average number of common shares outstanding: | | | | | | | | | �� | | | |
Basic | | | 34,445,256 | | | | | | | | 34,445,256 | |
Diluted | | | 34,445,256 | | | | | | | | 34,445,256 | |
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NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Note 1: Basis of Presentation
The unaudited pro forma condensed consolidated financial statements are based on the historical financial information of the Company adjusted to give effect to the sale of Strobic.
The unaudited pro forma condensed consolidated balance sheet reflects the sale of Strobic as if it had occurred on December 31, 2017. The unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2017 gives effect to the sale as if it had occurred at the beginning of the period presented. The unaudited pro forma condensed consolidated financial statements are based upon available information and assumptions that the Company believes are reasonable under the circumstances and are prepared to illustrate the estimated effects of the sale.
The unaudited pro forma condensed consolidated financial statements have been provided for illustrative purposes only and are not necessarily indicative of the financial position or results of operations that would have been achieved had the sale occurred on December 31, 2017 for the unaudited pro forma condensed consolidated balance sheet or at the beginning of the period presented for the unaudited pro forma condensed consolidated statement of operations, nor are they necessarily indicative of the Company’s future operating results.
Note 2: Pro Forma Adjustments
The pro forma adjustments included in the unaudited pro forma condensed consolidated financial statements:
(a) Reflects the gross proceeds of $28.5 million and transaction costs of $1.8 million from the sale of Strobic.
(b) Reflects the estimated current tax liability from the gain on the sale of Strobic using a federal statutory tax rate of 21% and a state tax rate of 5%.
(c) Reflects the net effect to accumulated earnings after pro forma adjustments.
(d) The tax effect of the pro-forma adjustments was calculated using the blended statutory tax rate of 39%.
(e) Reflects the pro forma adjustments to eliminate the revenues and expenses that are directly attributable to Strobic and will not continue after the completion of the sale.
(f) Reflects the pro forma adjustments to eliminate the assets and liabilities that are directly attributable to Strobic.
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