Ceco Environmental Corp. has a market cap of $85.1 million; its shares were traded at around $5.95 with and P/S ratio of 0.6. Ceco Environmental Corp. had an annual average earning growth of 0.4% over the past 10 years.
Highlight of Business Operations:Selling and administrative expenses from continuing operations decreased by $0.7 million, or 9.2%, from $7.6 million to $6.9 million during the second quarter. This decrease was due primarily to continuing reductions in selling and administrative wages and benefits due to staff reductions of $473,000 and a $269,000 reduction in bad debt expense. We are continuing our efforts to further streamline and centralize these selling and administrative expenses.
During the first six months of 2010 compared to the first six months of 2009, selling and administrative expenses from continuing operations declined $0.7 million from $14.8 million to $14.1 million. This decrease was due primarily to cumulative first and second quarter reductions in selling and administrative wages and benefits due to staff reductions of $522,000 and a year to date $170,000 reduction in bad debt expenses.
Amortization expense decreased by $41,000 to $125,000 during the second quarter of 2010 from $166,000 in the same period of 2009 and decreased by $219,000 to $260,000 in the first six months of 2010 from $479,000 in the same period of 2009. These decreases were the result of certain definite life intangibles related to earlier acquisitions becoming fully amortized.
Total bank debt at June 30, 2010 was $4.2 million and $2.7 million at December 31, 2009. The bank debt at June 30, 2010 consists of $2.2 million due on the revolving lines of credit and a term note totaling $2.0 million. Our current credit facility with Fifth Third Bank (the Bank Facility), as amended, includes a revolving line of credit of up to $20 million, including letters of credit, limited to a borrowing base amount computed as 70% of eligible accounts receivable, 50% of unbilled revenues up to $2.0 million, plus 50% of eligible inventories up to $7.5 million. Unused credit availability under our $20.0 million revolving line of credit at June 30, 2010 was $6.7 million. Interest on the outstanding borrowings is charged at the daily LIBOR rate plus 4.0% or the tranche LIBOR rate plus 3.5% for the revolver and the daily LIBOR rate plus 4.25% or the tranche LIBOR rate plus 3.75% for the term note. The weighted average interest rate under the Bank Facility as of June 30, 2010 and June 30, 2009 was 3.82% and 3.95%, respectively.
On November 26, 2009, the Company issued $10.8 million principal amount subordinated convertible promissory notes to a group of investors (the Investor Notes) which includes related parties: Icarus Investment Corp. ($2,200,000), Jason DeZwirek ($800,000), and Harvey Sandler Revocable Trust ($800,000), which trust owns over 10% of our outstanding common stock. Interest accrues under the Investor Notes at the annual rate of 6% and is payable as of the end of each calendar quarter. Interest paid for the three and six month periods was $162,000 and $324,000 respectively. We used the proceeds of the Investor Notes to repay all of our previously existing subordinated debt in the amount of approximately $4.5 million, which debt was accruing interest at rates between 11-12%. The balance of the proceeds will be used for general working capital. Fees of $320,000 were paid for the issuance of this debt and are being amortized over the term of the Investor Notes.
Depreciation and amortization amounted to $0.9 million in for the six months ended June 30, 2010 compared to $1.3 million for depreciation and amortization in the same period in 2009. This decrease in depreciation and amortization was due primarily to decreased amortization of definite life intangibles from recent acquisitions which are now fully amortized. Our net investment in working capital (excluding cash and cash equivalents, current portion of debt and working capital from discontinued operations) at June 30, 2010 was $16.8 million as compared to $13.3 million at December 31, 2009. We believe that our working capital needs will remain constant unless we experience a significant increase or decrease in sales and operating income.
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