Shareholders' Equity

12 Months Ended

Dec. 31, 2011

Shareholders' Equity [Abstract]

Shareholders' Equity

11. Shareholders' Equity

On August 11, 2011, the Board of Directors of the Company approved a share buyback program authorizing the purchase of up to 0.5 million shares of CECO common stock over an eighteen month period. During 2011 the Company repurchased under the program 91,790 shares of common stock for an aggregate amount of $560,000 and the shares were immediately retired. Also in 2011, the Company purchased 73,741 shares of CECO stock held by a retiring executive. The shares were purchased at the current market price of $5.84 for a total transaction value of $431,000 and the shares were immediately retired. All repurchases of the Company's common stock were completed using cash on hand.

The Company paid dividends on its common stock of $0.05 per share in 2011 compared to $0 in 2010. The Company paid on September 30, 2011 to common shareholders its first ever quarterly dividend of $0.025 per share, and paid a dividend of $0.025 per share on December 30, 2011. The dividend policy and the payment of cash dividends under that policy are subject to the Board of Director's continuing determination that the dividend policy and the declaration of dividends are in the best interest of CECO's shareholders. Future dividends and the dividend policy may be changed or cancelled at the Company's discretion at any time.

The Board of Directors announced on March 9, 2012 a cash dividend of $0.035 per share. The dividend is payable on March 30, 2012, to all shareholders of record at the close of business on March 20, 2012.

Share-Based Compensation

The 2007 Equity Incentive Plan (the "2007 Plan") was approved by shareholders on May 23, 2007 and replaced the 1997 Stock Option Plan (the "1997 Plan"). The 1997 Plan remains in effect solely for the purpose of the continued administration of the options outstanding under the 1997 Plan. The plans are administered by the Compensation Committee (the "Committee") of the Board of Directors. The 2007 Plan permits the granting of stock options and awards which are granted at a price equal to or greater than the fair market value of the Company's common stock at the date of grant. Generally, stock options or awards granted to non-employee directors vest in periods of one to three years from the date of grant. Stock options granted to employees generally vest equally over a period of 3 to 5 years from the date of grant. Stock awards granted to employees generally vest equally over a period of up to 3 years from the date of grant for awards subject to service requirements. Stock awards may be granted and vest based on the achievement of certain performance requirements as established by the Committee. Stock awards also may be granted without service or performance requirements, as determined by the Committee. The Committee, at its discretion, may establish other vesting periods and performance requirements when appropriate. During 2011, 95,000 stock options were granted to plan participants under the 2007 Plan. No stock awards were granted in 2010 or 2011. Also, there are no performance-based awards outstanding at either December 31, 2011 or 2010. The number of shares reserved for issuance under the 2007 Plan is 2.0 million, of which 737,792 shares were available for future grant as of December 31, 2011. The number of shares reserved under the 1997 Plan for issuance was 1.5 million, of which 1,036,300 shares were left unused as of December 31, 2011.

Share-based compensation expense for stock options under these plans and the employee stock purchase plan of $693,000 and $885,000 was recorded in the years ended December 31, 2011 and 2010, respectively. No equity compensation expense has been capitalized in inventory or fixed assets.

Employee Stock Purchase Plan

The 2009 Employee Stock Purchase Plan ("ESPP") was approved by shareholders on May 21, 2009.

The ESPP is administered by the Compensation Committee. The aggregate maximum number of shares of the Company's common stock that may be granted under the ESPP is 1.5 million shares over the ten year term of the ESPP, subject to adjustment in the event there is a reorganization, merger, consolidation, recapitalization, reclassification, stock split-up, or similar transaction with respect to the common stock.

The ESPP allows employees to purchase shares of common stock at a 15% discount from market price and pay for the shares through payroll deductions. Eligible employees can enter the plan at specific "offering dates" which occur in six month intervals.

The Company recognized employee stock purchase plan expense of $40,000 and $31,000 during the years ended December 31, 2011 and 2010, respectively. During 2011, 15,654 shares of common stock were purchased through the plan.

In addition to the Company's share-based compensation plans, certain other warrants have been issued that are not compensatory in nature. See further discussion in the "Warrants to Purchase Common Stock" section below.

Stock Options

The weighted-average fair value of stock options granted during 2011 and 2010 was estimated at $3.40 and $2.64 per option, respectively, using the Black-Scholes option-pricing model based on the following assumptions:

• Expected Volatility: The Company utilizes a volatility factor based on the Company's historical stock prices for a period of time equal to the expected term of the stock option utilizing weekly price observations. For 2011 and 2010, the Company utilized weighted-average volatility factors of 62.0% and 62.6%, respectively.

• Expected Term: Due to limited historical exercise data, the Company utilizes the simplified method of determining the expected term based on the vesting schedules and terms of the stock options. For 2011 and 2010, the Company utilized weighted-average expected term factors of 6.8 years and 7.3 years, respectively.

• Risk-Free Interest Rate: The risk-free interest rate factor utilized is based upon the implied yields currently available on U.S. Treasury zero-coupon issues over the expected term of the stock options. For 2011 and 2010, the Company utilized a weighted-average risk-free interest rate factors of 2.3%-3.0% and 3.11%, respectively.

• Expected Dividends: Expected dividends were zero as the Company had not historically paid dividends. However, as the Company started paying dividends later in 2011, this assumption will be reassessed for future grants.

The fair value of the stock options granted is recorded as compensation expense on a straight-line basis over the vesting periods of the options adjusted for the Company's estimate of pre-vesting forfeitures. The pre-vesting forfeiture estimate is based on historical activity and is reviewed periodically and updated as necessary.

Information related to all stock options under the 2007 Plan and 1997 Plan for the year ended December 31, 2011 and 2010 is shown in the table below:

(Shares in thousands)	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value ($000)
Outstanding at December 31, 2010		1,183		$	4.64		7.9 years
Granted		95			5.48
Forfeitures		(56	)		5.86
Exercised		(48	)		2.51
Outstanding at December 31, 2011		1,174			4.74		7.3 years	$	1,710
Exercisable at December 31, 2011		480			5.73		6.0 years	$	658

(Shares in thousands)	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value ($000)
Outstanding at December 31, 2009		598		$	6.13		6.1 years
Granted		727			4.04
Forfeitures		(137	)		8.18
Exercised		(5	)		1.98
Outstanding at December 31, 2010		1,183			4.64		7.9 years		2,294
Exercisable at December 31, 2010		330			5.92		5.3 years		581

The Company received $112,000 in cash from employees exercising options during the year ended December 31, 2011 and $11,000 from employees exercising options during the year ended December 31, 2010. The intrinsic value of options exercised during the year ended December 31, 2011 was $166,000.

Warrants to Purchase Common Stock

The Company has historically issued warrants to purchase common shares in conjunction with business acquisitions, debt issuances and employment contracts. The estimated fair value of warrants granted in conjunction with employment agreements is reflected as compensation expense over their related vesting periods, none of which extended into 2011 or 2010. Fair value of warrants is determined using a Black-Sholes valuation model with assumptions similar to the ones we used to value stock option awards.

On December 28, 2006, the Company issued warrants to purchase 250,000 shares to Icarus, a related party, at an exercise price of $9.07 and an expiration date of December 26, 2016. These warrants represent the only outstanding warrants as of December 31, 2011 and 2010.