<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended SEPTEMBER 30, 1997 Commission file number 0-7099
------------------ ------
CECO ENVIRONMENTAL CORP.
- --------------------------------------------------------------------------------
NEW YORK 13-2566064
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
505 UNIVERSITY AVENUE, SUITE 1400, TORONTO, ONTARIO, CANADA M5G 1X3
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 416-593-6543
--------------------
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
X Yes No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the close of the period covered by this report.
Class: COMMON, PAR VALUE $.01 PER SHARE
--------------------------------
OUTSTANDING at September 30, 1997 7,969,128
<PAGE>
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES
=========================================
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
INDEX
-----
<TABLE>
<CAPTION>
<S> <C> <C>
Part I - Financial Information:
Condensed consolidated balance sheet as of
September 30, 1997 and December 31, 1996 2
Condensed consolidated statement of operations
for the three-month and nine-month periods ended
September 30, 1997 and 1996 3
Condensed consolidated statement of cash flows for the
nine-month periods ended September 30, 1997 and 1996 4 & 5
Notes to condensed consolidated financial statements 6 & 7
Management's discussion and analysis of the
financial condition and results of operations 8 to 11
Part II - Other Information 12
Signature 13
</TABLE>
-1-
<PAGE>
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES
=========================================
CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
----------- -----------
ASSETS
<S> <C> <C>
Current assets:
Cash $ 877,710 $ 412,174
Marketable securities - trading 727,948 1,015,521
Accounts receivable 4,037,775 2,077,045
Inventories 678,793 565,371
Costs and estimated earnings in excess of billings
on uncompleted contracts 234,394 --
Prepaid expenses and other current assets 129,118 45,464
Prepaid income taxes 103,348 --
Deferred income taxes 58,735 58,735
----------- -----------
Total current assets 6,847,821 4,174,310
Property and equipment, at cost, net 1,989,198 1,806,126
Intangible assets, at cost, net 6,035,486 3,220,841
----------- -----------
Total assets $14,872,505 $ 9,201,277
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term obligations $ 1,040,576 $ 400,000
Current portion of long-term debt 323,043 83,100
Current portion of capital lease obligation 5,554 6,043
Accounts payable and accrued expenses 2,257,926 1,220,595
Billings in excess of costs and estimated earnings
on uncompleted contracts 1,873,918 --
Due to former owners of Busch Co. 331,196 --
Income taxes payable -- 276,976
----------- -----------
Total current liabilities 5,832,213 1,986,714
Long-term debt, less current portion 1,825,587 1,132,869
Capital lease obligation, less current portion 5,298 9,882
----------- -----------
Total liabilities 7,663,098 3,129,465
----------- -----------
Minority interest 273,648 964,203
----------- -----------
Shareholders' equity:
Preferred stock, $.01 par value; 10,000,000 shares
authorized, none issued -- --
Common stock, $.01 par value; 100,000,000 shares
authorized, 8,107,048 and 7,338,548 shares issued,
respectively 81,070 73,385
Capital in excess of par value 9,860,063 8,178,998
Accumulated deficit ( 2,656,705) ( 2,796,105)
----------- -----------
7,284,428 5,456,278
Less treasury stock, at cost ( 348,669) ( 348,669)
----------- -----------
Net shareholders' equity 6,935,759 5,107,609
----------- -----------
Total liabilities and shareholders' equity $14,872,505 $ 9,201,277
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
- -2-
<PAGE>
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES
=========================================
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 4,971,942 $ 2,195,120 $10,439,429 $ 6,220,217
----------- ----------- ----------- -----------
Costs and expenses:
Cost of sales 2,826,672 1,172,444 5,623,699 3,277,633
Selling and administrative 2,300,143 792,709 4,275,904 2,416,063
Depreciation and amortization 127,845 118,107 367,634 334,013
----------- ----------- ----------- -----------
5,254,660 2,083,260 10,267,237 6,027,709
----------- ----------- ----------- -----------
Income (loss) from operations ( 282,718) 111,860 172,192 192,508
Investment income 37,350 27,801 107,926 50,690
Interest expense ( 17,885) ( 34,390) ( 67,263) ( 118,440)
----------- ----------- ----------- -----------
Income (loss) before provision
(credit) for income taxes ( 263,253) 105,271 212,855 124,758
Provision (credit) for income taxes ( 109,000) 44,192 52,000 52,192
----------- ----------- ----------- -----------
Income (loss) before
minority interest ( 154,253) 61,079 160,855 72,566
Minority interest 52,793 ( 19,969) ( 21,455) ( 22,789)
----------- ----------- ----------- -----------
Net income (loss) ($ 101,460) $ 41,110 $ 139,400 $ 49,777
=========== =========== =========== ===========
Net income (loss) per share,
primary and fully diluted ($ .01) $ .01 $ .02 $ .01
=========== =========== =========== ===========
Weighted average number of
common shares outstanding 7,774,961 7,037,128 7,412,739 6,950,861
=========== =========== =========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-3-
<PAGE>
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES
=========================================
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1997 1996
---------- ----------
INCREASE (DECREASE) IN CASH
<S> <C> <C>
Cash flows from operating activities:
Net income $ 139,400 $ 49,777
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 367,634 334,013
Amortization of deferred charges -- 75,000
Minority interest 21,455 22,789
(Increase) decrease in operating assets, net of acquisition of Busch Co.:
Purchases of marketable securities (1,191,998) (1,408,200)
Proceeds from sales of marketable securities 1,501,143 502,876
Accounts receivable (1,960,730) 469,975
Inventories 31,957 ( 24,980)
Costs and estimated earnings in excess of billings
on uncompleted contracts ( 234,394) --
Prepaid expenses and other current assets ( 70,595) ( 65,406)
Prepaid income taxes ( 103,348) --
Increase (decrease) in operating liabilities,
net of acquisition of Busch Co.:
Accounts payable and accrued expenses 1,037,331 ( 406,714)
Income taxes payable ( 276,976) 73,261
Billings in excess of costs and estimated
earnings on uncompleted contracts 1,873,918 --
Due to former owners of Busch Co. 331,196 --
---------- ----------
Net cash provided by (used in) operating activities 1,465,993 ( 377,609)
---------- ----------
Cash flows from investing activities:
Acquisition of Busch Co. allocated to:
Goodwill (1,717,421) --
Inventory ( 145,379) --
Equipment ( 131,818) --
Patents ( 92,323) --
Prepaid expenses ( 13,059) --
Additions to property and equipment and intangible assets ( 468,624) ( 72,503)
Advances to officers -- ( 34,000)
---------- ----------
Net cash (used in) investing activities (2,568,624) ( 106,503)
---------- ----------
</TABLE>
CONTINUED ON NEXT PAGE
See accompanying notes to condensed consolidated financial statements.
- -4-
<PAGE>
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES
=========================================
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED
(unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1997 1996
---------- ----------
<S> <C> <C>
Cash flows from financing activities:
Increase in long-term debt $1,000,000 $ --
Proceeds from issuance of common stock -- 27,500
Proceeds from (reduction of) short-term obligations 640,576 ( 150,000)
Repayments of long-term debt and capital lease obligation ( 72,409) ( 175,056)
---------- ----------
Net cash provided by (used in) financing activities 1,568,167 ( 297,556)
---------- ----------
Net increase (decrease) in cash 465,536 ( 781,668)
Cash at beginning of period 412,174 1,043,011
---------- ----------
Cash at end of period $ 877,710 $ 261,343
========== ==========
SUPPLMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 67,263 $ 118,440
---------- ----------
Income taxes $ 432,324 $ 23,800
---------- ----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
- -5-
<PAGE>
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES
=========================================
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
- --------------------------------------------------------------------------------
1. Presentation of Financial Statements
------------------------------------
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to
present fairly the financial position as of September 30, 1997 and the
results of operations for the three-month and nine-month periods ended
September 30, 1997 and 1996 and cash flows for the nine-month periods
ended September 30, 1997 and 1996. The condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto, together with management's discussion and
analysis of financial condition and results of operations, contained in
the Company's 1996 Annual Report to stockholders. The results of
operations for the nine-month period ended September 30, 1997 are not
necessarily indicative of the results to be expected for the full year,
or any future interim period.
2. Acquisition of Business
-----------------------
On September 25, 1997, pursuant to an Asset Purchase Agreement, New
Busch Co., Inc., a wholly-owned subsidiary of CECO Filters, Inc.,
acquired substantially all of the assets, and the business, of Busch Co.
("Busch") for $2,100,000 in cash. Busch, located in Pittsburgh,
Pennsylvania, was engaged in the business of marketing, selling,
designing and assembling ventilation, environmental and process-related
products, and also provided manufacturer's representative services to
certain companies or manufacturers in support or related businesses. The
acquisition was accounted for as a purchase. The Asset Purchase
Agreement provides that, notwithstanding the actual September 25, 1997
closing date, the closing was deemed to be effective as of July 1, 1997.
The condensed consolidated statement of operations for the three-month
and nine-month periods ended September 30, 1997, therefore, includes the
operations of New Busch Co. since July 1, 1997.
On a pro forma basis, results of operations for the nine-month periods
ended September 30, 1997 and 1996 would have been as follows, if the
acquisition had been made as of January 1, 1996:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1997 1996
----------- -----------
<S> <C> <C>
Net sales $17,343,271 $15,033,989
Income before taxes on income 388,450 473,312
Net income 215,950 189,379
Net income per share $.03 $.03
3. Inventories consisted of the following:
September 30, December 31,
1997 1996
---------- ----------
Raw materials $409,617 $410,949
Finished goods 269,176 154,422
------- -------
$678,793 $565,371
======= =======
</TABLE>
- -6-
<PAGE>
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES
=========================================
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(unaudited)
- --------------------------------------------------------------------------------
3. Other Assets
------------
Investment in CECO Filters, Inc.
--------------------------------
Pursuant to a Stock Exchange Agreement dated May 30, 1992, between the
Company and IntroTech Investments, Inc. ("IntroTech"), a privately-held
Ontario corporation, the Company exchanged 1,666,666 newly issued shares
of its common stock for 1,666,666 shares of CECO Filters, Inc. ("CECO")
owned by IntroTech. CECO is a Delaware corporation engaged in the
pollution controls industry. It is a manufacturer of industrial air
filters, with its corporate headquarters located in Conshohocken,
Pennsylvania. The 1,666,666 shares of CECO common stock acquired by the
Company are restricted. Those shares represented 24.51% of the
outstanding shares of common stock of CECO.
During 1993 through 1996, the Company exchanged 2,953,964 additional
shares of its common stock for 2,953,964 shares of CECO's common stock
with unrelated third parties. Also, during 1993, the Company acquired,
for cash, an additional 21,100 shares of CECO's common stock from
unrelated third parties, which were subsequently sold in September,
1997. In June, 1997, the Company exchanged 186,000 additional shares of
its common stock for 186,000 shares of CECO's common stock with
unrelated third parties. On August 13, 1997, the Company exchanged
582,500 shares of its common stock for 1,165,000 shares of CECO's common
stock with an officer of CECO. As of September 30, 1997, the Company
owned 87.5% of CECO's common stock.
Summarized financial information of CECO as of and for its nine months
ended September 30, 1997, is as follows:
Financial position:
Working capital $ 300,744
============
Total assets $ 10,302,507
============
Net shareholders' equity $ 2,180,460
============
Results of operations:
Net sales $ 10,439,429
=============
Income before income taxes $ 131,118
=============
Net income $ 79,118
=============
- -7-
<PAGE>
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES
=========================================
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(unaudited)
- --------------------------------------------------------------------------------
Financial Condition, Liquidity and Capital Resources - The Company
- ------------------------------------------------------------------
The Company's consolidated cash and marketable securities position increased
from $1,427,695 at December 31, 1996 to $1,605,658 at September 30, 1997. This
increase of $177,963 is attributable principally to the source of cash from
operating activities of $1,156,848 (excluding activities involving marketable
securities) during the nine months ended September 30, 1997, offset by cash of
approximately $160,000 used towards the acquisition of Busch Co., $368,000 used
to acquire additional equipment and intangible assets, and $472,000 to repay
existing debt.
Management believes that the expected revenues from operations of CECO Filters,
Inc. ("CECO"), supplemented by the available line of credit, will be sufficient
to provide adequate cash to fund anticipated working capital and other cash
needs during the remainder of the year.
The Company and CECO have entered into a five-year management and consulting
agreement during 1994 pursuant to which the Company provides management and
financial consulting services to CECO for a monthly fee of $20,000 until the
agreement expires in December, 1998. The Company believes its consulting
agreement with CECO and investment income from its investment in marketable
securities should provide sufficient revenue to meet its general and
administrative expenses.
Results of Operations - The Company
- -----------------------------------
The Company's consolidated statement of operations for the nine-month periods
ended September 30, 1997 and 1996 reflects the operations of the Company
consolidated with the operations of CECO. As a result of multiple stock
acquisitions, the Company, effective April 7, 1993, owned a greater than 50%
interest in CECO. Minority interest in the consolidated statement of operations
has been presented as a reduction in net income or loss.
The Company received $60,000 during each quarter for management and financial
consulting services provided to CECO. This amount is not reflected in the
consolidated results of operations since it is eliminated in consolidation.
Except as set forth above, the Company has no other income, revenues or expenses
other than as a result of its investment in CECO and its investment in
marketable securities, and except for its investment activities, the Company
does not engage in operations other than through its operating subsidiary, CECO.
CECO is comprised of CECO Filters, Inc., Air Purator Corporation ("APC"),
Compliance Systems International, Inc. ("CSI"), U.S. Facilities Management
Company, Inc. ("USFM") and New Busch Co., Inc. (collectively referred to as "the
CECO Group"), which provide innovative solutions to air quality problems through
particle and chemical control technologies and management services.
- -8-
<PAGE>
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES
=========================================
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
(unaudited)
- --------------------------------------------------------------------------------
Results of Operations - The Company - Continued
- -----------------------------------------------
CECO manufactures and markets filters known as fiber bed mist eliminators,
designed to trap, collect and remove solid soluble and liquid particulate matter
suspended in an air or other gas stream whether generated from a point source
emission or otherwise. APC designs and manufactures high performance filter
media and bags for use in high temperature pulse-jet baghouses, the most
effective type of baghouse for capturing submicron particulate from gas streams.
CSI offers innovative patented technologies, Catenary Grid(R) and Narrow Gap
Venturi(TM), designed for use with heat and mass transfer operations and
particulate control. USFM provides facilities management and software, as well
as outsourced plant-wide maintenance management to help customers achieve their
performance goals. On September 25, 1997, CECO acquired substantially all of the
assets of Busch Co. of Pittsburgh, PA, effective July 1, 1997. Busch is engaged
in designing, manufacturing and supplying equipment used to control the
environment in and around industrial plants with a variety of proprietary and
patented technologies.
Results of Operations - CECO (Company's Subsidiary)
- ---------------------------------------------------
Comparison of Nine Months Ended September 30, 1997 to Nine Months Ended
- -----------------------------------------------------------------------
September 30, 1996
- ------------------
Revenues were approximately $10.4 million and $6.2 million for the nine-month
periods ended September 30, 1997 and 1996, respectively, representing an
increase of 67.8%. The increase in revenues from 1996 to 1997 resulted primarily
from an increase in sales orders, particularly new orders, which is a result of
the implementation of a target marketing approach, focusing the CECO Group's
efforts on opportunities in markets that are ready for its specialized systems
and services. In addition, the acquisition of Busch Co., effective July 1, 1997,
had the impact of increasing revenues by $2.7 million.
The CECO Group's backlog of orders at September 30, 1997 was approximately $10
million as compared to approximately $5.8 million at September 30, 1996, an
increase of $4.2 million or 72%. There can be no assurance that order backlog
will be replicated, or increased, or translate into higher revenue in the
future. The success of the CECO Group's business depends on a multitude of
factors that are out of the CECO Group's control. The CECO Group's operating
results can be significantly impacted by the introduction of new products, new
manufacturing technologies, rapid change in the demand for its product, decrease
in the average selling price over the life of a product as competition
increases, and the CECO Group's dependence on the efforts of middle men to sell
a significant portion of its product.
The CECO Group's overall cost of revenues increased as a percentage of sales for
the nine months ended September 30, 1997 (53.9%) compared to the nine months
ended September 30, 1996 (52.7%). The increase is attributed to the impact of
Busch Co. where costs as a percentage of revenues amounted to 64% from July 1,
1997 through September 30, 1997. Without the impact of Busch Co., the cost of
revenues as a percentage of revenues would have been 50.3%. The decrease,
compared to the prior year and without the impact of Busch Co., is attributed to
lower material costs, as well as lower costs incurred to service the CECO
Group's products. The CECO Group continues to use the latest technology
available in an effort to reduce both cost of revenues (and the maintenance of
optimal inventory levels) and operating expenses, and ultimately increase
overall company profits.
- -9-
<PAGE>
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES
=========================================
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
(unaudited)
- --------------------------------------------------------------------------------
Results of Operations - CECO (Company's Subsidiary)
- ---------------------------------------------------
Comparison of Nine Months Ended September 30, 1997 to Nine Months Ended
- -----------------------------------------------------------------------
September 30, 1996 - Continued
- ------------------------------
The CECO Group's selling and administrative expenses amounted to $4,137,533 for
the nine-month period ended September 30, 1997 compared to $2,248,916 for the
nine-month period ended September 30, 1996, representing an increase of
$1,888,617, or 84%. A significant amount of this increase is attributable to
selling and administrative expenses of Busch Co. since the effective date of the
acquisition, as well as selling and administrative expenses associated with USFM
which only recently commenced its operations. The selling and administrative
expenses of Busch include a $500,000 charge for a sign-on bonus to a former
officer of Busch Co. in connection with a three-year employment agreement. A
substantial portion of the selling and administrative expenses are fixed in
nature.
During 1994, the CECO Group entered into a management and consulting agreement
with the Company. The terms of the agreement require payment of monthly fees of
$20,000 from January, 1995 through December, 1998 in exchange for management and
financial consulting services involving corporate policies; marketing; strategic
and financial planning; and mergers, acquisitions and related matters. The CECO
Group incurred management fees to the Company of $180,000 during each of the
nine-month periods ended September 30, 1997 and 1996.
Interest expense decreased by $51,177, or 43.2%, during the nine-month period
ended September 30, 1997, when compared to the same period in 1996. The decrease
in interest expense can be attributed to a reduced utilization of the bank line
of credit during the nine months ended September 30, 1997 compared to the
previous year.
The CECO Group earned pre-tax income of $131,118 for the nine-month period ended
September 30, 1997 compared to pre-tax income of $116,910 for the nine-month
period ended September 30, 1996. This change is attributed principally to the
increase in revenues for the nine-month period ended September 30, 1997 with the
comparable period of 1996, offset by the increase in costs and expenses.
The provision for federal and state income taxes for the nine-month periods
ended September 30, 1997 and September 30, 1996 were comparable.
Comparison of Three Months Ended September 30, 1997 to Three Months Ended
- -------------------------------------------------------------------------
September 30, 1996
- ------------------
Revenues were approximately $5 million and $2.2 million for the three-month
periods ended September 30, 1997 and September 30, 1996, respectively,
representing an increase of 126%. The increase in revenues is primarily
attributable to the Busch Co. which accounted for approximately $2.7 million of
the CECO Group's consolidated revenues.
- -10-
<PAGE>
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES
=========================================
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
(unaudited)
- --------------------------------------------------------------------------------
Comparison of Three Months Ended September 30, 1997 to
- ------------------------------------------------------
Three Months Ended September 30, 1996 - Continued
- -------------------------------------------------
The CECO Group's overall cost of revenues increased as a percentage of sales for
the three months ended September 30, 1997 (56.8%) compared to the three months
ended September 30, 1996 (53.4%). The increase is attributed to the impact of
Busch Co. where costs as a percentage of revenues amounted to 64% from July 1,
1997 through September 30, 1997. Without the impact of Busch Co., the cost of
revenues as a percentage of revenues would have been 48.1%. The decrease,
compared to the prior year and without the impact of Busch Co., is attributed to
lower raw material costs, as well as lower costs incurred to service the CECO
Group's products. The CECO Group continues to use the latest technology
available in an effort to reduce both cost of revenues (and the maintenance of
optimal inventory levels) and operating expenses, and ultimately increase
overall company profits.
The CECO Group's selling and administrative expenses amounted to $2,239,767 for
the three-month period ended September 30, 1997 compared to $728,168 for the
three-month period ended September 30, 1996, representing an increase of
$1,511,599 or 207.6%. A significant amount of this increase is attributable to
selling and administrative expenses of Busch Co. since the effective date of the
acquisition, as well as selling and administrative expenses associated with USFM
which only recently commenced its operations. The selling and administrative
expenses of Busch include a $500,000 charge for a sign-on bonus to a former
officer of Busch Co. in connection with a three-year employment agreement.
Excluding the impact of Busch Co. and USFM, the Company's selling and
administrative expenses have declined for each of the last three quarterly
periods as management continues to focus on its target marketing approach
instituted during the latter part of 1995.
Interest expense decreased during the three-month period ended September 30,
1997, when compared to the same period in 1996, as a result of reduced
utilization of the bank line of credit.
The CECO Group incurred a pre-tax loss of $272,938 for the three-month period
ended September 30, 1997 compared to pre-tax income of $101,118 for the
three-month period ended September 30, 1996. This change is attributed
principally to the one-time charge incurred for the sign-on bonus described
previously.
The credit for federal and state income taxes for the three-month period ended
September 30, 1997 amounted to $109,000 compared to a provision for federal and
state income taxes of $44,192 for the three-month period ended September 30,
1996.
The Company is very excited about the addition of Busch Co. to its group. One of
our main strategies is to develop an organization that is equipped to satisfy
customers' needs by building an organization with skill sets and core
competencies that provide value added services to them. We plan to continue to
build on this strategy.
- -11-
<PAGE>
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES
=========================================
Part II - Other Information
- --------------------------------------------------------------------------------
Item 5 - Other Information
On August 13, 1997, CECO Environmental Corp. (the "Company") exchanged 582,500
newly issued shares of common stock for 1,165,000 shares of common stock of CECO
Filters, Inc. ("Filters") with an executive officer of Filters. The exchange
ratio was one share of common stock of the Company for two shares of common
stock of Filters. Immediately after the exchange transaction, the Company owned
87.5% of the outstanding common stock of Filters.
Item 6 - Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K - September 25, 1997 - Acquisition of substantially
all assets and business of Busch Co.
- -12-
<PAGE>
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES
=========================================
SIGNATURE
- --------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CECO ENVIRONMENTAL CORP.
------------------------
Phillip DeZwirek
Chief Financial Officer
Chief Executive Officer
Date: October 31, 1997
- -13-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES AS OF AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> $877,710
<SECURITIES> 727,948
<RECEIVABLES> 4,037,775
<ALLOWANCES> 0
<INVENTORY> 678,793
<CURRENT-ASSETS> 6,847,821
<PP&E> 3,681,274
<DEPRECIATION> 1,692,076
<TOTAL-ASSETS> 14,872,505
<CURRENT-LIABILITIES> 5,833,213
<BONDS> 2,148,630
0
0
<COMMON> 81,070
<OTHER-SE> 6,854,689
<TOTAL-LIABILITY-AND-EQUITY> 14,872,505
<SALES> 10,439,429
<TOTAL-REVENUES> 10,439,429
<CGS> 5,623,699
<TOTAL-COSTS> 10,267,237
<OTHER-EXPENSES> 67,263
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 67,263
<INCOME-PRETAX> 212,855
<INCOME-TAX> 52,000
<INCOME-CONTINUING> 139,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 139,400
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
