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What changed in CECO ENVIRONMENTAL CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of CECO ENVIRONMENTAL CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+173 added−176 removedSource: 10-K (2025-02-25) vs 10-K (2024-03-05)

Top changes in CECO ENVIRONMENTAL CORP's 2024 10-K

173 paragraphs added · 176 removed · 148 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe seek to fulfill this mission by providing leading solutions for niche, engineered applications in industrial air treatment and management, industrial water treatment, and the energy transition. We will continue to leverage our technologies and application expertise for customers around the world.
Biggest changeMission and Strategy Our mission is to help companies grow their business with safe, clean and more efficient solutions that help protect their people, the environment and their industrial equipment and facilities. We seek to fulfill this mission by providing leading solutions for niche, engineered applications in industrial air treatment and management, industrial water treatment, and the energy transition.
Providing assistance in meeting or exceeding stringent environmental regulations are a principal factor that drives our business. • Favorable Investment Climate for Net-zero Technologies: Our businesses are positively impacted by capital expenditures on technologies to address climate change and improve environmental outcomes. 2 • Emerging Market Industrialization: The rapid expansion of manufacturing in emerging economies, and the growing environmental focus in such emerging economies, increases the demand for our industrial air treatment and pollution controls for newly constructed and upgraded facilities.
Providing assistance in meeting or exceeding stringent environmental regulations are a principal factor that drives our business. • Favorable Investment Climate for Net-zero Technologies: Our businesses are positively impacted by capital expenditures on technologies to address climate change and improve environmental outcomes. • Emerging Market Industrialization: The rapid expansion of manufacturing in emerging economies, and the growing environmental focus in such emerging economies, increases the demand for our industrial air treatment and pollution controls for newly constructed and upgraded facilities.
These new and expanded facilities must comply with stricter environmental regulations, wastewater discharge, and emission controls requirements, and the adaptation of production processes will require new or modified catalyst recovery and regeneration systems which we provide. These factors, individually or collectively, tend to drive increases in industrial capital spending that are not directly impacted by general economic conditions.
These new and expanded facilities must comply with stricter 4 environmental regulations, wastewater discharge, and emission controls requirements, and the adaptation of production processes will require new or modified catalyst recovery and regeneration systems which we provide. These factors, individually or collectively, tend to drive increases in industrial capital spending that are not directly impacted by general economic conditions.
We offer our customers a complete end-to-end solution, including engineering and project management services, procurement and fabrication, construction and installation, aftermarket support, and sale of consumables, which allows our customers to avoid dealing with multiple vendors when managing projects. Long-standing experience and customer relationships in growing industry We have serviced the needs of our target markets for over 50 years.
We offer our customers a complete end-to-end solution, including engineering and project management services, procurement and fabrication, construction and installation, aftermarket support, and sale of consumables, which allows our customers to avoid dealing with multiple vendors when managing projects. 5 Long-standing experience and customer relationships in growing industry We have serviced the needs of our target markets for over 50 years.
When possible, we directly secure iron and steel sheet and plate products from steel mills, whereas other materials are purchased from a variety of steel service centers. Steel prices have traditionally been volatile, but we typically mitigate the risk of higher prices by including a “surcharge” on our standard products and tracking major materials industry indices and projections.
When possible, we directly secure iron and steel sheet and plate products from steel mills, whereas other materials are purchased from a variety of steel service centers. Steel prices have traditionally been volatile, but we typically mitigate the risk of higher prices by including a “surcharge” on our standard products and 7 tracking major materials industry indices and projections.
The SEC also maintains a website, www.sec.gov, that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. The content on any website referred to in this Annual Report on Form 10-K is not incorporated by reference into this Annual Report on Form 10-K unless expressly noted. 9
The SEC also maintains a website, www.sec.gov, that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. The content on any website referred to in this Annual Report on Form 10-K is not incorporated by reference into this Annual Report on Form 10-K unless expressly noted. 10
As our customers and end markets navigate this changing landscape, we are making production and power generation cleaner, more efficient and flexible, and workplaces safer. Increasingly, society, along with government regulation, is calling for companies to commit to the preservation and protection of the environment.
As our customers and end markets navigate this changing landscape, we are making production and power generation cleaner, more efficient and flexible, and workplaces safer. Increasingly, society, along with government regulation, is calling for companies to commit to the preservation and protection of the 3 environment.
Our legacy sectors include industrial wastewater treatment, industrial ventilation systems and contamination controls and filtration, semiconductor fabrication, electronics manufacturing, baseload and backup power generation, hydrocarbon processing, chemical processing, natural gas processing and transport, automobile and aircraft production, polysilicon production, battery recycling, metals processing and production, and produced water treatment.
Our legacy sectors include industrial wastewater treatment, industrial ventilation systems and contamination controls and filtration, semiconductor fabrication, electronics manufacturing, baseload and backup power generation, hydrocarbon processing, chemical processing, natural gas processing and transport, automobile production, polysilicon production, battery recycling, metals processing and production, and produced water treatment.
We sell and market our products and services with our own direct sales force in key regions including the United States, the Netherlands, United Kingdom, Canada, United Arab Emirates, India, China, Korea, and Singapore.
We sell and market our products and services with our own direct sales force in key regions including the United States, the Netherlands, United Kingdom, Germany, Canada, United Arab Emirates, India, China, Korea, and Singapore.
Our platform leaders have significant industry experience and are supported by an experienced and talented management team who is dedicated to maintaining 8 and expanding our position as a global leader in our markets. For discussion of the risks related to attracting and retention of management and executive employees, refer to “Part I, Item 1A.
Our platform leaders have significant industry experience and are supported by an experienced and talented management team who is dedicated to maintaining 9 and expanding our position as a global leader in our markets. For discussion of the risks related to attracting and retention of management and executive employees, refer to “Part I, Item 1A.
With an installed base of operating systems and equipment in excess of $6 billion, we are targeting to grow a higher share of recurring revenue from aftermarket products and installed base value-added services, which we believe will provide a greater customer retention and loyalty, and increased business resiliency.
With an installed base of operating systems and equipment in excess of $10 billion, we are targeting to grow a higher share of recurring revenue from aftermarket products and installed base value-added services, which we believe will provide a greater customer retention and loyalty, and increased business resiliency.
Customers We are not dependent upon any single customer, and no customer contributed 10% or more of our consolidated revenues for the years ended December 31, 2023, 2022, or 2021. Suppliers and Subcontractors We purchase our raw materials and supplies from a variety of global sources.
Customers We are not dependent upon any single customer, and no customer contributed 10% or more of our consolidated revenues for the years ended December 31, 2024, 2023, or 2022. Suppliers and Subcontractors We purchase our raw materials and supplies from a variety of global sources.
Todd Gleason (53) has served as a director and Chief Executive Officer since July 2020, and is responsible for driving the company’s strategic vision and aligning the organization for optimal value creation. Prior to joining the Company, Mr.
Todd Gleason (54) has served as a director and Chief Executive Officer since July 2020, and is responsible for driving the company’s strategic vision and aligning the organization for optimal value creation. Prior to joining the Company, Mr.
Peter Johansson (59) has served as SVP, Chief Financial and Strategy Officer since August 2022. From April 2020 to August 2022, Mr. Johansson had been an independent strategy and business development consultant and joined CECO as a consultant in October 2021.
Peter Johansson (60) has served as SVP, Chief Financial and Strategy Officer since August 2022. From April 2020 to August 2022, Mr. Johansson had been an independent strategy and business development consultant and joined CECO as a consultant in October 2021.
Lynn Watkins-Asiyanbi (49) has served as SVP, Chief Administrative and Legal Officer, and Corporate Secretary since August 2022. Prior to that, from June 2022 to August 2022, Ms. Watkins-Asiyanbi served as Senior Vice President, General Counsel and Corporate Secretary. From June 2016 to June 2022, Ms.
Lynn Watkins-Asiyanbi (50) has served as SVP, Chief Administrative and Legal Officer, and Corporate Secretary since August 2022. Prior to that, from June 2022 to August 2022, Ms. Watkins-Asiyanbi served as Senior Vice President, General Counsel and Corporate Secretary. From June 2016 to June 2022, Ms.
While there are not currently regulations proposed or pending that we believe will result in material capital, operating or other costs to the business at this time, such regulations could be proposed and/or passed into law in 2024 or beyond. Other regulations currently in place could be withdrawn and replaced with more stringent 7 requirements in 2024 or beyond.
While there are not currently regulations proposed or pending that we believe will result in material capital, operating or other costs to the business at this time, such regulations could be proposed and/or passed into law in 2025 or beyond. Other regulations currently in place could be withdrawn and replaced with more stringent requirements in 2025 or beyond.
In addition to lagging indicators, such as injury performance, the scorecards highlight leading indicators such as safety observations and near-misses, as well as other proactive actions taken at each site to ensure worker safety. For the year ended December 31, 2023, CECO’s domestic Total Recordable Incident Rate (“TRIR”) was 1.5% as compared to our benchmark industry average TRIR of 4.3%.
In addition to lagging indicators, such as injury performance, the scorecards highlight leading indicators such as safety observations and near-misses, as well as other proactive actions taken at each site to ensure worker safety. For the year ended December 31, 2024, CECO’s domestic Total Recordable Incident Rate (“TRIR”) was 1.2% as compared to our benchmark industry average TRIR of 4.3%.
Emerging sectors and applications include electric vehicle and battery production, desalination water transport, ultra-high purity water treatment for electrolysis and electronics production, naval/marine vessel oily water treatment, aluminum beverage can production, and lightweight, high-strength metals production.
Emerging sectors and applications include electric vehicle and battery production, desalination water transport, ultra-high purity water treatment for electrolysis and electronics production, naval/marine vessel oily water treatment, aluminum beverage can production, lightweight, high-strength metals production and datacenter acoustics management.
We conduct an annual code of conduct training that includes subject matter areas of: anti-corruption, discrimination, harassment, data privacy, appropriate use of company assets, protecting confidential information and how to report code violations. Each employee takes this annual training and follow up communications are conducted to ensure completion of the course by all employees.
We conduct an annual code of conduct training that includes, but is not limited to, the following subject matter areas: anti-corruption, discrimination, harassment, data privacy, appropriate use of company assets, protecting confidential information and how to report code violations. Each employee takes this annual training and follow up communications are conducted to ensure completion of the course by all employees.
Risk Factors” of this Annual Report on Form 10-K. Executive Officers of CECO The following are the executive officers of the Company as of February 26, 2024. All officers serve for a one year term and until their successors are elected and qualified.
Risk Factors” of this Annual Report on Form 10-K. Executive Officers of CECO The following are the executive officers of the Company as of February 13, 2025. All officers serve for a one year term and until their successors are elected and qualified.
Competition in the markets we serve is based on a number of considerations, including past performance, track record, customer approvals, lead times, technology, applications experience, know-how, reputation, product warranties, service and price. Demand for our product can vary period over period depending on conditions in the markets we serve.
Competition in the markets we serve is based on a number of considerations, including past performance, track record, customer approvals, lead times, technology, applications experience, know-how, reputation, product warranties, service and price, as well as being on the customer’s vendor approved list. Demand for our product can vary period over period depending on conditions in the markets we serve.
We believe that the additional competitive factors in our markets include: • performance track record and reputation; • comprehensive portfolio of solutions; • brand recognition; • high design standard; • quality customer service and support; and • financial and operational stability. We believe we compete favorably with respect to these factors.
We believe that the additional competitive factors in our markets include: • performance track record and reputation; • comprehensive portfolio of solutions; • brand recognition; • high design standard; • quality customer service and support; and • financial and operational stability.
Government Regulations We believe our operations are in compliance with applicable environmental laws and regulations. We believe that changes in environmental laws and regulations create opportunity given the nature of our business. Our business is subject to numerous evolving laws and regulations.
We believe we compete favorably with respect to these factors. 8 Government Regulations We believe our operations are in compliance with applicable environmental laws and regulations. We believe that changes in environmental laws and regulations create opportunity given the nature of our business. Our business is subject to numerous evolving laws and regulations.
We also timely completed our mandated sexual harassment training courses with the specified employees. We believe our management team has the experience necessary to effectively execute our strategy.
We also timely completed our mandated sexual harassment training courses both domestically and internationally with the impacted employees. We believe our management team has the experience necessary to effectively execute our strategy.
Backlog Backlog (i.e., unfulfilled or remaining performance obligations) represents the sales we expect to recognize for our products and services for which control has not yet transferred to the customer. Backlog was $370.9 million as of December 31, 2023 as compared to $311.7 million as of December 31, 2022, an increase of $59.2 million or 19.0%.
Backlog Backlog (i.e., unfulfilled or remaining performance obligations) represents the sales we expect to recognize for our products and services for which control has not yet transferred to the customer. Backlog was $540.9 million as of December 31, 2024 as compared to $370.9 million as of December 31, 2023, an increase of $170.0 million or 45.8%.
We start by understanding our customers’ needs, then by focusing our new product development efforts on those criteria that help protect our shared environment while improving a variety of operational outcomes including, but not limited to, facility uptime, production quality, employee safety, equipment protection and process performance. 5 We continually collaborate with our customers on projects to ensure the proper solution and customer satisfaction.
We start by understanding our customers’ needs, then by focusing our new product 6 development efforts on those criteria that help protect our shared environment while improving a variety of operational outcomes including, but not limited to, facility uptime, production quality, employee safety, equipment protection and process performance.
Our strategy to become a global leader in niche applications in industrial air treatment and management, industrial water treatment, and the energy transition is supported by an operating environment of performance excellence across the Company.
We will continue to leverage our technologies and application expertise for customers around the world. Our strategy to become a global leader in niche applications in industrial air treatment and management, industrial water treatment, and the energy transition is supported by an operating environment of performance excellence across the Company.
Our business model focuses on effective management of subcontractors and flow of raw and finished materials, which allows us to optimize working capital levels through reduction in certain assets and reduce capital expenditures.
Subcontractors are generally paid when we are paid by our customers according to the terms of our contract with the customer. Our business model focuses on effective management of subcontractors and flow of raw and finished materials, which allows us to optimize working capital levels through reduction in certain assets and reduce capital expenditures.
As of December 31, 2023, CECO had approximately 1,200 employees, across nine countries. Of our US employees, 131 are unionized in our Pennsylvania, Tennessee and North Carolina facilities. Outside the United States, we enter into employment contracts and agreements in those countries in which such relationships are mandatory or customary.
CECO has approximately 1,600 employees, across 10 countries. Of our United States employees, 190 are unionized in our Pennsylvania, Tennessee, North Carolina and Ohio facilities. Outside the United States, we enter into employment contracts and/or agreements in those countries where such relationships are mandatory or customary.
We use subcontractors with whom we have good working relationships and review each project at the beginning and on an ongoing basis to help ensure that all work is being done according to our specifications. Subcontractors are generally paid when we are paid by our customers according to the terms of our contract with the customer.
Typically, on turnkey projects, we subcontract manufacturing, electrical work, concrete work, controls, conveyors and insulation. We use subcontractors with whom we have good working relationships and review each project at the beginning and on an ongoing basis to help ensure that all work is being done according to our specifications.
We have a diversified customer base across a range of industries. We believe that the diversity of our customers, solutions, and end markets mitigates our risk of a potential fluctuation or downturn in demand from any individual industry or particular customer.
We believe that the diversity of our customers, solutions, and end markets mitigates our risk of a potential fluctuation or downturn in demand from any individual industry or particular customer. We believe we have the resources and capabilities to meet the needs of our customers as they upgrade and expand domestically as well as into new international markets.
The project development cycle may follow many different paths depending on the specifics of the job and end market.
We continually collaborate with our customers on projects to ensure the proper solution and customer satisfaction. The project development cycle may follow many different paths depending on the specifics of the job and end market.
Backlog is adjusted on a quarterly basis for fluctuations in foreign currency exchange rates. Substantially all backlog is expected to be delivered within 18 months, with a majority within 12 months. Backlog is not defined by United States generally accepted accounting principles ("GAAP") and our methodology for calculating backlog may not be consistent with methodologies used by other companies.
Backlog is adjusted on a quarterly basis for fluctuations in foreign currency exchange rates. Substantially all backlog is expected to be delivered within 18 - 24 months, with a majority within 12 months.
Competition The markets we serve are highly fragmented with numerous small and regional participants. We believe no single company competes with us across the full range of our solutions and products.
Backlog is not defined by United States generally accepted accounting principles ("GAAP") and our methodology for calculating backlog may not be consistent with methodologies used by other companies. Competition The markets we serve are highly fragmented with numerous small and regional participants. We believe no single company competes with us across the full range of our solutions and products.
We offer the depth of a large organization, while our lean organizational structure keeps us close to our customers and markets, allowing us to offer rapid and complete solutions in each unique situation. 4 Diversified equipment and solution portfolio and broad customer base The global diversity of our offering and footprint and customer base provides us with multiple growth opportunities.
We believe no single competitor has the resources to offer a similar portfolio of product and service capabilities. We offer the depth of a large organization, while our lean organizational structure keeps us close to our customers and markets, allowing us to offer rapid and complete solutions in each unique situation.
In contrast, favorable conditions in the economy generally lead to plant expansions and the construction of new industrial sites.
In contrast, favorable conditions in the economy generally lead to plant expansions and the construction of new industrial sites. However, in a weak economy, customers tend to lengthen the time from initial inquiry to the purchase order or may elect to defer purchases.
On contract work, we try to mitigate the risk of higher prices by including the current price in our estimate and generally include price inflation clauses for protection. 6 Typically, on turnkey projects, we subcontract manufacturing, electrical work, concrete work, controls, conveyors and insulation.
On contract work, we try to mitigate the risk of higher prices by including the current price in our estimate and generally include price inflation clauses for protection. We are prepared to quantify the impact of tariff policy changes on the purchase of raw materials and supplies, as they become available.
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However, in a weak economy, customers tend to lengthen the time from initial inquiry to the purchase order or may elect to defer purchases. 3 Mission and Strategy Our mission is to help companies grow their business with safe, clean and more efficient solutions that help protect their people, the environment and their industrial equipment and facilities.
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In 2024 and the first quarter of 2025, we disclosed multiple transactions that strategically align with the Company’s portfolio management strategy and vision. These transactions include the acquisition of Profire Energy ("Profire") and the intended divestiture of the Company’s Fluid Handling business.
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We believe no single competitor has the resources to offer a similar portfolio of product and service capabilities.
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Profire, a former publicly traded company on the NASDAQ under ticker symbol PFIE, is a leading North American supplier of mission-critical combustion automation and control solution services. Their core offering supports emissions reduction, safety objectives, and industry regulations.
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We believe we have the resources and capabilities to meet the needs of our customers as they upgrade and expand domestically as well as into new international markets.
Added
Profire has a large install base across oil & gas, petrochemical, and natural gas markets, with growing exposure to other energy transition markets. The business is headquartered in Lindon, Utah, with a research and development center in Edmonton-Alberta, Canada. The business has a long-tenured and experienced leadership team and had 2024 revenues of $63 million with accretive EBITDA margins.
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As part of our efforts to expand CECO’s diverse workforce, we: • initiated and implemented recruitment efforts to attract and build a more diverse workforce, including expanding career opportunity postings on career websites to diverse job boards, as well as search engines that aggregate and display job openings by employers, including those dedicated to diverse candidates; and • are developing a comprehensive Diversity, Equity and Inclusive roadmap to align with our operational structure.
Added
Fluid Handling is a well-positioned business with strong brands in the pumps and filters space. However, we are focused on businesses that more closely align with our strategic investments and leadership positions in the air, water and energy transition spaces.
Added
Diversified equipment and solution portfolio and broad customer base The global diversity of our offering and footprint and customer base provides us with multiple growth opportunities. We have a diversified customer base across a range of industries.
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Tariff policy is difficult to predict, any strategy shifts made in response to tariffs will be grounded in rigorous analysis that supports long-term value potential and that can hold up to further shifts in trade policy. We are partnering with trade policy experts and continuously assessing comprehensive supply chain vulnerability.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf we continue to have material weaknesses in our internal controls, or, if we fail to develop and maintain adequate internal controls in the future, including remediating any material weaknesses or deficiencies in our internal controls, we could be subject to regulatory actions, civil or criminal penalties or stockholder litigation.
Biggest changeIf we fail to maintain the adequacy of our internal controls, including remediating any material weaknesses or deficiencies in our internal controls, as such standards are modified, supplemented or amended in the future, we could be subject to regulatory actions, civil or criminal penalties or stockholder litigation.
If we are not able to establish and maintain effective internal control over financial reporting, including any failure to implement required new or improved controls, or if we experience difficulties in their implementation, our business, financial condition and 20 operating results could be harmed.
If we are not able to establish and maintain effective internal control over financial reporting, including any failure to implement required new or improved controls, or if we experience difficulties in their implementation, our business, financial condition and operating results could be harmed.
We can give no assurances that any additional material weaknesses will not arise in the future due to our failure to implement and maintain adequate internal control over financial reporting. Item 1B. Unresolve d Staff Comments Not applicable.
We can give no assurances that any material weaknesses will not arise in the future due to our failure to implement and maintain adequate internal control over financial reporting. Item 1B. Unresolve d Staff Comments Not applicable.
A trade war or other governmental action related to tariffs or international trade agreements, and any resulting negative sentiments towards the United States as a result thereof, would likely have an adverse effect on our international operations or upon our business, financial condition, results of operations and cash flows. 18 Risks Related to Our Common Stock The market price of our common stock may be volatile or may decline regardless of our operating performance and investors may not be able to resell shares they purchase at their purchase price.
A trade war or other governmental action related to tariffs or international trade agreements, and any resulting negative sentiments towards the United States as a result thereof, would likely have an adverse effect on our international operations or upon our business, financial condition, results of operations and cash flows. 19 Risks Related to Our Common Stock The market price of our common stock may be volatile or may decline regardless of our operating performance and investors may not be able to resell shares they purchase at their purchase price.
Failure of suppliers to supply, or delays in supplying, our raw materials or certain components, or allocations in the supply of certain high demand raw components, for any reason, including, without limitation, disruptions in our suppliers’ due to cybersecurity incidents, terrorist activity, public health crises, fires or other natural disasters could 12 materially adversely affect our operations and ability to meet our own delivery schedules on a timely and competitive basis.
Failure of suppliers to supply, or delays in supplying, our raw materials or certain components, or allocations in the supply of certain high demand raw components, for any reason, including, without limitation, disruptions in our suppliers’ due to cybersecurity incidents, terrorist activity, public health crises, fires or other natural disasters could 13 materially adversely affect our operations and ability to meet our own delivery schedules on a timely and competitive basis.
In the event of systems failure or interruption, including those related to force majeure, telecommunications failures, criminal acts, including hardware or software break-ins or extortion attempts, or viruses, or other cybersecurity incidents, we 16 will have limited ability to affect the timing and success of systems restoration and any resulting interruption in our ability to manage and operate our business could have a material adverse effect on our operating results.
In the event of systems failure or interruption, including those related to force majeure, telecommunications failures, criminal acts, including hardware or software break-ins or extortion attempts, or viruses, or other cybersecurity incidents, we will have limited ability to affect the timing and success of systems restoration and any resulting interruption in our ability to manage 17 and operate our business could have a material adverse effect on our operating results.
Bribery 17 Act (as defined below), the European Union’s General Data Protection Regulations and similar laws of other jurisdictions, could adversely impact our ability to compete against companies in such jurisdictions. Moreover, the violation of such laws or regulations, by us or our representatives, could result in severe penalties including monetary fines, criminal proceedings and suspension of export privileges.
Bribery 18 Act (as defined below), the European Union’s General Data Protection Regulations and similar laws of other jurisdictions, could adversely impact our ability to compete against companies in such jurisdictions. Moreover, the violation of such laws or regulations, by us or our representatives, could result in severe penalties including monetary fines, criminal proceedings and suspension of export privileges.
Any 13 write-down of goodwill or intangible assets resulting from future periodic evaluations could adversely materially impact our results of operations. We may incur costs as a result of certain restructuring activities, which may negatively impact our financial results, and we may not achieve some or all of the expected benefits of our restructuring plans.
Any 14 write-down of goodwill or intangible assets resulting from future periodic evaluations could adversely materially impact our results of operations. We may incur costs as a result of certain restructuring activities, which may negatively impact our financial results, and we may not achieve some or all of the expected benefits of our restructuring plans.
For the year ended December 31, 2023, approximately 33% of our total revenue was derived from products or services ultimately delivered or provided to end users outside the United States. As part of our operating strategy, we intend to expand our international operations through internal growth and selected acquisitions.
For the year ended December 31, 2024, approximately 33% of our total revenue was derived from products or services ultimately delivered or provided to end users outside the United States. As part of our operating strategy, we intend to expand our international operations through internal growth and selected acquisitions.
Implementing our business strategy requires specialized engineering and other talent, as our revenues are highly dependent on technological and product innovations. The market for employees in our industry is extremely competitive, and competitors for talent, particularly engineering talent, increasingly attempt to hire, and to varying degrees have been successful in hiring, our employees.
Implementing our business strategy requires specialized engineering and other talent, as our revenues are highly dependent on technological and product innovations. The market for employees in our industry is extremely competitive, and competition for talent, particularly engineering talent, increasingly attempt to hire, and to varying degrees have been successful in hiring, our employees.
We may not be able to refinance our existing or future debt, sell assets, borrow more money or raise equity on terms acceptable to us, if at all. 14 Our ability to execute our growth strategies may be limited by our ability to secure and retain additional financing on terms reasonably acceptable to us or at all.
We may not be able to refinance our existing or future debt, sell assets, borrow more money or raise equity on terms acceptable to us, if at all. 15 Our ability to execute our growth strategies may be limited by our ability to secure and retain additional financing on terms reasonably acceptable to us or at all.
Currency fluctuations may reduce profits on our foreign sales or increase our costs, either of which could adversely affect our financial results. Given that approximately 33% of our 2023 revenues are outside the United States, we are subject to the impact of fluctuations in foreign currency exchange rates.
Currency fluctuations may reduce profits on our foreign sales or increase our costs, either of which could adversely affect our financial results. Given that approximately 33% of our 2024 revenues are outside the United States, we are subject to the impact of fluctuations in foreign currency exchange rates.
Any changes the Biden administration makes to United States administrative policy could result in changes to existing trade agreements, greater restrictions on free trade generally and significant increases in tariffs on goods imported into the United States, particularly tariffs on products manufactured in Mexico and China, among other possible changes.
Any changes the Trump administration makes to United States administrative policy could result in changes to existing trade agreements, greater restrictions on free trade generally and significant increases in tariffs on goods imported into the United States, particularly tariffs on products manufactured in Mexico and China, among other possible changes.
Contract revenue and total direct cost estimates are reviewed and revised periodically as the work progresses and as change orders are approved, and adjustments are reflected in contract revenue in the period when these estimates are revised. These estimates are based 10 on management’s reasonable assumptions and our historical experience, and are only estimates.
Contract revenue and total direct cost estimates are reviewed and revised periodically as the work progresses and as change orders are approved, and adjustments are reflected in contract revenue in the period when these estimates are revised. These estimates are based 11 on management’s reasonable assumptions and our historical experience, and are only estimates.
For example, in a year-long project as opposed to a three-month project, more time is available for the customer to experience a softening in its business, which may cause the customer to cancel a project. 11 We face significant competition in the markets we serve.
For example, in a year-long project as opposed to a three-month project, more time is available for the customer to experience a softening in its business, which may cause the customer to cancel a project. 12 We face significant competition in the markets we serve.
We and our customers 15 will need to respond to new laws and regulations as well as consumer and business preferences resulting from climate change concerns. We and our customers may face cost increases, asset value reductions and operating process changes.
We and our customers 16 will need to respond to new laws and regulations as well as consumer and business preferences resulting from climate change concerns. We and our customers may face cost increases, asset value reductions and operating process changes.
Long-term fluctuations in relative currency values could have an adverse effect on our operations and financial conditions. If our goodwill or indefinite lived intangibles become impaired, we may be required to recognize charges that would adversely impact our results of operations. As of December 31, 2023, goodwill and indefinite lived intangibles were $220.9 million, or 36.8%, of our total assets.
Long-term fluctuations in relative currency values could have an adverse effect on our operations and financial conditions. If our goodwill or indefinite lived intangibles become impaired, we may be required to recognize charges that would adversely impact our results of operations. As of December 31, 2024, goodwill and indefinite lived intangibles were $279.2 million, or 36.8%, of our total assets.
We continue to devote substantial time and resources to the documentation and testing of our controls, and to plan for and the implementation of remedial efforts in those instances where remediation is indicated. As disclosed in Item 9A.
We continue to devote substantial time and resources to the documentation and testing of our controls, and to plan for and the implementation of remedial efforts in those instances where remediation is indicated.
As of December 31, 2023, approximately 200 of our approximately 1,200 employees are represented by international or independent labor unions under various union contracts, which, for our covered employees in the United States, expire between November 12, 2025 and May 1, 2026. It is possible that our workforce will become more unionized in the future.
Approximately 260 of our approximately 1,600 employees are represented by international or independent labor unions under various union contracts, which, for our covered employees in the United States, expire between November 12, 2025 and May 1, 2026. It is possible that our workforce will become more unionized in the future.
We have $138.6 million of indebtedness as of December 31, 2023, and incurrence of additional indebtedness could adversely affect our ability to operate our business, remain in compliance with debt covenants, make payments on our debt and limit our growth.
We have $221.5 million of indebtedness as of December 31, 2024, and incurrence of additional indebtedness could adversely affect our ability to operate our business, remain in compliance with debt covenants, make payments on our debt and limit our growth.
Our inability to deliver our backlog on time could affect our future sales and profitability, and our relationships with our customers. Our backlog was $370.9 million at December 31, 2023 and $311.7 million at December 31, 2022.
Our inability to deliver our backlog on time could affect our future sales and profitability, and our relationships with our customers. Our backlog was $540.9 million at December 31, 2024 and $370.9 million at December 31, 2023.
Such provisions, including those limiting who may call special stockholders’ meetings, together with the possible issuance of our preferred stock without stockholder approval, may make it more difficult for other persons, without the approval of our Board of Directors, to make a tender offer or otherwise acquire substantial amounts of our common stock or to launch other takeover attempts that a stockholder might consider to be in such stockholder’s best interest. 19 Risks Related to Internal Control over Financial Reporting We have identified material weaknesses in our internal control over financial reporting.
Such provisions, including those limiting who may call special stockholders’ meetings, together with the possible issuance of our preferred stock without stockholder approval, may make it more difficult for other persons, without the approval of our Board of Directors, to make a tender offer or otherwise acquire substantial amounts of our common stock or to launch other takeover attempts that a stockholder might consider to be in such stockholder’s best interest. 20 Risks Related to Internal Control over Financial Reporting Failure to maintain adequate internal controls could adversely affect our business.
Increased information technology cybersecurity threats and more sophisticated and targeted computer crime could pose a risk to our systems, networks, and products. Increased global information technology cybersecurity threats and more sophisticated and targeted computer crime pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data and communications.
Increased global information technology cybersecurity threats and more sophisticated and targeted computer crime, including utilization of generative artificial intelligence, pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data and communications.
The stock market has experienced and may in the future experience volatility that has often been unrelated to the operating performance of particular companies. The market price of our common stock has experienced, and may continue to experience, substantial volatility. During 2023, the sales price of our common stock on the NASDAQ ranged from $10.68 to $21.43 per share.
The stock market has experienced and may in the future experience volatility that has often been unrelated to the operating performance of particular companies. The market price of our common stock has experienced, and may continue to experience, substantial volatility. During 2024, the sales price of our common stock on the NASDAQ ranged from $18.50 to $35.16 per share.
Removed
If we are unable to develop and maintain adequate internal controls, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business.
Added
Additionally, our vendors may incorporate artificial intelligence tools into their offerings, which may inhibit their ability to maintain an adequate level of service and experience. Increased information technology cybersecurity threats and more sophisticated and targeted computer crime could pose a risk to our systems, networks, and products.
Removed
“Controls and Procedures” in this Annual Report on Form 10-K, we have material weaknesses in our control environment with regard to management’s review of revenue recognition for contracts and balance sheet reconciliations.
Removed
These material weaknesses could result in a misstatement of account balances or disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected.
Removed
To address these material weaknesses, we have developed a remediation plan that includes reinforcing the importance of adherence to Company policies regarding control performance and related documentation with control owners, strengthening existing training programs for control owners, and developing monitoring activities to validate the performance of controls by control owners. As of December 31, 2023, these remediation efforts are ongoing.
Removed
The actions that we are taking are subject to ongoing senior management review, as well as Audit Committee oversight. We will not be able to conclude whether the steps we are taking will fully remediate the material weaknesses in our internal control over financial reporting until we have completed our remediation efforts and subsequent evaluation of their effectiveness.
Removed
Until these material weaknesses are remediated, we plan to continue to perform additional analyses and other procedures to ensure that our consolidated financial statements are prepared in accordance with GAAP.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Company has engaged third-party cybersecurity service providers and leverages leading technologies and expertise to monitor, maintain, and provide 24/7 managed detection and response capabilities for coordination, escalation and remediation of alerts associated with information technology systems utilized by the Company.
Biggest changeIn general, the Company seeks to address cybersecurity risks through a comprehensive, cross-functional approach that is focused on preserving the confidentiality, security, and availability of Company and customer systems, information, and products. 21 The Company has engaged third-party cybersecurity service providers and leverages leading technologies and expertise to monitor, maintain, and provide 24/7 managed detection and response capabilities for coordination, escalation and remediation of alerts associated with information technology systems utilized by the Company.
Cybersecurity threats, including those as a result of any previous cybersecurity incidents, have not materially affected or are reasonably likely to materially affect the Company, including its business strategy, results of operations or financial condition. For more information on our cybersecurity related risks, refer to "Part I, Item 1A. Risk Factors" of this Annual Report on Form 10-K. 21
Cybersecurity threats, including those as a result of any previous cybersecurity incidents, have not materially affected or are reasonably likely to materially affect the Company, including its business strategy, results of operations or financial condition. For more information on our cybersecurity related risks, refer to "Part I, Item 1A. Risk Factors" of this Annual Report on Form 10-K.
The VP of IT has served in various roles in information technology and information security for over 25 years, including leading the cybersecurity programs for three public companies. The VP of IT holds undergraduate and graduate degrees in business and has attained multiple cybersecurity certifications including Certified Information Security Manager.
The VP of IT has served in various leadership roles in information technology and information security for over 25 years, including leading the cybersecurity programs for three public companies. The VP of IT holds undergraduate and graduate degrees in business and has attained multiple cybersecurity certifications including Certified Information Security Manager and Data Privacy.
Through ongoing communications, the VP of IT and the Executive Leadership Team, which includes our Chief Executive Officer, Chief Financial and Strategy Officer, and Chief Administrative and Legal Officer, monitor the prevention, detection, mitigation and remediation of cybersecurity threats and incidents in real time and report such threats and incidents to the Audit Committee when appropriate.
Through regular and ongoing communications, the VP of IT and the Executive Leadership Team, which includes our Chief Executive Officer, Chief Financial and Strategy Officer, and Chief Administrative and Legal Officer, manage the prevention, detection, mitigation and remediation of cybersecurity threats and incidents and escalate any such threats and incidents to the Audit Committee when appropriate.
On an annual basis, the Board and the Audit Committee discuss the Company’s approach to cybersecurity risk management with the Company's Vice President of Information Technology (the "VP of IT"). The VP of IT reports to the Chief Financial and Strategy Officer and is the head of the Company’s cybersecurity team.
On an annual basis, the Board and the Audit Committee discuss the Company’s approach to cybersecurity risk management with the Company's Vice President of Information Technology (the "VP of IT").
Removed
In general, the Company seeks to address cybersecurity risks through a comprehensive, cross-functional approach that is focused on preserving the confidentiality, security, and availability of Company and customer systems, information, and products.
Added
The Company has a team of cybersecurity professionals reporting to the VP of IT , the head of the Company’s cybersecurity team, dedicated to managing threats and incidents in real time and the reporting of any such incidents. The VP of IT reports to the Chief Financial and Strategy Officer.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeLocation of Facilities Segment Owned Leased States Countries Engineered Systems Segment 1 16 Arizona, California, Connecticut, Florida, New York, Ohio, Texas United States, The Netherlands, Canada, India, United Arab Emirates, Singapore, United Kingdom, People's Republic of China, South Korea Industrial Process Solutions Segment 1 10 California, Indiana, Michigan, North Carolina, Pennsylvania, Tennessee United States, United Kingdom, The Netherlands, People's Republic of China Corporate — 2 Ohio, Texas United States 2 28 Item 3.
Biggest changeLocation of Facilities Segment Owned Leased States Countries Engineered Systems Segment 1 16 Arizona, California, Connecticut, Florida, New York, Ohio, Texas United States, The Netherlands, Canada, India, United Arab Emirates, Singapore, United Kingdom, People's Republic of China, South Korea Industrial Process Solutions Segment 1 21 California, Indiana, Michigan, North Carolina, Ohio, Pennsylvania, Tennessee United States, United Kingdom, The Netherlands, Germany, People's Republic of China, Singapore, India Corporate — 2 Ohio, Texas United States 2 39 Item 3.
Our current capacity, with limited capital additions, is expected to be sufficient to meet production requirements for the near future. It is anticipated that most leases coming due in the near future will be renewed at expiration. The property we own is subject to collateral mortgages to secure the amounts owed under the Credit Facility.
Our current capacity, with limited capital additions, is expected to be sufficient to meet production requirements for the near future. It is anticipated that most leases coming due in the near future will be 22 renewed at expiration. The property we own is subject to collateral mortgages to secure the amounts owed under the Credit Facility.
Legal Proceedings See Note 12 to the Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K for information regarding legal proceedings in which we are involved. Item 4. Mine Saf ety Disclosures Not applicable. 22 PART II
Legal Proceedings See Note 12 to the Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K for information regarding legal proceedings in which we are involved. Item 4. Mine Saf ety Disclosures Not applicable. 23 PART II
Information on the number and location of principal operating facilities by segment was as follows as of December 31, 2023.
Information on the number and location of principal operating facilities by segment was as follows as of December 31, 2024.
Item 2. P roperties The Company has 30 principal operating facilities across 12 states and nine countries. The Company’s executive offices are located in Dallas, Texas. We maintain our facilities in good operating condition, and we believe they are suitable and adequate for the purposes for which they are intended to conduct business.
Item 2. P roperties The Company has 41 principal operating facilities across 12 states and 10 countries. The Company’s executive offices are located in Addison, Texas. We maintain our facilities in good operating condition, and we believe they are suitable and adequate for the purposes for which they are intended to conduct business.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer's Purchases of Equity Securities Period (amounts in thousands, except per share data) Total Number of Shares Purchased 1 Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs October 1, 2023 - October 31, 2023 — $ — — $ 13,000 November 1, 2023 - November 30, 2023 — — — 13,000 December 1, 2023 - December 31, 2023 — — — 13,000 Total — $ — — (1) On May 10, 2022, the Board of Directors authorized a $20.0 million share repurchase program as described within Note 9 to the Consolidated Financial Statements.
Biggest changeIssuer's Purchases of Equity Securities Period (amounts in thousands, except per share data) Total Number of Shares Purchased 1 Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs October 1, 2024 - October 31, 2024 — $ — — $ 8,000 November 1, 2024 - November 30, 2024 — — — 8,000 December 1, 2024 - December 31, 2024 — — — 8,000 Total — $ — — (1) On May 10, 2022, the Board of Directors authorized a $20.0 million share repurchase program as described within Note 9 to the Consolidated Financial Statements.
Market for Registrant’s Common Equity, Related S tockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded on The Nasdaq Global Select Market under the symbol “CECO.” Performance Graph The following graph sets forth the cumulative total return to CECO’s stockholders during the five years ended December 31, 2023, as well as the following indices: Russell 2000 Index, Standard and Poor’s (“S&P”) 600 Small Cap Industrial Machinery Index, and S&P 500 Index.
Market for Registrant’s Common Equity, Related S tockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded on The Nasdaq Global Select Market under the symbol “CECO.” Performance Graph The following graph sets forth the cumulative total return to CECO’s stockholders during the five years ended December 31, 2024, as well as the following indices: Russell 2000 Index, Standard and Poor’s (“S&P”) 600 Small Cap Industrial Machinery Index, and S&P 500 Index.
The program expires on April 30, 2025. Recent Sales of Unregistered Securities Not applicable. Item 6. [Res erved] 24
The program expires on April 30, 2025. Recent Sales of Unregistered Securities Not applicable. Item 6. [Res erved] 25
The following graph assumes $100 was invested on December 31, 2018, including the reinvestment of dividends, in each category.
The following graph assumes $100 was invested on December 31, 2019, including the reinvestment of dividends, in each category.
Holders The approximate number of registered stockholders of record of our common stock as of February 26, 2024 was 248, although there is a larger number of beneficial owners. 23 Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table provides information about our purchases of our equity securities for the quarter ended December 31, 2023.
Holders The approximate number of registered stockholders of record of our common stock as of February 13, 2025 was 237, although there is a larger number of beneficial owners. 24 Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table provides information about our purchases of our equity securities for the quarter ended December 31, 2024.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeWhile the Company cannot predict the exact timing or amounts of such charges, it does expect to treat these charges as special items in its future presentation of non-GAAP results. 27 Results of Operations Consolidated Results Our consolidated statements of income for the years ended December 31, 2023, 2022 and 2021 are as follows: Year ended December 31, (dollars in millions) 2023 2022 2021 Net sales $ 544.8 $ 422.6 $ 324.1 Cost of goods sold 373.8 294.4 223.2 Gross profit $ 171.0 $ 128.2 $ 100.9 Percent of sales 31.4 % 30.3 % 31.1 % Selling and administrative expenses $ 122.9 $ 93.4 $ 81.8 Percent of sales 22.6 % 22.1 % 25.2 % Amortization and earnout expenses 8.2 6.8 7.8 Acquisition and integration expenses 2.5 4.5 0.8 Executive transition expenses 1.5 1.2 — Restructuring expenses 1.3 0.1 0.6 Operating income $ 34.6 $ 22.2 $ 9.9 Percent of sales 6.4 % 5.3 % 3.1 % Other income (expense), net $ 0.4 $ 6.9 $ (2.2 ) Interest expense (13.4 ) (5.4 ) (3.0 ) Income before income taxes $ 21.5 $ 23.7 $ 4.7 Income tax expense 7.0 5.4 2.7 Net income $ 14.5 $ 18.3 $ 2.0 Noncontrolling interest (1.6 ) (0.8 ) (0.6 ) Net income attributable to CECO Environmental Corp. $ 12.9 $ 17.4 $ 1.4 Non-GAAP Measures To compare operating performance between the years ended December 31, 2023, 2022 and 2021 the Company has adjusted GAAP operating income to exclude (1) amortization of intangible assets, and earnout expenses, (2) restructuring expenses primarily relating to severance, facility exits, and associated legal expenses, (3) acquisition and integration expenses, which include legal, accounting, and other expenses, (4) executive transition expenses, including severance for the Company's former executives, fees and expenses incurred in the search, for and hiring, of new executives and (5) intangible asset impairment.
Biggest changeResults of Operations Consolidated Results Our consolidated statements of income for the years ended December 31, 2024, 2023 and 2022 are as follows: Year ended December 31, (dollars in millions) 2024 2023 2022 Net sales $ 557.9 $ 544.8 $ 422.6 Cost of goods sold 361.8 373.8 294.4 Gross profit $ 196.1 $ 171.0 $ 128.2 Percent of sales 35.1 % 31.4 % 30.3 % Selling and administrative expenses $ 146.7 $ 122.9 $ 93.4 Percent of sales 26.3 % 22.6 % 22.1 % Amortization and earnout expenses 9.1 8.2 6.8 Acquisition and integration expenses 4.2 2.5 4.5 Restructuring expenses 0.5 1.3 0.1 Asbestos litigation expenses 0.2 — — Executive transition expenses — 1.5 1.2 Operating income $ 35.4 $ 34.6 $ 22.2 Percent of sales 6.3 % 6.4 % 5.3 % Other (expense) income, net $ (4.7 ) $ 0.4 $ 6.9 Interest expense (13.0 ) (13.4 ) (5.4 ) Income before income taxes $ 17.7 $ 21.5 $ 23.7 Income tax expense 3.3 7.0 5.4 Net income $ 14.4 $ 14.5 $ 18.3 Noncontrolling interest (1.5 ) (1.6 ) (0.8 ) Net income attributable to CECO Environmental Corp. $ 13.0 $ 12.9 $ 17.4 29 Non-GAAP Measures To compare operating performance between the years ended December 31, 2024, 2023 and 2022 the Company has adjusted GAAP operating income to exclude (1) amortization of intangible assets, and earnout expenses, (2) restructuring expenses primarily relating to severance, facility exits, and associated legal expenses, (3) acquisition and integration expenses, which include legal, accounting, and other expenses, (4) executive transition expenses, including severance for the Company's former executives, fees and expenses incurred in the search, for and hiring, of new executives and (5) asbestos litigation expenses related to expected future settlement payments.
We break down costs of sales into five categories, as follows: • Subcontracts—Electrical work, concrete work, subcomponents and other subcontracts necessary to produce our products; • Labor—Our direct labor both in the shop and in the field; • Material—Raw materials that we buy to build our products; • Equipment—Fans, motors, control panels and other equipment necessary for turnkey systems; and • Factory overhead—Costs of facilities and supervision wages necessary to produce our products.
We break down costs of sales into five categories, as follows: • Subcontracts—Electrical work, concrete work, subcomponents and other subcontracts necessary to produce our products; • Labor—Our direct labor both in the shop and in the field; • Material—Raw materials that we buy to build our products, fans, motors, control panels and other equipment necessary for turnkey systems; and • Factory overhead—Costs of facilities and supervision wages necessary to produce our products.
As a part of its annual assessment, we first qualitatively assess whether current events or changes in circumstances lead to a determination that it is more likely than not (defined as a likelihood of more than 50 percent) that the fair value of an asset is less than its carrying amount.
As a part of the annual assessment, we first qualitatively assess whether current events or changes in circumstances lead to a determination that it is more likely than not (defined as a likelihood of more than 50 percent) that the fair value of an asset is less than its carrying amount.
We have excellent collaboration between our platforms and our centralized service teams ensuring optimal efficiency and alignment on growth and improvement initiatives. Our reportable segments are: • Engineered Systems segment: Our Engineered Systems segment serves the power generation, hydrocarbon processing, water/wastewater treatment, oily water separation and treatment, marine and naval vessels, and midstream oil and gas sectors.
We have excellent collaboration between our platforms and our centralized service teams ensuring optimal efficiency and alignment on growth and improvement initiatives. 27 Our reportable segments are: • Engineered Systems segment: Our Engineered Systems segment serves the power generation, hydrocarbon processing, water/wastewater treatment, oily water separation and treatment, marine and naval vessels, and midstream oil and gas sectors.
Other significant accounting policies Other significant accounting policies, not involving the same level of uncertainties as those discussed above, are nevertheless important to an understanding of our financial statements. See Note 1 to the Consolidated Financial Statements, Summary of 35 Significant Accounting Policies, which discusses accounting policies that must be selected by us when there are acceptable alternatives.
Other significant accounting policies Other significant accounting policies, not involving the same level of uncertainties as those discussed above, are nevertheless important to an understanding of our financial statements. See Note 1 to the Consolidated Financial Statements, Summary of Significant Accounting Policies, which discusses accounting policies that must be selected by us when there are acceptable alternatives.
(2) Includes notes payable and expected earnout liability. Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in conformity with GAAP. Preparation of the consolidated financial statements in accordance with GAAP requires management to make estimates, judgments and assumptions affecting the reported amounts of assets, liabilities, revenues and expenses and related contingent liabilities.
(2) Includes notes payable and expected earnout liability. Critical Accounting Estimates Our consolidated financial statements are prepared in conformity with GAAP. Preparation of the consolidated financial statements in accordance with GAAP requires management to make estimates, judgments and assumptions affecting the reported amounts of assets, liabilities, revenues and expenses and related contingent liabilities.
The accounting guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. We record the related interest expense and penalties, if any, as tax expense in the tax provision. Management must assess the realizability of the Company’s deferred tax assets.
The accounting guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition and 37 measurement of a tax position taken or expected to be taken in a tax return. We record the related interest expense and penalties, if any, as tax expense in the tax provision. Management must assess the realizability of the Company’s deferred tax assets.
In 2021, the US Congress passed the Infrastructure Investment and Jobs Act with $550 billion of new federal spending aimed at rebuilding roads and bridges, climate resilience, and other environmental initiatives. Similar investments are being made in many other countries in which we do business.
In 2021, the US Congress passed the Infrastructure Investment and Jobs Act with $550 billion 26 of new federal spending aimed at rebuilding roads and bridges, climate resilience, and other environmental initiatives. Similar investments are being made in many other countries in which we do business.
We account for a contract after it has been approved by all parties to the arrangement, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. 33 We recognize revenue as performance obligations are satisfied.
We account for a contract after it has been approved by all parties to the arrangement, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. We recognize revenue as performance obligations are satisfied.
After that, our ability to fund these expected uses of cash and to comply with the financial covenants under our debt agreements will depend on the results of future operations, performance and cash flow.
After that, our ability to fund these expected uses of cash and to comply with the financial covenants under our debt agreements will depend on the results of future operations, 35 performance and cash flow.
If the estimated fair value of an asset is less than its carrying value, an impairment charge is recorded for the amount by which the carrying value of the asset exceeds its estimated fair value. During 2023, 2022, and 2021, our annual impairment test indicated no impairment of our indefinite-lived tradenames.
If the estimated fair value of an asset is less than its carrying value, an impairment charge is recorded for the amount by which the carrying value of the asset exceeds its estimated fair value. During 2024, 2023, and 2022, our annual impairment test indicated no impairment of our indefinite-lived tradenames.
Comparison of the years ended December 31, 2022 and 2021 See the Management Discussion and Analysis section of our Annual Report on Form 10-K for the year ended December 31, 2022 for a discussion of business segment results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Comparison of the years ended December 31, 2023 and 2022 See the Management Discussion and Analysis section of our Annual Report on Form 10-K for the year ended December 31, 2023 for a discussion of business segment results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Accordingly, we recognized no impairment charges in our financial results for the years ended December 31, 2023, 2022, and 2021. For additional information on impairment testing results, see Note 6 to the Consolidated Financial Statements.
Accordingly, we recognized no impairment charges in our financial results for the years ended December 31, 2024, 2023, and 2022. For additional information on impairment testing results, see Note 6 to the Consolidated Financial Statements.
Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. No provision for estimated losses on uncompleted contracts was needed at December 31, 2023, 2022 and 2021. Inventories The Company’s inventories are valued at the lower of cost or net realizable value using the first-in, first-out inventory costing method.
Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. No provision for estimated losses on uncompleted contracts was needed at December 31, 2024, 2023 and 2022. 36 Inventories The Company’s inventories are valued at the lower of cost or net realizable value using the first-in, first-out inventory costing method.
As a part of the annual assessment, we first qualitatively assess whether current events or changes in circumstances lead to a determination that it is more likely than not (defined as a likelihood of more than 34 50 percent) that the fair value of a reporting unit is less than its carrying amount.
As a part of the annual assessment, we first qualitatively assess whether current events or changes in circumstances lead to a determination that it is more likely than not (defined as a likelihood of more than 50 percent) that the fair value of an asset is less than its carrying amount.
As material cost inflation occurs, the Company seeks to pass this cost onto our customers as price increases. Selling and administrative expense principally includes sales and engineering payroll and related fringes, advertising and marketing expenditures as well as all corporate and administrative functions and other costs that support our operations. The majority of these expenses are fixed.
As material cost inflation occurs, the Company seeks to pass this cost onto our customers as price increases. Selling and administrative expense principally includes sales and engineering payroll and related fringes, advertising and marketing expenditures as well as all corporate and administrative functions and other costs that support our operations.
If this qualitative assessment indicates a more likely than not potential that the asset may be impaired, the estimated fair value is determined by the relief from royalty method.
If this qualitative assessment indicates a more likely than not potential that the asset may be impaired, the estimated fair value is calculated using the relief from royalty method.
Our investment in net working capital is funded by cash flow from operations and by our revolving line of credit. At December 31, 2023, the Company had working capital of $78.3 million, compared with $94.0 million at December 31, 2022.
Our investment in net working capital is funded by cash flow from operations and by our revolving line of credit. At December 31, 2024, the Company had working capital of $86.3 million, compared with $78.3 million at December 31, 2023.
We complete an impairment assessment of the Company's indefinite life intangible assets on an annual basis, or more often as circumstances require.
Goodwill We complete an impairment assessment of the Company's indefinite life intangible assets on an annual basis, during the fourth quarter, or more often as circumstances require.
Year Ended December 31, (dollars in millions) 2023 2022 2021 Operating income as reported in accordance with GAAP $ 34.6 $ 22.2 $ 9.9 Operating margin in accordance with GAAP 6.4 % 5.3 % 3.1 % Amortization and earnout expenses 8.2 6.8 7.8 Acquisition and integration expenses 2.5 4.5 0.8 Executive transition expenses 1.5 1.2 — Restructuring expenses 1.3 0.1 0.6 Non-GAAP operating income $ 48.1 $ 34.8 $ 19.1 Non-GAAP operating margin 8.8 % 8.2 % 5.9 % Year Ended December 31, (dollars in millions) 2023 2022 2021 Net income as reported in accordance with GAAP $ 12.9 $ 17.4 $ 1.4 Amortization and earnout expenses 8.2 6.8 7.8 Acquisition and integration expenses 2.5 4.5 0.8 Executive transition expenses 1.5 1.2 — Restructuring expenses 1.3 0.1 0.6 Foreign currency remeasurement (1.0 ) (1.3 ) 2.0 Tax (benefit) expense of adjustments 1.2 (2.8 ) (2.8 ) Non-GAAP net income $ 26.6 $ 25.9 $ 9.8 Non-GAAP net income as a percentage of sales 4.9 % 6.1 % 3.0 % 28 Comparison of the years ended December 31, 2023 and 2022 Consolidated net sales in 2023 were $544.8 million compared with $422.6 million in 2022, an increase of $122.2 million or 28.9%.
Year Ended December 31, (dollars in millions) 2024 2023 2022 Operating income as reported in accordance with GAAP $ 35.4 $ 34.6 $ 22.2 Operating margin in accordance with GAAP 6.3 % 6.4 % 5.3 % Amortization and earnout expenses 9.1 8.2 6.8 Acquisition and integration expenses 4.2 2.5 4.5 Restructuring expenses 0.5 1.3 0.1 Asbestos litigation expenses 0.2 — — Executive transition expenses — 1.5 1.2 Non-GAAP operating income $ 49.4 $ 48.1 $ 34.8 Non-GAAP operating margin 8.9 % 8.8 % 8.2 % Year Ended December 31, (dollars in millions) 2024 2023 2022 Net income as reported in accordance with GAAP $ 13.0 $ 12.9 $ 17.4 Amortization and earnout expenses 9.1 8.2 6.8 Acquisition and integration expenses 4.2 2.5 4.5 Restructuring expenses 0.5 1.3 0.1 Asbestos litigation expenses 0.2 — — Executive transition expenses — 1.5 1.2 Foreign currency remeasurement 4.3 (1.0 ) (1.3 ) Tax (benefit) expense of adjustments (4.6 ) 1.2 (2.8 ) Non-GAAP net income $ 26.7 $ 26.6 $ 25.9 Non-GAAP net income as a percentage of sales 4.8 % 4.9 % 6.1 % 30 Comparison of the years ended December 31, 2024 and 2023 Consolidated net sales in 2024 were $557.9 million compared with $544.8 million in 2023, an increase of $13.1 million or 2.4%.
We continue to focus on increasing revenues and profitability in developing markets, where environmental awareness and associated regulatory standards are increasing, while continuing to strengthen and expand our product offerings and channels in our domestic market of the United States.
We continue to focus on increasing revenues and profitability in developing markets, where environmental awareness and associated regulatory standards are increasing, while continuing to strengthen and expand our product offerings and channels in our domestic market of the United States. Our enterprise strategy consists of a combined operational strategy and capital allocation strategy.
The ratio of current assets to current liabilities was 1.39 to 1.00 at December 31, 2023 as compared with a ratio of 1.64 to 1.00 at December 31, 2022. At December 31, 2023 and 2022, cash and cash equivalents totaled $54.8 million and $45.5 million, respectively.
The ratio of current assets to current liabilities was 1.35 to 1.00 at December 31, 2024 as compared with a ratio of 1.39 to 1.00 at December 31, 2023. At December 31, 2024 and 2023, cash and cash equivalents totaled $37.8 million and $54.8 million, respectively.
Joint Venture Debt On March 7, 2022, the Company's Effox-Flextor-Mader, Inc. joint venture ("EFM JV") entered into a loan agreement secured by the assets of the EFM JV in the aggregate principal amount of $11.0 million for the acquisition of General Rubber, LLC ("GRC"), as further described in Note 14 to the Consolidated Financial Statements.
Joint Venture Debt On March 7, 2022, the Company's Effox-Flextor-Mader, Inc. joint venture ("EFM JV") entered into a loan agreement secured by the assets of the EFM JV in the aggregate principal amount of $11.0 million for the acquisition of General Rubber, LLC.
Industrial Process Solutions segment Our Industrial Process Solutions segment net sales increased $5.3 million to $164.7 million in 2023 compared with $159.4 million in 2022, an increase of 3.3%. The increase is primarily attributable to an increase of $4.7 million in our duct fabrication and installation businesses.
Our Industrial Process Solutions segment net sales increased $9.2 million to $173.9 million in 2024 compared with $164.7 million in 2023, an increase of 5.6%. The increase is primarily attributable to an increase of $7.6 million in our duct fabrication and installation businesses.
In 2022, $48.3 million of cash was used in investing activities, which consisted of $44.9 for current year acquisitions and $3.4 million for acquisition of property and equipment. 32 Financing Activities Financing activities in 2023 provided cash of $21.1 million, which consisted primarily of $27.1 million of net borrowings under the Credit Facility, used to finance current year acquisitions, as well as $1.4 million of proceeds from employee stock purchase plan and exercise of stock options.
Financing activities in 2023 provided cash of $21.1 million, which consisted primarily of $27.1 million of net borrowings under the Credit Facility, used to finance current year acquisitions, as well as $1.4 million of proceeds from employee stock purchase plan and exercise of stock options.
Total unused credit availability under our Credit Facility and other non-U.S. credit facilities and agreements, exclusive of any potential asset base limitations, is as follows: December 31, 2023 2022 (dollars in millions) Credit Facility, revolving loans $ 140.0 $ 140.0 Draw down (17.3 ) (61.3 ) Letters of credit open (13.3 ) (18.9 ) Total unused credit availability $ 109.4 $ 59.8 Amount available based on borrowing limitations $ 99.8 $ 59.8 Overview of Cash Flows and Liquidity For the year ended December 31, (dollars in thousands) 2023 2022 2021 Total operating cash flow provided by operating activities $ 44,647 $ 29,649 $ 13,298 Net cash used in investing activities (56,486 ) (48,257 ) (2,083 ) Net cash provided by (used in) financing activities 21,144 38,176 (15,556 ) Effect of exchange rate changes on cash and cash equivalents (442 ) (4,978 ) (1,475 ) Net increase (decrease) in cash, cash equivalents and restricted cash $ 8,863 $ 14,590 $ (5,816 ) Operating Activities In 2023, $44.6 million of cash was provided by operating activities compared with $29.6 million provided by operating activities in 2022, an increase of $15.0 million.
See Note 8 to the Consolidated Financial Statements for further information on the Company’s debt facilities. 34 Total unused credit availability under our Credit Facility and other non-U.S. credit facilities and agreements, exclusive of any potential asset base limitations, is as follows: December 31, 2024 2023 (dollars in millions) Credit Facility, revolving loans $ 400.0 $ 140.0 Draw down (214.2 ) (17.3 ) Letters of credit open (18.9 ) (13.3 ) Total unused credit availability $ 166.9 $ 109.4 Amount available based on borrowing limitations $ 1.0 $ 99.8 Overview of Cash Flows and Liquidity For the year ended December 31, (dollars in thousands) 2024 2023 2022 Total operating cash flow provided by operating activities $ 24,828 $ 44,647 $ 29,649 Net cash used in investing activities (105,312 ) (56,486 ) (48,257 ) Net cash provided by financing activities 65,910 21,144 38,176 Effect of exchange rate changes on cash and cash equivalents (2,673 ) (442 ) (4,978 ) Net increase (decrease) in cash, cash equivalents and restricted cash $ (17,247 ) $ 8,863 $ 14,590 Operating Activities In 2024, $24.8 million of cash was provided by operating activities compared with $44.6 million provided by operating activities in 2023, a decrease of $19.8 million.
If there is a qualitative determination that the fair value of a particular reporting unit is more likely than not greater than its carrying value, we do not need to quantitatively test for goodwill impairment for that reporting unit.
If there is a qualitative determination that the fair value of a particular asset is more likely than not greater than its carrying value, we do not need to proceed to the quantitative estimated fair value test for that asset.
We assist customers in maintaining clean and safe operations for employees, reducing energy consumption, minimizing waste for customers, and meeting regulatory standards for toxic emissions, fumes, volatile organic compounds, and odor elimination through our platforms including duct fabrication and installation, industrial air, and fluid handling. 26 Our contracts are obtained either through competitive bidding or as a result of negotiations with our customers.
We assist customers in maintaining clean and safe operations for employees, reducing energy consumption, minimizing waste for customers, and meeting regulatory standards for toxic emissions, fumes, volatile organic compounds, and odor elimination through our platforms including duct fabrication and installation, industrial air, and fluid handling.
Cash flow from operating activities in 2023 had a favorable impact year-over-year primarily due to changes in net working capital. In 2022, $29.6 million of cash was provided by operating activities compared with $13.2 million in 2021, an increase of $16.4 million.
Cash flow from operating activities in 2024 had an unfavorable impact year-over-year primarily due to changes in net working capital. In 2023, $44.6 million of cash was provided by operating activities compared with $29.6 million provided by operating activities in 2022, an increase of $15.0 million.
Our cost of sales is principally driven by a number of factors, including material and subcontract prices and labor cost and availability. Changes in these factors may have a material impact on our overall gross profit margins.
Our focus is on increasing our operating margins as well as our gross margin percentage, which translates into stronger operating results. Our cost of sales is principally driven by a number of factors, including material and subcontract prices and labor cost and availability. Changes in these factors may have a material impact on our overall gross profit margins.
The Income from Operations table and corresponding comments regarding operating income at the reportable segment level include both intra-segment and inter-segment operating income. 2023 2022 2021 Net Sales (less intra-, inter-segment sales) (table only in thousands) Engineered Systems Segment $ 380,108 $ 263,224 $ 186,926 Industrial Process Solutions Segment 164,737 159,403 137,214 Total net sales $ 544,845 $ 422,627 $ 324,140 2023 2022 2021 Income from Operations (table only in thousands) Engineered Systems segment $ 59,846 $ 36,200 $ 25,770 Industrial Process Solutions segment 21,630 22,705 15,054 Corporate and Other (1) (46,907 ) (36,744 ) (30,967 ) Total income from operations $ 34,569 $ 22,161 $ 9,857 (1) Includes corporate compensation, professional services, information technology, and other general, administrative corporate expenses.
The Income from Operations table and corresponding comments regarding operating income at the reportable segment level include both intra-segment and inter-segment operating income. 2024 2023 2022 Net Sales (less intra-, inter-segment sales) (table only in thousands) Engineered Systems Segment $ 384,025 $ 380,108 $ 263,224 Industrial Process Solutions Segment 173,908 164,737 159,403 Total net sales $ 557,933 $ 544,845 $ 422,627 2024 2023 2022 Income from Operations (less intra-, inter-segment profit) (table only in thousands) Engineered Systems segment $ 72,373 $ 59,846 $ 36,200 Industrial Process Solutions segment 29,575 21,630 22,705 Corporate and Other (1) (66,545 ) (46,907 ) (36,744 ) Total income from operations $ 35,403 $ 34,569 $ 22,161 (1) Includes corporate compensation, professional services, information technology, and other general, administrative corporate expenses.
This was partially offset by $2.1 million of earnout payments, $1.7 million in distributions to non-controlling interest, $1.2 million of deferred consideration for acquisitions, $0.9 million in payments on our capital leases, and $0.4 million of financing fees.
This was partially offset by $2.1 million of earnout payments, $1.7 million in distributions to non-controlling interest, $1.2 million of deferred consideration for acquisitions, $0.9 million in payments on our capital leases, and $0.4 million of financing fees. Our primary sources of liquidity are cash generated from operations and borrowing availability under the Credit Facility.
Acquisitions and integration expenses related to various merger and acquisition diligence activities, which include legal, accounting and banking expenses, were $2.5 million in 2023, as compared with $4.5 million in 2022. The decrease is due to the timing of acquisition activity. See Note 14 to the Consolidated Financial Statements for further discussion on recent acquisitions.
See Note 7 to the Consolidated Financial Statements for further discussion on earnout expenses. Acquisitions and integration expenses related to various merger and acquisition diligence activities, which include legal, accounting and banking expenses, were $4.2 million in 2024, as compared with $2.5 million in 2023, an increase of $1.7 million, or 68.0%.
Cash flow from operating activities in 2022 had a favorable impact year-over-year primarily due to increases in net earnings, partially offset by increases in net working capital. Investing Activities In 2023, $56.5 million of cash was used in investing activities, which consisted of $48.1 for current year acquisitions and $8.4 million for acquisition of property and equipment.
Cash flow from operating activities in 2023 had a favorable impact year-over-year primarily due to changes in net working capital. Investing Activities In 2024, $105.3 million of cash was used in investing activities, which consisted of $87.9 million for current year acquisitions and $17.4 million for acquisition of property and equipment.
The Credit Facility allows letters of credit and bank guarantee issuances of up to $65.0 million from the bilateral lines of credit secured by pledged assets and collateral under the Credit Facility. See Note 8 to the Consolidated Financial Statements for further information on the Company’s debt facilities.
The Credit Facility allows letters of credit and bank guarantee issuances of up to $65.0 million from the bilateral lines of credit secured by pledged assets and collateral under the Credit Facility.
These GAAP financial statements include certain charges the Company believes are not indicative of its core ongoing operational performance. As a result, the Company provides financial information in this MD&A that was not prepared in accordance with GAAP and should not be considered as an alternative to the information prepared in accordance with GAAP.
As a result, the Company provides financial information in this MD&A that was not prepared in accordance with GAAP and should not be considered as an alternative to the information prepared in accordance with GAAP.
The Company has provided the non-GAAP financial measures including non-GAAP operating income, non-GAAP operating margin, and non-GAAP net income as a result of the adjustment for items that the Company believes are not indicative of its ongoing operations.
The Company provides this supplemental non-GAAP financial information, because the Company’s management utilizes it to evaluate its ongoing financial performance and the Company believes it provides greater transparency to investors as supplemental information to its GAAP results. 28 The Company has provided the non-GAAP financial measures including non-GAAP operating income, non-GAAP operating margin, and non-GAAP net income as a result of the adjustment for items that the Company believes are not indicative of its ongoing operations.
Operating income as a percentage of sales for 2023 was 6.4% compared with 5.3% for 2022. The increase in operating income is primarily attributable to increases in net organic sales and gaining operating leverage. Non-GAAP operating income was $48.1 million in 2023 and $34.8 million in 2022.
Operating income as a percentage of sales for 2024 was 6.3% compared with 6.4% for 2023. The increase in operating income is primarily attributable to the increase in gross profit. Non-GAAP operating income was $49.4 million in 2024, an increase of $1.3 million from $48.1 million in 2023.
The increase in non-GAAP operating income is primarily attributable to the increase in net organic sales and improved operating leverage. Non-GAAP operating income as a percentage of sales for 2023 was 8.8% compared with 8.2% for 2022. Other income for 2023 was $0.4 million compared to $6.9 million in 2022.
The increase in non-GAAP operating income is primarily attributable to the increase in gross profit. Non-GAAP operating income as a percentage of sales was 8.9% for 2024 compared with 8.8% for 2023. Other expense for 2024 was $(4.7) million compared to other income of $0.4 million in 2023, a decrease of $5.1 million.
This figure excludes earnout expenses / income, which are recorded in the segment in which the expense / income occurs. Comparison of the years ended December 31, 2023 and 2022 Engineered Systems segment Our Engineered Systems segment net sales increased $116.9 million to $380.1 million in 2023 compared with $263.2 million in 2022, an increase of 44.4%.
This figure excludes earnout expenses / income, which are recorded in the segment in which the expense / income occurs. Comparison of the years ended December 31, 2024 and 2023 Engineered Systems segment Our Engineered Systems segment orders booked increased $109.8 million, or 28.1%, to $500.9 million in 2024 compared with $391.1 million in 2023.
Income tax expense and the effective tax rate for 2023 were affected by changes in valuation allowances, and the net impact of global intangible low-taxed income ("GILTI") and foreign-derived intangible income ("FDII"), as well as certain permanent differences including state income taxes, non-deductible incentive stock-based compensation, and differences in tax rates among the jurisdictions in which we operate. 29 Comparison of the years ended December 31, 2022 and 2021 See the Management Discussion and Analysis section of our Annual Report on Form 10-K for the year ended December 31, 2022 for a discussion of our consolidated results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Income tax expense and the effective tax rate for 2024 were affected by changes in valuation allowances, and the net impact of global intangible low-taxed income ("GILTI") and foreign-derived intangible income ("FDII"), as well as certain permanent differences including state income taxes, non-deductible incentive stock-based compensation, and differences in tax rates among the jurisdictions in which we operate.
The decrease in other income was primarily attributable to net foreign currency transaction losses in the current year based on changes in exchange rates at our foreign subsidiaries. Interest expense increased to $13.4 million in 2023 from $5.4 million in 2022. The increase in interest expense is primarily due to higher interest rates and increased debt balances to fund acquisitions.
The decrease in other (expense) income was primarily attributable to net foreign currency transaction losses in the current year based on changes in exchange rates at our foreign subsidiaries. Interest expense was $13.0 million in 2024 compared to $13.4 million in 2023, a decrease of $0.4 million, or 3.0%.
Our geographic and industry diversity, and the breadth of our product and services portfolio, have helped mitigate the impact of any one industry or the economy of any single country on our consolidated operating results.
As a global business, our operations are affected by worldwide, regional and industry-specific economic factors, wherever we operate or do business. Our geographic and industry diversity, and the breadth of our product and services portfolio, have helped mitigate the impact of any one industry or the economy of any single country on our consolidated operating results.
We have secured raw materials from existing and alternate suppliers and have taken other mitigating actions to mitigate supply disruptions; however, we cannot guarantee that we can continue to do so in the future. In this event, our business, results and financial condition could be adversely affected.
In particular, we are currently experiencing shortages of raw materials and inflationary pressures for certain materials and labor. We have secured raw materials from existing and alternate suppliers and have taken other mitigating actions to mitigate supply disruptions; however, we cannot guarantee that we can continue to do so in the future.
Restructuring expenses were $1.4 million in 2023 compared to $0.1 million in 2022. These expenses related to severance, facility exits, and associated legal expenses, primarily as it relates to the exit of certain operations in China at the end of 2023. Operating income for 2023 was $34.6 million, an increase of $12.4 million from $22.2 million in 2022.
Restructuring expenses were $0.5 million in 2024 compared to $1.4 million in 2023, a decrease of $0.8 million, or 61.5%. These expenses related to severance, facility exits, and associated legal expenses, primarily as it relates to the exit of certain operations in China.
Operations Overview We operate our segments and the underlying platforms serving their respective niche end markets. Our platforms are structured to win in their target markets with a core focus on understanding customer needs and providing best-in-class solutions.
In this event, our business, results and financial condition could be adversely affected. Operations Overview Our segments consist of like end-market and end-market adjacent platforms. Our platforms are structured to win in their target markets with a core focus on understanding customer needs and providing best-in-class solutions.
Executive transition expenses were $1.5 million in 2023 compared to $1.2 million in 2022. These expenses related to fees and other expenses incurred in the search for and hiring of new executives, specifically the Chief Administrative and Legal Officer and Chief Finance and Strategy Officer for 2022 and Chief Operating Officer and Chief Accounting Officer for 2023.
These expenses related to severance for the former executives, as well as fees and other expenses incurred in the search for and hiring of a new executive, specifically as it relates to the departure of the former Chief Operating Officer and transition of the role of Chief Accounting Officer.
Our enterprise strategy consists of a combined operational strategy and capital allocation strategy. 25 Our operational strategy is implemented through our technology and application-based platforms aligned around target customers and end markets where our solutions are particularly valuable.
Our operational strategy is implemented through our technology and application-based platforms aligned around target customers and end markets where our solutions are particularly valuable. Core elements of our operational strategy are commercial and operational excellence, margin expansion, recurring revenue growth, cash flow generation, product management, and project management execution.
Pursuant to this amendment, the lenders provided an additional term loan in the aggregate principal amount of $75.0 million. Under the terms of the Credit Facility, the Company is required to maintain certain financial covenants, including the maintenance of a Consolidated Net Leverage Ratio (as defined in the Credit Facility).
Under the terms of the Credit Facility, the Company is required to maintain certain financial covenants, including the maintenance of a Consolidated Net Leverage Ratio not greater than 4.00 to 1.00 and a Consolidated Secured Net Leverage Ratio (as defined in the Credit Facility) not greater than 3.00 to 1.00.
Approximately 62.3%, or $3.3 million, of the increase in net sales is attributable to organic revenue growth, while $2.0 million is attributable to acquisitions that have occurred during the preceding twelve-month period. Operating income was $21.6 million in 2023 compared with $22.7 million in 2022.
Approximately $13.0 million of net sales in 2024 is attributable to acquisitions that have occurred during the preceding twelve-month period. Operating income for the Industrial Process segment increased $8.0 million to $29.6 million in 2024 compared with $21.6 million in 2023. The increase in operating income in primarily attributable to higher gross profit related to increased sales and project execution.
The increase in expense is attributable to an increase of $0.9 million in definite lived asset amortization due to recent acquisitions and $0.5 million in earnout expense. See Note 7 to the Consolidated Financial Statements for further discussion on earnout expenses.
Amortization and earnout expenses were $9.1 million in 2024 and $8.2 million in 2023, an increase of $0.9 million, or 11.0%. The increase in expense is attributable to an increase of $1.2 million in definite lived asset amortization due to recent acquisitions, partially offset by $0.4 million in earnout expense.
An advantage of our operating model is that as revenue grows, we have significant operating leverage on our fixed selling and administrative cost structure. Note Regarding Use of Non-GAAP Financial Measures The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Variable compensation based on the Company’s performance is included in selling and administrative expense. An advantage of our operating model is that as revenue grows, we have significant operating leverage on our fixed selling and administrative cost structure.
The following table summarizes the Company’s material cash requirements from known contractual obligations as of December 31, 2023: Payments Due by Period (dollars in thousands) Total Less than 1 year 1-3 years 3-5 years More than 5 years Term Loan Debt, including joint venture debt $ 121,279 $ 10,488 $ 107,023 $ 3,768 $ — Revolving Credit Loan 17,300 — 17,300 — — Interest expense (estimated) 26,825 11,154 15,344 328 — Purchase obligations (1) 109,957 109,957 — — — Operating lease obligations 16,938 4,363 6,372 2,723 3,480 Capital lease obligations 6,409 925 1,905 1,983 1,596 Liabilities related to acquisitions (2) 3,700 1,115 2,585 — — Totals $ 302,408 $ 138,001 $ 150,529 $ 8,802 $ 5,076 (1) Primarily consists of purchase obligations for costs associated with uncompleted sales contracts.
The following table summarizes the Company’s material cash requirements from known contractual obligations as of December 31, 2024: Payments Due by Period (dollars in thousands) Total Less than 1 year 1-3 years 3-5 years More than 5 years Term Loan Debt, including joint venture debt $ 7,297 $ 1,650 $ 5,647 $ — $ — Revolving Credit Loan 214,200 — — 214,200 — Interest expense (estimated) 73,532 15,735 46,213 11,584 — Purchase obligations (1) 173,681 173,681 — — — Operating lease obligations 31,161 5,810 8,912 6,730 9,709 Capital lease obligations 5,484 943 1,944 2,022 575 Liabilities related to acquisitions (2) 5,835 60 5,775 — — Totals $ 511,190 $ 197,879 $ 68,491 $ 234,536 $ 10,284 (1) Primarily consists of purchase obligations for costs associated with uncompleted sales contracts.
Debt consisted of the following: December 31, (table only in thousands) 2023 2022 Outstanding borrowings under Credit Facility Term loan payable in quarterly principal installments of $550 through September 2023, $825 through September 2025 and $1,100 thereafter with balance due upon maturity in December 2026. – Term loan $ 112,424 $ 41,309 – Revolving Credit Loan 17,300 61,300 Total outstanding borrowings under the Credit Facility 129,724 102,609 Outstanding borrowings under the joint venture term debt 8,855 10,083 Unamortized debt discount (1,296 ) (1,488 ) Total outstanding borrowings 137,283 111,204 Less: current portion (10,488 ) (3,579 ) Total debt, less current portion $ 126,795 $ 107,625 In 2023, the Company made repayments of $44.0 million on the revolving credit line and $1.2 million on the joint venture term debt, with net borrowings of $71.1 million on the term loan .
As of December 31, 2024 and 2023, $29.7 million and $38.5 million, respectively, of our cash and cash equivalents were held by foreign subsidiaries, as well as being denominated in foreign currencies. 33 Debt consisted of the following: December 31, (table only in thousands) 2024 2023 Outstanding borrowings under Credit Facility – Term loan $ — $ 112,424 – Revolving Credit Loan 214,200 17,300 Total outstanding borrowings under the Credit Facility 214,200 129,724 Outstanding borrowings under the joint venture term debt 7,297 8,855 Unamortized debt discount (2,617 ) (1,296 ) Total outstanding borrowings 218,880 137,283 Less: current portion (1,650 ) (10,488 ) Total debt, less current portion $ 217,230 $ 126,795 In 2024, the Company made repayments of $112.4 million on the term loan and $1.6 million on the joint venture term debt, with net borrowings of $196.9 million on the revolving credit line .
Income tax expense was $7.0 million and $5.4 million in 2023 and 2022, respectively. The effective tax rate for 2023 was 32.6% compared with 22.9% in 2022.
The decrease in interest expense is primarily due to lower a weighted average stated interest rate. 31 Income tax expense was $3.3 million in 2024 compared to $7.0 million in 2023, a decrease of $3.7 million, or 52.9%. The effective tax rate for 2024 was 18.5% compared with 32.6% in 2023.
Core elements of our operational strategy are commercial and operational excellence, margin expansion, recurring revenue growth, cash flow generation, product management, and project management execution. Our capital allocation strategy supports the growth and value creation generated by our operational strategy.
Our capital allocation strategy supports the growth and value creation generated by our operational strategy.
Goodwill We complete a goodwill impairment assessment on an annual basis as of October 1, or more often as circumstances require, on a reporting unit level, at or below the operating segment level.
Long-lived assets We complete an impairment assessment of the Company's indefinite life intangible assets on an annual basis, during the fourth quarter, or more often as circumstances require.
Operating income for the Engineered Systems segment increased $23.6 million to $59.8 million for 2023 compared with $36.2 million in 2022, an increase of 65.2%. The increase in operating income in primarily attributable to higher gross profit related to increased sales.
Approximately $20.1 million of net sales in 2024 is attributable to acquisitions that occurred during the preceding twelve-month period. 32 Operating income for the Engineered Systems segment increased $12.6 million to $72.4 million in 2024 compared with $59.8 million in 2023, an increase of 21.1%.
Contract terms offered by us are generally dependent on the complexity and risk of the project as well as the resources that will be required to complete the project. Our focus is on increasing our operating margins as well as our gross margin percentage, which translates into stronger operating results.
Our contracts are obtained either through customer upselling based on our leading brands and significant install base, competitive bidding or as a result of negotiations with our customers. Contract terms offered by us are generally dependent on the complexity and risk of the project as well as the resources that will be required to complete the project.
Gross profit increased by $42.8 million, or 33.4%, to $171.0 million in 2023 compared with $128.2 million in 2022. The increase in gross profit was primarily attributable to the increase in sales volume as described above.
Gross profit increased by $25.1 million, or 14.7%, to $196.1 million in 2024 compared with $171.0 million in 2023. The increase in gross profit was attributable to the increase in sales volume as described above, as well as sales mix, project execution and flow through from higher booked margins, as well as continued benefits from sourcing and value engineering.
The decrease is primarily attributable to $1.0 million of restructuring expenses incurred in 2023. 30 Corporate and Other segment Operating expense for the Corporate and Other segment increased $10.2 million to $46.9 million for 2023 compared with $36.7 million for 2022.
Corporate and Other segment Operating expense for the Corporate and Other segment increased $19.6 million to $66.5 million for 2024 compared with $46.9 million for 2023. The increase is primarily attributable to investments made to support growth inclusive of acquisition and integration expenses, and inflationary increases for wages and services.
Based on the analysis, the resultant estimated fair value of all of the reporting units exceeded their carrying value as of December 31, 2023. For additional information on goodwill impairment testing results, see Note 6 to the Consolidated Financial Statements.
During 2024, 2023, and 2022, our annual impairment test indicated no impairment of goodwill. Accordingly, we recognized no impairment charges in our financial results for the years ended December 31, 2024, 2023, and 2022. For additional information on impairment testing results, see Note 6 to the Consolidated Financial Statements.
In the third quarter of 2023, the Company entered into an Elevated Ratio Period resulting in a maximum Consolidated Net Leverage Ratio of 4.00 through June 30, 2024, after which time it will decrease to 3.50 until the end of the term of the Credit Facility. 31 As of December 31, 2023 and 2022, the Company was in compliance with all related financial and other restrictive covenants under the Credit Facility.
As of December 31, 2024 and 2023, the Company was in compliance with all related financial and other restrictive covenants under the Credit Facility.
The increase was led by increases of $88.2 million in our separation, filtration and industrial water businesses and $21.2 million in our thermal acoustics technologies.
The increase is driven by increases of $9.4 million in our dampers and expansion businesses and $7.2 million in our industrial air businesses, partially offset by a decrease of $9.5 million in our water and wastewater treatment technologies.
Approximately 58.2%, or $71.1 million, of the increase in net sales is attributable to organic revenue growth, defined as revenue recorded subsequent to the twelve-month period post-acquisition date, while $51.1 million is attributable to acquisitions that have occurred during the preceding twelve-month period.
The increase is primarily attributable to increased demand for energy transition projects and products as the market for power increases. Approximately $28.2 million of orders in 2024 are attributable to acquisitions that occurred during the preceding twelve-month period.
These were partially offset by $3.1 million paydown of our term debt, $7.0 million for the repurchase and retirement of our common stock, $1.4 million in distributions to non-controlling interest, and $0.6 million in payments on our capital leases. Our primary sources of liquidity are cash generated from operations and borrowing availability under the Credit Facility.
This was partially offset by $5.0 million for the repurchase and retirement of our common stock, $2.2 million relating to equity compensation, inclusive of awards surrendered for tax liabilities, proceeds from employee stock purchase plan and exercise of stock options, $2.1 million in distributions to non-controlling interest, $2.1 million of deferred consideration for acquisitions, $1.9 million of financing fees, $2.8 million of earnout payments, and $0.9 million in payments on our capital leases.
Market Pressures The senior management team monitors and manages the Company’s ability to operate effectively as the result of market pressures. In particular, we are currently experiencing shortages of raw materials and inflationary pressures for certain materials and labor.
While the primary focuses of our capital allocation strategy is organic growth and portfolio management, the Company closely monitors its leverage and debt repayment strategies. Market Pressures The senior management team monitors and manages the Company’s ability to operate effectively as the result of market pressures.
Financing activities in 2022 provided cash of $38.2 million, which consisted primarily of $39.3 million net borrowings on our revolving credit line and $11.0 million borrowings of joint venture term debt, both of which were used to finance current year acquisitions.
In 2023, $56.5 million of cash was used in investing activities, which consisted of $48.1 million for current year acquisitions and $8.4 million for acquisition of property and equipment. Financing Activities Financing activities in 2024 provided cash of $65.9 million, which consisted primarily of $82.9 million of net borrowings under the Credit Facility, used to finance current year acquisitions.
Removed
Industry Trends and Corporate Strategy We are a global corporation with worldwide operations. As a global business, our operations are affected by worldwide, regional and industry-specific economic factors, wherever we operate or do business.
Added
In 2024 and the first quarter of 2025, we disclosed multiple transactions that strategically align with the Company’s portfolio management strategy and vision. These transactions include the acquisition of Profire Energy ("Profire") and the intended divestiture of the Company’s Fluid Handling business.
Removed
The Company provides this supplemental non-GAAP financial information, because the Company’s management utilizes it to evaluate its ongoing financial performance and the Company believes it provides greater transparency to investors as supplemental information to its GAAP results.
Added
Profire, a former publicly traded company on the NASDAQ under ticker symbol PFIE, is a leading North American supplier of mission-critical combustion automation and control solution services. Their core offering supports emissions reduction, safety objectives, and industry regulations.
Removed
Gross profit as a percentage of sales increased to 31.4% in 2023 compared with 30.3% in 2022 due to higher project margin mix executed during the year and price increases. We continue to experience shortages of raw materials and inflationary pressures for certain materials and labor.
Added
Profire has a large install base across oil & gas, petrochemical, and natural gas markets, with growing exposure to other energy transition markets. The business is headquartered in Lindon, Utah, with a research and development center in Edmonton-Alberta, Canada. The business has a long-tenured and experienced leadership team and had 2024 revenues of $63 million with accretive EBITDA margins.
Removed
We have secured additional raw materials from existing and alternate suppliers and have taken other mitigating actions to mitigate supply disruptions, such as implementing price increases and applying material surcharges, we cannot guarantee that we can continue to do so in the future. In this event, our business, results and financial condition could be adversely affected.
Added
Fluid Handling is a well-positioned business with strong brands in the pumps and filters space. However, we are focused on businesses that more closely align with our strategic investments and leadership positions in the air, water and energy transition spaces. Industry Trends and Corporate Strategy We are a global corporation with worldwide operations.
Removed
Orders booked were $582.8 million in 2023 compared with $526.6 million in 2022. This $56.2 million increase is primarily attributable to recent acquisitions. Selling and administrative expenses were $122.9 million in 2023 compared with $93.4 million in 2022. The increase is primarily attributed to acquisitions during 2023, as well as increased investment to support our revenue growth and increased backlog.
Added
Note Regarding Use of Non-GAAP Financial Measures The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These GAAP financial statements include certain charges the Company believes are not indicative of its core ongoing operational performance.
Removed
Selling and administrative expenses as a percentage of sales were flat, with 22.6% in 2023 compared with 22.1% in 2022. Amortization and earnout expenses were $8.2 million in 2023 and $6.8 million in 2022.
Added
While the Company cannot predict the exact timing or amounts of such charges, it does expect to treat these charges as special items in its future presentation of non-GAAP results.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeTransaction gains (losses) included in “Other income (expense), net” line of the Consolidated Statements of Income were $1.2 million, $6.3 million, and $(3.1) million in 2023, 2022, and 2021, respectively. 36
Biggest changeTransaction (losses) gains included in “Other (expense) income, net” line of the Consolidated Statements of Income were $(4.3) million, $1.2 million, and $6.3 million in 2024, 2023, and 2022, respectively. 38
The Company has wholly-owned subsidiaries in several countries, including in the Netherlands, Canada, the People’s Republic of China, United Kingdom, Singapore, India, United Arab Emirates and South Korea. In the past, we have not hedged our foreign currency exposure. Future changes in exchange rates may positively or negatively impact our revenues, operating expenses and earnings.
The Company has wholly-owned subsidiaries in several countries, including in the Netherlands, Canada, the People’s Republic of China, United Kingdom, Singapore, India, United Arab Emirates, Germany and South Korea. In the past, we have not hedged our foreign currency exposure. Future changes in exchange rates may positively or negatively impact our revenues, operating expenses and earnings.
Most of the interest on the Company’s debt is indexed to SOFR market rates. The estimated annual impact of a hypothetical 10% change in the estimated weighted average borrowing rate at December 31, 2023 is $1.2 million.
Most of the interest on the Company’s debt is indexed to SOFR market rates. The estimated annual impact of a hypothetical 10% change in the estimated weighted average borrowing rate at December 31, 2024 is $1.6 million.
The carrying value of the Company’s total long-term debt and current maturities of long-term debt at December 31, 2023 was $138.6 million. Market risk was estimated as the potential decrease (increase) in future earnings and cash flows resulting from a hypothetical 10% increase (decrease) in the Company’s estimated weighted average borrowing rate at December 31, 2023.
The carrying value of the Company’s total long-term debt and current maturities of long-term debt at December 31, 2024 was $221.5 million. Market risk was estimated as the potential decrease (increase) in future earnings and cash flows resulting from a hypothetical 10% increase (decrease) in the Company’s estimated weighted average borrowing rate at December 31, 2024.

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