<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 JUNE 30, 1999 Commission file number 0-7099
--------------- ------------
CECO ENVIRONMENTAL CORP.
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NEW YORK 13-2566064
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
505 UNIVERSITY AVENUE, SUITE 1400, TORONTO, ONTARIO, CANADA M5G 1X3
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 416-593-6543
---------------
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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 June 30, 1999 8,388,816
<PAGE>
CECO ENVIRONMENTAL CORP.
------------------------
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
JUNE 30, 1999
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INDEX
-----
<TABLE>
<CAPTION>
<S> <C>
Part I - Financial Information:
Condensed consolidated balance sheet as of
June 30, 1999 and December 31, 1998 2
Condensed consolidated statement of operations
for the three-month and six-month periods ended
June 30, 1999 and 1998 3
Condensed consolidated statement of cash flows
for the six-month periods ended June 30, 1999 and 1998 4 & 5
Notes to condensed consolidated financial statements 6 to 8
Management's discussion and analysis of the
financial condition and results of operations 9 to 12
Signature 13
</TABLE>
- -1-
<PAGE>
CECO ENVIRONMENTAL CORP.
------------------------
CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited)
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<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
----------- -----------
ASSETS
<S> <C> <C>
Current assets:
Cash $ 203,582 $ 364,648
Marketable securities - trading 1,062,114 695,944
Accounts receivable 2,628,800 4,068,640
Inventories 838,986 541,315
Costs and estimated earnings in excess of
billings on uncompleted contracts 337,587 226,504
Due from former owners of Busch Co. 243,212 147,939
Investment in sales-type lease 103,350 95,400
Prepaid expenses and other current assets 295,910 344,961
Prepaid income taxes 94,000 --
Deferred income taxes 84,500 84,500
----------- -----------
Total current assets 5,892,041 6,569,851
Property and equipment, net 2,055,678 2,062,452
Goodwill, net 4,962,933 5,169,353
Other intangible assets, at cost, net 1,155,161 1,270,780
Investment in sales-type lease 286,200 333,900
Other assets 379,946 --
Deferred income taxes 136,200 68,500
----------- -----------
$14,868,159 $15,474,836
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term obligations $ 2,100,000 $ 1,200,000
Current portion of long-term debt 345,074 385,149
Accounts payable and accrued expenses 2,610,395 3,107,227
Billings in excess of costs and estimated
earnings on uncompleted contracts 728,012 1,174,427
Unearned income 69,300 78,000
Income taxes payable 13,040 253,100
----------- -----------
Total current liabilities 5,865,821 6,197,903
Long-term debt, less current portion 1,212,943 1,569,713
----------- -----------
Total liabilities 7,078,764 7,767,616
----------- -----------
Minority interest 123,519 149,941
----------- -----------
Shareholders' equity:
Preferred stock, $.01 par value; 10,000,000 shares
authorized and none issued -- --
Common stock, $.01 par value; 100,000,000
shares authorized and 8,388,816 shares issued 83,888 83,888
Capital in excess of par value 10,139,013 10,139,013
Accumulated deficit (2,208,356) (2,316,953)
----------- -----------
8,014,545 7,905,948
Less treasury stock, at cost (348,669) (348,669)
----------- -----------
Net shareholders' equity 7,665,876 7,557,279
----------- -----------
$14,868,159 $15,474,836
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
- -2-
<PAGE>
CECO ENVIRONMENTAL CORP.
------------------------
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Net sales - products $ 2,064,389 $ 1,775,781 $ 4,594,235 $ 4,190,770
Contract revenues 1,900,468 3,730,385 4,143,279 7,062,128
------------ ------------ ------------ ------------
Total revenues 3,964,857 5,506,166 8,737,514 11,252,898
------------ ------------ ------------ ------------
Costs and expenses:
Cost of revenues - products 1,065,081 818,199 2,349,727 2,103,209
Cost of revenues - contracts 1,038,578 2,585,537 2,535,293 4,794,966
Selling and administrative 1,651,638 1,300,686 3,145,418 3,011,486
Depreciation and amortization 155,664 78,322 298,688 211,546
------------ ------------ ------------ ------------
3,910,961 4,782,744 8,329,126 10,121,207
------------ ------------ ------------ ------------
Income from continuing operations
before investment income and
interest expense 53,896 723,422 408,388 1,131,691
Investment income 120,289 18,513 158,468 35,445
Interest expense (64,013) (62,022) (139,511) (108,720)
------------ ------------ ------------ ------------
Income from continuing operations
before provision for income taxes 110,172 679,913 427,345 1,058,416
Provision for income taxes (35,840) 272,000 179,400 437,000
------------ ------------ ------------ ------------
Income from continuing operations
before minority interest 74,332 407,913 247,945 621,416
Minority interest 2,709 (28,911) (5,621) (59,003)
------------ ------------ ------------ ------------
Income from continuing operations 77,041 379,002 242,324 562,413
------------ ------------ ------------ ------------
Discontinued operations:
Loss from operations of discontinued
division, net of income tax benefit 3,200 (172,960) (121,245) (220,535)
and minority interest
Loss from disposal of discontinued
division -- -- (12,482) --
------------ ------------ ------------ ------------
3,200 (172,960) (133,727) (220,535)
------------ ------------ ------------ ------------
Net income $ 80,241 $ 206,042 $ 108,597 $ 341,878
============ ============ ============ ============
Net income per share, basic and diluted $ .01 $ .02 $ .01 $ .04
============ ============ ============ ============
Weighted average number of common shares
outstanding:
Basic 8,250,896 8,250,896 8,250,896 8,203,935
============ ============ ============ ============
Diluted 9,414,640 8,680,198 9,445,495 8,633,236
============ ============ ============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
- -3-
<PAGE>
CECO ENVIRONMENTAL CORP.
------------------------
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
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<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1999 1998
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash flows from operating activities:
<S> <C> <C>
Net income $ 108,597 $ 341,878
Adjustments to reconcile net income to net cash
(used in) operating activities:
Loss from discontinued operations 133,727 220,535
Depreciation and amortization 240,202 154,812
Deferred income taxes (67,700) -
Unearned income (8,700) -
Goodwill amortization - CECO Filters, Inc. 58,486 56,734
Minority interest 5,621 43,739
(Increase) decrease in operating assets:
Accounts receivable 575,058 (579,997)
Inventories (297,671) 59,972
Costs and estimated earnings in excess of
billings on uncompleted contracts (144,471) (361,564)
Due from former owners of Busch Co. (95,273) -
Investment in sales-type lease 39,750 -
Prepaid expenses and other current assets 38,224 82,552
Prepaid and refundable income taxes (94,000) 150,200
Other assets (207,428) -
Marketable securities - trading (366,170) 7,928
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses 96,352 694,865
Billings in excess of costs and estimated
earnings on uncompleted contracts (301,052) (1,032,401)
Accrued income taxes (240,060) 100,800
---------- ----------
Net cash (used in) continuing operations (526,508) (59,947)
Net cash provided by discontinued operations 35,896 6,226
----------- ------------
Net cash (used in) operating activities (490,612) (53,721)
---------- -----------
Cash flows from investing activities:
Additions to property and equipment and intangible assets (113,071) (21,665)
Capital expenditures of discontinued operations (1,856) (109,608)
Acquisition of additional shares of CECO Filters, Inc. (55,459) (97,932)
Acquisition of IFM, net of cash acquired, comprised of the following:
Excess of current liabilities over current
assets, net of cash acquired - 169,756
Equipment - (125,132)
Goodwill - (152,533)
---------- ----------
Net cash (used in) investing activities (170,386) (337,114)
---------- ----------
</TABLE>
CONTINUED ON NEXT PAGE
See accompanying notes to condensed consolidated financial statements.
- -4-
<PAGE>
CECO ENVIRONMENTAL CORP.
------------------------
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED
(unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1999 1998
---------- ---------
<S> <C> <C>
Cash flows from financing activities:
Proceeds from short-term obligations $2,286,014 $ --
Net borrowings (repayments) of short-term obligations (1,386,014) 800,000
Proceeds from long-term debt 1,412,155 --
Repayments of long-term debt and capital lease obligation (1,812,223) (277,682)
Due to former owners of Busch Co. -- (709,983)
---------- ---------
Net cash provided by (used in) financing activities 499,932 (187,665)
---------- ---------
Net (decrease) in cash (161,066) (578,500)
Cash at beginning of period 364,648 847,827
---------- ---------
Cash at end of period $ 203,582 $ 269,327
========== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 139,511 $ 137,752
---------- ----------
Income taxes $ 485,960 $ 53,100
---------- ---------
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
On March 31, 1999, the Company sold the contracts and customer list of a
division in exchange for a non-interest bearing promissory note with a present
value of $174,493.
- -5-
<PAGE>
CECO ENVIRONMENTAL CORP.
------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
- -------------------------------------------------------------------------------
1. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to
present fairly the financial position as of June 30, 1999 and the
results of operations for the three-month and six-month periods ended
June 30, 1999 and 1998 and cash flows for the six-month periods ended
June 30, 1999 and 1998. The results of operations for the three-month
and six-month periods ended June 30, 1999 are not necessarily indicative
of the results to be expected for the full year.
2. Discontinued Operations
On March 31, 1999, the Company's subsidiary, CECO Filters, Inc.
("CECO"), sold the contracts and customer list of a division for
$250,000. The sales price was paid through a non-interest bearing
promissory note from the purchaser. Monthly principal payments of $1,500
commence October 1, 1999 with a balloon payment for the balance due on
April 1, 2007.
The following is a summary of operating activity for this discontinued
division:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1999 1998
--------- ----------
<S> <C> <C>
Revenues $387,656 $1,826,163
Cost of revenues (493,439) (1,748,486)
Selling and administrative (128,651) (464,940)
Depreciation and amortization (7,998) (12,029)
Interest expense - (4,069)
--------- ----------
Operating loss (242,432) (403,361)
Income tax benefit 112,200 161,000
Minority interest 8,987 21,826
--------- ----------
Loss from operations of discontinued division ($121,245) ($220,535)
========= ==========
The following is a summary of the loss recorded from the disposal of
this division:
Net present value note receivable $174,493
Impairment of goodwill (166,932)
Disposition costs (20,043)
--------
Loss from disposal of discontinued division ($12,482)
========
The following is a summary of the balance sheet for this discontinued
division:
DECEMBER 31,
1998
------------
Current assets $1,332,463
Property and equipment, net 233,740
Other assets 166,932
Current liabilities (992,384)
----------
Net assets of discontinued operations $ 740,751
==========
</TABLE>
- -6-
<PAGE>
CECO ENVIRONMENTAL CORP.
------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(unaudited)
- -------------------------------------------------------------------------------
3. Inventories consisted of the following:
JUNE 30, DECEMBER 31,
1999 1998
-------- --------
Raw materials $449,174 $380,477
Finished goods 127,041 46,742
Parts for resale 262,771 114,096
-------- --------
$838,986 $541,315
======== ========
4. Investment in CECO Filters, Inc.
The Company acquired 65,800 shares of CECO's common stock on the open
market for the amount of $55,459 during the six-month period ended June
30, 1999. As of June 30, 1999, the Company owned 93.8% of CECO's common
stock.
Summarized financial information of CECO as of and for its six months
ended June 30, 1999, is as follows:
Financial position:
Working capital (deficiency) ($ 928,820)
==========
Total assets $9,900,922
==========
Net shareholders' equity $2,401,698
==========
Results of operations:
Continuing:
Total revenues $8,737,514
==========
Income before income taxes $ 153,963
==========
Income from continuing operations $ 89,363
==========
Discontinued:
Loss from discontinued operations ($ 142,714)
==========
Net loss ($ 53,351)
==========
5. Debt
On March 16, 1999, CECO entered into a formal financing arrangement
with a bank which provides for a $5,000,000 line of credit, a $625,000
term loan, a $787,155 mortgage note payable and a $2,000,000
acquisition line of credit. A portion of the proceeds was used to repay
the previous line of credit, term loan and mortgage note payable.
The $5,000,000 line of credit expires March 16, 2000. The term loan is
payable in monthly installments of $20,833 plus interest through
September 1, 2001. The mortgage note payable is due in monthly
installments of $8,032 plus interest with a balloon payment on March 1,
2006. Interest is charged at prime less .25% or LIBOR plus 2.25%.
The bank financing is collateralized by CECO's receivables,
intangibles, property and equipment. The bank debt is also subject to
certain financial covenants.
- -7-
<PAGE>
CECO ENVIRONMENTAL CORP.
------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(unaudited)
- -------------------------------------------------------------------------------
6. Segment and Related Information
The Company has two reportable segments: Air Quality Improvement and
Ventilation and Environmental Products. The Company provides standard
and engineered systems and filter media for air quality improvement
through its Air Quality Improvement segment. The Ventilation and
Environmental Products segment assembles and manufactures ventilation,
environmental and process-related products. The Interfacility
Maintenance segment, which provided interfacility repair, preventative
maintenance and inter-facility construction, was discontinued on March
31, 1999.
<TABLE>
<CAPTION>
VENTILATION ELIMINATION
AIR AND OF INTER-
QUALITY ENVIRONMENTAL SEGMENT TOTAL
IMPROVEMENT PRODUCTS OTHER ACTIVITY CONSOLIDATED
----------- ------------- ----- ---------- ------------
<S> <C> <C> <C> <C> <C>
Six Months ended June 30, 1999
Revenues $3,816,594 $5,126,189 $23,537 ($228,806) $ 8,737,514
Operating income 69,832 284,188 54,368 408,388
Six Months ended June 30, 1998
Revenues $4,281,970 $7,048,917 $13,211 $(91,200) $11,252,898
Operating income (loss) 699,925 567,066 (135,300) 1,131,691
</TABLE>
- -8-
<PAGE>
CECO ENVIRONMENTAL CORP.
------------------------
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 $1,060,592 at December 31, 1998 to $1,265,696 at June 30, 1999. This
increase of $205,104 is attributable to net cash provided by financing
activities of $499,932, offset by cash used in operating activities of $124,442
(excluding activities relating to marketable securities), additions to property
and equipment and intangible assets of $114,927, and the acquisition of
additional shares of CECO of $55,459. The investment in marketable securities is
primarily in high yield bonds and common stock of major U.S. corporations. CECO
Filters, Inc. ("CECO") maintains a $5,000,000 line of credit with a commercial
bank of which $2,100,000 was outstanding as of June 30, 1999.
Management believes that the expected revenues from operations of 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.
Since January 1, 1994, the Company and CECO have been parties to a management
and consulting agreement pursuant to which the Company has provided management
and financial consulting services to CECO for a monthly fee of $20,000 through
July, 1998 and $35,000 per month from August, 1998 through May, 1999 and $50,000
from June, 1999 thereafter. This agreement automatically renews at December 31
of each year for one-year terms unless cancelled by the Company.
The Company believes its consulting agreement with CECO and interest income from
its investments 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 six-month periods
ended June 30, 1999 and 1998 reflects the operations of the Company consolidated
with the operations of CECO. At June 30, 1999, the Company owned 93.8% of CECO.
Minority interest in the consolidated statement of operations has been presented
as a reduction in net income.
The Company received $225,000 and $120,000 during the six-month periods ended
June 30, 1999 and 1998, respectively, 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.
The Company has no income, revenues or expenses other than as a result of its
investment in CECO, its consulting agreement with CECO, and its investment in
marketable securities. 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"), U.S.
Facilities Management Company, Inc. ("USFM-Indiana") 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
services.
- -9-
<PAGE>
CECO ENVIRONMENTAL CORP.
------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
(unaudited)
- -------------------------------------------------------------------------------
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. CECO offers innovative patented technologies, Catenary
Grid(R) and Narrow Gap Venturi(TM) designed for use with heat and mass transfer
operations and particulate control. 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. USFM-Indiana provides facilities management, as
well as outsourced plant-wide maintenance management to help customers achieve
their performance goals. 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.
On March 31, 1999, CECO sold the contracts and customer list of a division for
$250,000. The sales price was paid through a non-interest bearing promissory
note from the purchaser. Monthly principal payments of $1,500 commence October
1, 1999 with a balloon payment for the balance due on April 1, 2007.
Results of Operations - CECO (Company's Subsidiary)
- ---------------------------------------------------
Comparison of Six Months Ended June 30, 1999 to Six Months Ended June 30, 1998
- ------------------------------------------------------------------------------
Revenues from continuing operations were approximately $8.7 million and $11.3
million for the six months ended June 30, 1999 and 1998, respectively, a
decrease of 22%. The decrease in revenues from 1998 to 1999 resulted primarily
from a decrease in sales orders, particularly new orders. The sales in CECO's
Air Quality Improvement segment were approximately 11% lower ($3.8 million for
the six months ended June 30, 1999 compared to $4.3 million for the six months
ended June 30, 1998) and revenues in CECO's Ventilation and Environmental
Product segment were approximately 27% lower ($5.1 million for the six months
ended June 30, 1999 compared to $7.1 million for the six months ended June 30,
1998).
CECO's backlog of orders at June 30, 1999 was approximately $6.5 million as
compared to approximately $10 million at June 30, 1998, a decrease of $3.5
million or 35%. There can be no assurance that order backlog will be replicated,
or increased, or translate into higher revenues in the future. The success of
CECO's business depends on a multitude of factors that are out of CECO's
control. CECO'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 CECO's dependence on the efforts of
middle men to sell a significant portion of its product.
- -10-
<PAGE>
CECO ENVIRONMENTAL CORP.
------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
(unaudited)
- -------------------------------------------------------------------------------
CECO's overall cost of revenues from continuing operations decreased as a
percentage of sales for the six months ended June 30, 1999 (56%) compared to the
six months ended June 30, 1998 (61%). The decrease is attributed to lower
material costs, as well as lower costs incurred to service CECO products. CECO
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.
CECO's selling and administrative expenses from continuing operations amounted
to $3,068,818 for the six-month period ended June 30, 1999 compared to
$2,854,000 for the six-month period ended June 30, 1998, representing an
increase of $214,818 or 7% predominately resulting from non-recurring costs
incurred in 1999.
CECO incurred management fees to the Company of $225,000 and $120,000 during the
six months ended June 30, 1999 and 1998, respectively.
Interest expense increased by $30,791, or 28%, during the six-month period ended
June 30, 1999 when compared to the same period in 1998. The increase in interest
expense can be attributed to an increased utilization of the bank line of credit
from a new credit facility during the six months ended June 30, 1999, compared
to the previous year.
CECO earned income from continuing operations, after taxes, of $89,363 for the
six months ended June 30, 1999 as compared to $655,190 for the six months ended
June 30, 1998. This change is attributed principally to the decrease in revenues
and increase in selling and administrative expenses resulting from non-recurring
costs for the six-month period ended June 30, 1999 compared to the same period
in 1998.
The provision for federal and state income taxes for the six-month period ended
June 30, 1999 amounted to $64,600 compared to $437,000 for the six-month period
ended June 30, 1998 and reflects an effective income tax rate of approximately
42% and 40% for each respective period.
Comparison of Three Months Ended June 30, 1999 to Three Months Ended June 30,
1998
- ----------------------------------------------------------------------------
Sales were approximately $4.0 million and $5.5 million for the three-month
periods ended June 30, 1999 and 1998, respectively. This represents a decrease
of 28% compared to the three months ended June 30, 1998.
CECO's overall cost of revenues decreased as a percentage of revenues for the
three months ended June 30, 1999 (53%) compared to the three months ended June
30, 1998 (62%). The decrease, compared to the prior year, is attributed to lower
material costs, as well as lower costs incurred to service CECO's products. CECO
continues to use the latest technology available in an effort to reduce both
cost of revenue (and the maintenance of optimal inventory levels) and operating
expenses, and ultimately increase overall company profits.
CECO's selling and administrative expenses amounted to $1,607,379 for the
three-month period ended June 30, 1999 compared to $1,239,413 for the
three-month period ended June 30, 1998, representing an increase of $367,966 or
30% predominately resulting from non-recurring costs incurred in the three-month
period ended June 30, 1999.
- -11-
<PAGE>
CECO ENVIRONMENTAL CORP.
------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
(unaudited)
- -------------------------------------------------------------------------------
Interest expense increased by $1,990, or 3%, during the three-month period ended
June 30, 1999 when compared to the same period in 1998. The increase in interest
expense can be attributed to an increased utilization of the bank line of credit
during the three months ended June 30, 1999 compared to the previous year.
CECO incurred a pre-tax loss from continuing operations of $69,036 for the
three-month period ended June 30, 1999 as compared to pre-tax earnings of
$678,946 for the three-month period ended June 30, 1998. This change is
attributed principally to the decrease in revenues and increase in selling and
administrative expenses resulting from non-recurring costs for the three-month
period ended June 30, 1999 compared to the same period in 1998.
Federal and state income taxes for the three-month period ended June 30, 1999
amounted to a recovery of $28,600 compared to a provision of $272,000 for the
three-month period ended June 30, 1998 and reflects an effective income tax rate
of approximately 41% and 40% for each respective period.
Other Matters
- -------------
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Certain information included in this document
and other materials filed or to be filed with the Securities and Exchange
Commission, as well as information included in oral or other written statements
made or to be made by the Company, contains statements that are forward-
looking. Such statements may relate to plans for future expansion, business
development activities, other capital spending, financing, or other effects of
regulation and competition. Such information involves important risks and
uncertainties that could significantly affect anticipated results in the future
and, accordingly, such results may differ from those expressed in any forward-
looking statements made by or on behalf of the Company. These risks and
uncertainties include, but are not limited to, those relating to product and
service development activities, dependence on existing management, global
economic and market conditions, and changes in federal or state laws.
- -12-
<PAGE>
CECO ENVIRONMENTAL CORP.
------------------------
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: August 6, 1999
- -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 SIX MONTHS ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 203,582
<SECURITIES> 1,062,114
<RECEIVABLES> 2,628,800
<ALLOWANCES> 0
<INVENTORY> 838,986
<CURRENT-ASSETS> 5,892,041
<PP&E> 4,138,336
<DEPRECIATION> 2,082,658
<TOTAL-ASSETS> 14,868,159
<CURRENT-LIABILITIES> 5,865,821
<BONDS> 3,658,017
0
0
<COMMON> 83,888
<OTHER-SE> 7,581,988
<TOTAL-LIABILITY-AND-EQUITY> 14,868,159
<SALES> 4,594,235
<TOTAL-REVENUES> 8,737,514
<CGS> 2,349,727
<TOTAL-COSTS> 8,329,126
<OTHER-EXPENSES> 139,511
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 139,511
<INCOME-PRETAX> 427,345
<INCOME-TAX> 179,400
<INCOME-CONTINUING> 242,324
<DISCONTINUED> 133,727
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 108,597
<EPS-BASIC> .01
<EPS-DILUTED> .01
</TABLE>
