CECO Environmental Corp. (CECE, Financial) filed Quarterly Report for the period ended 2009-03-31.
CECO ENVIRONMENTAL CORP. manufactures and sells primarily in the United States of fiber bed mist eliminators to the chemical printing plating power generation food processing waste incineration and textile industries. CECO Environmental Corp. has a market cap of $54.4 million; its shares were traded at around $3.8 with a P/E ratio of 10.3 and P/S ratio of 0.3. CECO Environmental Corp. had an annual average earning growth of 19.4% over the past 10 years.
Selling and administrative expenses increased by $0.7 million or 10.7% to $7.5 million during the first quarter of 2009 from $6.8 million in the same period of 2008. This was due primarily to an additional two months of FKI expenses in 2009 (acquired March 1, 2008) as well as an additional three months of Flextor expenses in 2009 (acquired August 1, 2008) which together amounted to a $1.3 million increase. These increases were partially offset by reductions in wages and fringes of $0.4 million and professional services of $0.3 million. We have reduced staffing levels and various selling and administrative costs throughout the Company in response to the slowing economy and will continue to monitor these costs as we move forward.
Total bank debt at March 31, 2009 was $17.5 million and $22.6 million at December 31, 2008. The bank debt at March 31, 2009 consists of $13.5 million due on the revolving line of credit and a term note totaling $4.0 million. Unused credit availability under our $30.0 million revolving line of credit at March 31, 2009 was $3.1 million. Availability is limited as determined by a borrowing base formula contained in the credit agreement.
On August 14, 2008, the Company issued a Subordinated Convertible Promissory Note (the Subdebt Note) in the amount of Canadian $5,000,000 to Icarus Investment Corp., a company which is controlled by Phillip DeZwirek, our Chairman and CEO, and Jason DeZwirek, our Secretary and one of our Directors. The Subdebt Note provides for interest to accrue at the rate of 10% per annum in 2008, 11% per annum in 2009, and 12% per annum commencing January 1, 2010. The Subdebt Note was amended in February 2009 to provide for interest payments to be payable monthly, instead of semi-annually, subject to the Subordination Agreement between Fifth Third Bank and Icarus Investment Corp. The Subdebt Note was further amended on May 1, 2009 to extend its maturity date to October 1, 2011 from July 31, 2010. Fees of Canadian $38,000 were paid for this amendment and will be deferred and amortized over the remaining term of the Subdebt. The Subdebt Note also matures in the event of a merger or reorganization of the Company that results in a change of control, upon the sale of 50% of the assets of the Company, or any sale of any division of the Company in excess of $5 million. To the extent that the Company completes an equity financing in excess of $10 million, 25% of the
amounts in excess of the $10 million are required to be used to repay the Subdebt Note, provided that the Company is not in default under the Bank Facility. We repaid Canadian $3,726,000 (U.S. $3.0 million) under the Subdebt Note on March 31, 2009. The outstanding balance of the Subdebt Note at March 31, 2009, as translated into U.S. dollars was $1.0 million.
Financing activities used cash of $8.1 million during the first three months of 2009 compared with cash provided of $17.8 million during the same period of 2008. Cash was used for net payments on the bank credit facility of $4.9 million and a payment on the subordinated debt of $3.0 million for the three-month period ended March 31, 2009 compared to borrowings of $17.7 million for the prior years quarter. The payment of bank borrowings and a portion of our subordinated debt in 2009 was made using cash provided by operating activities.
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CECO ENVIRONMENTAL CORP. manufactures and sells primarily in the United States of fiber bed mist eliminators to the chemical printing plating power generation food processing waste incineration and textile industries. CECO Environmental Corp. has a market cap of $54.4 million; its shares were traded at around $3.8 with a P/E ratio of 10.3 and P/S ratio of 0.3. CECO Environmental Corp. had an annual average earning growth of 19.4% over the past 10 years.
Highlight of Business Operations:
Orders booked in the first quarter of 2009 were $35.0 million as compared to $52.8 million (including $14.0 million of acquired backlog of FKI) during the first quarter of 2008, a decrease of $17.8 million or 33.7%.Selling and administrative expenses increased by $0.7 million or 10.7% to $7.5 million during the first quarter of 2009 from $6.8 million in the same period of 2008. This was due primarily to an additional two months of FKI expenses in 2009 (acquired March 1, 2008) as well as an additional three months of Flextor expenses in 2009 (acquired August 1, 2008) which together amounted to a $1.3 million increase. These increases were partially offset by reductions in wages and fringes of $0.4 million and professional services of $0.3 million. We have reduced staffing levels and various selling and administrative costs throughout the Company in response to the slowing economy and will continue to monitor these costs as we move forward.
Total bank debt at March 31, 2009 was $17.5 million and $22.6 million at December 31, 2008. The bank debt at March 31, 2009 consists of $13.5 million due on the revolving line of credit and a term note totaling $4.0 million. Unused credit availability under our $30.0 million revolving line of credit at March 31, 2009 was $3.1 million. Availability is limited as determined by a borrowing base formula contained in the credit agreement.
On August 14, 2008, the Company issued a Subordinated Convertible Promissory Note (the Subdebt Note) in the amount of Canadian $5,000,000 to Icarus Investment Corp., a company which is controlled by Phillip DeZwirek, our Chairman and CEO, and Jason DeZwirek, our Secretary and one of our Directors. The Subdebt Note provides for interest to accrue at the rate of 10% per annum in 2008, 11% per annum in 2009, and 12% per annum commencing January 1, 2010. The Subdebt Note was amended in February 2009 to provide for interest payments to be payable monthly, instead of semi-annually, subject to the Subordination Agreement between Fifth Third Bank and Icarus Investment Corp. The Subdebt Note was further amended on May 1, 2009 to extend its maturity date to October 1, 2011 from July 31, 2010. Fees of Canadian $38,000 were paid for this amendment and will be deferred and amortized over the remaining term of the Subdebt. The Subdebt Note also matures in the event of a merger or reorganization of the Company that results in a change of control, upon the sale of 50% of the assets of the Company, or any sale of any division of the Company in excess of $5 million. To the extent that the Company completes an equity financing in excess of $10 million, 25% of the
amounts in excess of the $10 million are required to be used to repay the Subdebt Note, provided that the Company is not in default under the Bank Facility. We repaid Canadian $3,726,000 (U.S. $3.0 million) under the Subdebt Note on March 31, 2009. The outstanding balance of the Subdebt Note at March 31, 2009, as translated into U.S. dollars was $1.0 million.
Financing activities used cash of $8.1 million during the first three months of 2009 compared with cash provided of $17.8 million during the same period of 2008. Cash was used for net payments on the bank credit facility of $4.9 million and a payment on the subordinated debt of $3.0 million for the three-month period ended March 31, 2009 compared to borrowings of $17.7 million for the prior years quarter. The payment of bank borrowings and a portion of our subordinated debt in 2009 was made using cash provided by operating activities.
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