10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2012

or

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from             to             

Commission File No. 0-7099

CECO ENVIRONMENTAL CORP.

4625 Red Bank Road, Cincinnati, Ohio 45227

Telephone (513) 458-2600

IRS Employer Identification No. 13-2566064

State of Incorporation: Delaware

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 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the exchange act. (check one)

Large Accelerated Filer	¨	Accelerated Filer	¨
Non-Accelerated Filer	¨	Smaller reporting company	x

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date: 14,711,582 shares of common stock, par value $0.01 per share, as of November 5, 2012.

CECO Environmental Corp. and Subsidiaries

QUARTERLY REPORT ON FORM 10-Q

For the quarter ended September 30, 2012

Table of Contents

Part I – Financial Information		2
Item 1.	Financial Statements	2
	Consolidated balance sheets as of September 30, 2012 and December 31, 2011	2
	Consolidated statements of income for the three-month and nine-month periods ended September 30, 2012 and 2011	3
	Consolidated statements of comprehensive income for the three-month and nine-month periods ended September 30, 2012 and 2011	4
	Consolidated statements of cash flows for the nine-month periods ended September 30, 2012 and 2011	5
	Notes to consolidated financial statements	6
Item 2.	Management discussion and analysis of financial condition and results of operations	19
Item 4.	Controls and Procedures	27
Part II – Other Information		28
Item 1.	Legal Proceedings	28
Item 6.	Exhibits	28
Signature		29

1

CECO ENVIRONMENTAL CORP.

Part I – Financial Information

ITEM 1. FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(dollars in thousands, except per share data)	SEPTEMBER 30, 2012			DECEMBER 31, 2011
ASSETS
Current assets:
Cash and cash equivalents	$	24,455		$	12,724
Accounts receivable, net		21,281			23,109
Costs and estimated earnings in excess of billings on uncompleted contracts		7,057			10,643
Inventories, net		4,292			4,344
Prepaid expenses and other current assets		2,399			2,650
Total current assets		59,484			53,470
Property, plant and equipment, net		5,128			5,651
Goodwill		14,777			14,661
Intangible assets- finite life, net		274			526
Intangible assets-indefinite life		3,230			3,218
Deferred income tax asset, net		848			848
Deferred charges and other assets		714			971
	$	84,455		$	79,345
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	12,101		$	13,569
Billings in excess of costs and estimated earnings on uncompleted contracts		8,501			9,647
Income taxes payable		1,531			393
Total current liabilities		22,133			23,609
Other liabilities		3,197			3,146
Convertible subordinated notes (including related parties notes of $3,950 in 2012 and 2011)		8,760			9,600
Total liabilities		34,090			36,355
Commitments and contingencies
Shareholders’ equity:
Preferred stock, $.01 par value; 10,000 shares authorized, none issued		—			—
Common stock, $.01 par value; 100,000,000 shares authorized, 14,849,502 and 14,654,262 shares issued in 2012 and 2011, respectively		148			146
Capital in excess of par value		45,393			44,249
Accumulated earnings		7,410			1,301
Accumulated other comprehensive loss		(2,230	)		(2,350	)
		50,721			43,346
Less treasury stock, at cost, 137,920 shares in 2012 and 2011		(356	)		(356	)
Total shareholders’ equity		50,365			42,990
	$	84,455		$	79,345

The notes to the condensed consolidated financial statements are an integral part of the above statements.

2

CECO ENVIRONMENTAL CORP.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

	THREE MONTHS ENDED SEPTEMBER 30,						NINE MONTHS ENDED SEPTEMBER 30
(dollars in thousands, except per share data)	2012			2011			2012			2011
Net sales	$	33,102		$	32,947		$	100,720		$	101,440
Cost of sales		22,574			23,249			69,461			74,571
Gross profit		10,528			9,698			31,259			26,869
Selling and administrative		6,197			6,270			18,724			17,958
Amortization		80			118			252			341
Income from operations		4,251			3,310			12,283			8,570
Other (expenses) income, net		(69	)		103			(133	)		436
Interest expense (including related party interest of $60 and $59, and $178 and $177, respectively)		(291	)		(296	)		(828	)		(870	)
Income before income taxes		3,891			3,117			11,322			8,136
Income tax expense		623			798			3,524			2,606
Net income	$	3,268		$	2,319		$	7,798		$	5,530
Per share data:
Basic net income	$	0.22		$	0.16		$	0.53		$	0.39
Diluted net income	$	0.19		$	0.14		$	0.47		$	0.34
Weighted average number of common shares outstanding:
Basic		14,630,264			14,371,752			14,591,325			14,340,119
Diluted		17,258,552			17,157,305			17,199,337			17,130,767

The notes to the condensed consolidated financial statements are an integral part of the above statements.

3

CECO ENVIRONMENTAL CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

	THREE MONTHS ENDED SEPTEMBER 30,					NINE MONTHS ENDED SEPTEMBER 30
(dollars in thousands)	2012		2011			2012		2011
Net income	$	3,268	$	2,319		$	7,798	$	5,530
Other comprehensive income (loss), net of tax:
Foreign currency		170		(263	)		84		(131	)
Other comprehensive income (loss)		170		(263	)		84		(131	)
Comprehensive income	$	3,438	$	2,056		$	7,882	$	5,399

The notes to the condensed consolidated financial statements are an integral part of the above statements.

4

CECO ENVIRONMENTAL CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	NINE MONTHS ENDED SEPTEMBER 30,
(dollars in thousands)	2012			2011
Cash flows from operating activities:
Net income	$	7,798		$	5,530
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		910			1,086
Non cash interest expense included in net income		69			68
Share based compensation expense		493			538
Bad debt expense		141			212
Inventory reserve expense		147			196
Gain on sale of fixed assets		(11	)		—
Changes in operating assets and liabilities:
Accounts receivable		1,657			5,942
Costs and estimated earnings in excess of billings on uncompleted contracts		3,586			(1,923	)
Inventories		(95	)		(820	)
Prepaid expense and other current assets		281			(96	)
Deferred charges and other assets		188			(138	)
Accounts payable and accrued expenses		(1,392	)		(5,041	)
Billings in excess of costs and estimated earnings on uncompleted contracts		(1,146	)		684
Income taxes payable		1,138			(1,171	)
Other liabilities		42			(188	)
Net cash provided by operating activities		13,806			4,879
Cash flows from investing activities:
Acquisitions of property and equipment		(234	)		(654	)
Net proceeds from sale of plant and equipment		37			636
Net cash used in investing activities		(197	)		(18	)
Cash flows from financing activities:
Proceeds from exercise of stock options		266			111
Cash paid for repurchase of common shares		(456	)		(483	)
Dividends paid to common shareholders		(1,688	)		(363	)
Net cash used in financing activities		(1,878	)		(735	)
Net increase in cash and cash equivalents		11,731			4,126
Cash and cash equivalents at beginning of period		12,724			5,792
Cash and cash equivalents at end of period	$	24,455		$	9,918
Supplemental Schedule of Non-Cash Activities:
Conversion of subordinated debt to common stock	$	840		$	700
Cash paid during the period for:
Interest	$	828		$	872
Income taxes	$	1,619		$	4,294

The notes to the condensed consolidated financial statements are an integral part of the above statements.

5

CECO ENVIRONMENTAL CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Basis of reporting for consolidated financial statements

The accompanying unaudited condensed consolidated financial statements of CECO Environmental Corp. and its subsidiaries (the “Company”, “we”, “us”, or “our”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted pursuant to those rules and regulations. In the opinion of management, the accompanying unaudited, condensed consolidated financial statements of the Company contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position as of September 30, 2012 and the results of operations and cash flows for the three month and nine month periods ended September 30, 2012 and 2011. The results of operations for the three month and nine month periods ended September 30, 2012 are not necessarily indicative of the results to be expected for the full year. The balance sheet as of December 31, 2011 has been derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 filed with the SEC.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

These financial statements and accompanying notes should be read in conjunction with the audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 filed with the SEC.

2. New Accounting Pronouncements Adopted

ASC 220—In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-05, “Presentation of Comprehensive Income” which requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This ASU eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments in this ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The ASU became effective for the Company during the quarter ended March 31, 2012. Although the adoption of this ASU impacts the way the Company reports comprehensive income, the adoption of this guidance did not have a material effect on the Company’s consolidated results of operations, financial position or cash flows.

In December 2011, the FASB issued ASU 2011-12, “Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards ASU No. 2011-05”. In order to defer only those changes in ASU 2011-05 that relate to the presentation of reclassification adjustments, the paragraphs in this ASU supersede certain pending paragraphs in ASU 2011-05. Entities should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before ASU 2011-05. All other requirements in ASU 2011-05 are not affected by this ASU.

ASC 820—In May 2011, the FASB issued ASU 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” which generally represents clarifications of Topic 820, “Fair Value Measurements”, but also includes certain instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements has changed. This ASU results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and the International Financial Reporting Standards. The ASU became effective for the Company during the quarter ended March 31, 2012 and must be applied prospectively. The adoption of this guidance did not have a material effect on the Company’s consolidated results of operations, financial position or cash flows.

6

CECO ENVIRONMENTAL CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

ASC 350 – In July 2012, the FASB issued ASU 2012-02, “Intangibles – Goodwill and Other – Testing Indefinite-Lived Intangible Assets for Impairment”. ASU 2012-02 amends prior indefinite-lived intangible asset impairment testing guidance and gives the Company the option to first assess qualitative factors in determining whether it is more likely than not (a likelihood of more than 50%) that an indefinite-lived intangible asset is impaired. If, based on such qualitative assessment, the Company determines that it is more likely than not that an indefinite-lived intangible asset is not impaired, then calculating the fair value of such asset is not necessary. ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. However, early adoption is permitted if a public entity’s financial statements have not yet been issued. The adoption of ASU 2012-02 is not expected to have an impact on the Company’s consolidated results of operations, financial position or cash flows.

3. Costs and Estimated Earnings on Uncompleted Contracts

Revenues from contracts, representing the majority of our revenues, are recognized on the percentage of completion method, measured by the percentage of contract costs incurred to date compared to estimated total contract costs for each contract. This method is used because management considers contract costs to be the best available measure of progress on these contracts. Our remaining revenues are recognized when risk and title passes to the customer, which is generally upon shipment of product.

Our contracts have various lengths to completion ranging from a few days to several months. We anticipate that a majority of our current contracts will be completed by year end.

	September 30,			December 31,
(dollars in thousands)	2012			2011
Costs incurred on uncompleted contracts	$	52,358		$	57,345
Estimated earnings		16,408			17,512
		68,766			74,857
Less billings to date		(70,210	)		(73,861	)
	$	(1,444	)	$	996
Included in the accompanying consolidated balance sheets under the following captions:
Costs and estimated earnings in excess on uncompleted contacts	$	7,057		$	10,643
Billings in excess of costs and estimated earnings on uncompleted contracts		(8,501	)		(9,647	)
	$	(1,444	)	$	996

4. Inventories

(dollars in thousands)	September 30, 2012			December 31, 2011
Raw materials and subassemblies	$	2,855		$	3,017
Finished goods		1,207			1,147
Parts for resale		702			580
Obsolescence allowance		(472	)		(400	)
	$	4,292		$	4,344

Amounts (debited) credited to the allowance for obsolete inventory and charged to cost of sales amounted to $65,000 and $47,000 for the three month periods ended September 30, 2012 and 2011, respectively, and $147,000 and $196,000 for the nine month periods ended September 30, 2012 and 2011, respectively.

7

CECO ENVIRONMENTAL CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

5. Goodwill and Intangible Assets

	Nine months ended				Year ended
(dollars in thousands)	September 30, 2012				December 31, 2011
Goodwill / Tradename	Goodwill		Tradename		Goodwill			Tradename
Beginning balance	$	14,661	$	3,218	$	14,713		$	3,225
Acquisition earn-out settlement		21		—		—			—
Foreign currency adjustments		95		12		(52	)		(7	)
	$	14,777	$	3,230	$	14,661		$	3,218
	As of September 30, 2012				As of December 31, 2011
			Accum.					Accum.
Intangible assets – finite life	Cost		Amort.		Cost			Amort.
Patents	$	1,414	$	1,258	$	1,414		$	1,193
Customer lists		1,653		1,535		1,653			1,348
	$	3,067	$	2,793	$	3,067		$	2,541

Amortization expense of finite life intangible assets for the three months ended September 30, 2012 and 2011 was $80,000 and $118,000, respectively, and for the nine months ended September 30, 2012 and 2011 was $252,000 and $341,000, respectively. Amortization over the next five years for finite life intangibles will be $64,000 for the remainder of 2012, $130,000 in 2013, $69,000 in 2014, $6,000 in 2015, and $5,000 in 2016.

6. Debt

We entered into our current bank facility on December 29, 2005 with Fifth Third Bank (the “Bank Facility”). The Bank Facility was amended on various dates and fees paid for these amendments were deferred and are being amortized over the remaining term of the Bank Facility.

Terms of the Bank Facility, as amended, include a revolving line of credit for up to $20.0 million (with a $10.0 million letters of credit sublimit); a termination date of April 1, 2013 and financial covenants that require compliance at each quarter-end through March 31, 2013. The maximum capital expenditures financial covenant is $2.5 million per year. The minimum Fixed Charge Coverage Ratio is 1.25:1.0. The maximum funded debt to EBITDA covenant is 3.0 to 1. Our Bank Facility also contains cross-default provisions with respect to our subordinated debt. Also, if we fail to pay (after grace periods) any other debt or lease that, individually or in the aggregate involves indebtedness in excess of $100,000, and such default gives any creditor or lessor the right to accelerate the maturity of any such indebtedness or lease payments, then absent a waiver from the lender, it would result in a default under our Bank Facility and the acceleration of the maturity of outstanding debt under our Bank Facility. As of September 30, 2012, we were in compliance with all related financial and other restrictive covenants, and expect continued compliance. In the future, if we cannot comply with the terms of the Bank Facility covenants it will be necessary for us to obtain a waiver or renegotiate our loan covenants, and there can be no assurance that such negotiations would be successful. In the event that we are not successful in obtaining a waiver or an amendment, we would be declared in default, which could cause all amounts owed to be immediately due and payable. We had no outstanding borrowings under the line of credit as of September 30, 2012 and December 31, 2011. Borrowings are subject to a borrowing base limitation, including reducing the borrowing base by the amount of outstanding letters of credit, and at September 30, 2012, $10.8 million could be borrowed at an interest rate of LIBOR plus 3.5%. As of September 30, 2012, the Company has $2.0 million in outstanding trade letters of credit. Our property and equipment, accounts receivable, investments and inventory serve as collateral for our bank debt.

On November 26, 2009, the Company issued $10.8 million principal amount of subordinated convertible promissory notes to a group of investors (the “Investor Notes”) which includes related parties: Icarus Investment Corp., which is controlled by Phillip DeZwirek, our Chairman, and Jason DeZwirek, a director and Secretary ($2,200,000), JMP Fam Holdings, Inc., which is controlled by Jonathan Pollack, a Company Director ($150,000), 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 on the Investor Notes for the three and nine month periods ended September 30, 2012 was $136,000 and $417,000, respectively, and $159,000 and $475,000, respectively, for the corresponding time periods in 2011 We used the proceeds

8

CECO ENVIRONMENTAL CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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 was available to 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.

The Investor Notes are due on November 26, 2014 and are not repayable prior to maturity except upon a change of control, or upon the consent of the holder. The outstanding principal amount of the Investor Notes or any portion thereof, but not the interest, is convertible at the holder’s option, at any time at a conversion price of $4.00 per share, such price being greater than the Company’s share price at the date of issuance of the Investor Notes. Following three years from the issuance date of the Investor Notes, if the closing price of the common stock of the Company is greater than $8.00 for five consecutive days, the Company can cause conversion of the Investor Notes. The outstanding balance of the Investor Notes at September 30, 2012 and December 31, 2011 was $8.8 million and $9.6 million, respectively. In the first quarter and second quarter of 2012, $200,000 and $240,000 principal of the Investor Notes, respectively, were converted to 50,000 and 60,000 shares of our common stock, respectively. In the third quarter of 2012, $400,000 principal of the Investor Notes was converted to 100,000 shares of our common stock.

7. Earnings and Dividends per Share

The computational components of basic and diluted earnings per share for the three month periods ended September 30, 2012 and 2011 and for the nine month periods ended September 30, 2012 and 2011 are below (shares and dollars in thousands, except per share amounts).

	For the three month period ended September 30, 2012
	Numerator (Income)		Denominator (Shares)		Per Share Amount
Basic net income and earnings per share	$	3,268		14,630	$	0.22
Effect of dilutive securities and notes:
Common stock equivalents arising from stock options and employee stock purchase plan		—		371		—
Subordinated convertible promissory notes		82		2,257		(0.03	)
Diluted earnings and earnings per share	$	3,350		17,258	$	0.19
	For the three month period ended September 30, 2011
	Numerator (Income)		Denominator (Shares)		Per Share Amount
Basic net income and earnings per share	$	2,319		14,372	$	0.16
Effect of dilutive securities and notes:
Common stock equivalents arising from stock options and employee stock purchase plan		—		163		—
Subordinated convertible promissory notes		95		2,622		(0.02	)
Diluted earnings and earnings per share	$	2,414		17,157	$	0.14
	For the nine month period ended September 30, 2012
	Numerator (Income)		Denominator (Shares)		Per Share Amount
Basic net income and earnings per share	$	7,798		14,591	$	0.53
Effect of dilutive securities and notes:
Common stock equivalents arising from stock options and employee stock purchase plan		—		290		—
Subordinated convertible promissory notes		250		2,318		(0.06	)
Diluted earnings and earnings per share	$	8,048		17,199	$	0.47

9

CECO ENVIRONMENTAL CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

	For the nine month period ended September 30, 2011
	Numerator (Income)		Denominator (Shares)		Per Share Amount
Basic net income and earnings per share	$	5,530		14,340	$	0.39
Effect of dilutive securities and notes:
Common stock equivalents arising from stock options and employee stock purchase plan		—		144		—
Subordinated convertible promissory notes		285		2,647		(0.05	)
Diluted earnings and earnings per share	$	5,815		17,131	$	0.34

We consider outstanding options and warrants in computing diluted net income per share only when they are dilutive. For each of the three and nine month periods ended September 30, 2012, 322,500 outstanding options and warrants were excluded from the computation of diluted weighted average common shares outstanding as their effect would have been anti-dilutive. For the three and nine month periods ended September 30, 2011, 427,500 outstanding options and warrants were excluded from the computation of diluted weighted average common shares outstanding as their effect would have been anti-dilutive.

Holders of restricted stock awards participate in nonforfeitable dividend rights on a one-for-one basis with holders of common stock. Holders of these awards are not obligated to share in losses of the Company. Therefore, these share awards are included in the computation of basic earnings per share during periods of net income using the two-class method, but are excluded from such computation in periods of net loss. When the Company declares a dividend on its common stock, the related dividend on shares of unvested restricted stock that are not expected to vest would be recorded as additional compensation expense and therefore excluded from the two-class method computations; however, there were no non-vested restricted share awards outstanding for the three or nine months ended September 30, 2012 or 2011. Undistributed earnings included in the two-class method computations are allocated equally to each share of common stock outstanding, including all shares of unvested restricted common shares.

Once a restricted stock award vests, it is included in the computation of weighted average shares outstanding for purposes of basic and diluted earnings (loss) per share.

Pursuant to the if-converted method, diluted earnings per share for the third quarter of 2012 includes a $82,000 after tax add back of interest expense to earnings and 2.3 million additional shares, and $95,000 and 2.6 million additional shares for the third quarter of 2011, related to the assumed conversion of the convertible Investor Notes described in Note 6. For the nine month period ended September 30, 2012 diluted earnings per share includes a $250,000 after tax addback of interest expense, and 2.3 million additional shares, and $285,000 and 2.6 million additional shares for the comparable 2011 period, related to the assumed conversion of the convertible Investor Notes.

Dividends

Prior to fiscal year 2011, we had not paid any cash dividends on our common stock. In August 2011, our Board of Directors approved a quarterly cash dividend program, subject to the Board’s continuing determination that the dividend policy and the declaration of dividends are in the best interest of our shareholders. The declaration and payment of dividends is also subject to continued consent by our lender, as our credit agreement contains provisions that prevent us from paying any dividends to our shareholders without such consent. Future dividends and the dividend policy may be changed or cancelled at the Company’s discretion at any time. In fiscal year 2012, our Board has declared the following cash dividends on our common stock:

Dividend Per share	Record Date	Payment Date	Payments (dollars in thousands)
$0.035	March 20, 2012	March 30, 2012	$ 512
$0.035	June 15, 2012	June 29, 2012	$ 512
$0.045	September 14, 2012	September 28, 2012	$ 664

10

CECO ENVIRONMENTAL CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Effective August 13, 2012, the Company implemented a Dividend Reinvestment Plan (the “Plan”), under which the Company may issue up to 750,000 shares of common stock. The Plan provides a way for interested shareholders to increase their holdings in our common stock. Participation in the Plan is strickly voluntary and is open only to existing shareholders.

8. Share-Based Compensation

The Company accounts for share-based compensation in accordance with ASC Topic 718, “Compensation – Stock Compensation” which requires the Company to recognize compensation expense for share-based awards, measured at the fair value of the awards at the grant date. The Company recognized expense of approximately $165,000 and $151,000 during the quarters ended September 30, 2012 and 2011, respectively, and $493,000 and $538,000 for the nine month periods ended September 30, 2012 and 2011, respectively.

9. Pension and Employee Benefit Plans

We sponsor a non-contributory defined benefit pension plan for certain union employees. The plan is funded in accordance with the funding requirements of the Employee Retirement Income Security Act of 1974.

We also sponsor a postretirement health care plan for office employees retired before January 1, 1990. The plan allows retirees who have attained the age of 65 to elect the type of coverage desired.

Retirement and health care plan expense is based on valuations performed by plan actuaries as of the beginning of each fiscal year. The components of the expense consisted of the following:

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2012			2011			2012			2011
Pension plan:
Service cost	$	15		$	10		$	45		$	30
Interest cost		82			92			246			276
Expected return on plan assets		(94	)		(97	)		(282	)		(291	)
Amortization of net actuarial loss		83			63			249			189
Net periodic benefit cost	$	86		$	68		$	258		$	204
Health care plan:
Interest cost	$	1		$	—		$	3		$	—
Amortization of gain		(2	)		(1	)		(6	)		(3	)
Net periodic benefit cost	$	(1	)	$	(1	)	$	(3	)	$	(3	)

For the nine months ended September 30, 2012, we made contributions to our defined benefit plans totaling $292,000. During the remainder of 2012 we do not anticipate making any additional pension plan contributions due to the application of the Moving Ahead for Progress in the 21st Century Act (MAP-21). The application of MAP-21 decreased the required contributions for 2012.

10. Income Taxes

Federal and state income tax expense was $623,000 during the third quarter of 2012 compared to $798,000 during the same quarter of 2011. Federal and state income tax expense was $3.5 million for the first nine months of 2012 compared to $2.6 million in 2011. The effective tax rate was 16.0% and 31.1% for the three and nine months ended September 30, 2012, respectively, and 25.6% and 32.0% for the comparable 2011 periods. Included in the income tax provision calculation for the three months ended September 30, 2012 is a $708,000 tax benefit, net of related uncertain tax position reserves, for research and development income tax credits earned during 2011. This credit was not contemplated in the 2011 tax provision because it was not identified or quantified until 2012. The Company is in the process of calculating this credit related to the

11

CECO ENVIRONMENTAL CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

additional open years of 2009 and 2010, which is expected to be completed in the fourth quarter of 2012 and may result in additional tax benefit to be recorded in the fourth quarter of 2012. Along with the tax benefit of research and development income tax credits, our effective tax rate is additionally affected by certain permanent differences including non-deductible incentive stock based compensation, reversals of certain income tax reserves/deferrals, and tax holidays in foreign jurisdictions.

The Company accounts for uncertain tax positions pursuant to ASC Topic 740, “Income Taxes.” As of September 30, 2012 and December 31, 2011, the liability for uncertain tax positions totaled approximately $128,000 and $52,000, respectively. The Company recognizes interest accrued related to uncertain tax positions in interest expense and penalties in income tax expense.

The Company files income tax returns in various federal, state and local jurisdictions. The Company is no longer subject to federal, state and local income tax examinations by tax authorities for years before 2008.

11. Product Warranties

The Company’s warranty reserve is to cover the products sold and is principally at our Effox subsidiary. The warranty accrual is based on historical claims information. The warranty reserve is reviewed and adjusted as necessary on a quarterly basis. Warranty accrual is not significant at the Company’s other operations due to the nature of the work which includes installation and testing. Accrued warranty expense is included in Accounts payable and accrued expenses on our condensed consolidated balance sheets, and the change in accrued warranty is summarized in the following table:

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2012			2011			2012			2011
Beginning balance	$	585		$	487		$	431		$	455
Provision		52			28			263			239
Payments		(25	)		(213	)		(82	)		(392	)
Ending balance	$	612		$	302		$	612		$	302

12. Financial Instruments

Our financial instruments consist primarily of investments in cash and cash equivalents, receivables and certain other assets, and accounts payable, which approximate fair value at September 30, 2012, due to their short term nature. The carrying amounts of our debt obligations approximate fair value based on future payments discounted at current interest rates for similar fair market determinations or interest rates which fluctuate with the market. As these inputs are not considered to be observable (i.e. supported by little or no market activity), the Company has designated these obligations as Level 3.

13. Commitments and Contingencies – Legal Matters

On January 13, 2011, the SEC initiated a non-public formal investigation of the Company. We have been cooperating with and intend to continue to cooperate with the SEC. The Company has been informed by its Chairman of the Board that he has received multiple subpoenas in connection with such inquiry. Another director has received two subpoenas as well. In accordance with the terms of the Company’s bylaws and the General Corporation Law of Delaware, the Company is advancing expenses incurred by its Chairman and other director in this matter. Because the matter is ongoing, we cannot predict the outcome of this formal inquiry at this time, and, as a result, no conclusion can be reached as to what impact, if any, this inquiry may have on us, our operations, or financial condition.

Other income for the second quarter of 2011 includes a payment to the Company of $359,000 related to short swing trading profits that were returned to the Company by a director and an affiliated shareholder.

The Company was involved in an arbitration proceeding initiated in April 2011 by William L. Heumann, Gerald J. Plappert, and Paul S. Brannick, related to the 2008 acquisition of Fisher-Klosterman Inc., in which

12

CECO ENVIRONMENTAL CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

the plaintiffs were claiming amounts owed pursuant to an earn-out provision in the purchase agreement. The arbitrator ruled on February 15, 2012 favorably to the Company resulting in a payment of the Company’s stock worth $20,500 and half of the plaintiffs’ legal and arbitrator costs of $106,000.

On October 12, 2012 the Company received a letter from the Sheet Metal Workers’ Local Union No. 80 (“the Union”) alleging that the Company had completely withdrawn from the Union’s Pension Trust Fund and may be liable for an amount up to $5.3 million. The Company is disputing this allegation entirely. The Company has requested information regarding the basis of the withdrawal determination and the calculation of the liability amount, and based on initial investigation believes the claim is meritless. The Company has obtained legal counsel and plans to vigorously defend itself.

The Company is also a party to routine contract and employment-related litigation matters and routine audits of state and local tax returns arising in the ordinary course of its business.

The final outcome and impact of open matters, and related claims and investigations that may be brought in the future, are subject to many variables, and cannot be predicted. We establish accruals only for those matters where we determine that a loss is probable and the amount of loss can be reasonably estimated. As a result, we have accrued as necessary for any liability with respect to open matters. The Company expenses legal costs as they are incurred. While it is currently not possible to reasonably estimate the aggregate amount of costs that we may incur in connection with these matters, such costs could have a material adverse effect on our financial position, liquidity, or results of operations.

We are not aware of pending claims or assessments, other than as described above, which may have a material adverse impact on our liquidity, financial position, or results of operations.

14. Stock Purchase

During the first quarter of 2011, the Company purchased 73,741 shares of CECO stock held by a retiring executive. The shares were purchased at the then current market price of $5.84 for a total transaction value of $430,647 and the shares were immediately retired.

On August 10, 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. No shares were repurchased in the first quarter of 2012 and during the three month period ended June 30, 2012, the Company repurchased and immediately retired 62,519 shares of common stock for $456,000. No shares were repurchased during the three month period ended September 30, 2012, which leaves the maximum number of shares that may yet be purchased at 345,691.

15. Business Segment Information

The Company’s operations are organized and reviewed by management along its product lines and presented in three reportable segments. The results of the segments are reviewed through to the “Income from operations” line on the Statements of Income. The accounting policies of the segments are the same as those in the consolidated financial statements.

Engineered Equipment Technology and Parts Group (“EET&P Group”)

Our EET&P Group, located in the United States, Canada, Brazil, China, and India, is comprised of CECO Filters, Busch International, CECO Abatement, Effox, Fisher-Klosterman, Flextor and A.V.C. We enable our customers to meet Best Available Control Technology requirements and compliance targets for fumes, volatile organic compounds, process, and industrial odors. Our services eliminate toxic emission fumes and volatile organic compounds from large-scale industrial processes. We have a presence in the chemical processing, ethanol, paint booth emissions, wastewater treatment, and wood products industries.

13

CECO ENVIRONMENTAL CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Contracting/Services Group (“C/S Group”)

Our C/S Group is comprised of the contracting/services operations of our Kirk & Blum divisions. We provide custom metal fabrication services at our Kirk & Blum Columbia, Tennessee and Louisville, Kentucky locations. These facilities are used to fabricate parts, subassemblies, and customized products for air pollution and non-air pollution applications from sheet, plate, and structurals.

Component Parts Group (“CP Group”)

We market component parts for industrial air systems to contractors, distributors and dealers throughout the United States.

Summary of Business by Segment

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2012			2011			2012			2011
Net Sales
Engineered Equipment Technology and Parts Group
United States	$	18,775		$	18,073		$	57,202		$	60,179
Canada		1,865			1,490			5,820			5,852
China		2,166			2,806			5,223			6,475
Brazil					864			121			1,851
India		173			104			173			229
Subtotal (a)		22,979			23,337			68,539			74,586
Contracting / Services Group (a)		6,166			7,284			20,577			22,554
Component Parts Group (a)		5,524			5,282			16,804			14,585
Corporate and other (a) (b)		—			253			19			880
Eliminations		(1,567	)		(3,209	)		(5,219	)		(11,165	)
Net sales	$	33,102		$	32,947		$	100,720		$	101,440
	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2012			2011			2012			2011
Income (loss) from Operations
Engineered Equipment Technology and Parts Group (a)	$	3,946		$	3,294		$	11,110		$	8,303
Contracting / Services Group (a)		836			903			2,520			2,281
Component Parts Group (a)		966			820			3,378			2,674
Corporate and other (a) (b)		(1,455	)		(1,613	)		(4,667	)		(4,555	)
Eliminations		(42	)		(94	)		(58	)		(133	)
Income from operations	$	4,251		$	3,310		$	12,283		$	8,570

(a) The amounts presented at the reportable business segment level include both external and intersegment net sales and operating income(loss), as applicable. See following tables in this Note 15 under “Intra-segment and Inter-segment Revenues.”

(b) Includes corporate compensation, professional services, information technology, and other general and administrative corporate expenses. Also included are the operations of our Engineering Group, which are not significant to the overall operations of the Company and were sold in November 2011.

14

CECO ENVIRONMENTAL CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

	Three Months Ended September  30,				Nine Months Ended September 30,
(dollars in thousands)	2012		2011		2012		2011
Property and Equipment Additions
Engineered Equipment Technology and Parts Group	$	57	$	78	$	109	$	144
Contracting / Services Group		14		63		44		72
Component Parts Group		21		236		59		268
Corporate and other (c)		10		21		22		170
Property and equipment additions	$	102	$	398	$	234	$	654

(c) Includes Corporate and Engineering Group property and equipment additions. The Engineering Group was sold in November 2011.

	Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in thousands)	2012		2011		2012		2011
Depreciation and Amortization
Engineered Equipment Technology and Parts Group	$	146	$	174		445	$	618
Contracting / Services Group		53		59		163		173
Component Parts Group		48		49		144		132
Corporate and other (d)		53		58		158		163
Depreciation and Amortization	$	300	$	340		910	$	1,086

(d) Includes Corporate and Engineering Group depreciation and amortization. The Engineering Group was sold in November 2011.

(dollars in thousands)	September 30, 2012			December 31, 2011
Identifiable Assets
Engineered Equipment Technology and Parts Group	$	48,498		$	51,480
Contracting / Services Group		26,837			18,588
Component Parts Group		6,078			5,577
Corporate and other (e)		8,568			9,705
Eliminations (f)		(5,526	)		(6,005	)
Identifiable Assets (g)	$	84,455		$	79,345

(e) Includes Corporate and Engineering Group identifiable assets. The Engineering Group was sold in November 2011. Corporate assets primarily consists of cash, income tax related assets, and intercompany note receivable.

(f) Includes eliminations for intercompany trade accounts receivable, intercompany job revenue, and intercompany note receivable.

(g) The Company has revised its business segment reporting primarily to exclude nontrade accounts receivable in order to better reflect the manner in which such assets are reviewed by management.

15

CECO ENVIRONMENTAL CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(dollars in thousands)	September 30, 2012		December 31, 2011
Goodwill
Engineered Equipment Technology and Parts Group	$	14,777	$	14,661

Intra-segment and Inter-segment Revenues

The Company has multiple divisions that sell to each other within segments (intra-segment sales) and between segments (inter-segment sales) as indicated in the following tables:

	Three months ended September 30, 2012
(dollars in thousands)	Total sales		Less intra- segment sales														Net sales to outside
						Less inter-segment sales
						EET&P			C/S			CP		Corp. (a)			customers
Net Sales
Engineered Equipment Technology and Parts Group
United States	$	18,775	$	(334	)	$	—		$	(16	)	$	—	$	—		$	18,425
Canada		1,865		(10	)		—			—			—		—			1,855
China		2,166		(379	)		—			—			—		—			1,787
Brazil		—		—			—			—			—		—			—
India		173		—			—			—			—		—			173
Subtotal		22,979		(723	)		—			(16	)		—		—			22,240
Contracting / Services Group		6,166		(20	)		(502	)		—			—		—			5,644
Component Parts Group		5,524		(89	)		(3	)		(194	)		—		—			5,238
Corporate and other (a)		—		—			—			—			—		(20	)		(20	)
Net sales	$	34,669	$	(832	)	$	(505	)	$	(210	)	$	—	$	(20	)	$	33,102

(a) Includes adjustment for revenue on intercompany jobs.

16

CECO ENVIRONMENTAL CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

	Three months ended September 30, 2011
	Total sales		Less intra- segment sales															Net sales  to outside customers
						Less inter-segment sales
(dollars in thousands)						EET&P			C/S			CP			Corp. (a)
Net Sales
Engineered Equipment Technology and Parts Group
United States	$	18,073	$	(669	)	$	—		$	(279	)	$	—		$	—		$	17,125
Canada		1,490		—			—			—			—			—			1,490
China		2,806		(1,272	)		—			—			—			—			1,534
Brazil		864		—			—			—			—			—			864
India		104		—			—			—			—			—			104
Subtotal		23,337		(1,941	)		—			(279	)		—			—			21,117
Contracting / Services Group		7,284		(13	)		(536	)		—			(42	)		(8	)		6,685
Component Parts Group		5,282		(71	)		(46	)		(207	)		—			—			4,958
Corporate and other (a)		253		—			—			(3	)		—			(63	)		187
Net sales	$	36,156	$	(2,025	)	$	(582	)	$	(489	)	$	(42	)	$	(71	)	$	32,947

(a) Includes the operations of our Engineering Group, which is not significant to the overall operations of the Company, and adjustment for revenue on intercompany jobs. The Engineering Group was sold in November 2011.

	Nine months ended September 30, 2012
	Total Sales		Less intra- segment sales													Net sales to outside
						Less inter-segment sales
(dollars in thousands)						EET&P			C/S			CP		Corp. (a)		customers
Net Sales
Engineered Equipment Technology and Parts Group
United States	$	57,202	$	(687	)	$	—		$	(626	)	$	—	$	—	$	55,889
Canada		5,820		63			—			—			—		—		5,883
China		5,223		(1,934	)		—			—			—		—		3,289
Brazil		121		—			—			—			—		—		121
India		173		—			—			—			—		—		173
Subtotal		68,539		(2,558	)		—			(626	)		—		—		65,355
Contracting / Services Group		20,577		(68	)		(1,037	)		—			—		—		19,472
Component Parts Group		16,804		(236	)		(21	)		(693	)		—		—		15,854
Corporate and other (a)		19		—			—			(10	)		—		30		39
Net sales	$	105,939	$	(2,862	)	$	(1,058	)	$	(1,329	)	$	—	$	30	$	100,720

(a) Includes adjustment for revenue on intercompany jobs.

17

CECO ENVIRONMENTAL CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

	Nine months ended September 30, 2011
(dollars in thousands)	Total sales		Less intra- segment Sales															Net sales  to outside Customers
						Less inter-segment sales
						EET&P			C/S			CP			Corp. (a)
Net Sales
Engineered Equipment Technology and Parts Group
United States	$	60,179	$	(3,495	)	$	—		$	(2,754	)	$	—		$	—		$	53,930
Canada		5,852		—			—			—			—			—			5,852
China		6,475		(1,798	)		—			—			—			—			4,677
Brazil		1,851		—			—			—			—			—			1,851
India		229		—			—			—			—			—			229
Subtotal		74,586		(5,293	)		—			(2,754	)		—			—			66,539
Contracting / Services Group		22,554		(82	)		(1,761	)		—			(42	)		(53	)		20,616
Component Parts Group		14,585		(336	)		(123	)		(639	)		—			—			13,487
Corporate and other (a)		880		—			—			(42	)		—			(40	)		798
Net sales	$	112,605	$	(5,711	)	$	(1,884	)	$	(3,435	)	$	(42	)	$	(93	)	$	101,440

(a) Includes the operations of our Engineering Group, which is not significant to the overall operations of the Company, and adjustment for revenue on intercompany jobs. The Engineering Group was sold in November 2011.

18

CECO ENVIRONMENTAL CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

ITEM 2. Management discussion and analysis of financial condition and results of operations

The Company’s consolidated statements of income for the three-month and nine-month periods ended September 30, 2012 and 2011 reflect the consolidated operations of the Company and its subsidiaries.

We are one of the leading global providers of air-pollution control technology products and services. These products, technology, and services are marketed under the “Kirk & Blum,” “CECO Filters,” “Busch International,” “CECO Abatement Systems,” “KB Duct,” “Effox,” “Fisher-Klosterman,” “Buell,” “Flextor,” and “A.V.C.” trade names. Our revenues are generated by our services of engineering and designing as well as building equipment, and installing systems that capture, clean and destroy airborne contaminants from industrial facilities and equipment that controls emissions from such facilities. We have a diversified base of more than 3,500 active customers among a myriad of industries including aerospace, brick, cement, steel, ceramics, metal working, ethanol, printing, paper, food, foundry, power, refining, mining, metal plating, woodworking, chemicals, tobacco, glass, automotive, and pharmaceuticals. Therefore, our business is not concentrated in a single industry or customer. Demand for our products and services is created by increasingly strict EPA mandated industry Maximum Achievable Control Technology standards and OSHA established Threshold Limit Values, as well as existing pollution control and energy legislation domestically as well as globally.

We believe that as economic conditions continue to improve, there will be an increase in the level of pollution control capital expenditures driven by an elevated focus on environmental issues such as global warming and energy-saving alternatives as well as a U.S. Government supported effort to reduce our dependence on foreign oil through the use of bio-fuels like ethanol and electrical energy generated by our abundant domestic supply of coal. We also feel that similar opportunities will continue to develop outside the United States. Much of our business is driven by various regulatory standards and guidelines governing air quality in and outside factories. Our Chinese operation is experiencing significant expansion due to the tightening of air pollution standards by China’s Ministry of Environmental Protection.

We continue to focus on increasing revenues and profitability globally while continuing to strengthen and expand our presence domestically. Our operating strategy has historically involved horizontally expanding our scope of technology, products, and services through selective acquisitions and the formation of new business units that are then vertically integrated into our growing group of turnkey system providers. By employing this strategy, we have expanded our business and increased our revenues by adding CECO Abatement Systems, KB Duct, CECO Environmental India, Effox, Fisher-Klosterman, Buell, Flextor and A.V.C. Our continuing focus will be on global growth, market coverage, and specifically expansion of our China and India operations. Operational excellence, margin expansion, after-market growth, and safety leadership are also critical to our growth strategy.

Operations Overview

We operate under a “hub and spoke” business model in which executive management, finance, administrative and marketing staff serves as the hub while the sales channels serve as spokes. We use this model throughout our operations. This has provided us with certain efficiencies over a more decentralized model. The Company’s division presidents and general managers are responsible for successfully running their operations, that is, sales, gross margins, manufacturing, pricing, safety, employee development, and customer service excellence. The managers work closely with the CEO on global growth strategies, operational excellence, and employee development. The headquarters (hub) focuses on enabling the core back-office key functions for scale and efficiency, that is, accounting, payroll, human resources/benefits, IT, safety support, audit controls, and administration. We have organizational focus from headquarters through-out our divisional businesses with minimal duplicative work streams. We are structured for growth and will do smart future bolt-on acquisitions with a full integration strategy.

Our three operating segments are: the Engineered Equipment Technology and Parts Group (“EET&P Group”), which produces various types of air pollution control equipment, the Contracting / Services Group (“C/S Group”), which produces air pollution control and industrial ventilation systems and the Component Parts Group (“CP Group”), which manufactures products used by us and other air pollution control companies and contractors. It is through combining the efforts of some or all of these groups that we are able to offer complete turnkey systems to our customers and leverage the operational efficiencies between our family of companies. Due to the relative size of our former Engineering Group, our reportable segment disclosures in our financial statements include this group’s results with our corporate and other disclosures. In November 2011, we sold kbd/Technic, which comprised our small Engineering Group. kbd/Technic provided industrial ventilation engineering and source emission testing services.

19

CECO ENVIRONMENTAL CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Our contracts are obtained either through competitive bidding or as a result of negotiations with our customers. Contract terms offered by us are generally dependent on the complexity and risk of the project as well as the resources that will be required to complete the project. For example, a contract that can be performed primarily by subcontractors and that does not require us to use our fabrication and assembly facilities can be quoted at a lower gross margin than a more typical contract that will require additional factory overhead and administrative expenses. Our focus is on increasing our operating margins as well as our gross margin percentage which translates into higher net income. Our sales typically peak in the fourth quarter due to a tendency of customers to want to fully utilize annual capital budgets and due to the fact that many industrial facilities shut down for the holiday season and that creates demand for maintenance and renovation work that can be done at no other time.

Results of Operations

Consolidated Results

Our consolidated statements of income for the three month and nine-month periods ended September 30, 2012 and 2011 are as follows:

	Three Months Ended September  30,						Nine Months Ended September  30,
(dollars in millions)	2012			2011			2012			2011
Net sales	$	33.1		$	32.9		$	100.7		$	101.4
Cost of sales		22.6			23.2			69.5			74.6
Gross profit	$	10.5		$	9.7		$	31.2		$	26.9
Percent of sales		31.7	%		29.5	%		31.0	%		26.5	%
Selling and administrative expenses	$	6.2		$	6.3		$	18.7		$	18.0
Percent of sales		18.7	%		19.1	%		18.6	%		17.8	%
Operating income	$	4.3		$	3.3		$	12.3		$	8.6
Percent of sales		12.8	%		10.0	%		12.2	%		8.5	%

Consolidated sales for the third quarter increased $0.2 million to $33.1 million from $32.9 million in 2011. The increase in sales was primarily due to a $1.1 million sales increase in the EET&P Group offset by a $1.0 million decrease in the C/S Group.

Consolidated sales for the first nine months of 2012 were $100.7 million compared to $101.4 million in 2011, a decrease of $0.7 million. The decrease in sales was primarily due to decreases of $1.2 million and $1.1 million in the EET&P Group and the C/S Group, respectively, offset by an increase of $2.4 million in the CP Group. The sales decrease of 1.8% in our EET&P Group is primarily due to project delays requested by customers, while the decrease of 5.5% in the C/S Group is primarily due to the continued targeting of higher margin projects. The increased demand for our products and services created by certain industrial sectors, such as small independent contractors that purchase component parts created the 17.6% increase in our CP Group sales.

Gross profit increased by $0.8 million, or 8.2%, to $10.5 million in the third quarter of 2012 compared with $9.7 million in the same period of 2011. Gross profit as a percentage of sales was 31.7% in 2012 compared to 29.5% in 2011. The increase in gross profit was primarily due to a shift to higher margin work in both the EET&P Group and the C/S Group.

For the first nine months of 2012, gross profit increased by $4.3 million, or 16.0% to $31.2 million compared with $26.9 million in the same period of 2011. Gross profit as a percentage of sales was 31.0% in 2012 compared to 26.5% in 2011. The net increase in gross profit was primarily due to a shift to higher margin work in both the EET&P Group and the C/S Group.

Orders booked were $41.8 million during the third quarter of 2012 and $113.4 million for the first nine months of 2012, as compared to $35.6 million during the third quarter of 2011 and $102.4 million in the first nine months of 2011. We continue to experience an active level of customer inquiry and quoting activities and have realized increased bookings at our Effox and Flextor divisions.

20

CECO ENVIRONMENTAL CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Selling and administrative expenses were $6.2 million during the third quarter of 2012 compared to $6.3 million during the third quarter of 2011. During the first nine months of 2012, selling and administrative expenses were $18.7 million compared to $18.0 million in the first nine months of 2011. The increase for the nine month period in 2012 was primarily due to increases in certain accruals based on increased levels of profitability in 2012.

Amortization expense decreased by $38,000 to $80,000 during the third quarter of 2012 from $118,000 in the same period of 2011, and decreased by $89,000 to $252,000 in the first nine months of 2012 from $341,000 in the same period of 2011. The decrease in amortization expense was the result of certain finite life intangibles related to earlier acquisitions becoming fully amortized.

Operating income was $4.3 million in the third quarter of 2012, an increase of $1.0 million compared to $3.3 million during the same quarter of 2011. Operating income as a percent of sales in the third quarter of 2012 was 12.8% compared to 10.0% for the same period in 2011.

Operating income for the first nine months of 2012 increased by $3.7 million to $12.3 million from $8.6 million during the same period of 2011. Operating income as a percent of sales for the nine months ended September 30, 2012 was 12.2% compared to 8.5% for the same period in 2011.

Interest expense was $291,000 and $296,000 for the third quarter of 2012 and 2011, respectively, and $828,000 and $870,000 for the first nine months of 2012 and 2011, respectively. The decrease for the three month and nine months ended September 30, 2012 is due to the conversion of $1.3 million of our subordinated debt into equity during the twelve months from October 1, 2011 to September 30, 2012.

Federal and state income tax expense was $623,000 during the third quarter of 2012 compared to $798,000 during the same quarter of 2011. Federal and state income tax expense was $3.5 million for the first nine months of 2012 compared to $2.6 million in 2011. The effective tax rate was 16.0% and 31.1% for the three and nine months ended September 30, 2012, respectively, and 25.6% and 32.0% for the comparable 2011 periods. Included in the income tax provision calculation for the three months ended September 30, 2012 is a $708,000 tax benefit, net of related uncertain tax position reserves, for research and development income tax credits earned during 2011. This credit was not contemplated in the 2011 tax provision because it was not identified or quantified until 2012. The Company is in the process of calculating this credit related to the additional open years of 2009 and 2010, which is expected to be completed in the fourth quarter of 2012 and may result in additional tax benefit to be recorded in the fourth quarter of 2012. Along with the tax benefit of research and development income tax credits, our effective tax rate is additionally affected by certain permanent differences including non-deductible incentive stock based compensation, reversals of certain income tax reserves/deferrals, and tax holidays in foreign jurisdictions.

The Company accounts for uncertain tax positions pursuant to ASC Topic 740, “Income Taxes.” As of September 30, 2012 and December 31, 2011, the liability for uncertain tax positions totaled approximately $128,000 and $52,000, respectively. The Company recognizes interest accrued related to uncertain tax positions in interest expense and penalties in income tax expense.

The Company files income tax returns in various federal, state and local jurisdictions. The Company is no longer subject to federal, state and local income tax examinations by tax authorities for years before 2008.

21

CECO ENVIRONMENTAL CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Business Segments

The Company’s operations are organized and reviewed by management along its product lines and presented in three reportable segments. The results of the segments are reviewed through to the “Income from operations” line on the Statements of Income. The amounts presented in the Net Sales table below and in the following comments regarding our net sales at the reportable business segment level exclude both intra-segment and inter-segment net sales. The Income (loss) from Operations table and corresponding comments regarding operating income at the reportable segment level include both intra-segment and inter-segment operating income.

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2012			2011			2012			2011
Net Sales (less intra-, inter-segment sales)
Engineered Equipment Technology and Parts Group
United States	$	18,425		$	17,125		$	55,889		$	53,930
Canada		1,855			1,490			5,883			5,852
China		1,787			1,534			3,289			4,677
Brazil		—			864			121			1,851
India		173			104			173			229
Subtotal		22,240			21,117			65,355			66,539
Contracting / Services Group		5,644			6,685			19,472			20,616
Component Parts Group		5,238			4,958			15,854			13,487
Corporate and other		(20	)		187			39			798
Net sales	$	33,102		$	32,947		$	100,720		$	101,440
	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2012			2011			2012			2011
Income (loss) from Operations
Engineered Equipment Technology and Parts Group	$	3,946		$	3,294		$	11,110		$	8,303
Contracting / Services Group		836			903			2,520			2,281
Component Parts Group		966			820			3,378			2,674
Corporate and other (a)		(1,455	)		(1,613	)		(4,667	)		(4,555	)
Eliminations		(42	)		(94	)		(58	)		(133	)
Income from operations	$	4,251		$	3,310		$	12,283		$	8,570

(a) Includes corporate compensation, professional services, information technology, and other general and administrative corporate expenses. Also included are the operations of our Engineering Group, which is not significant to the overall operations of the Company and were sold in November 2011.

Engineered Equipment Technology and Parts Group

Our EET&P Group net sales for the third quarter of 2012 increased $1.1 million to $22.2 million from $21.1 million in the same period in 2011. Net sales for the nine months ended September 30, 2012 were $65.4 million compared to $66.5 million in 2011. The increase in the third quarter of 2012 is primarily due to an increase of $2.2 million of net sales at our Effox and Flextor divisions, offset by a decrease of $1.5 million in revenues in our Fisher-Klosterman division during the quarter. The decrease for the nine months ended September 30, 2012 was primarily due to decreased revenues of $4.2 million at Fisher-Klosterman and $1.5 million at CECO Abatement, offset by increases of $3.1 million at our Effox and Flextor divisions and $3.0 million at our Busch division. The decrease in revenues is due to certain large projects not being replaced at our Fisher-Klosterman division, and a decrease of ethanol industry orders.

22

CECO ENVIRONMENTAL CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Operating income from our EET&P Group increased 19.8% to $3.9 million in the third quarter of 2012 from $3.3 million in the same period of 2011. The increase was due to an increase of $1.2 million of combined operating income at our Effox and Flextor divisions, offset by operating income decreases at the other EET&P Group divisions. The increase at Effox and Flextor was due to increased margins on projects. Revenue volume decreases negatively impacted the results of the other EET&P Group divisions.

Operating income during the nine months ended September 30, 2012 increased by $2.8 million to $11.1 million, compared to $8.3 million for the same period in 2011. The increase for the nine months ended September 30, 2012 was primarily due to the increase of combined operating income of $4.0 million at our Effox and Flextor divisons, offset by a decrease of $1.1 million at Fisher-Klosterman.

Contracting / Services Group

Our C/S Group net sales for the third quarter of 2012 were $5.6 million compared to $6.7 million in the same period in 2011. Net sales for the nine months ended September 30, 2012 were $19.5 million compared to $20.6 million in 2011. The C/S Group is continuing to target higher margin design, build, end user customer segments, which resulted in the net sales decrease for the three and nine months periods.

Operating income for C/S Group was $0.8 million in the third quarter of 2012 compared to $0.9 million in the third quarter of 2011. Operating income for the nine months ended September 30, 2012 increased $0.2 million to $2.5 million from $2.3 million in 2011. This increase is primarily due to a strategic shift in customer segments and reduced operating costs in 2012 from facility consolidations and streamlining efforts, effective project management, and improved pricing strategies.

Component Parts Group

Our CP Group net sales for the third quarter of 2012 increased $0.2 million to $5.2 million from $5.0 million in the same period in 2011. Net sales for the nine months ended September 30, 2012 increased $2.4 million to $15.9 million from $13.5 million in 2011. This increase is primarily due to increased demand for our component parts and clamp together duct products, which is the result of many smaller contractors buying these products instead of making them in-house.

Operating income for CP Group increased $0.2 million to $1.0 million from $0.8 million during the third quarter of 2012 from 2011, and increased $0.7 million to $3.4 million for the nine month period ended September 30, 2012 from $2.7 million in 2011. These increases are primarily due to increased revenues as described above and better strategic pricing strategies.

Backlog

Our backlog consists of the amount of revenue we expect from complete performance of uncompleted, signed, firm fixed price contracts that have not been completed for products and services we expect to substantially deliver within the next 12 months. Our backlog as of September 30, 2012, was $67.6 million compared to $54.9 million as of December 31, 2011. There can be no assurances that backlog will be replicated, increased or translated into higher revenues in the future. The success of our business depends on a multitude of factors related to our backlog and the orders secured during the subsequent periods. Certain contracts are highly dependent on the work of contractors and other subcontractors participating in a project, over which we have no or limited control, and their performance on such project could have an adverse effect on the profitability of our contracts. Delays resulting from these contractors and subcontractors, changes in the scope of the project, weather, and labor availability also can have an effect on a contract’s profitability.

New Accounting Pronouncements

For information regarding recent accounting pronouncements, see Note 2 to the unaudited consolidated financial statements within Item 1 of this report.

23

CECO ENVIRONMENTAL CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Financial Condition, Liquidity and Capital Resources

Our principal sources of liquidity are cash flow from operations and available borrowings under our revolving credit facility. Our principal uses of cash are operating costs, payment of interest on our Investor Notes, working capital and other general corporate requirements.

At September 30, 2012 and December 31, 2011, cash and cash equivalents totaled $24.5 million and $12.7 million, respectively. Cash balances may fluctuate from time to time due to collected funds not being immediately swept against the credit line balance; however, we had no outstanding borrowings under this line as of September 30, 2012.

Terms of our Bank Facility, as amended, include a revolving line of credit for up to $20.0 million (with a $10.0 million letters of credit sublimit) a termination date of April 1, 2014 and financial covenants that require compliance at each quarter-end through March 31, 2013. The maximum capital expenditures financial covenant is $2.5 million per year. The minimum Fixed Charge Coverage Ratio is 1.25:1.0. The maximum funded debt to EBITDA covenant is 3.0 to 1. Our Bank Facility also contains cross-default provisions with respect to our subordinated debt. Also, if we fail to pay (after grace periods) any other debt or lease that, individually or in the aggregate involves indebtedness in excess of $100,000, and such default gives any creditor or lessor the right to accelerate the maturity of any such indebtedness or lease payments, then absent a waiver from the lender, it would result in a default under our Bank Facility and the acceleration of the maturity of outstanding debt under our Bank Facility. As of September 30, 2012, we were in compliance with all related financial and other restrictive covenants, and expect continued compliance. In the future, if we cannot comply with the terms of the Bank Facility covenants it will be necessary for us to obtain a waiver or renegotiate our loan covenants, and there can be no assurance that such negotiations would be successful. In the event that we are not successful in obtaining a waiver or an amendment, we would be declared in default, which could cause all amounts owed to be immediately due and payable. We have no outstanding borrowings under the line of credit as of September 30, 2012 and December 31, 2011. Borrowings are subject to a borrowing base limitation, including reducing the borrowing base by the amount of outstanding letters of credit, and at September 30, 2012, $10.8 million could be borrowed at an interest rate of LIBOR plus 3.5%. As of September 30, 2012, the Company has $2.0 million in outstanding trade letters of credit. Our property and equipment, accounts receivable, investments and inventory serve as collateral for our bank debt.

On November 26, 2009, the Company issued $10.8 million principal amount of subordinated convertible promissory notes to a group of investors (the “Investor Notes”) which includes related parties: Icarus Investment Corp., which is controlled by Phillip DeZwirek, our Chairman and former Chief Executive Officer, and Jason DeZwirek, a director and Secretary ($2.2 million), JMP Fam Holdings, Inc., which is controlled by Jonathan Pollack, a Company Director ($150,000), 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 on the Investor Notes for the three and nine month periods was $136,000 and $417,000, respectively, and $159,000 and $475,000, respectively, for the same periods in 2011. 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 was available to 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.

The Investor Notes are due on November 26, 2014 and are not repayable prior to maturity except upon a change of control, or upon the consent of the holder. The outstanding principal amount of the Investor Notes or any portion thereof, but not the interest, is convertible at the holder’s option, at any time at a conversion price of $4.00 per share, such price being greater than the Company’s share price at the date of issuance of the Investor Notes. Following three years from the issuance date of the Investor Notes, if the closing price of the common stock of the Company is greater than $8.00 for five consecutive days, the Company can cause conversion of the Investor Notes. The outstanding balance of the Investor Notes at September 30, 2012 and December 31, 2011 was $8.8 million and $9.6 million, respectively. In the first quarter and second quarter of 2012, $200,000 and $240,000 principal of the Investor Notes, respectively, were converted to 50,000 and 60,000 shares of our common stock, respectively. In the third quarter of 2012, $400,000 principal of the Investor Notes was converted to 100,000 shares of our common stock.

24

CECO ENVIRONMENTAL CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Overview of Cash Flows and Liquidity

	For the nine months  ended September 30,
(dollars in thousands)	2012			2011
Net cash provided by operating activities	$	13,806		$	4,879
Net cash used in investing activities		(197	)		(18	)
Net cash used in financing activities		(1,878	)		(735	)
Net increase in cash	$	11,731		$	4,126

For the nine months ended September 30, 2012, $13.8 million of cash was provided by operating activities compared to $4.9 million for the same period in 2011. The $8.9 million increase in cash flows from operating activities was due to an increase in net income, excluding non-cash items, of $1.9 million and a net $6.9 million decrease in non-cash working capital requirements. The net decrease in working capital requirements was largely due to a $3.7 million increase in cash provided by the change in uncompleted contract balances due to an increase in billings as compared to costs incurred to date, $3.6 million increase in cash provided by the change in accounts payable and accrued expenses balances, and a $2.3 million increase in cash provided by the change in accrued income taxes balances due to the inclusion of the research and development income tax credits discussed earlier in footnote 10. These working capital changes were offset by a $4.3 million use of cash by the change in accounts receivable balances.

Our net investment in working capital (excluding cash and cash equivalents) at September 30, 2012 was $12.9 million as compared to $17.1 million at December 31, 2011. We believe that our working capital needs will remain constant unless we experience a significant change in sales and operating income.

For the nine months ended September 30, 2012, net cash used in investing activities of $234,000 was for capital expenditures for plant and equipment offset by $37,000 from proceeds from sales of plant and equipment. For the nine months ended September 30, 2011, capital expenditures of $654,000 for property and equipment was offset principally by cash proceeds of $636,000 from the sale of our Indianapolis facility.

For the nine months ended September 30, 2012, financing activities used net cash of $1.9 million, which consisted of $2.1 million used for the payment of common stock dividends and repurchase of shares offset by $266,000 of cash provided by the exercise of stock options and issuance of shares under our Dividend Reinvestment Plan. For the nine months ended September 30, 2011, financing activities used cash of $735,000 which consisted primarily of cash used to repurchase common stock of $483,000 and dividends paid to our common shareholders totaling $363,000, offset by $111,000 provided by stock option exercises.

When we undertake large jobs, our working capital objective is to make these projects self-funding. We try to achieve this by obtaining initial down payments, progress billing contracts, when possible, utilizing extended payment terms from material suppliers, and paying sub-contractors after payment from our customers, which is an industry practice. Our investment in net working capital is funded by cash flow from operations and by our revolving line of credit. Inventory remains relatively constant from quarter to quarter. Accordingly, changes in inventory do not constitute a significant part of our investment in working capital.

Given our cash flow projections and unused credit facility that is available until April 1, 2013, our liquidity is strong and is expected to meet our ongoing cash and subordinated debt service requirements.

Forward-Looking Statements

This Form 10-Q includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including statements regarding industry prospects or future results of operations or financial position made in this Form 10-Q are forward-looking. We use words such as “believe,” “expect,” “anticipate,” “intends,” “estimate,” “forecast,” “project,” “will,” “plan,” “should” and similar expressions to identify forward-looking statements. Forward-looking statements are based on management’s current expectations and assumptions that are subject to risks and uncertainties, many of which are beyond our control, which may cause actual results, performance or trends to differ materially from those expressed in the forward-looking statements. Potential risks, among others, that could cause actual results to differ materially are discussed under “Item 1A Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and include, but are not limited to:

25

CECO ENVIRONMENTAL CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

our dependence on fixed price contracts and the risks associated therewith, including actual costs exceeding our estimates and our method of accounting for contract revenue; our history of losses and possibility of further losses; fluctuations in operating results from period to period due to seasonality of our business; the effect of growth on our infrastructure, resources, and existing sales; our ability to expand our operations in both new and existing markets; the potential for contract delay or cancellation; the potential for fluctuations in prices for manufactured components and raw materials; our ability to raise capital and the availability of capital resources; our ability to fully utilize and retain executives; the impact of federal, state or local government regulations; labor shortages or increases in labor costs; economic and political conditions generally; and the effect of competition in the air pollution control and industrial ventilation industry.

We caution investors that other factors might, in the future, prove to be important in affecting our results of operations. New factors emerge from time to time and it is not possible for management to predict all such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or a combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Investors are further cautioned not to place undue reliance on such forward-looking statements as they speak only to our views as of the date the statement is made. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise.

26

CECO ENVIRONMENTAL CORP.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Interim Chief Financial Officer, has evaluated our disclosure controls and procedures pursuant to Rule 13a-15 of the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this quarterly report. Based on this evaluation, our Chief Executive Officer and Interim Chief Financial Officer have concluded that these controls and procedures are effective as of the end of the period covered by this quarterly report on Form 10-Q.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2012 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

27

CECO ENVIRONMENTAL CORP.

PART II – OTHER INFORMATION

ITEM 1. Legal Proceedings

Information with respect to legal proceedings can be found in Note 13 “Commitments and Contingencies – Legal Matters” to the Condensed Consolidated Financial Statements contained in Part I, Item 1 of this report, and is incorporated by reference herein.

ITEM 6. Exhibits

31.1	Rule 13(a)/15d- 14(a) Certification by Chief Executive Officer
31.2	Rule 13(a)/15d- 14(a) Certification by Interim Chief Financial Officer
32.1	Certification of Chief Executive Officer (18 U.S. Section 1350)
32.2	Certification of Interim Chief Financial Officer (18 U.S. Section 1350)
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

28

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.
By:	/s/    Benton L. Cook
	Benton L. Cook Interim Chief Financial Officer

Date: November 8, 2012

29

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Jeffrey Lang, certify that:

1. I have reviewed this quarterly report on Form 10-Q of CECO Environmental Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any changes to the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Jeffrey Lang

Jeffrey Lang

Chief Executive Officer

Date: November 8, 2012

EX-31.2

Exhibit 31.2

Certification of Interim Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Benton L. Cook, certify that:

1. I have reviewed this quarterly report on Form 10-Q of CECO Environmental Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any changes to the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Benton L. Cook

Benton L. Cook

Interim Chief Financial Officer

Date: November 8, 2012

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Report of CECO Environmental Corp. (the “Company”) on Form 10-Q for the period ending September 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jeffrey Lang, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Jeffrey Lang

Jeffrey Lang

Chief Executive Officer

Date: November 8, 2012

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Report of CECO Environmental Corp. (the “Company”) on Form 10-Q for the period ending September 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Benton L. Cook, Interim Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Benton L. Cook

Benton L. Cook

Interim Chief Financial Officer

Date: November 8, 2012

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Earnings and Dividends per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Computational components of basic and diluted earnings per share
Net income loss available to common stockholders basic	$ 3,268	$ 2,319	$ 7,798	$ 5,530
Basic net income and earnings per share	14,630,264	14,371,752	14,591,325	14,340,119
Basic net income and earnings per share, Amount	$ 0.22	$ 0.16	$ 0.53	$ 0.39
Effect of dilutive securities and notes:
Common stock equivalents arising from stock options and employee stock purchase plan
Common stock equivalents arising from stock options and employee stock purchase plan, shares	371	163	290	144
Common stock equivalents arising from stock options and employee stock purchase plan per share
Subordinated convertible promissory notes	82	95	250	285
Subordinated convertible promissory notes	2,257	2,622	2,318	2,647
Subordinated convertible promissory notes per, share	$ (0.03)	$ (0.02)	$ (0.06)	$ (0.05)
Net income loss available to common stockholders diluted	$ 3,350	$ 2,414	$ 8,048	$ 5,815
Diluted net income and earnings per share	17,258,552	17,157,305	17,199,337	17,130,767
Earnings Per Share, Diluted	$ 0.19	$ 0.14	$ 0.47	$ 0.34

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Stock Purchase (Details) (USD $)	3 Months Ended				9 Months Ended
	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Mar. 31, 2011	Sep. 30, 2012	Dec. 31, 2011	Aug. 10, 2011
Stock Purchase (Textual) [Abstract]
Total transaction value of shares purchased from retiring executive	$ 356,000				$ 356,000	$ 356,000
Stock Purchase (Additional Textual) [Abstract]
Current market price of purchased shares				$ 5.84
Authorized share buy back program, number of shares							500,000
Share repurchase period					18 months
Repurchased shares of common stock	0	62,519	0
Repurchase of common stock Value		456,000
Maximum number of shares that may yet be purchased	345,691				345,691
Executive Officer [Member]
Stock Purchase (Textual) [Abstract]
Shares purchased from a retiring executive				73,741
Total transaction value of shares purchased from retiring executive				$ 430,647

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Product Warranties (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Change in accrued warranty expense
Beginning balance	$ 585	$ 487	$ 431	$ 455
Provision	52	28	263	239
Payments	(25)	(213)	(82)	(392)
Ending balance	$ 612	$ 302	$ 612	$ 302

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Inventories (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Summary of inventories
Raw materials and subassemblies	$ 2,855	$ 3,017
Finished goods	1,207	1,147
Parts for resale	702	580
Obsolescence allowance	(472)	(400)
Inventory, net	$ 4,292	$ 4,344

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Inventories (Tables)

9 Months Ended

Sep. 30, 2012

Inventories [Abstract]

Summary of inventories

(dollars in thousands)	September 30, 2012			December 31, 2011
Raw materials and subassemblies	$	2,855		$	3,017
Finished goods		1,207			1,147
Parts for resale		702			580
Obsolescence allowance		(472	)		(400	)
	$	4,292		$	4,344

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Business Segment Information (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011	Dec. 31, 2010
Intra-segment and Inter-segment Revenues
Income (loss) from Operations	$ 4,251	$ 3,310	$ 12,283	$ 8,570
Property and Equipment Additions	102	398	234	654
Depreciation and Amortization	300	340	910	1,086
Identifiable Assets	84,455		84,455		79,345
Goodwill	14,777		14,777		14,661	14,713
Engineered Equipment Technology and Parts Group [Member]
Intra-segment and Inter-segment Revenues
Income (loss) from Operations	3,946	3,294	11,110	8,303
Property and Equipment Additions	57	78	109	144
Depreciation and Amortization	146	174	445	618
Identifiable Assets	48,498		48,498		51,480
Goodwill	14,777		14,777		14,661
Contracting / Services Group [Member]
Intra-segment and Inter-segment Revenues
Income (loss) from Operations	836	903	2,520	2,281
Property and Equipment Additions	14	63	44	72
Depreciation and Amortization	53	59	163	173
Identifiable Assets	26,837		26,837		18,588
Component Parts Group [Member]
Intra-segment and Inter-segment Revenues
Income (loss) from Operations	966	820	3,378	2,674
Property and Equipment Additions	21	236	59	268
Depreciation and Amortization	48	49	144	132
Identifiable Assets	6,078		6,078		5,577
Corporate and other [Member]
Intra-segment and Inter-segment Revenues
Income (loss) from Operations	(1,455)	(1,613)	(4,667)	(4,555)
Property and Equipment Additions	10	21	22	170
Depreciation and Amortization	53	58	158	163
Identifiable Assets	8,568		8,568		9,705
Eliminations [Member]
Intra-segment and Inter-segment Revenues
Income (loss) from Operations	(42)	(94)	(58)	(133)
Identifiable Assets	$ (5,526)		$ (5,526)		$ (6,005)

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Share-Based Compensation (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Share-Based Compensation (Textual) [Abstract]
Recognized share-based compensation awards	$ 165,000	$ 151,000	$ 493,000	$ 538,000

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Goodwill and Intangible Assets (Details Textual) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Goodwill and intangible assets (Textual) [Abstract]
Amortization expense of finite life intangible assets	$ 80,000	$ 118,000	$ 252,000	$ 341,000
Amortization expense of finite life intangibles for remainder of 2012	64,000		64,000
Amortization expense of finite life intangibles for 2013	130,000		130,000
Amortization expense of finite life intangibles for 2014	69,000		69,000
Amortization expense of finite life intangibles for 2015	6,000		6,000
Amortization expense of finite life intangibles for 2016	$ 5,000		$ 5,000

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Commitments and Contingencies - Legal Matters (Details) (USD $)	6 Months Ended	9 Months Ended
	Jun. 30, 2011	Sep. 30, 2012	Oct. 12, 2012
Commitments and Contingencies-Legal Matters (Textual) [Abstract]
Payment to the Company related to short swing trading profits	$ 359,000
Company's stock worth		20,500
Plaintiffs' legal costs		106,000
Liability paid for withdrawing from the Union's Pension Trust Fund			$ 5,300,000

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New Accounting Pronouncements Adopted

9 Months Ended

Sep. 30, 2012

New Accounting Pronouncements Adopted [Abstract]

New Accounting Pronouncements Adopted

2. New Accounting Pronouncements Adopted

ASC 220—In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-05, “Presentation of Comprehensive Income” which requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This ASU eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments in this ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The ASU became effective for the Company during the quarter ended March 31, 2012. Although the adoption of this ASU impacts the way the Company reports comprehensive income, the adoption of this guidance did not have a material effect on the Company’s consolidated results of operations, financial position or cash flows.

In December 2011, the FASB issued ASU 2011-12, “Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards ASU No. 2011-05”. In order to defer only those changes in ASU 2011-05 that relate to the presentation of reclassification adjustments, the paragraphs in this ASU supersede certain pending paragraphs in ASU 2011-05. Entities should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before ASU 2011-05. All other requirements in ASU 2011-05 are not affected by this ASU.

ASC 820—In May 2011, the FASB issued ASU 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” which generally represents clarifications of Topic 820, “Fair Value Measurements”, but also includes certain instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements has changed. This ASU results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and the International Financial Reporting Standards. The ASU became effective for the Company during the quarter ended March 31, 2012 and must be applied prospectively. The adoption of this guidance did not have a material effect on the Company’s consolidated results of operations, financial position or cash flows.

ASC 350 – In July 2012, the FASB issued ASU 2012-02, “Intangibles – Goodwill and Other – Testing Indefinite-Lived Intangible Assets for Impairment”. ASU 2012-02 amends prior indefinite-lived intangible asset impairment testing guidance and gives the Company the option to first assess qualitative factors in determining whether it is more likely than not (a likelihood of more than 50%) that an indefinite-lived intangible asset is impaired. If, based on such qualitative assessment, the Company determines that it is more likely than not that an indefinite-lived intangible asset is not impaired, then calculating the fair value of such asset is not necessary. ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. However, early adoption is permitted if a public entity’s financial statements have not yet been issued. The adoption of ASU 2012-02 is not expected to have an impact on the Company’s consolidated results of operations, financial position or cash flows.

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Pension and Employee Benefit Plans (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Pension plan [Member]
Pension plan:
Service cost	$ 15	$ 10	$ 45	$ 30
Interest cost	82	92	246	276
Expected return on plan assets	(94)	(97)	(282)	(291)
Amortization of net actuarial loss	83	63	249	189
Net periodic benefit cost	86	68	258	204
Health care plan [Member]
Pension plan:
Interest cost	1		3
Amortization of gain	(2)	(1)	(6)	(3)
Net periodic benefit cost	$ (1)	$ (1)	$ (3)	$ (3)

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Product Warranties (Tables)

9 Months Ended

Sep. 30, 2012

Product Warranties [Abstract]

Change in accrued warranty expense

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2012			2011			2012			2011
Beginning balance	$	585		$	487		$	431		$	455
Provision		52			28			263			239
Payments		(25	)		(213	)		(82	)		(392	)
Ending balance	$	612		$	302		$	612		$	302

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Pension and Employee Benefit Plans (Tables)

9 Months Ended

Sep. 30, 2012

Pension and Employee Benefit Plans [Abstract]

Components of pension and employee benefit expenses

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2012			2011			2012			2011
Pension plan:
Service cost	$	15		$	10		$	45		$	30
Interest cost		82			92			246			276
Expected return on plan assets		(94	)		(97	)		(282	)		(291	)
Amortization of net actuarial loss		83			63			249			189
Net periodic benefit cost	$	86		$	68		$	258		$	204
Health care plan:
Interest cost	$	1		$	—		$	3		$	—
Amortization of gain		(2	)		(1	)		(6	)		(3	)
Net periodic benefit cost	$	(1	)	$	(1	)	$	(3	)	$	(3	)

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Pension and Employee Benefit Plans (Details Textual) (USD $)	9 Months Ended
	Sep. 30, 2012 Age
Pension and Employee Benefit Plans (Textual) [Abstract]
Effective date of retirement for availing post retirement health care plan	Jan. 01, 1990
Minimum age for the retirees to elect desired health care plan	65
Defined benefit plan contributions	$ 292,000
Anticipated contribution to fund the pension plan during the reminder of the fiscal year	$ 0

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Business Segment Information (Tables)

9 Months Ended

Sep. 30, 2012

Business Segment Information [Abstract]

Reportable business segment level include both external and intersegment net sales

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2012			2011			2012			2011
Net Sales
Engineered Equipment Technology and Parts Group
United States	$	18,775		$	18,073		$	57,202		$	60,179
Canada		1,865			1,490			5,820			5,852
China		2,166			2,806			5,223			6,475
Brazil					864			121			1,851
India		173			104			173			229
Subtotal (a)		22,979			23,337			68,539			74,586
Contracting / Services Group (a)		6,166			7,284			20,577			22,554
Component Parts Group (a)		5,524			5,282			16,804			14,585
Corporate and other (a) (b)		—			253			19			880
Eliminations		(1,567	)		(3,209	)		(5,219	)		(11,165	)
Net sales	$	33,102		$	32,947		$	100,720		$	101,440

(a) The amounts presented at the reportable business segment level include both external and intersegment net sales and operating income(loss), as applicable. See following tables in this Note 15 under “Intra-segment and Inter-segment Revenues.”

(b) Includes corporate compensation, professional services, information technology, and other general and administrative corporate expenses. Also included are the operations of our Engineering Group, which are not significant to the overall operations of the Company and were sold in November 2011.

	Three months ended September 30, 2012
(dollars in thousands)	Total sales		Less intra- segment sales														Net sales to outside
						Less inter-segment sales
						EET&P			C/S			CP		Corp. (a)			customers
Net Sales
Engineered Equipment Technology and Parts Group
United States	$	18,775	$	(334	)	$	—		$	(16	)	$	—	$	—		$	18,425
Canada		1,865		(10	)		—			—			—		—			1,855
China		2,166		(379	)		—			—			—		—			1,787
Brazil		—		—			—			—			—		—			—
India		173		—			—			—			—		—			173
Subtotal		22,979		(723	)		—			(16	)		—		—			22,240
Contracting / Services Group		6,166		(20	)		(502	)		—			—		—			5,644
Component Parts Group		5,524		(89	)		(3	)		(194	)		—		—			5,238
Corporate and other (a)		—		—			—			—			—		(20	)		(20	)
Net sales	$	34,669	$	(832	)	$	(505	)	$	(210	)	$	—	$	(20	)	$	33,102

(a) Includes adjustment for revenue on intercompany jobs.

	Three months ended September 30, 2011
	Total sales		Less intra- segment sales															Net sales  to outside customers
						Less inter-segment sales
(dollars in thousands)						EET&P			C/S			CP			Corp. (a)
Net Sales
Engineered Equipment Technology and Parts Group
United States	$	18,073	$	(669	)	$	—		$	(279	)	$	—		$	—		$	17,125
Canada		1,490		—			—			—			—			—			1,490
China		2,806		(1,272	)		—			—			—			—			1,534
Brazil		864		—			—			—			—			—			864
India		104		—			—			—			—			—			104
Subtotal		23,337		(1,941	)		—			(279	)		—			—			21,117
Contracting / Services Group		7,284		(13	)		(536	)		—			(42	)		(8	)		6,685
Component Parts Group		5,282		(71	)		(46	)		(207	)		—			—			4,958
Corporate and other (a)		253		—			—			(3	)		—			(63	)		187
Net sales	$	36,156	$	(2,025	)	$	(582	)	$	(489	)	$	(42	)	$	(71	)	$	32,947

(a) Includes the operations of our Engineering Group, which is not significant to the overall operations of the Company, and adjustment for revenue on intercompany jobs. The Engineering Group was sold in November 2011.

	Nine months ended September 30, 2012
	Total Sales		Less intra- segment sales													Net sales to outside
						Less inter-segment sales
(dollars in thousands)						EET&P			C/S			CP		Corp. (a)		customers
Net Sales
Engineered Equipment Technology and Parts Group
United States	$	57,202	$	(687	)	$	—		$	(626	)	$	—	$	—	$	55,889
Canada		5,820		63			—			—			—		—		5,883
China		5,223		(1,934	)		—			—			—		—		3,289
Brazil		121		—			—			—			—		—		121
India		173		—			—			—			—		—		173
Subtotal		68,539		(2,558	)		—			(626	)		—		—		65,355
Contracting / Services Group		20,577		(68	)		(1,037	)		—			—		—		19,472
Component Parts Group		16,804		(236	)		(21	)		(693	)		—		—		15,854
Corporate and other (a)		19		—			—			(10	)		—		30		39
Net sales	$	105,939	$	(2,862	)	$	(1,058	)	$	(1,329	)	$	—	$	30	$	100,720

(a) Includes adjustment for revenue on intercompany jobs.

	Nine months ended September 30, 2011
(dollars in thousands)	Total sales		Less intra- segment Sales															Net sales  to outside Customers
						Less inter-segment sales
						EET&P			C/S			CP			Corp. (a)
Net Sales
Engineered Equipment Technology and Parts Group
United States	$	60,179	$	(3,495	)	$	—		$	(2,754	)	$	—		$	—		$	53,930
Canada		5,852		—			—			—			—			—			5,852
China		6,475		(1,798	)		—			—			—			—			4,677
Brazil		1,851		—			—			—			—			—			1,851
India		229		—			—			—			—			—			229
Subtotal		74,586		(5,293	)		—			(2,754	)		—			—			66,539
Contracting / Services Group		22,554		(82	)		(1,761	)		—			(42	)		(53	)		20,616
Component Parts Group		14,585		(336	)		(123	)		(639	)		—			—			13,487
Corporate and other (a)		880		—			—			(42	)		—			(40	)		798
Net sales	$	112,605	$	(5,711	)	$	(1,884	)	$	(3,435	)	$	(42	)	$	(93	)	$	101,440

(a) Includes the operations of our Engineering Group, which is not significant to the overall operations of the Company, and adjustment for revenue on intercompany jobs. The Engineering Group was sold in November 2011.

Intra-segment and Inter-segment Revenues.

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2012			2011			2012			2011
Income (loss) from Operations
Engineered Equipment Technology and Parts Group (a)	$	3,946		$	3,294		$	11,110		$	8,303
Contracting / Services Group (a)		836			903			2,520			2,281
Component Parts Group (a)		966			820			3,378			2,674
Corporate and other (a) (b)		(1,455	)		(1,613	)		(4,667	)		(4,555	)
Eliminations		(42	)		(94	)		(58	)		(133	)
Income from operations	$	4,251		$	3,310		$	12,283		$	8,570

(a) The amounts presented at the reportable business segment level include both external and intersegment net sales and operating income(loss), as applicable. See following tables in this Note 15 under “Intra-segment and Inter-segment Revenues.”

(b) Includes corporate compensation, professional services, information technology, and other general and administrative corporate expenses. Also included are the operations of our Engineering Group, which are not significant to the overall operations of the Company and were sold in November 2011.

Property and Equipment Additions

	Three Months Ended September  30,				Nine Months Ended September 30,
(dollars in thousands)	2012		2011		2012		2011
Property and Equipment Additions
Engineered Equipment Technology and Parts Group	$	57	$	78	$	109	$	144
Contracting / Services Group		14		63		44		72
Component Parts Group		21		236		59		268
Corporate and other (c)		10		21		22		170
Property and equipment additions	$	102	$	398	$	234	$	654

(c) Includes Corporate and Engineering Group property and equipment additions. The Engineering Group was sold in November 2011.

	Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in thousands)	2012		2011		2012		2011
Depreciation and Amortization
Engineered Equipment Technology and Parts Group	$	146	$	174		445	$	618
Contracting / Services Group		53		59		163		173
Component Parts Group		48		49		144		132
Corporate and other (d)		53		58		158		163
Depreciation and Amortization	$	300	$	340		910	$	1,086

(d) Includes Corporate and Engineering Group depreciation and amortization. The Engineering Group was sold in November 2011.

(dollars in thousands)	September 30, 2012			December 31, 2011
Identifiable Assets
Engineered Equipment Technology and Parts Group	$	48,498		$	51,480
Contracting / Services Group		26,837			18,588
Component Parts Group		6,078			5,577
Corporate and other (e)		8,568			9,705
Eliminations (f)		(5,526	)		(6,005	)
Identifiable Assets (g)	$	84,455		$	79,345

(e) Includes Corporate and Engineering Group identifiable assets. The Engineering Group was sold in November 2011. Corporate assets primarily consists of cash, income tax related assets, and intercompany note receivable.

(f) Includes eliminations for intercompany trade accounts receivable, intercompany job revenue, and intercompany note receivable.

(g) The Company has revised its business segment reporting primarily to exclude nontrade accounts receivable in order to better reflect the manner in which such assets are reviewed by management.

(dollars in thousands)	September 30, 2012		December 31, 2011
Goodwill
Engineered Equipment Technology and Parts Group	$	14,777	$	14,661

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New Accounting Pronouncements Adopted (Details)	9 Months Ended
	Sep. 30, 2012
New Accounting Pronouncements Adopted [Abstract]
Likelihood of Impairment of Indefinite-lived Intangible assets	50.00%

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Basis of Reporting for Consolidated Financial Statements

9 Months Ended

Sep. 30, 2012

Basis of Reporting for Consolidated Financial Statements [Abstract]

Basis of reporting for consolidated financial statements

1. Basis of reporting for consolidated financial statements

The accompanying unaudited condensed consolidated financial statements of CECO Environmental Corp. and its subsidiaries (the “Company”, “we”, “us”, or “our”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted pursuant to those rules and regulations. In the opinion of management, the accompanying unaudited, condensed consolidated financial statements of the Company contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position as of September 30, 2012 and the results of operations and cash flows for the three month and nine month periods ended September 30, 2012 and 2011. The results of operations for the three month and nine month periods ended September 30, 2012 are not necessarily indicative of the results to be expected for the full year. The balance sheet as of December 31, 2011 has been derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 filed with the SEC.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

These financial statements and accompanying notes should be read in conjunction with the audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 filed with the SEC.

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Costs and Estimated Earnings on Uncompleted Contracts (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Costs and Estimated Earnings on Uncompleted Contracts
Costs incurred on uncompleted contracts	$ 52,358	$ 57,345
Estimated earnings	16,408	17,512
Contract Receivable, Total	68,766	74,857
Less billings to date	(70,210)	(73,861)
Net bills receivable	(1,444)	996
Included in the accompanying consolidated balance sheets under the following captions:
Costs and estimated earnings in excess on uncompleted contacts	7,057	10,643
Billings in excess of costs and estimated earnings on uncompleted contracts	(8,501)	(9,647)
Net bills receivable	$ (1,444)	$ 996

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Earnings and Dividends per Share (Details 1) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012
Schedule of dividends payable
Common stock, dividends, per share, declared	$ 0.045	$ 0.035	$ 0.035
Dividends Payable, Record Date	Sep. 14, 2012	Jun. 15, 2012	Mar. 20, 2012
Dividends Payable, Payment Date	Sep. 28, 2012	Jun. 29, 2012	Mar. 30, 2012
Dividend, Payments	$ 664	$ 512	$ 512

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Condensed Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Current assets:
Cash and cash equivalents	$ 24,455	$ 12,724
Accounts receivable, net	21,281	23,109
Costs and estimated earnings in excess of billings on uncompleted contracts	7,057	10,643
Inventories, net	4,292	4,344
Prepaid expenses and other current assets	2,399	2,650
Total current assets	59,484	53,470
Property, plant and equipment, net	5,128	5,651
Goodwill	14,777	14,661
Intangible assets- finite life, net	274	526
Intangible assets-indefinite life	3,230	3,218
Deferred income tax asset, net	848	848
Deferred charges and other assets	714	971
Total assets	84,455	79,345
Current liabilities:
Accounts payable and accrued expenses	12,101	13,569
Billings in excess of costs and estimated earnings on uncompleted contracts	8,501	9,647
Income taxes payable	1,531	393
Total current liabilities	22,133	23,609
Other liabilities	3,197	3,146
Convertible subordinated notes (including related parties notes of $3,950 in 2012 and 2011)	8,760	9,600
Total liabilities	34,090	36,355
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.01 par value; 10,000 shares authorized, none issued
Common stock, $.01 par value; 100,000,000 shares authorized, 14,849,502 and 14,654,262 shares issued in 2012 and 2011, respectively	148	146
Capital in excess of par value	45,393	44,249
Accumulated earnings	7,410	1,301
Accumulated other comprehensive loss	(2,230)	(2,350)
Stockholders' equity before treasury stock	50,721	43,346
Less treasury stock, at cost, 137,920 shares in 2012 and 2011	(356)	(356)
Total shareholders' equity	50,365	42,990
Total liabilities and shareholders' equity	$ 84,455	$ 79,345

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Income Taxes (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Income Taxes (Textual) [Abstract]
Liability for uncertain tax positions totaled	$ 128,000		$ 128,000		$ 52,000
Income tax expense	623,000	798,000	3,524,000	2,606,000
income tax provision	16.00%	25.60%	31.10%	32.00%
Tax benefit of research and development income tax Credits	$ 708,000

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Condensed Consolidated Statements of Comprehensive Income (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Condensed Consolidated Statements of Comprehensive Income [Abstract]
Net income	$ 3,268	$ 2,319	$ 7,798	$ 5,530
Other comprehensive income (loss), net of tax:
Foreign currency	170	(263)	84	(131)
Other comprehensive income (loss)	170	(263)	84	(131)
Comprehensive income	$ 3,438	$ 2,056	$ 7,882	$ 5,399

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Goodwill and Intangible Assets (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2012	Dec. 31, 2011
Goodwill / Tradename
Beginning balance	$ 14,661	$ 14,713
Acquisition earn-out settlement	21
Foreign currency adjustments	95	(52)
Ending balance	14,777	14,661
Beginning balance	3,218	3,225
Acquisition earn-out settlement
Foreign currency adjustments	12	(7)
Ending balance	$ 3,230	$ 3,218

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Business Segment Information

9 Months Ended

Sep. 30, 2012

Business Segment Information [Abstract]

Business Segment Information

15. Business Segment Information

The Company’s operations are organized and reviewed by management along its product lines and presented in three reportable segments. The results of the segments are reviewed through to the “Income from operations” line on the Statements of Income. The accounting policies of the segments are the same as those in the consolidated financial statements.

Engineered Equipment Technology and Parts Group (“EET&P Group”)

Our EET&P Group, located in the United States, Canada, Brazil, China, and India, is comprised of CECO Filters, Busch International, CECO Abatement, Effox, Fisher-Klosterman, Flextor and A.V.C. We enable our customers to meet Best Available Control Technology requirements and compliance targets for fumes, volatile organic compounds, process, and industrial odors. Our services eliminate toxic emission fumes and volatile organic compounds from large-scale industrial processes. We have a presence in the chemical processing, ethanol, paint booth emissions, wastewater treatment, and wood products industries.

Contracting/Services Group (“C/S Group”)

Our C/S Group is comprised of the contracting/services operations of our Kirk & Blum divisions. We provide custom metal fabrication services at our Kirk & Blum Columbia, Tennessee and Louisville, Kentucky locations. These facilities are used to fabricate parts, subassemblies, and customized products for air pollution and non-air pollution applications from sheet, plate, and structurals.

Component Parts Group (“CP Group”)

We market component parts for industrial air systems to contractors, distributors and dealers throughout the United States.

Summary of Business by Segment

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2012			2011			2012			2011
Net Sales
Engineered Equipment Technology and Parts Group
United States	$	18,775		$	18,073		$	57,202		$	60,179
Canada		1,865			1,490			5,820			5,852
China		2,166			2,806			5,223			6,475
Brazil					864			121			1,851
India		173			104			173			229
Subtotal (a)		22,979			23,337			68,539			74,586
Contracting / Services Group (a)		6,166			7,284			20,577			22,554
Component Parts Group (a)		5,524			5,282			16,804			14,585
Corporate and other (a) (b)		—			253			19			880
Eliminations		(1,567	)		(3,209	)		(5,219	)		(11,165	)
Net sales	$	33,102		$	32,947		$	100,720		$	101,440
	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2012			2011			2012			2011
Income (loss) from Operations
Engineered Equipment Technology and Parts Group (a)	$	3,946		$	3,294		$	11,110		$	8,303
Contracting / Services Group (a)		836			903			2,520			2,281
Component Parts Group (a)		966			820			3,378			2,674
Corporate and other (a) (b)		(1,455	)		(1,613	)		(4,667	)		(4,555	)
Eliminations		(42	)		(94	)		(58	)		(133	)
Income from operations	$	4,251		$	3,310		$	12,283		$	8,570

(a) The amounts presented at the reportable business segment level include both external and intersegment net sales and operating income(loss), as applicable. See following tables in this Note 15 under “Intra-segment and Inter-segment Revenues.”

(b) Includes corporate compensation, professional services, information technology, and other general and administrative corporate expenses. Also included are the operations of our Engineering Group, which are not significant to the overall operations of the Company and were sold in November 2011.

	Three Months Ended September  30,				Nine Months Ended September 30,
(dollars in thousands)	2012		2011		2012		2011
Property and Equipment Additions
Engineered Equipment Technology and Parts Group	$	57	$	78	$	109	$	144
Contracting / Services Group		14		63		44		72
Component Parts Group		21		236		59		268
Corporate and other (c)		10		21		22		170
Property and equipment additions	$	102	$	398	$	234	$	654

(c) Includes Corporate and Engineering Group property and equipment additions. The Engineering Group was sold in November 2011.

	Three Months Ended September 30,				Nine Months Ended September 30,
(dollars in thousands)	2012		2011		2012		2011
Depreciation and Amortization
Engineered Equipment Technology and Parts Group	$	146	$	174		445	$	618
Contracting / Services Group		53		59		163		173
Component Parts Group		48		49		144		132
Corporate and other (d)		53		58		158		163
Depreciation and Amortization	$	300	$	340		910	$	1,086

(d) Includes Corporate and Engineering Group depreciation and amortization. The Engineering Group was sold in November 2011.

(dollars in thousands)	September 30, 2012			December 31, 2011
Identifiable Assets
Engineered Equipment Technology and Parts Group	$	48,498		$	51,480
Contracting / Services Group		26,837			18,588
Component Parts Group		6,078			5,577
Corporate and other (e)		8,568			9,705
Eliminations (f)		(5,526	)		(6,005	)
Identifiable Assets (g)	$	84,455		$	79,345

(e) Includes Corporate and Engineering Group identifiable assets. The Engineering Group was sold in November 2011. Corporate assets primarily consists of cash, income tax related assets, and intercompany note receivable.

(f) Includes eliminations for intercompany trade accounts receivable, intercompany job revenue, and intercompany note receivable.

(g) The Company has revised its business segment reporting primarily to exclude nontrade accounts receivable in order to better reflect the manner in which such assets are reviewed by management.

(dollars in thousands)	September 30, 2012		December 31, 2011
Goodwill
Engineered Equipment Technology and Parts Group	$	14,777	$	14,661

Intra-segment and Inter-segment Revenues

The Company has multiple divisions that sell to each other within segments (intra-segment sales) and between segments (inter-segment sales) as indicated in the following tables:

	Three months ended September 30, 2012
(dollars in thousands)	Total sales		Less intra- segment sales														Net sales to outside
						Less inter-segment sales
						EET&P			C/S			CP		Corp. (a)			customers
Net Sales
Engineered Equipment Technology and Parts Group
United States	$	18,775	$	(334	)	$	—		$	(16	)	$	—	$	—		$	18,425
Canada		1,865		(10	)		—			—			—		—			1,855
China		2,166		(379	)		—			—			—		—			1,787
Brazil		—		—			—			—			—		—			—
India		173		—			—			—			—		—			173
Subtotal		22,979		(723	)		—			(16	)		—		—			22,240
Contracting / Services Group		6,166		(20	)		(502	)		—			—		—			5,644
Component Parts Group		5,524		(89	)		(3	)		(194	)		—		—			5,238
Corporate and other (a)		—		—			—			—			—		(20	)		(20	)
Net sales	$	34,669	$	(832	)	$	(505	)	$	(210	)	$	—	$	(20	)	$	33,102

(a) Includes adjustment for revenue on intercompany jobs.

	Three months ended September 30, 2011
	Total sales		Less intra- segment sales															Net sales  to outside customers
						Less inter-segment sales
(dollars in thousands)						EET&P			C/S			CP			Corp. (a)
Net Sales
Engineered Equipment Technology and Parts Group
United States	$	18,073	$	(669	)	$	—		$	(279	)	$	—		$	—		$	17,125
Canada		1,490		—			—			—			—			—			1,490
China		2,806		(1,272	)		—			—			—			—			1,534
Brazil		864		—			—			—			—			—			864
India		104		—			—			—			—			—			104
Subtotal		23,337		(1,941	)		—			(279	)		—			—			21,117
Contracting / Services Group		7,284		(13	)		(536	)		—			(42	)		(8	)		6,685
Component Parts Group		5,282		(71	)		(46	)		(207	)		—			—			4,958
Corporate and other (a)		253		—			—			(3	)		—			(63	)		187
Net sales	$	36,156	$	(2,025	)	$	(582	)	$	(489	)	$	(42	)	$	(71	)	$	32,947

(a) Includes the operations of our Engineering Group, which is not significant to the overall operations of the Company, and adjustment for revenue on intercompany jobs. The Engineering Group was sold in November 2011.

	Nine months ended September 30, 2012
	Total Sales		Less intra- segment sales													Net sales to outside
						Less inter-segment sales
(dollars in thousands)						EET&P			C/S			CP		Corp. (a)		customers
Net Sales
Engineered Equipment Technology and Parts Group
United States	$	57,202	$	(687	)	$	—		$	(626	)	$	—	$	—	$	55,889
Canada		5,820		63			—			—			—		—		5,883
China		5,223		(1,934	)		—			—			—		—		3,289
Brazil		121		—			—			—			—		—		121
India		173		—			—			—			—		—		173
Subtotal		68,539		(2,558	)		—			(626	)		—		—		65,355
Contracting / Services Group		20,577		(68	)		(1,037	)		—			—		—		19,472
Component Parts Group		16,804		(236	)		(21	)		(693	)		—		—		15,854
Corporate and other (a)		19		—			—			(10	)		—		30		39
Net sales	$	105,939	$	(2,862	)	$	(1,058	)	$	(1,329	)	$	—	$	30	$	100,720

(a) Includes adjustment for revenue on intercompany jobs.

	Nine months ended September 30, 2011
(dollars in thousands)	Total sales		Less intra- segment Sales															Net sales  to outside Customers
						Less inter-segment sales
						EET&P			C/S			CP			Corp. (a)
Net Sales
Engineered Equipment Technology and Parts Group
United States	$	60,179	$	(3,495	)	$	—		$	(2,754	)	$	—		$	—		$	53,930
Canada		5,852		—			—			—			—			—			5,852
China		6,475		(1,798	)		—			—			—			—			4,677
Brazil		1,851		—			—			—			—			—			1,851
India		229		—			—			—			—			—			229
Subtotal		74,586		(5,293	)		—			(2,754	)		—			—			66,539
Contracting / Services Group		22,554		(82	)		(1,761	)		—			(42	)		(53	)		20,616
Component Parts Group		14,585		(336	)		(123	)		(639	)		—			—			13,487
Corporate and other (a)		880		—			—			(42	)		—			(40	)		798
Net sales	$	112,605	$	(5,711	)	$	(1,884	)	$	(3,435	)	$	(42	)	$	(93	)	$	101,440

(a) Includes the operations of our Engineering Group, which is not significant to the overall operations of the Company, and adjustment for revenue on intercompany jobs. The Engineering Group was sold in November 2011.

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Goodwill and Intangible Assets (Details 1) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Intangible assets - finite life
Cost	$ 3,067	$ 3,067
Accum. Amort.	2,793	2,541
Patents [Member]
Intangible assets - finite life
Cost	1,414	1,414
Accum. Amort.	1,258	1,193
Customer lists [Member]
Intangible assets - finite life
Cost	1,653	1,653
Accum. Amort.	$ 1,535	$ 1,348

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Costs and Estimated Earnings on Uncompleted Contracts (Tables)

9 Months Ended

Sep. 30, 2012

Costs and Estimated Earnings on Uncompleted Contracts [Abstract]

Costs and estimated earnings on uncompleted contracts

	September 30,			December 31,
(dollars in thousands)	2012			2011
Costs incurred on uncompleted contracts	$	52,358		$	57,345
Estimated earnings		16,408			17,512
		68,766			74,857
Less billings to date		(70,210	)		(73,861	)
	$	(1,444	)	$	996
Included in the accompanying consolidated balance sheets under the following captions:
Costs and estimated earnings in excess on uncompleted contacts	$	7,057		$	10,643
Billings in excess of costs and estimated earnings on uncompleted contracts		(8,501	)		(9,647	)
	$	(1,444	)	$	996

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Cash flows from operating activities:
Net income	$ 7,798,000	$ 5,530,000
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	910,000	1,086,000
Non cash interest expense included in net income	69,000	68,000
Share based compensation expense	493,000	538,000
Bad debt expense	141,000	212,000
Inventory reserve expense	147,000	196,000
Gain on sale of fixed assets	(11,000)
Changes in operating assets and liabilities:
Accounts receivable	1,657,000	5,942,000
Costs and estimated earnings in excess of billings on uncompleted contracts	3,586,000	(1,923,000)
Inventories	(95,000)	(820,000)
Prepaid expense and other current assets	281,000	(96,000)
Deferred charges and other assets	188,000	(138,000)
Accounts payable and accrued expenses	(1,392,000)	(5,041,000)
Billings in excess of costs and estimated earnings on uncompleted contracts	(1,146,000)	684,000
Income taxes payable	1,138,000	(1,171,000)
Other liabilities	42,000	(188,000)
Net cash provided by operating activities	13,806,000	4,879,000
Cash flows from investing activities:
Acquisitions of property and equipment	(234,000)	(654,000)
Net proceeds from sale of plant and equipment	37,000	636,000
Net cash used in investing activities	(197,000)	(18,000)
Cash flows from financing activities:
Proceeds from exercise of stock options	266,000	111,000
Cash paid for repurchase of common shares	(456,000)	(483,000)
Dividends paid to common shareholders	(1,688,000)	(363,000)
Net cash used in financing activities	(1,878,000)	(735,000)
Net increase in cash and cash equivalents	11,731,000	4,126,000
Cash and cash equivalents at beginning of period	12,724,000	5,792,000
Cash and cash equivalents at end of period	24,455,000	9,918,000
Supplemental Schedule of Non-Cash Activities:
Conversion of subordinated debt to common stock	840,000	700,000
Cash paid during the period for:
Interest	828,000	872,000
Income taxes	$ 1,619,000	$ 4,294,000

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Condensed Consolidated Balance Sheets [Abstract]
Convertible subordinated notes, related parties notes	$ 3,950	$ 3,950
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	10,000	10,000
Preferred stock, shares issued	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	14,849,502	14,654,262
Treasury stock, shares	137,920	137,920

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Income Taxes

9 Months Ended

Sep. 30, 2012

Income Taxes [Abstract]

Income Taxes

10. Income Taxes

Federal and state income tax expense was $623,000 during the third quarter of 2012 compared to $798,000 during the same quarter of 2011. Federal and state income tax expense was $3.5 million for the first nine months of 2012 compared to $2.6 million in 2011. The effective tax rate was 16.0% and 31.1% for the three and nine months ended September 30, 2012, respectively, and 25.6% and 32.0% for the comparable 2011 periods. Included in the income tax provision calculation for the three months ended September 30, 2012 is a $708,000 tax benefit, net of related uncertain tax position reserves, for research and development income tax credits earned during 2011. This credit was not contemplated in the 2011 tax provision because it was not identified or quantified until 2012. The Company is in the process of calculating this credit related to the additional open years of 2009 and 2010, which is expected to be completed in the fourth quarter of 2012 and may result in additional tax benefit to be recorded in the fourth quarter of 2012. Along with the tax benefit of research and development income tax credits, our effective tax rate is additionally affected by certain permanent differences including non-deductible incentive stock based compensation, reversals of certain income tax reserves/deferrals, and tax holidays in foreign jurisdictions.

The Company accounts for uncertain tax positions pursuant to ASC Topic 740, “Income Taxes.” As of September 30, 2012 and December 31, 2011, the liability for uncertain tax positions totaled approximately $128,000 and $52,000, respectively. The Company recognizes interest accrued related to uncertain tax positions in interest expense and penalties in income tax expense.

The Company files income tax returns in various federal, state and local jurisdictions. The Company is no longer subject to federal, state and local income tax examinations by tax authorities for years before 2008.

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Document and Entity Information	9 Months Ended
	Sep. 30, 2012	Nov. 05, 2012
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2012
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3
Entity Registrant Name	CECO ENVIRONMENTAL CORP.
Entity Central Index Key	0000003197
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		14,711,582
Trading Symbol	cece

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Product Warranties

9 Months Ended

Sep. 30, 2012

Product Warranties [Abstract]

Product Warranties

11. Product Warranties

The Company’s warranty reserve is to cover the products sold and is principally at our Effox subsidiary. The warranty accrual is based on historical claims information. The warranty reserve is reviewed and adjusted as necessary on a quarterly basis. Warranty accrual is not significant at the Company’s other operations due to the nature of the work which includes installation and testing. Accrued warranty expense is included in Accounts payable and accrued expenses on our condensed consolidated balance sheets, and the change in accrued warranty is summarized in the following table:

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2012			2011			2012			2011
Beginning balance	$	585		$	487		$	431		$	455
Provision		52			28			263			239
Payments		(25	)		(213	)		(82	)		(392	)
Ending balance	$	612		$	302		$	612		$	302

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Condensed Consolidated Statements of Income (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Condensed Consolidated Statements of Income [Abstract]
Net sales	$ 33,102	$ 32,947	$ 100,720	$ 101,440
Cost of sales	22,574	23,249	69,461	74,571
Gross profit	10,528	9,698	31,259	26,869
Selling and administrative	6,197	6,270	18,724	17,958
Amortization	80	118	252	341
Income from operations	4,251	3,310	12,283	8,570
Other (expense) income, net	(69)	103	(133)	436
Interest expense (including related party interest of $60 and $59,and $178 and $177, respectively)	(291)	(296)	(828)	(870)
Income before income taxes	3,891	3,117	11,322	8,136
Income tax expense	623	798	3,524	2,606
Net income	$ 3,268	$ 2,319	$ 7,798	$ 5,530
Per share data:
Basic net income	$ 0.22	$ 0.16	$ 0.53	$ 0.39
Diluted net income	$ 0.19	$ 0.14	$ 0.47	$ 0.34
Weighted average number of common shares outstanding:
Basic	14,630,264	14,371,752	14,591,325	14,340,119
Diluted	17,258,552	17,157,305	17,199,337	17,130,767

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Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2012

Goodwill and Intangible Assets [Abstract]

Goodwill and Intangible Assets

5. Goodwill and Intangible Assets

	Nine months ended				Year ended
(dollars in thousands)	September 30, 2012				December 31, 2011
Goodwill / Tradename	Goodwill		Tradename		Goodwill			Tradename
Beginning balance	$	14,661	$	3,218	$	14,713		$	3,225
Acquisition earn-out settlement		21		—		—			—
Foreign currency adjustments		95		12		(52	)		(7	)
	$	14,777	$	3,230	$	14,661		$	3,218
	As of September 30, 2012				As of December 31, 2011
			Accum.					Accum.
Intangible assets – finite life	Cost		Amort.		Cost			Amort.
Patents	$	1,414	$	1,258	$	1,414		$	1,193
Customer lists		1,653		1,535		1,653			1,348
	$	3,067	$	2,793	$	3,067		$	2,541

Amortization expense of finite life intangible assets for the three months ended September 30, 2012 and 2011 was $80,000 and $118,000, respectively, and for the nine months ended September 30, 2012 and 2011 was $252,000 and $341,000, respectively. Amortization over the next five years for finite life intangibles will be $64,000 for the remainder of 2012, $130,000 in 2013, $69,000 in 2014, $6,000 in 2015, and $5,000 in 2016.

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Inventories

9 Months Ended

Sep. 30, 2012

Inventories [Abstract]

Inventories

4. Inventories

(dollars in thousands)	September 30, 2012			December 31, 2011
Raw materials and subassemblies	$	2,855		$	3,017
Finished goods		1,207			1,147
Parts for resale		702			580
Obsolescence allowance		(472	)		(400	)
	$	4,292		$	4,344

Amounts (debited) credited to the allowance for obsolete inventory and charged to cost of sales amounted to $65,000 and $47,000 for the three month periods ended September 30, 2012 and 2011, respectively, and $147,000 and $196,000 for the nine month periods ended September 30, 2012 and 2011, respectively.

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New Accounting Pronouncements Adopted (Policies)

9 Months Ended

Sep. 30, 2012

New Accounting Pronouncements Adopted [Abstract]

Comprehensive Income

In December 2011, the FASB issued ASU 2011-12, “Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards ASU No. 2011-05”. In order to defer only those changes in ASU 2011-05 that relate to the presentation of reclassification adjustments, the paragraphs in this ASU supersede certain pending paragraphs in ASU 2011-05. Entities should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before ASU 2011-05. All other requirements in ASU 2011-05 are not affected by this ASU.

Fair Value Measurements

ASC 820—In May 2011, the FASB issued ASU 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” which generally represents clarifications of Topic 820, “Fair Value Measurements”, but also includes certain instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements has changed. This ASU results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and the International Financial Reporting Standards. The ASU became effective for the Company during the quarter ended March 31, 2012 and must be applied prospectively. The adoption of this guidance did not have a material effect on the Company’s consolidated results of operations, financial position or cash flows.

Intangibles - Goodwill and Other - Testing Indefinite-Lived Intangible Assets for Impairment

ASC 350 – In July 2012, the FASB issued ASU 2012-02, “Intangibles – Goodwill and Other – Testing Indefinite-Lived Intangible Assets for Impairment”. ASU 2012-02 amends prior indefinite-lived intangible asset impairment testing guidance and gives the Company the option to first assess qualitative factors in determining whether it is more likely than not (a likelihood of more than 50%) that an indefinite-lived intangible asset is impaired. If, based on such qualitative assessment, the Company determines that it is more likely than not that an indefinite-lived intangible asset is not impaired, then calculating the fair value of such asset is not necessary. ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. However, early adoption is permitted if a public entity’s financial statements have not yet been issued. The adoption of ASU 2012-02 is not expected to have an impact on the Company’s consolidated results of operations, financial position or cash flows.

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Financial Instruments

9 Months Ended

Sep. 30, 2012

Financial Instruments [Abstract]

Financial Instruments

12. Financial Instruments

Our financial instruments consist primarily of investments in cash and cash equivalents, receivables and certain other assets, and accounts payable, which approximate fair value at September 30, 2012, due to their short term nature. The carrying amounts of our debt obligations approximate fair value based on future payments discounted at current interest rates for similar fair market determinations or interest rates which fluctuate with the market. As these inputs are not considered to be observable (i.e. supported by little or no market activity), the Company has designated these obligations as Level 3.

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Share-Based Compensation

9 Months Ended

Sep. 30, 2012

Share-Based Compensation [Abstract]

Share-Based Compensation

8. Share-Based Compensation

The Company accounts for share-based compensation in accordance with ASC Topic 718, “Compensation – Stock Compensation” which requires the Company to recognize compensation expense for share-based awards, measured at the fair value of the awards at the grant date. The Company recognized expense of approximately $165,000 and $151,000 during the quarters ended September 30, 2012 and 2011, respectively, and $493,000 and $538,000 for the nine month periods ended September 30, 2012 and 2011, respectively.

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Debt

9 Months Ended

Sep. 30, 2012

Debt [Abstract]

Debt

6. Debt

We entered into our current bank facility on December 29, 2005 with Fifth Third Bank (the “Bank Facility”). The Bank Facility was amended on various dates and fees paid for these amendments were deferred and are being amortized over the remaining term of the Bank Facility.

Terms of the Bank Facility, as amended, include a revolving line of credit for up to $20.0 million (with a $10.0 million letters of credit sublimit); a termination date of April 1, 2013 and financial covenants that require compliance at each quarter-end through March 31, 2013. The maximum capital expenditures financial covenant is $2.5 million per year. The minimum Fixed Charge Coverage Ratio is 1.25:1.0. The maximum funded debt to EBITDA covenant is 3.0 to 1. Our Bank Facility also contains cross-default provisions with respect to our subordinated debt. Also, if we fail to pay (after grace periods) any other debt or lease that, individually or in the aggregate involves indebtedness in excess of $100,000, and such default gives any creditor or lessor the right to accelerate the maturity of any such indebtedness or lease payments, then absent a waiver from the lender, it would result in a default under our Bank Facility and the acceleration of the maturity of outstanding debt under our Bank Facility. As of September 30, 2012, we were in compliance with all related financial and other restrictive covenants, and expect continued compliance. In the future, if we cannot comply with the terms of the Bank Facility covenants it will be necessary for us to obtain a waiver or renegotiate our loan covenants, and there can be no assurance that such negotiations would be successful. In the event that we are not successful in obtaining a waiver or an amendment, we would be declared in default, which could cause all amounts owed to be immediately due and payable. We had no outstanding borrowings under the line of credit as of September 30, 2012 and December 31, 2011. Borrowings are subject to a borrowing base limitation, including reducing the borrowing base by the amount of outstanding letters of credit, and at September 30, 2012, $10.8 million could be borrowed at an interest rate of LIBOR plus 3.5%. As of September 30, 2012, the Company has $2.0 million in outstanding trade letters of credit. Our property and equipment, accounts receivable, investments and inventory serve as collateral for our bank debt.

On November 26, 2009, the Company issued $10.8 million principal amount of subordinated convertible promissory notes to a group of investors (the “Investor Notes”) which includes related parties: Icarus Investment Corp., which is controlled by Phillip DeZwirek, our Chairman, and Jason DeZwirek, a director and Secretary ($2,200,000), JMP Fam Holdings, Inc., which is controlled by Jonathan Pollack, a Company Director ($150,000), 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 on the Investor Notes for the three and nine month periods ended September 30, 2012 was $136,000 and $417,000, respectively, and $159,000 and $475,000, respectively, for the corresponding time periods in 2011 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 was available to 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.

The Investor Notes are due on November 26, 2014 and are not repayable prior to maturity except upon a change of control, or upon the consent of the holder. The outstanding principal amount of the Investor Notes or any portion thereof, but not the interest, is convertible at the holder’s option, at any time at a conversion price of $4.00 per share, such price being greater than the Company’s share price at the date of issuance of the Investor Notes. Following three years from the issuance date of the Investor Notes, if the closing price of the common stock of the Company is greater than $8.00 for five consecutive days, the Company can cause conversion of the Investor Notes. The outstanding balance of the Investor Notes at September 30, 2012 and December 31, 2011 was $8.8 million and $9.6 million, respectively. In the first quarter and second quarter of 2012, $200,000 and $240,000 principal of the Investor Notes, respectively, were converted to 50,000 and 60,000 shares of our common stock, respectively. In the third quarter of 2012, $400,000 principal of the Investor Notes was converted to 100,000 shares of our common stock.

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Earnings and Dividends per Share

9 Months Ended

Sep. 30, 2012

Earnings and Dividends per Share [Abstract]

Earnings and Dividends per Share

7. Earnings and Dividends per Share

The computational components of basic and diluted earnings per share for the three month periods ended September 30, 2012 and 2011 and for the nine month periods ended September 30, 2012 and 2011 are below (shares and dollars in thousands, except per share amounts).

	For the three month period ended September 30, 2012
	Numerator (Income)		Denominator (Shares)		Per Share Amount
Basic net income and earnings per share	$	3,268		14,630	$	0.22
Effect of dilutive securities and notes:
Common stock equivalents arising from stock options and employee stock purchase plan		—		371		—
Subordinated convertible promissory notes		82		2,257		(0.03	)
Diluted earnings and earnings per share	$	3,350		17,258	$	0.19
	For the three month period ended September 30, 2011
	Numerator (Income)		Denominator (Shares)		Per Share Amount
Basic net income and earnings per share	$	2,319		14,372	$	0.16
Effect of dilutive securities and notes:
Common stock equivalents arising from stock options and employee stock purchase plan		—		163		—
Subordinated convertible promissory notes		95		2,622		(0.02	)
Diluted earnings and earnings per share	$	2,414		17,157	$	0.14
	For the nine month period ended September 30, 2012
	Numerator (Income)		Denominator (Shares)		Per Share Amount
Basic net income and earnings per share	$	7,798		14,591	$	0.53
Effect of dilutive securities and notes:
Common stock equivalents arising from stock options and employee stock purchase plan		—		290		—
Subordinated convertible promissory notes		250		2,318		(0.06	)
Diluted earnings and earnings per share	$	8,048		17,199	$	0.47

	For the nine month period ended September 30, 2011
	Numerator (Income)		Denominator (Shares)		Per Share Amount
Basic net income and earnings per share	$	5,530		14,340	$	0.39
Effect of dilutive securities and notes:
Common stock equivalents arising from stock options and employee stock purchase plan		—		144		—
Subordinated convertible promissory notes		285		2,647		(0.05	)
Diluted earnings and earnings per share	$	5,815		17,131	$	0.34

We consider outstanding options and warrants in computing diluted net income per share only when they are dilutive. For each of the three and nine month periods ended September 30, 2012, 322,500 outstanding options and warrants were excluded from the computation of diluted weighted average common shares outstanding as their effect would have been anti-dilutive. For the three and nine month periods ended September 30, 2011, 427,500 outstanding options and warrants were excluded from the computation of diluted weighted average common shares outstanding as their effect would have been anti-dilutive.

Holders of restricted stock awards participate in nonforfeitable dividend rights on a one-for-one basis with holders of common stock. Holders of these awards are not obligated to share in losses of the Company. Therefore, these share awards are included in the computation of basic earnings per share during periods of net income using the two-class method, but are excluded from such computation in periods of net loss. When the Company declares a dividend on its common stock, the related dividend on shares of unvested restricted stock that are not expected to vest would be recorded as additional compensation expense and therefore excluded from the two-class method computations; however, there were no non-vested restricted share awards outstanding for the three or nine months ended September 30, 2012 or 2011. Undistributed earnings included in the two-class method computations are allocated equally to each share of common stock outstanding, including all shares of unvested restricted common shares.

Once a restricted stock award vests, it is included in the computation of weighted average shares outstanding for purposes of basic and diluted earnings (loss) per share.

Pursuant to the if-converted method, diluted earnings per share for the third quarter of 2012 includes a $82,000 after tax add back of interest expense to earnings and 2.3 million additional shares, and $95,000 and 2.6 million additional shares for the third quarter of 2011, related to the assumed conversion of the convertible Investor Notes described in Note 6. For the nine month period ended September 30, 2012 diluted earnings per share includes a $250,000 after tax addback of interest expense, and 2.3 million additional shares, and $285,000 and 2.6 million additional shares for the comparable 2011 period, related to the assumed conversion of the convertible Investor Notes.

Dividends

Prior to fiscal year 2011, we had not paid any cash dividends on our common stock. In August 2011, our Board of Directors approved a quarterly cash dividend program, subject to the Board’s continuing determination that the dividend policy and the declaration of dividends are in the best interest of our shareholders. The declaration and payment of dividends is also subject to continued consent by our lender, as our credit agreement contains provisions that prevent us from paying any dividends to our shareholders without such consent. Future dividends and the dividend policy may be changed or cancelled at the Company’s discretion at any time. In fiscal year 2012, our Board has declared the following cash dividends on our common stock:

Dividend Per share	Record Date	Payment Date	Payments (dollars in thousands)
$0.035	March 20, 2012	March 30, 2012	$ 512
$0.035	June 15, 2012	June 29, 2012	$ 512
$0.045	September 14, 2012	September 28, 2012	$ 664

Effective August 13, 2012, the Company implemented a Dividend Reinvestment Plan (the “Plan”), under which the Company may issue up to 750,000 shares of common stock. The Plan provides a way for interested shareholders to increase their holdings in our common stock. Participation in the Plan is strickly voluntary and is open only to existing shareholders.

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Pension and Employee Benefit Plans

9 Months Ended

Sep. 30, 2012

Pension and Employee Benefit Plans [Abstract]

Pension and Employee Benefit Plans

9. Pension and Employee Benefit Plans

We sponsor a non-contributory defined benefit pension plan for certain union employees. The plan is funded in accordance with the funding requirements of the Employee Retirement Income Security Act of 1974.

We also sponsor a postretirement health care plan for office employees retired before January 1, 1990. The plan allows retirees who have attained the age of 65 to elect the type of coverage desired.

Retirement and health care plan expense is based on valuations performed by plan actuaries as of the beginning of each fiscal year. The components of the expense consisted of the following:

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2012			2011			2012			2011
Pension plan:
Service cost	$	15		$	10		$	45		$	30
Interest cost		82			92			246			276
Expected return on plan assets		(94	)		(97	)		(282	)		(291	)
Amortization of net actuarial loss		83			63			249			189
Net periodic benefit cost	$	86		$	68		$	258		$	204
Health care plan:
Interest cost	$	1		$	—		$	3		$	—
Amortization of gain		(2	)		(1	)		(6	)		(3	)
Net periodic benefit cost	$	(1	)	$	(1	)	$	(3	)	$	(3	)

For the nine months ended September 30, 2012, we made contributions to our defined benefit plans totaling $292,000. During the remainder of 2012 we do not anticipate making any additional pension plan contributions due to the application of the Moving Ahead for Progress in the 21st Century Act (MAP-21). The application of MAP-21 decreased the required contributions for 2012.

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Inventories (Details Textual) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Inventories (Textual) [Abstract]
Amounts (debited) credited to the allowance for obsolete inventory	$ 65,000	$ 47,000	$ 147,000	$ 196,000

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Business Segment Information (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Property and Equipment Additions
Total sales	$ 33,102	$ 32,947	$ 100,720	$ 101,440
Less intra-segment sales	(832)	(2,025)	(2,862)	(5,711)
EET & P	(505)	(582)	(1,058)	(1,884)
C/S	(210)	(489)	(1,329)	(3,435)
CP		(42)		(42)
Corp.(a)	(20)	(71)	30	(93)
Net sales to outside customers	33,102	32,947	100,720	101,440
Engineered Equipment Technology and Parts Group [Member] | Subtotal [Member]
Property and Equipment Additions
Total sales	22,979	23,337	68,539	74,586
Less intra-segment sales	(723)	(1,941)	(2,558)	(5,293)
EET & P
C/S	(16)	(279)	(626)	(2,754)
CP
Corp.(a)
Net sales to outside customers	22,240	21,117	65,355	66,539
Contracting / Services Group [Member]
Property and Equipment Additions
Total sales	6,166	7,284	20,577	22,554
Less intra-segment sales	(20)	(13)	(68)	(82)
EET & P	(502)	(536)	(1,037)	(1,761)
C/S
CP		(42)		(42)
Corp.(a)		(8)		(53)
Net sales to outside customers	5,644	6,685	19,472	20,616
Component Parts Group [Member]
Property and Equipment Additions
Total sales	5,524	5,282	16,804	14,585
Less intra-segment sales	(89)	(71)	(236)	(336)
EET & P	(3)	(46)	(21)	(123)
C/S	(194)	(207)	(693)	(639)
CP
Corp.(a)
Net sales to outside customers	5,238	4,958	15,854	13,487
Corporate and other [Member]
Property and Equipment Additions
Total sales		253	19	880
Less intra-segment sales
EET & P
C/S		(3)	(10)	(42)
CP
Corp.(a)	(20)	(63)	30	(40)
Net sales to outside customers	(20)	187	39	798
United States [Member] | Engineered Equipment Technology and Parts Group [Member]
Property and Equipment Additions
Total sales	18,775	18,073	57,202	60,179
Less intra-segment sales	(334)	(669)	(687)	(3,495)
EET & P
C/S	(16)	(279)	(626)	(2,754)
CP
Corp.(a)
Net sales to outside customers	18,425	17,125	55,889	53,930
Canada [Member] | Engineered Equipment Technology and Parts Group [Member]
Property and Equipment Additions
Total sales	1,865	1,490	5,820	5,852
Less intra-segment sales	(10)		63
EET & P
C/S
CP
Corp.(a)
Net sales to outside customers	1,855	1,490	5,883	5,852
China [Member] | Engineered Equipment Technology and Parts Group [Member]
Property and Equipment Additions
Total sales	2,166	2,806	5,223	6,475
Less intra-segment sales	(379)	(1,272)	(1,934)	(1,798)
EET & P
C/S
CP
Corp.(a)
Net sales to outside customers	1,787	1,534	3,289	4,677
Brazil [Member] | Engineered Equipment Technology and Parts Group [Member]
Property and Equipment Additions
Total sales		864	121	1,851
Less intra-segment sales
EET & P
C/S
CP
Corp.(a)
Net sales to outside customers		864	121	1,851
India [Member] | Engineered Equipment Technology and Parts Group [Member]
Property and Equipment Additions
Total sales	173	104	173	229
Less intra-segment sales
EET & P
C/S
CP
Corp.(a)
Net sales to outside customers	$ 173	$ 104	$ 173	$ 229

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Stock Purchase

9 Months Ended

Sep. 30, 2012

Stock Purchase [Abstract]

Stock Purchase

14. Stock Purchase

During the first quarter of 2011, the Company purchased 73,741 shares of CECO stock held by a retiring executive. The shares were purchased at the then current market price of $5.84 for a total transaction value of $430,647 and the shares were immediately retired.

On August 10, 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. No shares were repurchased in the first quarter of 2012 and during the three month period ended June 30, 2012, the Company repurchased and immediately retired 62,519 shares of common stock for $456,000. No shares were repurchased during the three month period ended September 30, 2012, which leaves the maximum number of shares that may yet be purchased at 345,691.

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Goodwill and Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2012

Goodwill and Intangible Assets [Abstract]

Goodwill / Tradename

	Nine months ended				Year ended
(dollars in thousands)	September 30, 2012				December 31, 2011
Goodwill / Tradename	Goodwill		Tradename		Goodwill			Tradename
Beginning balance	$	14,661	$	3,218	$	14,713		$	3,225
Acquisition earn-out settlement		21		—		—			—
Foreign currency adjustments		95		12		(52	)		(7	)
	$	14,777	$	3,230	$	14,661		$	3,218

Intangible assets - finite life

	As of September 30, 2012				As of December 31, 2011
			Accum.				Accum.
Intangible assets – finite life	Cost		Amort.		Cost		Amort.
Patents	$	1,414	$	1,258	$	1,414	$	1,193
Customer lists		1,653		1,535		1,653		1,348
	$	3,067	$	2,793	$	3,067	$	2,541

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Business Segment Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Reportable business segment level include both external and intersegment net sales
Net sales	$ 33,102	$ 32,947	$ 100,720	$ 101,440
Engineered Equipment Technology and Parts Group [Member] | Subtotal [Member]
Reportable business segment level include both external and intersegment net sales
Net sales	22,979	23,337	68,539	74,586
Contracting / Services Group [Member]
Reportable business segment level include both external and intersegment net sales
Net sales	6,166	7,284	20,577	22,554
Component Parts Group [Member]
Reportable business segment level include both external and intersegment net sales
Net sales	5,524	5,282	16,804	14,585
Corporate and other [Member]
Reportable business segment level include both external and intersegment net sales
Net sales		253	19	880
Eliminations [Member]
Reportable business segment level include both external and intersegment net sales
Net sales	(1,567)	(3,209)	(5,219)	(11,165)
United States [Member] | Engineered Equipment Technology and Parts Group [Member]
Reportable business segment level include both external and intersegment net sales
Net sales	18,775	18,073	57,202	60,179
Canada [Member] | Engineered Equipment Technology and Parts Group [Member]
Reportable business segment level include both external and intersegment net sales
Net sales	1,865	1,490	5,820	5,852
China [Member] | Engineered Equipment Technology and Parts Group [Member]
Reportable business segment level include both external and intersegment net sales
Net sales	2,166	2,806	5,223	6,475
Brazil [Member] | Engineered Equipment Technology and Parts Group [Member]
Reportable business segment level include both external and intersegment net sales
Net sales		864	121	1,851
India [Member] | Engineered Equipment Technology and Parts Group [Member]
Reportable business segment level include both external and intersegment net sales
Net sales	$ 173	$ 104	$ 173	$ 229

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Earnings and Dividends per Share (Details Textual) (USD $)	2 Months Ended	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Earnings and Dividends Per Share (Additional Textual) [Abstract]
Number of non-vested restricted share awards outstanding	0	0	0	0	0
Diluted earnings per share amount after tax addback of interest expense		$ 82,000	$ 95,000	$ 250,000	$ 285,000
Diluted earnings per share additional shares		2,300,000	2,600,000	2,300,000	2,600,000
Dividend reinvestment plan under common stock	$ 750,000
Warrants [Member]
Earnings and Dividends per Share (Textual) [Abstract]
Number of outstanding options and warrants excluded from the computation of diluted weighted average common shares outstanding because of anti-dilutive effect		322,500	427,500	322,500	427,500

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Condensed Consolidated Statements of Income (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Condensed Consolidated Statements of Income [Abstract]
Interest expense, related parties interest	$ 60	$ 59	$ 178	$ 177

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Costs and Estimated Earnings on Uncompleted Contracts

9 Months Ended

Sep. 30, 2012

Costs and Estimated Earnings on Uncompleted Contracts [Abstract]

Costs and Estimated Earnings on Uncompleted Contracts

3. Costs and Estimated Earnings on Uncompleted Contracts

Revenues from contracts, representing the majority of our revenues, are recognized on the percentage of completion method, measured by the percentage of contract costs incurred to date compared to estimated total contract costs for each contract. This method is used because management considers contract costs to be the best available measure of progress on these contracts. Our remaining revenues are recognized when risk and title passes to the customer, which is generally upon shipment of product.

Our contracts have various lengths to completion ranging from a few days to several months. We anticipate that a majority of our current contracts will be completed by year end.

	September 30,			December 31,
(dollars in thousands)	2012			2011
Costs incurred on uncompleted contracts	$	52,358		$	57,345
Estimated earnings		16,408			17,512
		68,766			74,857
Less billings to date		(70,210	)		(73,861	)
	$	(1,444	)	$	996
Included in the accompanying consolidated balance sheets under the following captions:
Costs and estimated earnings in excess on uncompleted contacts	$	7,057		$	10,643
Billings in excess of costs and estimated earnings on uncompleted contracts		(8,501	)		(9,647	)
	$	(1,444	)	$	996

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Earnings and Dividends per Share (Tables)

9 Months Ended

Sep. 30, 2012

Earnings and Dividends per Share [Abstract]

Computational components of basic and diluted earnings per share

	For the three month period ended September 30, 2012
	Numerator (Income)		Denominator (Shares)		Per Share Amount
Basic net income and earnings per share	$	3,268		14,630	$	0.22
Effect of dilutive securities and notes:
Common stock equivalents arising from stock options and employee stock purchase plan		—		371		—
Subordinated convertible promissory notes		82		2,257		(0.03	)
Diluted earnings and earnings per share	$	3,350		17,258	$	0.19
	For the three month period ended September 30, 2011
	Numerator (Income)		Denominator (Shares)		Per Share Amount
Basic net income and earnings per share	$	2,319		14,372	$	0.16
Effect of dilutive securities and notes:
Common stock equivalents arising from stock options and employee stock purchase plan		—		163		—
Subordinated convertible promissory notes		95		2,622		(0.02	)
Diluted earnings and earnings per share	$	2,414		17,157	$	0.14
	For the nine month period ended September 30, 2012
	Numerator (Income)		Denominator (Shares)		Per Share Amount
Basic net income and earnings per share	$	7,798		14,591	$	0.53
Effect of dilutive securities and notes:
Common stock equivalents arising from stock options and employee stock purchase plan		—		290		—
Subordinated convertible promissory notes		250		2,318		(0.06	)
Diluted earnings and earnings per share	$	8,048		17,199	$	0.47

	For the nine month period ended September 30, 2011
	Numerator (Income)		Denominator (Shares)		Per Share Amount
Basic net income and earnings per share	$	5,530		14,340	$	0.39
Effect of dilutive securities and notes:
Common stock equivalents arising from stock options and employee stock purchase plan		—		144		—
Subordinated convertible promissory notes		285		2,647		(0.05	)
Diluted earnings and earnings per share	$	5,815		17,131	$	0.34

Schedule of dividends payable

Dividend Per share	Record Date	Payment Date	Payments (dollars in thousands)
$0.035	March 20, 2012	March 30, 2012	$ 512
$0.035	June 15, 2012	June 29, 2012	$ 512
$0.045	September 14, 2012	September 28, 2012	$ 664

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Debt (Details) (USD $)	3 Months Ended				9 Months Ended
	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011	Nov. 26, 2009
Debt (Textual) [Abstract]
Revolving line of credit					$ 20,000,000
Letters of credit sublimit included in line of credit					10,000,000
Termination date of line of credit					Apr. 01, 2013
Financial covenants which require compliance					Mar. 31, 2013
Maximum capital expenditures financial covenant					2,500,000
The minimum Fixed Charge Coverage Ratio					1.25%
The maximum funded debt to EBITDA covenant					3.00%
Excess in aggregate indebtedness					100,000
Borrowing base limitation	10,800,000				10,800,000
Interest rate for borrowing at LIBOR rate					3.50%
Outstanding trade letters of credit	2,000,000				2,000,000
Principal amount of subordinated convertible promissory notes								10,800,000
Convertible promissory notes issued to Chairman, director and Secretary								2,200,000
Convertible promissory notes issued to a company director								150,000
Convertible promissory notes issued to Secretary								800,000
Convertible promissory notes issued to Harvey Sandler Revocable Trust								800,000
Percentage of outstanding common stock with Harvey Sandler Revocable Trust					10.00%
Interest accrues under the Investor Notes at the annual rate	6.00%				6.00%
Interest paid on the investor notes	136,000			159,000	417,000	475,000
Proceeds of the Investor Notes to repay all previously existing subordinated debt					4,500,000
Accruing interest at rates, minimum					11.00%
Accruing interest at rates, maximum					12.00%
Fees paid for the issuance of this debt					320,000
Conversion price of Investors Notes to Shares	$ 4.00				$ 4.00
Expected conversion price of Investor Notes after three years and five consecutive days	$ 8.00				$ 8.00
Outstanding balance of the Investor Notes	8,800,000				8,800,000		9,600,000
Investor Notes was converted to shares, amount	$ 400,000	$ 240,000	$ 200,000		$ 840,000	$ 700,000
Investor Notes was converted to shares	100,000	60,000	50,000

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Commitments and Contingencies - Legal Matters

9 Months Ended

Sep. 30, 2012

Commitments and Contingencies - Legal Matters [Abstract]

Commitments and Contingencies - Legal Matters

13. Commitments and Contingencies – Legal Matters

On January 13, 2011, the SEC initiated a non-public formal investigation of the Company. We have been cooperating with and intend to continue to cooperate with the SEC. The Company has been informed by its Chairman of the Board that he has received multiple subpoenas in connection with such inquiry. Another director has received two subpoenas as well. In accordance with the terms of the Company’s bylaws and the General Corporation Law of Delaware, the Company is advancing expenses incurred by its Chairman and other director in this matter. Because the matter is ongoing, we cannot predict the outcome of this formal inquiry at this time, and, as a result, no conclusion can be reached as to what impact, if any, this inquiry may have on us, our operations, or financial condition.

Other income for the second quarter of 2011 includes a payment to the Company of $359,000 related to short swing trading profits that were returned to the Company by a director and an affiliated shareholder.

The Company was involved in an arbitration proceeding initiated in April 2011 by William L. Heumann, Gerald J. Plappert, and Paul S. Brannick, related to the 2008 acquisition of Fisher-Klosterman Inc., in which the plaintiffs were claiming amounts owed pursuant to an earn-out provision in the purchase agreement. The arbitrator ruled on February 15, 2012 favorably to the Company resulting in a payment of the Company’s stock worth $20,500 and half of the plaintiffs’ legal and arbitrator costs of $106,000.

On October 12, 2012 the Company received a letter from the Sheet Metal Workers’ Local Union No. 80 (“the Union”) alleging that the Company had completely withdrawn from the Union’s Pension Trust Fund and may be liable for an amount up to $5.3 million. The Company is disputing this allegation entirely. The Company has requested information regarding the basis of the withdrawal determination and the calculation of the liability amount, and based on initial investigation believes the claim is meritless. The Company has obtained legal counsel and plans to vigorously defend itself.

The Company is also a party to routine contract and employment-related litigation matters and routine audits of state and local tax returns arising in the ordinary course of its business.

The final outcome and impact of open matters, and related claims and investigations that may be brought in the future, are subject to many variables, and cannot be predicted. We establish accruals only for those matters where we determine that a loss is probable and the amount of loss can be reasonably estimated. As a result, we have accrued as necessary for any liability with respect to open matters. The Company expenses legal costs as they are incurred. While it is currently not possible to reasonably estimate the aggregate amount of costs that we may incur in connection with these matters, such costs could have a material adverse effect on our financial position, liquidity, or results of operations.

We are not aware of pending claims or assessments, other than as described above, which may have a material adverse impact on our liquidity, financial position, or results of operations.