CECO Environmental Annual Report 2014

FY2014 Annual Report · CECO Environmental

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SECURITIES & EXCHANGE COMMISSION EDGAR FILING

Form: 10-K

Date Filed: 2015-03-18

Corporate Issuer CIK: 3197

© Copyright 2015, Issuer Direct Corporation. All Right Reserved. Distribution of this document is strictly prohibited, subject to the
terms of use.

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark one)
x

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2014

❑ 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.

Delaware
(State or other jurisdiction of
incorporation or organization)

4625 Red Bank Road
Cincinnati, Ohio
(Address of principal executive offices)

13-2566064
(I.R.S. Employer
Identification No.)

45227
(Zip Code)

Registrant’s telephone number, including area code: (513) 458-2600

Securities registered under Section 12(b) of the Act:

Title of Each Class
Common Stock, $0.01 par value per share

Name of Each Exchange on Which Registered
The NASDAQ Stock Market LLC

Securities registered under Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities

Act. Yes ❑ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the

Act. Yes ❑ No x

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities

Exchange Act of 1934 during the preceding 12 months (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 website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will

not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. ❑

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 x Non-Accelerated Filer ❑ Smaller reporting company ❑

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 aggregate market value of voting and non-voting common stock held by non-affiliates of the registrant was $254.1 million
based upon the closing market price and shares of common stock outstanding as of June 30, 2014. For the purpose of the foregoing
calculation only, all directors and executive officers of the registrant and owners of more than 10% of the registrant’s common stock
are assumed to be affiliates of the registrant. This determination of affiliate status is not necessarily conclusive for any other purpose.

As of March 4, 2015, the registrant had 26,410,085 shares of common stock, par value $0.01 per share, outstanding.

Portions of the definitive Proxy Statement for the 2015 Annual Meeting of Stockholders, which is to be filed with the Securities

Documents Incorporated by Reference

and Exchange Commission within 120 days of the fiscal year ended December 31, 2014, are incorporated by reference into Part III of
this Annual Report to the extent described herein.

CECO Corporation and Subsidiaries
ANNUAL REPORT ON FORM 10-K
For the year ended December 31, 2014

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Table of Contents

Description

Item
PART I.

Item 1.

Business

Item 1A. Risk Factors

Item 1B. Unresolved Staff Comments

Item 2.

Properties

Item 3.

Legal Proceedings

Item 4.

Mine Safety Disclosures

PART II.

Item 5.

Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity

Securities

Item 6.

Selected Financial Data

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8.

Financial Statements and Supplementary Data

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

PART III.

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accountant Fees and Services

PART IV.

Item 15. Exhibits and Financial Statement Schedules

SIGNATURES

Page

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K includes forward-looking statements within the meaning of the Securities Act of 1933 (the
“Securities Act”) and the Securities Exchange Act of 1934. Any statements contained in this Annual Report on Form 10-K, other than
statements of historical fact, including statements about management’s beliefs and expectations, are forward-looking statements and
should be evaluated as such. These statements are made on the basis of management’s views and assumptions regarding future
events and business performance. Words such as “estimate,” “believe,” “anticipate,” “expect,” “intend,” “plan,” “target,” “project,”
“should,” “may,” “will” and similar expressions are intended to identify forward-looking statements. Forward-looking statements involve
risks and uncertainties that may cause actual results to differ materially from any future results, performance or achievements
expressed or implied by such statements. These risks and uncertainties include, but are not limited to: our ability to successfully
integrate operations and realize the synergies from our acquisitions, as well as a number of factors related to our business, including
economic and financial market conditions generally and economic conditions in our service areas; dependence on fixed price
contracts and the risks associated therewith, including actual costs exceeding estimates and method of accounting for contract
revenue; fluctuations in operating results from period to period due to seasonality of the business; the effect of growth on our
infrastructure, resources, and existing sales; the ability to expand operations in both new and existing markets; the potential for
contract delay or cancellation; changes in or developments with respect to any litigation or investigation; the potential for fluctuations
in prices for manufactured components and raw materials; the substantial amount of debt incurred in connection with our recent
acquisitions and our ability to repay or refinance it or incur additional debt in the future; the impact of federal, state or local
government regulations; political conditions generally; and the effect of competition in the product recovery, air pollution control and
fluid handling and filtration industries. These and other risks and uncertainties are discussed in more detail in Item 1A. “Risk Factors”
of this Annual Report on Form 10-K. Many of these risks are beyond management’s ability to control or predict. Should one or more
of these risks or uncertainties materialize, or should the assumptions prove incorrect, actual results may vary in material aspects from
those currently anticipated. Investors are 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 under the federal securities laws or the rules and
regulations of the Securities and Exchange Commission, we undertake no obligation to update or review any forward-looking
statements, whether as a result of new information, future events or otherwise.

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Item 1.

Business

General

PART I

CECO Environmental Corp. and its consolidated subsidiaries (“CECO,” the “Company,” “we,” “us,” or “our”) is a leading global

environmental technology company focused on critical solutions in the product recovery, air pollution control, fluid handling and
filtration industries. CECO was incorporated in the State of New York in 1966 and reincorporated in the State of Delaware in January
2002. The Company has been publicly traded since January 1, 1978 and our common stock currently trades on the NASDAQ Stock
Market LLC under the symbol “CECE.”

We operate through three principal groups, each of which is a reportable segment: (i) Air Pollution Control, (2) Energy and

(3) Fluid Handling and Filtration. By combining the efforts of certain or all of these segments, we are able to offer complete full
systems to our customers and leverage the operational efficiencies between our family of technology companies.

During 2014, the Company operated its business under the following three reportable segments (see Note 17 in the Notes to

Consolidated Financial Statements for additional information):

•

Air Pollution Control Segment, product recovery and air pollution control technologies, comprised of the following:

Adwest Technologies, Inc., HEE-Duall Air and Odor Technologies, Busch International, Emtrol-Buell Energy Cyclones,
Flex-Kleen Dust Collection Technologies, Fisher-Klosterman, Kirk & Blum, KB Duct and SAT Technology.

•

Energy Segment, customized solutions for the power and petrochemical industry, comprised of the following:

Aarding Thermal Acoustics, Effox-Flextor, AVC Specialists and Zhongli.

Fluid Handling and Filtration Segment, high quality pump, filtration and fume exhaust solutions, comprised of the

following:

Met-Pro Global Pump Solutions, Mefiag Filtration Solutions, Keystone Filtration Solutions, CECO Filters and Strobic Air.

Recent Company Developments

Our business is characterized by the breadth and diversity of our product and service offerings, customer base, and end-market
applications. We market our products and services under multiple brands, including “Effox-Flextor,” “Kirk & Blum,” “KB Duct,” “Fisher-
Klosterman,” “FKI,” “Emtrol-Buell,” “AVC,” “Busch International,” “CECO Filters,” “Adwest,” “Aarding,” “HEE-Duall,” “Flex-Kleen,” “Bio-
Reaction,” “Dean Pump,” “Fybroc,” “Sethco,” “Mefiag Filtration,” “Keystone Filter,” and “Strobic Air” to multiple end-markets, a broad
group of customers and for a wide range of applications.

We have established a family of companies, each playing a specialized role in the creation of product recovery, air pollution

control, fluid handling and filtration solutions. A part of our growth and business strategy is to acquire businesses that align with our
long-term goals. Beginning in December 2012, we acquired Adwest Technologies, Inc. (“Adwest”), a designer and manufacturer of
regenerative thermal oxidizers (“RTOs”). Domestic and international acquisition activity increased significantly during 2013. In
February 2013, we acquired Aarding Thermal Acoustics B.V. (“Aarding”), a global provider of natural gas turbine exhaust systems
and silencer applications. In August 2013, we acquired Met-Pro Corporation (“Met-Pro”), a leading, niche-oriented, global provider, of
product recovery, pollution control, fluid handling, and filtration systems. In 2014,

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we completed four acquisitions, including i) in August 2014, HEE Environmental Engineering (“HEE”), a North American designer and
manufacturer of scrubbers and fans for the air pollution control market, ii) in September 2014, SAT Technology, Inc. (“SAT”), a
provider of volatile organics compounds abatement solutions for the Chinese air pollution control environment, iii) in November 2014,
Emtrol LLC (“Emtrol”), a global leader in the design and manufacture of fluid catalytic cracking and industrial cyclone technology and
iv) in December 2014, Jiangyin Zhongli Industrial Technology Co. Ltd. (“Zhongli”), a designer and manufacturer of power industry
damper, diverter and ball mills systems in China.

Industry Overview

We serve a large industrial market that has grown steadily over the last several years. The market for product recovery, air

pollution control, and fluid handling and filtration is a highly fragmented, multi-billion dollar, global market.

We believe demand for our products and services in the United States and globally has recently and will continue to be driven by

the following two factors:

•

Stringent Regulatory Environment. The adoption of increasingly stringent environmental regulations in the United States

and globally requires businesses to pay strict attention to environmental protection. Businesses and industries of all types
from refineries, power, chemical processes, metals and minerals, energy market and industrial manufacturing must comply
with these various international, federal, state and local government regulations or potentially face substantial fines or be
forced to suspend production or alter their production processes. Regulations range from the air quality standards
promulgated by the Environmental Protection Agency (“EPA”) to Occupational Safety and Health Administrative Agency
(“OSHA”) standards regulating allowable contaminants in workplace environments, in addition to many local, state, and
country level regulations on a worldwide basis. These increasingly stringent environmental regulations are the principal
factor that drives our business.

•

Worldwide Industrialization. Global trade has increased significantly over the last decade and is driven by growth in

emerging markets, including China and India, as well as other developing nations in Asia and Latin America. As a result of
globalization, manufacturing that was historically performed domestically continues to migrate to lower cost countries. This
movement of the manufacture of goods throughout the world increases demand for industrial ventilation products as new
construction continues. We expect that more rigorous environmental regulations will be introduced to create a cleaner
working environment and reduce environmental emissions as these economies evolve.

These factors, individually or collectively, tend to cause increases in industrial capital spending that are not directly
impacted by general economic conditions, expansion, or capacity increases. In contrast, favorable conditions in the
economy generally lead to plant expansions and the construction of new industrial sites. However, in a weak economy,
customers tend to lengthen the time from their initial inquiry to the purchase order, or defer purchases.

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Strategy

Our goal is to become the global leader in product recovery, air pollution control, fluid handling and filtration products and

services by delivering exceptional value for our customers, shareholders, and employees. Our core focus is:

• Profitable Growth

• Product, Service and Project Excellence
• Operational Excellence

• Employee Development

• Global Market Coverage

• Safety Leadership

Implementing profitable ways to grow globally, both
organically and inorganically, with premier technology and
solutions in diverse industries.

- Creating customer successes and building customer loyalty.
Running smart, lean, and best-in-class with innovative
-
operating processes in all that we do.
Investing in the training and development of our employees
and building world-class general management and leadership.
Improving sales and manufacturing (internal and external)
resources to expand our customer base and increase
revenues. Uncover new customer opportunities in diverse
industries.
Ensuring employee safety through preventative safety
practices.

Our strategy utilizes all of our resource capabilities to help customers improve efficiencies and meet specific regulatory
requirements within their business processes through optimal design and integration of full contaminant and pollution control
systems. Our engineering and design expertise in product recovery, air pollution control, and fluid handling and filtration, combined
with our comprehensive suite of product and service offerings allow us to provide customers with a one-stop, cost-effective solution,
to meet their integrated abatement needs.

Competitive Strengths

Leading Market Position as a Complete Solution Provider. We believe we are a leading provider of critical solutions in the
product recovery, air pollution control, and fluid handling and filtration industries. The multi-billion dollar global market is highly
fragmented with numerous small and regional contracting firms separately supplying engineering services, fabrication, installation,
testing and monitoring, products and spare parts. Through the vertical integration of our family of companies, we offer our customers
a complete end-to-end solution, including engineering and project management services, procurement and fabrication, construction
and installation, aftermarket support and sale of consumables, which allows our customers to avoid dealing with multiple vendors
when managing projects.

Long-standing experience and customer relationships in growing industry. We have serviced the environmental needs of our
target markets for over 100 years. Our extensive experience and expertise in providing diversified solutions enhances our overall
customer relationships, and provides us with a competitive advantage in our markets relative to other companies in the industry. We
believe this is evidenced by strong relationships with many of our world-class customers. We believe no single competitor has the
resources to offer a similar portfolio of product and service capabilities. Our family of companies offers the depth of a large
organization, while our lean organizational structure keeps us close to our customers and markets, allowing us to offer rapid and
complete solutions in each unique situation.

Global Diversification and Broad Customer Base. The global diversity of our operations and customer base provides us with
multiple growth opportunities. As of December 31, 2014, we had a diversified customer base of more than 5,000 active customers
across a range of industries. Our customers represent some of the largest refineries, power, chemical processes, metals and
minerals, energy market and industrial manufacturing companies. We believe that the diversity of our customers and end-markets
mitigates our risk of a potential

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fluctuation or downturn in demand from any individual industry or particular customer. We believe we have the resources and
capabilities to meet the needs of our customers as they upgrade and expand domestically as well as into new international markets.
Once systems have been installed and a relationship has been established with the customer, we are often awarded repetitive
service and maintenance business as the customers’ process changes and modifications or additions to their systems become
necessary.

Experienced Management and Engineering Team. Our senior management team has an average of 25 years of experience in

the product recovery, air pollution control, fluid handling and filtration segments. Our Chief Executive Officer, Jeff Lang, has more
than 30 years of executive operating management experience in manufacturing. The business experience of our management team
enables us to pursue our strategy. Our senior management team is supported by a strong operating management team, which
possesses extensive operational and managerial experience, averaging over 20 years of industry experience, most of which has
been with us and our family of companies. Our workforce includes approximately 213 engineers, designers, and project managers
whose significant specialized industry experience and technical expertise enables them to have a deep understanding of the solutions
that will best suit the needs of our customers. The experience and stability of our management, operating and engineering teams
have been crucial to our growth, developing and maintaining customer relationships, and increasing our market share.

Disciplined Acquisition Program with Successful Integration. We believe that we have demonstrated an ability to successfully
acquire and integrate companies with complementary product or service offerings. We will continue to seek and execute additional
strategic acquisitions and focus on expanding our product service and breadth, as well as entering into new adjacent markets. We
believe that the breadth and diversity of our products and services and our ability to deliver full solutions to various end markets
provides us with multiple sources of stable growth and a competitive advantage relative to other players in the industry.

Expand Customer Base and Penetrate End Markets through Global Market Coverage. We constantly look for opportunities to
gain new customers and penetrate geographic locations and end-markets with existing products and services or acquire new product
or service opportunities. For example, our acquisition of EFFOX, Inc. (“Effox”) in 2007 allowed us to access the multi-billion dollar
energy, power and utilities markets. The acquisition of Flextor, Inc. (“Flextor”) in 2008 further expanded Effox’s business
internationally. Our acquisition of FKI in 2008 expanded our access to the petroleum and power markets and also provides us with a
manufacturing facility in China. The acquisition of AVC, Inc. (“AVC”) in 2008 added additional replacement parts sales to Fisher-
Klosterman’s (“FKI”) business. The Adwest acquisition in 2012 expanded our abilities to design RTOs. The Aarding acquisition in
2013 increased our global access to natural gas turbine exhaust systems and silencer applications, and helped our global natural gas
business including the Flextor division, which provides complementary and integrated engineered solutions to those of Aarding. The
Met-Pro acquisition in 2013 expanded our domestic and global penetration by providing niche-oriented product recovery, pollution
control, fluid handling, and filtration systems. The HEE Environmental Engineering acquisition in 2014 bolstered our North American
scrubber business. The SAT Technology acquisition in 2014 bolstered our Asian air pollution control business. The 2014 acquisition
of Emtrol LLC, combined with our FKI and Buell businesses, has made us the global leader in fluid catalytic cracking and industrial
cyclone technology. The Jiangyin Zhongli Industrial Technology Co. Ltd. acquisition in 2014 expanded our global leadership into Asia
in our traditional power industry business.

We intend to continue to expand our sales force, customer base, and end markets, and have identified a number of potential

attractive growth opportunities both domestically and globally, including international projects in China, India, Latin America, Europe
and the Middle East.

Develop Innovative Solutions. We intend to continue to leverage our engineering and manufacturing expertise and strong

customer relationships to develop new customized products to address the identified needs of our customers or a particular end
market. We thoroughly analyze new product opportunities by considering projected demand for the product or service, price point,
and expected operating costs, and only pursue those opportunities that we believe will contribute to earnings growth in the near-term.
In addition, we continually improve our traditional technologies and adapt them to new industries and processes.

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Maintain Strong Customer Focus. We enjoy a diversified customer base of more than 5,000 active customers across a broad

base of industries, including power, municipalities, chemical, industrial manufacturing, refining, petrochemical, metals, minerals and
mining, hospitals and universities. We believe that there are multiple opportunities for us to expand our penetration of existing
markets and customers.

Products and Services

We believe that we are a leading provider of critical solutions to the product recovery, air pollution control, fluid handling and
filtration segments. We focus on engineering, designing, building, and installing systems that capture, clean and destroy airborne
contaminants from industrial facilities as well as equipment that controls emissions from such facilities, as well as fluid handling and
filtration systems. We provide a wide spectrum of products and services including dampers and diverters, cyclonic technology,
thermal oxidizers, filtration systems, scrubbers, fluid handling equipment and plant engineering services and engineered design build
fabrication.

The table below illustrates how our family of companies are spread over our diversified customer base, providing a broad range

of applications.

Divisions

Energy Segment

Zhongli

Capabilities
(products and services)

Typical Industries

Typical Applications

• Design and manufacture:

• Coal-Fired and Natural

- Dampers
- Expansion Joints
- Gas Turbine Exhaust
Systems & Silencer
Applications
• Aftermarket Service

Gas Power Plants

• Petro-chemical
• Chemical Processing
• Refining
• Metals
• Wood Products

• Steam Heat Recovery
• Flue Gas

Desulphurization

• Catalytic (NOx) Reduction
• Gas Turbine Exhaust

Fluid Handling and Filtration Segment

• Fiber-Bed and Mesh Style

Mist Collectors

• Engineered Systems
• Replacement Filters
• Repack Services

• Sulfuric Acid
• Asphalt Roofing

Products

• Chemical Processing
• Fertilizer
• Metals
• Semiconductors

• Absorption Towers
• Drying Towers
• Asphalt Saturators
• Acid/Caustic Mist
• Storage Tank Emissions
• Organic Emissions

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• Centrifugal Pumps
• Non Metallic Wafer Style

Butterfly Valves

• Filter Cartridges and

• Metal Finishing and

• Purification of Air and

Plating

• Printed Circuits
Fabrication

Liquids

• Fluid Handling
• Filtration

Housings

• Water and Wastewater

• Fans
• Laboratory Fume Hood

Exhaust Systems

Treatment

• Food and Beverage
• Chemical and

• Ventilation Recirculation

Petrochemical Processing

and Heat Recovery
Systems

• Filters and Filter Systems
• Carbonate Precipitators

• Oil and Gas
• Pharmaceutical
• University, Public

Health and Government

• Industrial Ventilation
• Refining, Oil Production

and Petrochemical

• Aquarium and
Aquaculture

• Desalination and Water

Reuse

• Heavy Duty Air Handling

and Conditioning

• Fume Exhaust Systems
• Air-Curtain Hoods
• JET*STAR Strip/ Coil
Coolers and Dryers

• Aluminum
• Chemical
• Paper
• Power
• Steel

Air Pollution Control Segment

• Rolling Mill Oil Mist

Collection

• Heavy Gauge Strip and

Coil:
- Coolers
- Dryers

• General Ventilation

• Air Pollution Control
• Product Recovery and

Capture

• Petroleum Refining
• Catalyst Recovery
• Manufactured Sand
• Protection of Downstream
Process and Pollution
Control Equipment
• Flyash Beneficiation

• Refineries
• Utilities
• Bio Fuels
• Petrochemicals
• Pharmaceutical
• Forest Products
• Manufacturing
• Food

• Chemical Processing
• Ethanol
• Paint Booth Emissions
• Wastewater Treatment
• Wood Products
• Asphalt

• High Efficiency
Destruction:
- Volatile Organic
Compounds

- Fumes
- Industrial Odors

• Design, Manufacture

and/or Install:
- Industrial Cyclones
- FCC Cyclones
- Scrubbers
- Venturi
- Packed Bed
- Multiple Purpose

• Medial Filtration:

- Baghouse Fabric Filters
- Cartridge Collectors
- Pneumatic Conveying

and
Industrial Ventilation

• Regenerative Thermal

Oxidation

• Catalytic and Thermal

Oxidation
• Selective and

Regenerative Catalytic
Reduction

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• Full Design, Build, Install:
• Dust Collectors
• Oil Mist Collectors
• Chip Conveyance

Systems

• Custom Sheet Metal

Fabrication

• Component Parts for
Industrial Air Systems

• Aerospace
• Automotive
• Food
• Foundry
• Glass
• Primary Metals
• Printing Industrial
• Sheet Metal Contractors

• Clamp-Together

• Industrial Sheet Metal

Componentized Ducting
Systems

Contractors

• Chemical
• Food
• Furniture
• Metals
• Pharmaceuticals

• Collection:
- Dust
- Oil Mist
- Fume Exhaust
• Exhaust/Make-up Air
• Paint/Finishing Booths
• Pneumatic Conveying
• Industrial Ventilation

Systems

• Capture in Moderately
Abrasive Environments
- Dust Particles
- Fumes
- Oil Mist

• Cyclone Dust Collection
• Filters: Bin Vent
• Filters: Fabric
• Filters: High

Pressure/High Vaccuum

• HEPA Filter Systems

• Municipal and Industrial
Wastewater Treatment

• Metal Finishing and

• Product Recovery
• Pollution Control
• Purification of Air and

Liquids

Plating

• Printed Circuits
Fabrication

• Wood Products
• Food and Beverage
• Chemical Processing
• Pharmaceutical
• University, Public Health

and Government
• Industrial Ventilation
• Refining, Oil Production

and Petrochemical

• Aquarium and
Aquaculture

• Desalination and Water

Reuse

• Product Recovery
• Pollution Control
• Purification of Air and

Liquids

• Aerators and Degasifiers
• Biotrickling Filers and

• Municipal and Industrial
Wastewater Treatment

Biofliters

• Metal Finishing and

• Carbon Absorbers
• Duct Hoods and Exhaust

Fans

Plating

• Printed Circuits
Fabrication

• Filers: Wet Particulate
• Mist Eliminators
• Scrubbers: Chemical and
Biological Order Control

• Wood Products
• Food and Beverage
• Chemical Processing
• Pharmaceutical

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• Scrubbers: Emergency

• University, Public Health

Gas

• Scrubbers: Wet
• Storage Tanks

and Government
• Industrial Ventilation
• Refining, Oil Production

and Petrochemical

• Aquarium and
Aquaculture

• Desalination and Water

Reuse

Project Design and Research and Development

We focus our development efforts on designing and introducing new and improved approaches and methodologies that produce

better system performance for our customers, and often improve customer process performance. We produce specialized products
that are often tailored to the specifications of a customer or application. We continually collaborate with our customers to develop the
proper solution and ensure customer satisfaction.

We also specialize in the design, fabrication and installation of full ventilation systems and processes. The project development
cycle may follow many different paths depending on the specifics of the job and end-market. The cycle normally takes between one
and six months from concept and design to production, but may vary significantly depending on developments that occur during the
process, including among others, the emergence of new environmental demands, changes in design specifications and ability to
obtain necessary approvals.

Sales, Marketing and Support

Our global selling strategy is to provide a solutions-based approach by being a single source provider of technology products
and services. The strategy involves expanding our scope of products and services through selective acquisitions and the formation of
new business units that are then integrated into our growing family of technology and system providers. We believe this strategy
provides a discernible competitive advantage. We execute this strategy by utilizing our portfolio of in-house technologies and those of
third-party equipment suppliers. Many of these have been long standing relationships, which have evolved from pure supplier roles to
value-added business partnerships. This enables us to leverage existing business with selective alliances of suppliers and application
specific engineering expertise. Our products primarily compete on the basis of price, performance, speed of delivery, quality,
customer support, and single source. Our value proposition to customers is to provide competitively priced, customized solutions. Our
industry-specific knowledge, accompanied by our product and service offerings, provide valuable synergies for design innovation.

We sell and market our products and services with our own direct sales force, including employees in the United States, the

Netherlands, Canada, India, Mexico, China, Singapore, and South America, in conjunction with outside sales representatives in
North America, Latin America, Europe, the Middle East & Africa, Asia, and India. We expect to continue expanding our sales and
support capabilities and our network of outside sales representatives in key regions domestically and internationally.

Much of our marketing effort consists of individual visits to customers, dissemination of sales and advertising materials, such as

product announcements, brochures, magazine articles, advertisements and cover or article features in trade journals and other
publications. We also participate in public relations and promotional events, including industry tradeshows and technical conferences.
We have an internal marketing organization that is responsible for these initiatives.

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Our customer service organization or sales force provides our customers with technical assistance, use and maintenance

information as well as other key information regarding their purchase. We also actively provide our customers with access to key
information regarding changes and pending changes in environmental regulations as well as new product or service developments.
We believe that maintaining a close relationship with our customers and providing them with the support they request improves their
level of satisfaction and enables us to foresee their potential future product needs or service demands. Moreover, they can lead to
sales of annual service and support contracts as well as consumables. Our website (www.cecoenviro.com) also provides our
customers with online tools and technical resources.

Quality Assurance

In engineered systems, quality is defined as system performance. We review with our customers, before the contract is signed,
the level of pollutants capture required and the efficiency of the equipment that will remove the contaminant from the air stream prior
to it being exhausted to the atmosphere. We then review these same parameters internally to assure that warranties will be met.
Standard project management and production management tools are used to help ensure that all work is done to specification and
that project schedules are met. Equipment is tested at the site to ensure it is functioning properly. Historically, our warranty expense
has been very low.

Customers

We are not dependent upon any single customer, and no customer comprised 10% or more of our consolidated revenues for

2014, 2013 or 2012. We do not believe the loss of any one of our customers would have a material adverse effect on us and our
subsidiaries taken as a whole.

Suppliers and Subcontractors

We purchase our raw materials and supplies from a variety of global sources. When possible, we directly secure angle iron and
sheet plate products from steel mills, whereas other materials are purchased from a variety of steel service centers. Steel prices have
been volatile, but we typically mitigate the risk of higher prices by including a “surcharge” on our standard products. On contract work,
we mitigate the risk of higher prices by including the current price in our estimate and generally include price inflation clauses for
protection.

We believe we have a good relationship with our suppliers and do not anticipate any difficulty in continuing to purchase such

items on terms acceptable to us. We have not experienced difficulty in procuring a sufficient supply of materials in the past. We
typically agree to billing terms with our suppliers ranging from net 30 to 45 days. To the extent that our current suppliers are unable or
unwilling to continue to supply us with materials, we believe that we would be able to obtain such materials from other suppliers on
acceptable terms.

Typically, on turnkey projects, we subcontract such things as electrical work, concrete work, controls, conveyors and insulation.

We use subcontractors with whom we have good working relationships and review each project both at the beginning and on an
ongoing basis to help ensure that all work is being done according to our specifications. Subcontractors are generally paid when we
are paid by our customers according to the terms of our contract with the customer.

Backlog

Backlog is a representation of the amount of revenue expected from complete performance of firm fixed-price contracts that
have not been completed for products and services we expect to substantially deliver within the next 12 months. Our customers may
have the right to cancel a given order, although historically cancellations have been rare. Backlog was approximately $140.1 million
and $98.5 million as of December 31, 2014 and 2013, respectively. Substantially all 2013 backlog was completed in 2014. A
substantial portion of the 2014 backlog is

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expected to be completed in 2015. Backlog is not defined by U.S. generally accepted accounting principles (“GAAP”) and our
methodology for calculating backlog may not be consistent with methodologies used by other companies.

Competition

We believe that there are no singly dominant companies in the product recovery, air pollution control, fluid handling and filtration

product and service industries. These markets are fragmented with numerous small and regional participants. Due to the size and
shipping weight of many of our projects, localized manufacturing/fabrication capabilities are very important to our customers. As a
result, competition varies widely by region and industry. The market for our engineered products is reasonably competitive and is
characterized by technological change, continuously changing environment regulations, and evolving customer requirements. We
believe that the additional competitive factors in our markets include:

•

performance track record in difficult plant applications;

comprehensive portfolio of products with leading technology;

solid brand recognition in the fluid handling market;

ability to design standard and custom products that meet customers’ needs;

ability to provide reliable solutions in a timely manner;

quality customer service and support; and

financial and operational stability, including reputation.

We believe we compete favorably with respect to these factors.

Seasonality

Our business is subject to potential seasonal fluctuations. The fourth quarter of our fiscal year, which ends December 31, is
typically our strongest quarter. This is due to a combination of factors. First, many of our customers attempt to complete major capital
improvement projects before the end of the calendar year. Also, many customers shut down over the December holidays to perform
maintenance services on their facilities, which often requires the use of our products and services. These factors create increased
demand for our products and services during this period.

Conversely, the first quarter of our calendar fiscal year is typically our weakest quarter. This is caused to some extent by winter

weather constraints on outside construction activity and by the seasonality of capital improvement projects as discussed above.

Government Regulations

We believe our operations are in material compliance with applicable environmental laws and regulations. We believe that

changes in environmental laws and regulations create opportunity given the nature of our business.

We are subject to the requirements of OSHA and comparable state statutes. We believe we are in material compliance with
OSHA and state requirements, including general industry standards, record keeping requirements and monitoring of occupational
exposures. In general, we expect to increase our expenditures to comply with stricter industry and regulatory safety standards
needed. Although such expenditures cannot be accurately estimated at this time, we do not believe that they will have a material
adverse effect on our financial position, results of operations or cash flows.

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Intellectual Property

Our business has historically relied on technical know-how and experience rather than patented technology. We hold patents at
our Busch International, CECO Filters, Fisher-Klosterman and Met-Pro businesses. We do not view our patents to be material to our
business.

Financial Information about Geographic Areas

For 2014, 2013 and 2012, sales to customers outside the United States, including export sales, accounted for approximately

30%, 21% and 14%, respectively, of consolidated net sales. The largest portion of these sales were to European, Asian, and
Canadian customers.

With the February 2013 acquisition of Aarding and August 2013 acquisition of Met-Pro, both of which have operations in the
Netherlands, along with our China operations (bolstered by the December 2014 acquisition of Zhongli), sales to customers outside of
the United States have increased. Our operations outside of the United States are subject to additional risks, which are more fully
described in “Item 1A. Risk Factors. Our operations outside of the United States are subject to political, investment and local business
risks” of this annual report on Form 10-K.

Employees

We had 850 full-time and three part-time employees as of December 31, 2014. The facilities of Kirk & Blum and Fluid Handling

and Filtration in Telford, Pennsylvania are unionized except for selling, engineering, design, administrative and operating
management personnel. None of our other employees are subject to a collective bargaining agreements. We consider our
relationship with our employees to be satisfactory. In total, as of December 31, 2014, approximately 226 employees were represented
by international or independent labor unions under various union contracts that expire at various intervals.

Executive Officers of the Registrant

The following are the executive officers of the Company as of December 31, 2014. The terms of all officers expire at the next

annual meeting of the board of directors and upon the election of the successors of such officers.

Name
Jason DeZwirek
Jeffrey Lang
Edward J. Prajzner
Benton L. Cook

Age
44
58
48
52

Position with
CECO
Chairman of the Board of Directors
Chief Executive Officer and President, and Director
Chief Financial Officer and Secretary
Vice President of Finance and Controller

Jason DeZwirek became a director of the Company in February 1994 and Chairman of the Board in May 2013. Previously, he
served as Secretary of the Company from February 1998 until September 2013. He also serves as a member of the board of directors
of the Company’s subsidiaries. In 1999, Mr. DeZwirek founded Kaboose Inc., a family focused online media company. Mr. DeZwirek
served as the Chairman and CEO of Kaboose Inc. until its sale to Disney Online (a subsidiary of The Walt Disney Company) and
Barclays Private Equity Limited in June 2009. Mr. DeZwirek also previously served as a director and corporate secretary of API
Technologies Corp. (NASDAQ:ATNY), a prime contractor in electronics, highly engineered systems, secure communications and
electronic components and sub-systems for the defense and aerospace industries, from November 2006 through January 2011.
Mr. DeZwirek also is and has been involved in private investment activities.

Jeffrey Lang has served as a director and the Chief Executive Officer since February 2010, as President since September 2013

and in several leadership positions with our subsidiaries since October 2010. From May

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2010 until September 2013, Mr. Lang also served as our Chief Operating Officer. Prior to joining the Company, from 2007 until 2009,
Mr. Lang was the Executive Vice President, Operating Officer of McJunkin Red Man Corporation, a distributor of pipes, valves and
fittings and related services serving the petrochemical, petroleum refining, pulp and paper, oil industry and utilities. From 2006 until
2007, he was the Senior Vice President and Operating Officer of Red Man Pipe and Supply Company, a pipe distribution company,
that merged with McJunkin Corporation to form McJunkin Red Man Corporation. Previously, Mr. Lang was employed by Ingersoll
Rand Company, a global industrial company, for twenty-five years from 1980 to 2005. He started out as a sales engineer in 1980,
became a Sales and Service Branch Manager in 1985, the Southeast U.S. Area Manager, Air Solutions in 1995, and by 1999 was the
Director and General Manager, North American Distributor Division, and from 2002 to 2005 served as the Director and General
Manager, North American industrial Air Solutions, reporting directly to the President of the Air Solutions Group.

Edward J. Prajzner became our Chief Financial Officer and Secretary in March 2014. He previously served as Chief Accounting

Officer and Vice President of Finance from September 2013. Mr. Prajzner served as Corporate Controller and Chief Accounting
Officer of Met-Pro from June 2012 until its acquisition by the Company in August 2013. Prior to joining Met-Pro in May 2012,
Mr. Prajzner served as Senior Vice President and Corporate Controller of CDI Corporation, an engineering and staffing company,
from November 2010 to March 2012. From December 2008 to December 2010, he served as the Corporate Controller of American
Infrastructure, Inc., a heavy civil engineering company.

Benton L. Cook became our Vice President of Finance and Controller as of March 2014. Mr. Cook served as our Controller since

2008. Mr. Cook served as Interim Chief Financial Officer from September 2011 through September 2013. Mr. Cook joined CECO in
2004 as Project Manager for Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) implementation.

Where to Find More Information

We use our Investor Relations website, www.cecoenviro.com, as a channel for routine distribution of important information,
including news releases, analyst presentations and financial information. We post filings as soon as reasonably practicable after they
are electronically filed with, or furnished to, the U.S. Securities and Exchange Commission, or SEC, including our annual, quarterly,
and current reports on Forms 10-K, 10-Q, and 8-K; our proxy statements; and any amendments to those reports or statements. All
such postings and filings are available on our Investor Relations website free of charge. The SEC also maintains a website,
www.sec.gov, that contains reports, proxy and information statements and other information regarding issuers that file electronically
with the SEC. The content on any website referred to in this Annual Report on Form 10-K is not incorporated by reference into this
Annual Report on Form 10-K unless expressly noted.

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Item 1A. Risk Factors

An investment in our securities involves a high degree of risk. You should carefully consider the risk factors described below,
together with the other information included in this Annual Report on Form 10-K before you decide to invest in our securities. The
risks described below are the material risks of which we are currently aware; however, they may not be the only risks that we may
face. Additional risks and uncertainties not currently known to us or that we currently view as immaterial may also impair our
business. If any of these risks develop into actual events, it could materially and adversely affect our business, financial condition,
results of operations and cash flows, and the trading price of your shares could decline and you may lose all or part of your
investment.

RisksRelated to Our Business and Industry

Changes in current environmental legislation could have an adverse impact on the sale of our environmental control systems and
products and on our financial condition, results of operations and cash flows.

Our environmental systems business is primarily driven by capital spending, clean air rules, plant upgrades by our customers to
comply with laws and regulations governing the discharge of pollutants into the environment or otherwise relating to the protection of
the environment or human health. These laws include, but not limited to, U.S. federal statutes such as the Resource Conservation
and Recovery Act of 1976, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, the Clean Water
Act, the Clean Air Act, the Clean Air Interstate Rule, and the regulations implementing these statutes, as well as similar laws and
regulations at state and local levels and in other countries. These U.S. laws and regulations may change and other countries may not
adopt similar laws and regulations. Our business may be adversely impacted to the extent that environmental regulations are
repealed, amended, implementation dates delayed, or to the extent that regulatory authorities reduce enforcement.

Our dependence upon fixed-price contracts could adversely affect our operating results.

The majority of our projects are currently performed on a fixed-price basis. Under a fixed-price contract, we agree on the price

that we will receive for the entire project, based upon a defined scope, which includes specific assumptions and project criteria. If our
estimates of our own costs to complete the project are below the actual costs that we incur, our margins will decrease, and we may
incur a loss. The revenue, cost and gross profit realized on a fixed-price contract will often vary from the estimated amounts because
of unforeseen conditions or changes in job conditions and variations in labor and equipment productivity over the term of the contract.
If we are unsuccessful in mitigating these risks, we may realize gross profits that are different from those originally estimated and
incur reduced profitability or losses on projects. Depending on the size of a project, these variations from estimated contract
performance could have a significant effect on our operating results. In general, turnkey contracts to be performed on a fixed-price
basis involve an increased risk of significant variations. This is a result of the long-term nature of these contracts and the inherent
difficulties in estimating costs and of the interrelationship of the integrated services to be provided under these contracts whereby
unanticipated costs or delays in performing part of the contract can have compounding effects by increasing costs of performing other
parts of the contract.

If actual costs for our projects with fixed-price contracts exceed our original estimates, our profits will be reduced or we may suffer
losses.

The majority of our contracts are fixed-priced contracts. Although we benefit from cost savings, we have limited ability to recover
cost overruns. Because of the large scale and long-term nature of certain of our contracts, unanticipated cost increases may occur as
a result of several factors, including:

•

increases in cost or shortages of components, materials or labor;

unanticipated technical problems;

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•

required project modifications not initiated by the customer; and

suppliers’ or subcontractors’ failure to perform.

Any of these factors could delay delivery of our products. Our contracts often provide for liquidated damages in the case of late

delivery. Unanticipated costs that we cannot pass on to our customers, for example the increases in steel prices or the payment of
liquidated damages under fixed contracts, would negatively impact our profits.

Percentage-of-completion method of accounting for contract revenue may result in material adjustments that would adversely
affect our financial condition, results of operations and cash flows.

We recognize contract revenue for a substantial component of our business using the percentage-of-completion method on
fixed price contracts over $50,000. Under this method, for each contract, estimated contract revenue is calculated based generally on
the percentage that actual direct costs to date are to total estimated direct costs. Estimated contract losses are recognized in full
when determined. Accordingly, contract revenue and total direct cost estimates are reviewed and revised periodically as the work
progresses and as change orders are approved, and adjustments based upon the percentage-of-completion are reflected in contract
revenue in the period when these estimates are revised. These estimates are based on management’s reasonable assumptions and
our historical experience, and are only estimates. Variation of actual results from these assumptions, which are outside the control of
management and can differ from our historical experience, could be material. To the extent that these adjustments result in an
increase, a reduction or the elimination of previously reported contract revenue, we would recognize a credit or a charge against
current earnings, which could be material.

We have recently made and may make future acquisitions, which involve numerous risks that could impact our financial condition,
results of operations and cash flows.

Our operating strategy involves expanding our scope of products and services through selective acquisitions and the formation

of new business units that are then integrated into our growing family of turnkey system providers. We have acquired, and may
selectively acquire, other businesses, product or service lines, assets or technologies that are complementary to our business. We
may be unable to find or consummate future acquisitions at acceptable prices and terms. We continually evaluate potential
acquisition opportunities in the ordinary course of business. Acquisitions involve numerous risks, including among others:

•

difficulties in integrating the acquired businesses, product or service lines, assets or technologies;

diverting management’s attention from normal daily operations of the business;

entering markets in which we have no or limited direct prior experience and where competitors in such markets have

stronger market positions;

unanticipated costs and exposure to undisclosed or unforeseen liabilities;

the ability to service debt obligations incurred in connection with such acquisitions, if any;

potential loss of key employees and customers of the acquired businesses, product or service lines, assets or technologies;

our ability to properly establish and maintain effective internal controls over an acquired company; and

increasing demands on our operational and information technology systems.

Although we conduct what we believe to be a prudent level of investigation regarding the operating and financial condition of the
businesses, product or service lines, assets or technologies we purchase, an unavoidable level of risk remains regarding their actual
operating and financial condition. Until we actually assume operating control of these businesses, product or service lines, assets or
technologies, we may not be able to ascertain their actual value or understand potential liabilities. This is particularly true with respect
to acquisitions outside the United States.

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In addition, acquisitions of businesses may require additional debt or equity financing, resulting in additional leverage or dilution

of ownership. Our credit agreement (“Credit Agreement”) contains certain covenants that limit, or which may have the effect of
limiting, among other things, acquisitions, capital expenditures, the sale of assets and the incurrence of additional indebtedness.

We may incur material costs as a result of existing or future product liability claims, or other claims and litigation that could
adversely affect our financial condition, results of operations and cash flows; and our insurance coverage may not cover all claims
or may be insufficient to cover the claims.

Despite our quality assurance measures, we may be exposed to product liability claims, other claims and litigation in the event

that the use of our products results, or is alleged to result, in bodily injury and/or property damage or our products actually or
allegedly fail to perform as expected. While we maintain insurance coverage with respect to certain product liability and other claims,
we may not be able to obtain such insurance on acceptable terms in the future, if at all, and any such insurance may not provide
adequate coverage against product liability and other claims. Any future damages that are not covered by insurance or are in excess
of policy limits could have a material adverse effect on our financial condition, results of operations and cash flows. In addition,
product liability and other claims can be expensive to defend and can divert the attention of management and other personnel for
significant periods of time, regardless of the ultimate outcome.

An unsuccessful defense of a product liability or other claim could have an adverse effect on our financial condition, results of

operations and cash flows. Even if we are successful in defending against a claim relating to our products, claims of this nature could
cause our customers to lose confidence in our products and us.

We are party to asbestos-containing product litigation that could adversely affect our financial condition, results of operations and
cash flows.

Our subsidiary, Met-Pro, beginning in 2002, began to be named in asbestos-related lawsuits filed against a large number of
industrial companies including, in particular, those in the pump and fluid handling industries. In management’s opinion, the complaints
typically have been vague, general and speculative, alleging that Met-Pro, along with the numerous other defendants, sold
unidentified asbestos-containing products and engaged in other related actions that caused injuries (including death) and loss to the
plaintiffs. Counsel has advised that more recent cases typically allege more serious claims of mesothelioma. The Company’s insurers
have hired attorneys who, together with the Company, are vigorously defending these cases. Many cases have been dismissed after
the plaintiff fails to produce evidence of exposure to Met-Pro’s products. In those cases where evidence has been produced, the
Company’s experience has been that the exposure levels are low and the Company’s position has been that its products were not a
cause of death, injury or loss. The Company has been dismissed from or settled a large number of these cases. Cumulative
settlement payments from 2002 through December 31, 2014 for cases involving asbestos-related claims were $0.8 million, which
together with all legal fees other than corporate counsel expenses have been paid by the Company’s insurers. The average cost per
settled claim, excluding legal fees, was approximately $25,000.

Based upon the most recent information available to the Company regarding such claims, there were a total of 195 cases

pending against the Company as of December 31, 2014 (with Connecticut, New York, Pennsylvania and West Virginia having the
largest number of cases), as compared with 173 cases that were pending as of January 1, 2014. During 2014, 51 new cases were
filed against the Company, and the Company was dismissed from 29 cases and settled zero cases. Most of the pending cases have
not advanced beyond the early stages of discovery, although a number of cases are on schedules leading to, or are scheduled for
trial. The Company believes that its insurance coverage is adequate for the cases currently pending against the Company and for the
foreseeable future, assuming a continuation of the current volume, nature of cases and settlement amounts. However, the Company
has no control over the number and nature of cases that are filed against it, nor as to the financial health of its insurers or their
position as to coverage. The Company also presently believes that none of the pending cases will have a material adverse impact
upon the Company’s results of operations, liquidity or financial condition.

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Our business may be adversely affected by global economic conditions.

A national or global economic downturn or credit crisis may have a significant negative impact on our financial condition, future

results of operations and cash flows. Specific risk factors related to these overall economic and credit conditions include the following:
customer or potential customers may reduce or delay their procurement or new product development; key suppliers may become
insolvent resulting in delays for our material purchases; vendors and other third parties may fail to perform their contractual
obligations; customers may be unable to obtain credit to finance purchases of our products and services; and certain customers may
become insolvent. These risk factors could reduce our product sales, increase our operating costs, impact our ability to collect
customer receivables, lengthen our cash conversion cycle and increase our need for cash, which would ultimately decrease our
profitability and negatively impact our financial condition. They could also limit our ability to expand through acquisitions due to the
tightening of the credit markets.

Our ability to obtain financing for future growth opportunities may be limited.

Our ability to execute our growth strategies may be limited by our ability to secure and retain additional financing on terms
reasonably acceptable to us or at all. Certain of our competitors are larger companies that may have greater access to capital, and
therefore, may have a competitive advantage over us should our access to capital be limited.

Our inability to deliver our backlog on time could affect our future sales and profitability, and our relationships with our customers.

Our backlog has increased to $140.1 million at December 31, 2014 from $98.5 million at December 31, 2013. Our ability to meet

customer delivery schedules for our backlog is dependent on a number of factors including, but not limited to, access to the raw
materials required for production, an adequately trained and capable workforce, project engineering expertise for certain large
projects, sufficient manufacturing plant capacity and appropriate planning and scheduling of manufacturing resources. Our failure to
deliver in accordance with customer expectations may result in damage to existing customer relationships and result in the loss of
future business. Failure to deliver backlog in accordance with expectations could negatively impact our financial performance and
cause adverse changes in the market price of our common stock.

Since our financial performance is seasonal, current results are not necessarily indicative of future results.

Our operating results may fluctuate significantly due to the seasonality of our business and these fluctuations make it more
difficult for us to predict accurately in a timely manner factors that may have a negative impact on our business. The fourth quarter of
our fiscal year, which ends December 31, is typically our strongest quarter. For example, many of our customers attempt to complete
major capital improvement projects before the end of the calendar year. In addition, many customers shut down over the end of year
holidays to perform maintenance services on their facilities. These factors create increased demand for our products and services
during this period.

Conversely, the first quarter of our fiscal year is typically our weakest quarter. This is caused to some extent by winter weather

constraints on outside construction activity but also by the seasonality of capital improvement projects as discussed relating to the
fourth quarter. Accordingly, results for any one quarter are not necessarily indicative of results to be expected for any other quarter or
for any year.

Our financial performance may vary significantly from period to period, making it difficult to estimate future revenue.

Our annual revenues and earnings have varied in the past and are likely to vary in the future. Our contracts generally stipulate

customer specific delivery terms and may have contract cycles of a year or more, which subjects these contracts to many factors
beyond our control. In addition, contracts that are significantly larger in

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size than our typical contracts tend to intensify their impact on our annual operating results. Furthermore, as a significant portion of
our operating costs are fixed, an unanticipated decrease in our revenues, a delay or cancellation of orders in backlog, or a decrease
in the demand for our products, may have a significant impact on our annual operating results. Therefore, our annual operating
results may be subject to significant variations and our operating performance in one period may not be indicative of our future
performance.

A significant portion of our accounts receivable are related to larger contracts, which increases our exposure to credit risk.

We closely monitor the credit worthiness of our customers. Significant portions of our sales are to customers who place large
orders for custom products and whose activities are related to the power and oil/gas industries. As a result, our exposure to credit risk
is affected to some degree by conditions within these industries and governmental and/or political conditions. We frequently attempt
to reduce our exposure to credit risk by requiring progress payments and letters of credit. However, the continuing economic climate
and other unanticipated events that affect our customers could have a materially adverse impact on our operating results.

Our operations outside of the United States are subject to political, investment and local business risks.

For the year ended December 31, 2014, approximately 30% of our total revenue was derived from products or services
ultimately delivered or provided to end-users outside the United States. As part of our operating strategy, we intend to expand our
international operations through internal growth and selected acquisitions. Our goal is to balance revenues 50/50 between the United
States and the rest of the world. Operations outside of the United States, particularly in emerging markets, are subject to a variety of
risks that are different from or are in addition to the risks we face within the United States. Among others, these risks include:

•

local, economic, political and social conditions, including potential hyperinflationary conditions and political instability in

certain countries;

imposition of limitations on the remittance of dividends and payments by foreign subsidiaries;

adverse currency exchange rate fluctuations, including significant devaluations of currencies;

tax-related risks, including the imposition of taxes and the lack of beneficial treaties, that result in higher effective tax rates

for us;

difficulties in enforcing agreements and collecting receivables through certain foreign local systems;

domestic and foreign customs, tariffs and quotas or other trade barriers;

increased costs for transportation and shipping;

difficulties in protecting intellectual property;

risk of nationalization of private enterprises by foreign governments;

managing and obtaining support and distribution channels for overseas operations;

hiring and retaining qualified management personnel for our overseas operations;

legal and regulatory requirements, including import, export, defense regulations and foreign exchange controls;

imposition or increase of restrictions on investment;

disadvantages of competing against companies from countries that are not subject to United States laws and regulations,

including the Foreign Corrupt Practice Act (“FCPA”); and

required compliance with a variety of local laws and regulations, which may differ materially from those to which we are

subject in the United States.

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In addition, we could be adversely affected by violations of the FCPA and similar worldwide anti-bribery laws as well as export
controls and economic sanction laws. The FCPA and similar anti-bribery laws in other jurisdictions generally prohibit companies and
their intermediaries from making improper payments to non-U.S. officials for the purposes of obtaining or retaining business. Our
policies mandate compliance with these laws. We operate in many parts of the world that have experienced governmental corruption
to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices.
We cannot assure you that our internal controls and procedures will always protect us from reckless or criminal acts committed by our
employees or agents. If we are found to be liable for FCPA, export control or sanction violations, we could suffer from criminal or civil
penalties or other sanctions, including loss of export privileges or authorization needed to conduct aspects of our international
business, which could have a material adverse effect on our business.

The occurrence of one or more of the foregoing factors could have a material adverse effect on our international operations or

upon our financial condition, results of operations and cash flows.

Changes in billing terms can increase our exposure to working capital and credit risk.

Our products are generally sold under contracts that allow us to bill upon the completion of certain agreed upon milestones or

upon actual shipment of the product, and certain contracts include a retention provision. We attempt to negotiate progress-billing
milestones on all large contracts to help us manage the working capital and credit risk associated with these large contracts.
Consequently, shifts in the billing terms of the contracts in our backlog from period to period can increase our requirement for working
capital and can increase our exposure to credit risk.

Customers may cancel or delay projects. As a result, our backlog may not be indicative of our future revenue.

Customers may cancel or delay projects for reasons beyond our control. Our orders normally contain cancellation provisions

that permit us to recover our costs, and, for most contracts, a portion of our anticipated profit in the event a customer cancels an
order. If a customer elects to cancel an order, we may not realize the full amount of revenues included in our backlog. If projects are
delayed, the timing of our revenues could be affected and projects may remain in our backlog for extended periods of time. Revenue
recognition occurs over long periods of time and is subject to unanticipated delays. If we receive relatively large orders in any given
quarter, fluctuations in the levels of our quarterly backlog can result because the backlog in that quarter may reach levels that may
not be sustained in subsequent quarters. As a result, our backlog may not be indicative of our future revenues. With rare exceptions,
we are not issued contracts until a customer is ready to start work on a project. Thus, it is our experience that the only relation
between the length of a project and the possibility that a project may be cancelled is simply the fact that there is more time involved.
In a year-long as opposed to a three-month project more time is available for the customer to experience a softening in their
business, which may cause the customer to cancel a project.

Our gross margins are affected by shifts in our product mix.

Certain of our products have higher gross profit margins than others. Consequently, changes in the product mix of our sales

from quarter-to-quarter or from year-to-year can have a significant impact on our reported gross profit margins. Certain of our
products also have a much higher internally manufactured cost component. Therefore, changes from quarter-to-quarter or from year-
to-year can have a significant impact on our reported gross margins. In addition, contracts with a higher percentage of subcontracted
work or equipment purchases may result in lower gross profit margins.

If our goodwill or intangibles become impaired, we may be required to recognize charges that would reduce our net income or
increase our net loss.

As of December 31, 2014, goodwill and indefinite lived intangibles represented approximately $187.3 million, or 45.2% of our

total assets. Goodwill and indefinite lived intangible assets are not amortized, but

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instead are subject to annual impairment evaluations (or more frequently if circumstances require). Major factors that influence our
evaluations are our estimates for future revenue and expenses associated with the specific intangible asset or the reporting unit in
which our goodwill resides. This is the most sensitive of our estimates related to our evaluations. Other factors considered in our
evaluations include assumptions as to the business climate, industry and economic conditions. These assumptions are subjective
and different estimates could have a significant impact on the results of our analyses. While management, based on current
forecasts and outlooks, believes that the assumptions and estimates are reasonable, we can make no assurances that future actual
operating results will be realized as planned and that there will not be material impairment charges as a result. In particular, an
economic downturn could have a material adverse impact on our customers thereby forcing them to reduce or curtail doing business
with us and such a result may materially affect the amount of cash flow generated by our future operations. Any write-down of
goodwill or intangible assets resulting from future periodic evaluations would, as applicable, either decrease our net income or
increase our net loss and those decreases or increases could be material.

We face significant competition in the markets we serve.

The industries in which we compete are all highly competitive and highly fragmented. We compete against a number of local,
regional and national contractors and manufacturers in each of our product or service lines, many of which have been in existence
longer than us and some of which have substantially greater financial resources than we do. Our products primarily compete on the
basis of price, performance, speed of delivery, quality, customer support and single source. Any failure by us to compete effectively in
the markets we serve could have a material adverse effect on our financial condition, results of operations and cash flows.

Increasing costs for manufactured components, raw materials, transportation, health care and energy prices may adversely affect
our profitability.

We use a broad range of manufactured components and raw materials in our products, including raw steel, steel-related

components, filtration media, and equipment such as fans and motors. Materials and subcontracting costs comprise the largest
components of our total costs. Further increases in the price of these items could further materially increase our operating costs and
materially adversely affect our profit margins. Similarly, transportation and health care costs have risen steadily over the past few
years and represent an increasing burden for us. Although we try to contain these costs whenever possible, and although we try to
pass along increased costs in the form of price increases to our customers, we may be unsuccessful in doing so, and even when
successful, the timing of such price increases may lag significantly behind our incurrence of higher costs.

We rely on several key employees whose absence or loss could disrupt our operations or be adverse to our business.

We are highly dependent on the experience of our management in the continuing development of our operations. The loss of

the services of certain of these individuals would have a material adverse effect on our business. Although we have employment and
non-competition agreements with certain of our key employees, as a practical matter, those agreements will not assure the retention
of our employees, and we may not be able to enforce all of the provisions in any employment or non-competition agreement. Our
future success will depend in part on our ability to attract and retain qualified personnel to manage our development and future
growth. We cannot guarantee that we will be successful in attracting and retaining such personnel. Our failure to recruit additional key
personnel could have a material adverse effect on our financial condition, results of operations and cash flows.

Any incurrence of additional indebtedness could adversely affect our ability to operate our business, remain in compliance with
debt covenants, make payments on our debt and limit our growth.

Outstanding indebtedness could have important consequences for investors, including the following:

•

it may be more difficult for us to satisfy our obligations with respect to our Credit Agreement, and any failure to comply with
the obligations of any of the agreements governing any additional indebtedness, including financial and other restrictive
covenants, could result in an event of default under such agreements;

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•

the covenants contained in our debt agreements limit our ability to borrow money in the future for acquisitions, capital

expenditures or to meet our operating expenses or other general corporate obligations;

the amount of our interest expense may increase because our borrowings are at variable rates of interest, which, if interest

rates increase, could result in higher interest expense;

we may need to use a portion of our cash flows to pay principal and interest on our debt, which will reduce the amount of

money we have for operations, working capital, capital expenditures, expansion, acquisitions or general corporate or other
business activities;

we may have a higher level of debt than some of our competitors, which could put us at a competitive disadvantage;

we may be more vulnerable to economic downturns and adverse developments in our industry or the economy in general;

and

our debt level could limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we

operate.

Our ability to meet our expenses and debt obligations will depend on our future performance, which will be affected by financial,
business, economic, regulatory and other factors. We will not be able to control many of these factors. We cannot be certain that our
earnings will be sufficient to allow us to pay the principal and interest on our existing or future debt and meet our other obligations. If
we do not have enough money to service our existing or future debt, we may be required to refinance all or part of our existing or
future debt, sell assets, borrow more money or raise equity. We may not be able to refinance our existing or future debt, sell assets,
borrow more money or raise equity on terms acceptable to us, if at all.

Our manufacturing operations are dependent on third-party suppliers.

Although we are not dependent on any one supplier, we are dependent on the ability of our third-party suppliers to supply our

raw materials, as well as certain specific component parts. Failure by our third-party suppliers to meet our requirements could have a
material adverse effect on us. We cannot assure you that our third-party suppliers will dedicate sufficient resources to meet our
scheduled delivery requirements or that our suppliers will have sufficient resources to satisfy our requirements during any period of
sustained demand. Failure of suppliers to supply, or delays in supplying, our raw materials or certain components, or allocations in
the supply of certain high demand raw components could materially adversely affect our operations and ability to meet our own
delivery schedules on a timely and competitive basis.

Failure to maintain adequate internal controls could adversely affect our business.

Under Section 404 of the Sarbanes-Oxley Act, we are required to include in each of our Annual Reports on Form 10-K, a report
containing our management’s assessment of the effectiveness of our internal control over financial reporting and an attestation report
of our independent auditor. These laws, rules and regulations continue to evolve and could become increasingly stringent in the
future. We have undertaken actions to enhance our ability to comply with the requirements of the Sarbanes-Oxley Act, including, but
not limited to, the engagement of consultants, the documentation of existing controls and the implementation of new controls or
modification of existing controls as deemed appropriate.

We continue to devote substantial time and resources to the documentation and testing of our controls, and to plan for and the
implementation of remedial efforts in those instances where remediation is indicated. As indicated below, as of December 31, 2014,
our management determined that significant deficiencies in internal control over financial reporting constituted a material weakness. If
we fail to maintain the adequacy of our internal controls, including remediating any material weaknesses or deficiencies in our
internal controls, as such

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standards are modified, supplemented or amended in the future, we could be subject to regulatory actions, civil or criminal penalties
or shareholder litigation. In addition, failure to maintain adequate internal controls could result in financial statements that do not
accurately reflect our financial condition, results of operations and cash flows. We believe that the out-of-pocket costs, the diversion of
management’s attention from running our day-to-day operations and operational changes caused by the need to comply with the
requirements of Section 404 will continue to be significant.

There are inherent limitations in all internal control systems over financial reporting, and misstatements due to error or fraud may
occur and not be detected.

While we continue to take action to ensure compliance with the internal control, disclosure control and other requirements of the
Sarbanes-Oxley Act and the rules and regulations promulgated thereunder by the SEC, there are inherent limitations in our ability to
control all circumstances. Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that
our internal controls and disclosure controls can prevent all errors and all frauds. A control system, no matter how well conceived and
operated, can provide only reasonable assurance that the objectives of the control system are met. In addition, the design of a control
system must reflect the fact that there are resource constraints and the benefit of controls must be evaluated in relation to their costs.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control
issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-
making can be faulty and that breakdowns can occur because of simple error or mistake. Further, controls can be circumvented by
individual acts of some persons, by collusion of two or more persons, or by management override of the controls. The design of any
system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may be
inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate. Because
of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

As of December 31, 2014, our management determined that significant deficiencies in the financial reporting close process
related to the adequacy of accounting personnel and oversight, accounting for income taxes, and segregation of duties, among
others, when taken in the aggregate, constitute a material weakness in our internal control over financial reporting. If we are not able
to maintain the adequacy of our internal control over financial reporting, including any failure to implement required new or improved
controls, or if we experience difficulties in their implementation, our business, financial condition and operating results could be
harmed. We can give no assurances that any additional material weaknesses will not arise in the future due to our failure to
implement and maintain adequate internal control over financial reporting.

If we do not develop improved products and new products in a timely manner in response to industry demands, our business and
revenues will be adversely affected.

The air pollution control and filtration industry is characterized by ongoing technological developments and changing customer
requirements. As a result, our success and continued growth depend, in part, on our ability in a timely manner to develop or acquire
rights to, and successfully introduce into the marketplace, enhancements of existing products and new products that incorporate
technological advances, meet customer requirements and respond to products developed by our competition. We cannot assure you
that we will be successful in developing or acquiring such rights to products on a timely basis or that such products will adequately
address the changing needs of the marketplace.

Our business can be significantly affected by changes in technology and regulatory standards.

The air pollution control and filtration industry is characterized by changing technology, competitively imposed process

standards and regulatory requirements, each of which influences the demand for our products

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and services. Changes in legislative, regulatory or industrial requirements may render certain of our products and processes obsolete.
Acceptance of new products and services may also be affected by the adoption of new government regulations requiring stricter
standards. Our ability to anticipate changes in technology and regulatory standards and to respond with new and enhanced products
on a timely basis will be a significant factor in our ability to grow and to remain competitive. We cannot guarantee that we will be able
to achieve the technological advances that may be necessary for us to remain competitive or that certain of our products or services
will not become obsolete.

Work stoppages or similar difficulties could significantly disrupt our operations.

As of December 31, 2014, 226 of our 850 employees are represented by international or independent labor unions under
various union contracts that expire from May 1, 2015 to May 31, 2018. It is possible that our workforce will become more unionized in
the future. Although we consider our employee relations to generally be good, our existing labor agreements may not prevent a strike
or work stoppage at one or more of our facilities in the future and we may be affected by other labor disputes. A work stoppage at
one or more of our facilities may have a material adverse effect on our business. Unionization activities could also increase our costs,
which could have an adverse effect on our profitability.

Additionally, a work stoppage at one of our suppliers could adversely affect our operations if an alternative source of supply
were not readily available. Work stoppages by employees of our customers also could result in reduced demand for our products.

Liability to customers under warranties may adversely affect our reputation, our ability to obtain future business and our earnings.

We provide certain warranties as to the proper operation and conformance to specifications of the products we manufacture or

produce. Failure of our products to operate properly or to meet specifications may increase our costs by requiring additional
engineering resources and services, replacement of parts and equipment or monetary reimbursement to customers. We have in the
past received warranty claims, are currently subject to warranty claims, and we expect to continue to receive claims in the future. To
the extent that we incur substantial warranty claims in any period, our reputation, our ability to obtain future business and our
earnings could be adversely affected.

Our use of subcontractors could potentially harm our profitability and business reputation.

Occasionally we act as a prime contractor in some of the engineered projects we undertake. In our capacity as lead provider

and when acting as a subcontractor, we perform a majority of the work on our projects with our own resources and typically
subcontract only such specialized activities as electrical work, concrete work, insulation, conveyors and controls. In our industry, the
lead contractor is normally responsible for the performance of the entire contract, including subcontract work. Thus, when acting as a
prime contractor, we are subject to risk associated with the failure of one or more subcontractors to perform as anticipated.

We employ subcontractors at various locations around the world to meet our customers’ needs in a timely manner, meet local

content requirements and reduce costs. Subcontractors generally perform the majority of our manufacturing for international
customers. We also utilize subcontractors in North America. The use of subcontractors decreases our control over the performance
of these functions and could result in project delays, escalated costs and substandard quality. These risks could adversely affect our
profitability and business reputation. In addition, many of our competitors, who have greater financial resources and greater
bargaining power than we have, use the same subcontractors that we use and could potentially influence our ability to hire these
subcontractors. If we were to lose relationships with key subcontractors, our business could be adversely impacted.

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Currency fluctuations may reduce profits on our foreign sales or increase our costs, either of which could adversely affect our
financial results.

With the acquisitions of Aarding, Met-Pro, Emtrol, and Zhongli, an increasing portion of our consolidated revenues have been

and will be generated outside the United States. Consequently, we are subject to fluctuations in foreign currency exchange rates.
Translation losses resulting from currency fluctuations may adversely affect the profits from our operations and have a negative
impact on our financial results. Foreign currency fluctuations may also make our systems and products more expensive for our
customers, which could have a negative impact on our sales. In addition, we purchase some foreign-made products directly from and
through our subcontractors. Due to the multiple currencies involved in our business, foreign currency positions partially offset and are
netted against one another to reduce exposure. We cannot assure that fluctuations in foreign currency exchange rates will not make
these products more expensive to purchase. Increases in our direct or indirect cost of purchasing these products could negatively
impact our financial results if we are not able to pass those increased costs on to our customers.

We might be unable to protect our intellectual property rights and our products could infringe the intellectual property rights of
others, which could expose us to costly disputes.

Although we believe that our products do not infringe patents or violate the proprietary rights of others, it is possible that our

existing patent rights may not be valid or that infringement of existing or future patents or proprietary rights may occur. In the event
our products infringe patents or proprietary rights of others, we may be required to modify the design of our products or obtain a
license for certain technology. We cannot guarantee that we will be able to do so in a timely manner, upon acceptable terms and
conditions, or at all. Failure to do any of the foregoing could have a material adverse effect upon our business. Moreover, if our
products infringe patents or proprietary rights of others, we could, under certain circumstances, become liable for damages, which
also could have a material adverse effect on our business.

Risks related to our pension and other post-retirement plans may adversely impact our results of operations and cash flow.

Significant changes in actual investment return on pension assets, discount rates, and other factors may adversely affect our
results of operations and pension contributions in future periods. GAAP requires that we calculate income or expense for the plans
using actuarial valuations. These valuations reflect assumptions about financial markets and interest rates. We establish the discount
rate used to determine the present value of the projected and accumulated benefit obligation at the end of each year based upon the
available market rates for high quality, fixed-income investments. An increase in the discount rate would increase future pension
expense and, conversely, a decrease in the discount rate would decrease future pension expense. Funding requirements for our U.S.
pension plans may become more significant. The ultimate amounts to be contributed are dependent upon, among other things,
interest rates, underlying asset returns and the impact of legislative or regulatory changes related to pension funding obligations. For
a discussion regarding the significant assumptions used to estimate pension expense, including discount rate and the expected long-
term rate of return on plan assets, and how our financial statements can be affected by pension plan accounting policies, see “Critical
Accounting Policies” included in this Annual Report on Form 10-K in “Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations.”

Increased information technology security threats and more sophisticated and targeted computer crime could pose a risk to our
systems, networks, and products.

Increased global information technology security threats and more sophisticated and targeted computer crime pose a risk to the

security of our systems and networks and the confidentiality, availability and integrity of our data and communications. While we
attempt to mitigate these risks by employing a number of measures, including employee training, comprehensive monitoring of our
networks and systems, and maintenance of

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backup and protective systems, our systems, networks and products remain potentially vulnerable to advanced persistent threats.
Depending on their nature and scope, such threats could potentially lead to the compromising of confidential information and
communications, improper use of our systems and networks, manipulation and destruction of data, defective products, production
downtimes and operational disruptions, which in turn could adversely affect our reputation, competitiveness and results of operations.

Risks Related to Our Common Stock

The market price of our common stock may be volatile or may decline regardless of our operating performance and investors may
not be able to resell shares they purchase at their purchase price.

The stock market has experienced and may in the future experience volatility that has often been unrelated to the operating
performance of particular companies. The market price of our common stock has experienced, and may continue to experience,
substantial volatility. During the twelve-month period ended December 31, 2014, the sales price of our common stock on the
NASDAQ has ranged from a low of $12.40 to a high of $18.90 per share. We expect our common stock to continue to be subject to
fluctuations. Broad market and industry factors may adversely affect the market price of our common stock, regardless of our actual
operating performance. Factors that could cause fluctuation in the common stock price may include, among other things:

•

actual or anticipated variations in quarterly operating results;

adverse general economic conditions, including, but not limited to, withdrawals of investments in the stock markets

generally or a tightening of credit available to potential acquirers of businesses, that result in a lower average prices being
paid for public company shares and lower valuations being placed on businesses;

other domestic and international macroeconomic factors unrelated to our performance;

our failure to meet the expectations of the investment community;

industry trends and the business success of our customers;

loss of key customers;

announcements of technological advances by us or our competitors;

current events affecting the political and economic environment in the United States;

conditions or trends in our industry, including demand for our products and services, technological advances and

governmental regulations;

litigation or other proceedings involving or affecting us; and

additions or departures of our key personnel.

The realization of any of these risks and other factors beyond our control could cause the market price of our common stock to

decline significantly.

The number of shares of our common stock eligible for future sale could adversely affect the market price of our stock.

We have reserved 2.6 million shares of our common stock for issuance under our 2007 Equity Incentive Plan (the “2007 Plan”),

which may include option grants, stock grants and restricted stock grants. As of December 31, 2014, approximately 2.3 million options
or shares of restricted stock have been issued under the 2007 Plan. Icarus, an affiliate of ours, also owns warrants to purchase
250,000 shares of common stock that have piggy-back rights granting it the right to require that we register such shares in the event
we file any registration statements in the future.

We had outstanding options to purchase approximately 80,000 shares of our common stock as of December 31, 2014 under our

1997 Stock Option Plan and outstanding options to purchase approximately

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1,647,000 shares of our common stock under our 2007 plan. The shares under both plans are registered for resale on currently
effective registration statements.

We may issue additional restricted securities or register additional shares of common stock under the Securities Act in the

future. The issuance of a significant number of shares of common stock upon the exercise of stock options or warrants, or the
availability for sale, or resale, of a substantial number of the shares of common stock under registration statements, under Rule 144 or
otherwise, could adversely affect the market price of our common stock.

One or more issuances of shares of our common stock under our stock incentive plan or securities in connection with financing
transactions or the conversion of warrants will dilute current shareholders.

Pursuant to our stock incentive plan, we may grant stock awards to our employees, directors and consultants. Dilution will occur

upon exercise of any outstanding stock awards convertible into or exchangeable or exercisable for common stock. Moreover, if we
raise additional funds by issuing additional common stock, or securities, further dilution to our existing shareholders will result. In
addition, we have historically issued warrants to purchase common shares in conjunction with business acquisitions, debt issuances
and employment contracts, of which 250,000 warrants are currently outstanding, which may cause dilution when exercised.

Our ability to issue preferred stock could adversely affect the rights of holders of our common stock.

Our certificate of incorporation authorizes us to issue up to 10,000 shares of preferred stock in one or more series on terms that

may be determined at the time of issuance by our board of directors. Accordingly, we may issue shares of any series of preferred
stock that would rank senior to our common stock as to voting or dividend rights or rights upon our liquidation, dissolution or winding
up.

Certain provisions in our charter documents have anti-takeover effects.

Certain provisions of our certificate of incorporation and bylaws may have the effect of delaying, deferring or preventing a

change in control of us. Such provisions, including those limiting who may call special shareholders’ meetings, together with the
possible issuance of our preferred stock without shareholder approval, may make it more difficult for other persons, without the
approval of our board of directors, to make a tender offer or otherwise acquire substantial amounts of our common stock or to launch
other takeover attempts that a shareholder might consider to be in such shareholder’s best interest.

Item 1B. Unresolved Staff Comments

Not Applicable.

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Item 2.

Properties

The following facilities were owned or leased by the Company as of December 31, 2014.

Owned and Leased Locations
Air Pollution Control Segment:
Anaheim, California
Glendale Heights, Illinois
Owosso, Michigan
Louisville, Kentucky
Louisville, Kentucky
Lebanon, Pennsylvania
Pittsburgh, Pennsylvania
Columbia, Tennessee
Shanghai, China
Pune, India
Islandia, New York
Cambridgeshire, United Kingdom
Shanghai, People’s Republic of China
Ontario, California
Adelanto, California
Louisville, Kentucky
Cincinnati, Ohio (a)
Salt Lake City, Utah
Greensboro, North Carolina

Energy Segment:

Moorpark, California
Ventura, California
Cincinnati, Ohio
Nunspeet, the Netherlands
JiangYin City, People’s Republic of China
Montreal, Canada

Fluid Handling and Filtration Segment:

Telford, Pennsylvania
Indianapolis, Indiana
Heerenveen, the Netherlands
Guangzhou, People’s Republic of China
Hatfield, Pennsylvania
Waukegan, Illinois

Corporate offices:

Cincinnati, Ohio (b)
Toronto, Canada
Wayne, Pennsylvania

Type

Square Footage

Annual Rent

Expiration

Mfg.
Mfg.
Mfg.
Mfg.
Mfg.
Sales
Sales
Mfg.
Mfg.
Sales
Sales
Sales
Sales
Sales
Mfg.
Sales
Mfg.
Mfg.
Mfg.

Mfg.
Sales
Mfg.
Mfg.
Mfg.
Sales

Mfg.
Mfg.
Mfg.
Mfg.
Mfg.
Mfg.

Admin.
Admin.
Admin.

17,200
20,000
63,000
61,095
35,000
4,221
4,000
34,800
40,000
678
8,178
1,600
2,475
2,453
17,125
5,450
53,210
13,600
30,000

4,300
1,281
96,400
58,125
181,447
3,514

93,500
66,000
34,000
17,168
31,000
22,000

$ 247,000
$ 73,000
Owned
$ 126,000
Owned
$ 57,000
$ 64,000
$ 127,000
$ 209,000
$
7,000
$ 172,000
$ 132,000
$ 35,000
$ 14,000
$ 90,000
$ 54,000
$ 199,000
$ 46,000
$ 104,000

$ 52,000
$ 15,000
$ 313,000
$ 402,000
$ 624,000
$ 34,000

Owned
Owned
Owned
$ 53,000
Owned
Owned

December 2016
November 2015
Held for Sale
February 2018

November 2019
May 2015
August 2015
March 2016
March 2017
October, 2019
June, 2016
May, 2015
April, 2015
March, 2017
November, 2019
April 2018
April 2015
August 2018

April 2015
April 2017
November 2026
December 2016
December 2018
October 2017

July 2015
Held for Sale
Held for Sale

7,000
4,000
2,600

$ 101,000
$ 181,000
$ 35,000

June 2016
August 2018
June 2019

(a)
(b)

Location is also used by Kirk and Blum as a sales office.
Location is also used by Kirk and Blum as a management office.

It is anticipated that most leases coming due in the near future will be renewed at expiration. The property we own is subject to
collateral mortgages to secure the amounts owed under the Credit Agreement. Our current capacity, with limited capital additions, is
expected to be sufficient to meet production requirements for the near future. We believe our production facilities are suitable and can
meet our future production needs.

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Item 3.

Legal Proceedings

See Note 12 “Commitments and Contingencies – Legal Proceedings” to the Consolidated Financial Statements contained in

Part II, Item 8 of this Annual Report on Form 10-K for information regarding legal proceedings in which we are involved.

Item 4.

Mine Safety Disclosures

Not applicable.

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PART II

Item 5.

Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities

Market Information

Our common stock is traded on the NASDAQ under the symbol “CECE.” The following table sets forth the high and low sales

prices of our common stock as reported by the NASDAQ during the periods indicated.

2014

2013

4
Qtr.

3
Qtr.

$15.90 $16.00
13.38

12.40

2
Qtr.
$17.29
13.02

1
Qtr.
$18.90
14.22

4
Qtr.
$19.42
13.91

3
Qtr.
$14.16
11.81

2
Qtr.
$13.18
10.44

1
Qtr.
$14.32
9.92

High
Low

Performance Graph

The following graph sets forth the cumulative total return to CECO’s shareholders during the five years ended December 31,

2014, as well as the following indices: Russell 2000 Index, Standard and Poor’s (“S&P”) 600 Small Cap Industrial Machinery Index,
and S&P 500 Index. Assumes $100 was invested on December 31, 2009, including the reinvestment of dividends, in each category.

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Dividends

Our dividend policy and the payment of cash dividends under that policy are subject to the Board of Director’s continuing
determination that the dividend policy and the declaration of dividends are in the best interest of our shareholders. Future dividends
and the dividend policy may be changed or cancelled at the Board of Director’s discretion at any time. Payment of dividends is also
subject to the continuing compliance with our financial covenants under our Credit Agreement. During 2014 and 2013, our Board of
Directors declared the following quarterly cash dividends on our common stock:

Dividend
Per Share

$0.060
$0.060
$0.060
$0.050
$0.050
$0.050
$0.050
$0.050

Record Date

Payment Date

December 19, 2014
September 16, 2014
June 13, 2014
March 19, 2014
December 17, 2013
September 16, 2013
June 14, 2013
March 18, 2013

December 30, 2014
September 30, 2014
June 27, 2014
March 31, 2014
December 31, 2013
September 30, 2013
June 28, 2013
March 28, 2013

On March 4, 2015, our Board of Directors declared a quarterly dividend of $0.066 per share. The dividend will be paid on

March 31, 2015 to all shareholders of record at the close of business on March 19, 2015.

Holders

The approximate number of registered shareholders of record of our common stock as of March 4, 2015 was 373, although

there are a larger number of beneficial owners.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

We did not repurchase any shares of our common stock during the fourth quarter of 2014.

Recent Sales of Unregistered Securities

In connection with our acquisition of Emtrol, on November 3, 2014, the Company issued 453,858 shares of common stock with

an agreed upon value of $6 million (based on the average closing price of the Company’s common stock on the NASDAQ for the
preceeding thirty trading days) to each of the members of Emtrol as part of the total consideration for the purchase of the membership
interests of Emtrol. The fair value of the shares issued was $5.8 million, which reflects the closing price of the Company’s common
stock on the closing date of the acquisitions, adjusted for certain trading restrictions placed on the common stock issued. The shares
were issued in reliance on an exemption from the registration requirements of the Securities Act, provided by Section 4(a)(2) of the
Securities Act as a private offering. Such issuance did not involve a public offering, and was made without general solicitation or
advertising. In addition to compliance with securities laws, sales of these shares are subject to restricted stock agreements with each
of the members of Emtrol.

In connection with our acquisition of HEE on August 13, 2014, the Company issued 34,626 shares to the sellers of HEE as a
part of the purchase price consideration. The fair value of the shares issued was $0.5 million, which reflects the closing price of the
Company’s common stock on the closing date of the acquisition. The shares were issued in reliance on an exemption from the
registration requirements of the Securities Act, provided by Section 4(a)(2) of the Securities Act as a private offering. Such issuance
did not involve a public offering, and was made without general solicitation or advertising. In addition to compliance with securities
laws, sales of these shares are subject to restricted stock agreements with each of the sellers of HEE.

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Item 6.

Selected Financial Data

(In thousands, except per share data)

Net sales
Gross profit
Income from continuing operations
Net income
Basic earnings per common share
Diluted earnings per common share
Weighted average shares outstanding –

2014
263,217
84,823
21,663
13,077
0.51
0.50

$
$

2013
197,317
61,555
6,972
6,557
0.33
0.32

Year Ended December 31,
2012
135,052
42,443
16,683
10,850
0.73
0.65

$
$

2011
139,192
38,168
11,723
8,272
0.58
0.51

$
$

2010
140,602
32,653
3,676
2,105
0.15
0.15

$
$

basic

25,750,972

20,116,991

14,813,186

14,386,410

14,308,130

Weighted average shares outstanding –

diluted

Dividends declared per common share
Dividends paid
Working capital:
Total assets
Short-term debt
Long-term debt (1)
Shareholders’ equity

26,196,901
0.23
$
5,937

20,719,951
0.20
$
4,337

17,246,058
0.16
$
2,460

17,115,284
0.05
$
728

17,102,357
—
—

414,365
8,887
103,541
181,224

349,210
9,922
79,160
170,406

94,104
—
—
61,994

79,345
—
9,600
42,990

74,791
—
10,800
35,174

(1)

Long-term debt as of December 31, 2011 and 2010 consisted of convertible subordinated notes, including $3,950 to related
parties for both periods.

Results of operations from acquired businesses are included from the date of acquisition forward. The fair value of assets and
liabilities, inclusive of changes resulting from operating the businesses, are included in the first period ended after the date of each
acquisition, and all periods thereafter. Acquisitions consist of the following: i) Adwest in December 2012, ii) Aarding in March 2013, iii)
Met-Pro in August 2013, iv) HEE in August 2014, v) SAT in September 2014, vi) Emtrol in November 2014 and vii) Zhongli in
December 2014.

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Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s discussion and analysis should be read in conjunction with the consolidated financial statements and
accompanying notes included in Item 8 of this Annual Report on Form 10-K, which include additional information about our
accounting policies, practices and the transactions underlying our financial results. The preparation of our consolidated financial
statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts in our
consolidated financial statements and the accompanying notes including various claims and contingencies related to lawsuits, taxes,
environmental and other matters arising during the normal course of business. We apply our best judgment, our knowledge of
existing facts and circumstances and actions that we may undertake in the future in determining the estimates that affect our
consolidated financial statements. We evaluate our estimates on an ongoing basis using our historical experience, as well as other
factors we believe appropriate under the circumstances, such as current economic conditions, and adjust or revise our estimates as
circumstances change. As future events and their effects cannot be determined with precision, actual results may differ from these
estimates.

Overview

Business Overview

We are a leading global environmental technology company focused on critical solutions in the product recovery, air pollution

control, fluid handling and filtration segments. Through our well-known brands including the “Effox-Flextor,” “Kirk & Blum,” “KB Duct,”
“Fisher-Klosterman,” “Emtrol-Buell,” “FKI,” “AVC,” “Busch International,” “CECO Filters,” “Adwest,” “Aarding,” “HEE-Duall,” “Flex-
Kleen,” “Bio-Reaction,” “Dean Pump,” “Fybroc,” “Sethco,” “Mefiag Filtration,” “Keystone Filter,” “Strobic Air”, “Sat Technology” and
“Zhongli” tradenames; we provide a wide spectrum of products and services including dampers & diverters, cyclonic technology,
thermal oxidizers, filtration systems, scrubbers, exhaust systems, fluid handling equipment and plant engineered services and
engineered design build fabrication. These products play a vital role in helping companies achieve exacting production standards,
meeting increasing plant needs and stringent emissions control regulations around the globe. We believe that globally we serve the
broadest range of markets and industries including power, municipalities, chemical, industrial manufacturing, refining, petrochemical,
metals, minerals & mining, hospitals and universities. 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.

Industry Trends and Corporate Strategy

We believe 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 positioned to benefit from 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. 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.

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Recent Developments

On December 15, 2014, the Company acquired 100% of the equity interests of Zhongli for $7.0 million in cash. As additional

consideration, the former owners are entitled to earn-out payments based upon a multiple of specified financial results through
December 31, 2017. There is no maximum amount of earn-out, under the terms of the Framework Agreement. Based on projections
at the acquisition date, the Company estimated the fair value of the earn-out to be $17.1 million. Zhongli is a designer and
manufacturer of power industry damper, diverter and ball mill systems in China, which complements our Energy Segment businesses.

On November 3, 2014, the Company acquired 100% of the membership interests of Emtrol. The Company paid cash at closing

of $31.9 million, which was financed with borrowing under our Credit Agreement. The Company also issued 453,858 shares of the
Company’s common stock with an agreed upon value of $6.0 million computed based on the average closing price of the Company’s
common stock for the thirty trading days immediately preceding the acquisition date. The shares of common stock issued to the
former members contain restrictions on sale or transfer for periods ranging from one to two years from the acquisition date.
Accordingly, the preliminary fair value of the common stock issued has been determined to be $5.8 million, which reflects the
estimated fair value of the shares based on the closing price of the Company’s common stock on the acquisition date and a discount
related to the sale and transfer restrictions. Emtrol is engaged in the business of designing and manufacturing of fluid catalytic
cracking and industrial cyclone technology for a variety of industries including the refinery, petrochemical, and chemical sectors,
which complements our Air Pollution Control Segment businesses.

On September 26, 2014, the Company acquired 100% of the stock of SAT for $1.4 million in cash. The Company is holding

back $0.2 million of this cash until certain working capital requirements are determined to be met, as defined in the agreement. As
additional consideration, the former owners are entitled to earn-out payments upon the achievement of specified financial results
through September 30, 2017. Based on projections at the acquisition date, the Company estimated the fair value of the earn-out to be
$1.0 million, which is the maximum amount of the earnout. SAT is a provider of Volatile Organic Compounds abatement solutions for
the Chinese air pollution control market, which complements our Air Pollution Control Segment businesses.

On August 13, 2014, the Company acquired certain assets and liabilities of HEE for $7.0 million in cash. The Company also
issued 34,626 shares of the Company’s common stock with an agreed upon value of $0.5 million computed based on the average
closing price of the Company’s common stock for the thirty trading days immediately preceding the acquisition date. The shares of
common stock issued to the former owners contain restrictions on sale or transfer for a period of six months from the acquisition date.
Accordingly, the preliminary fair value of the common stock issued has been determined to be $0.5 million, which reflects the
estimated fair value of the shares based on the closing price of the Company’s common stock on the acquisition date and a discount
related to the sale and transfer restrictions. As additional consideration, the former owners are entitled to earn-out payments upon the
achievement of specified financial results through July 31, 2017. Based on projections at the acquisition date, the Company estimated
the fair value of the earn-out to be $2.0 million, which is the maximum amount of the earnout. HEE is a North American designer and
manufacturer of scrubbers and fans for the air pollution control market, which complements our Air Pollution Control Segment
businesses.

Effective January 1, 2014, CECO implemented an internal reorganization which resulted in CECO reporting its results in three

reportable segments:

•

Air Pollution Control Segment, product recovery and air pollution control technologies, comprised of the following:

Adwest, HEE-Duall Air and Odor Technologies, Busch International, Emtrol-Buell Energy Cyclones, Flex-Kleen Dust
Collection Technologies, Fisher-Klosterman, Kirk & Blum, KB Duct and SAT Technology.

•

Energy Segment, customized solutions for the power and petrochemical industry, comprised of the following:

Aarding Thermal Acoustics, Effox-Flextor, AVC Specialists, Inc. and Zhongli.

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•

Fluid Handling and Filtration Segment, high quality pump, filtration and fume exhaust solutions, comprised of the

following:

Met-Pro Global Pump Solutions, Mefiag Filtration Solutions, Keystone Filtration Solutions, CECO Filters and Strobic Air
Corporation.

The financial information presented in this Annual Report on Form 10-K incorporates the change in the composition of the

Company’s reportable segments as a result of the segment reorganization effective January 1, 2014.

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, purchasing, safety,
employee development, and customer service excellence. The presidents work closely with our 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 excellent organizational focus from headquarters throughout our divisional businesses with clarity and minimal duplicative
work streams. We are structured for growth and will do future bolt-on acquisitions.

Our three reportable segments are: the Air Pollution Control Segment (“APC”), which produces various types product recovery

and air pollution control technologies, the Energy Segment, which produces customized solutions for the power and petrochemical
industry, and the Fluid Handling and Filtration Segment (“FHF”), which produces high quality pump, filtration and fume exhaust
solutions. 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.

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 cost of sales is principally driven by a number of factors including material prices and labor cost and availability. Changes in

these factors may have a material impact on our overall gross profit margins. For example, in larger contracts, we may incur sub-
contract work or direct equipment purchases, which may only be marked-up to a limited extent and consequently, the gross margins
of the Company are affected. However, profitability is enhanced through the absorption of fixed operating costs, including selling,
general and administrative and factory overhead.

We break down costs of sales into five categories. They are:

•

Labor—Our direct labor both in the shop and in the field;

Material—Raw material that we buy to build our products;

Equipment—Fans, motors, control panels and other equipment necessary for turnkey systems;

Subcontracts—Electrical work, concrete work and other subcontracts necessary to produce our products;

Factory overhead—Costs of facilities and supervision wages necessary to produce our products.

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In general, labor provides us the most flexibility in margin followed by material and equipment and subcontracts. Across our
various product lines, the relative relationships of these factors change and cause variations in gross margin percentage. Material
costs have also increased faster than labor costs, which also reduces gross margin percentage.

Selling and administrative expense principally includes sales payroll and related fringes, advertising and marketing expenditures
as well as all corporate and administrative functions and other costs that support our operations. The majority of these expenses are
fixed. We expect to leverage our fixed operating structure as we continue to grow our revenue.

Note Regarding Use of Non-GAAP Financial Measures

The Company’s audited consolidated financial statements are prepared in accordance with GAAP. These GAAP financial

statements include certain charges the Company believes are not indicative of its ongoing operational performance.

As a result, the Company provides financial information in this MD&A that was not prepared in accordance with GAAP and

should not be considered as an alternative to the information prepared in accordance with GAAP. The Company provides this
supplemental non-GAAP financial information, which the Company’s management utilizes to evaluate its ongoing financial
performance, and which the Company believes provides greater transparency to investors as supplemental information to its GAAP
results.

The Company has provided the non-GAAP financial measures of non-GAAP gross profit and gross profit margin, non-GAAP
operating income, non-GAAP operating margin, and non-GAAP net income as a result of items that the Company believes are not
indicative of its ongoing operations. These include charges associated with the Company’s acquisition and integration of Adwest,
Aarding, Met-Pro, HEE, SAT, Emtrol, and Zhongli and the items described below in “Consolidated Results.” The Company believes
that evaluation of its financial performance compared with prior and future periods can be enhanced by a presentation of results that
exclude the impact of these items. As a result of the Company’s recently completed acquisitions, the Company has incurred and
expects to continue to incur substantial charges associated with the acquisition and integration of these companies. While the
Company cannot predict the exact timing or amounts of such charges, it does expect to treat these charges as special items in its
future presentation of non-GAAP results. See Note 16 to the audited consolidated financial statements for further information on the
Company’s recently completed acquisitions.

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Results of Operations

Consolidated Results

Our consolidated statements of income for the years ended December 31, 2014, 2013 and 2012 are as follows:

($ in millions)
Net sales
Cost of goods sold

Gross profit

Percent of sales
Selling and administrative
Percent of sales

Acquisition and integration expense

Percent of sales

Amortization and earn out expenses

Percent of sales

Legal reserves

Percent of sales

Operating income

Percent of sales

2014
$263.2
178.4

$ 84.8
32.2%
$ 51.4
19.5%
1.3
$
0.5%

$ 10.1

3.9%
0.3
0.1%

$ 21.7

8.2%

Year ended
December 31,

2013
$197.3
135.8

$ 61.5
31.2%
$ 37.1
18.8%
7.2
$
3.6%
6.7
3.4%
3.5
1.8%
7.0
3.5%

2012
$135.1
92.7

$ 42.4
31.4%
$ 25.4
18.8%
$ —
—
0.3
$
0.2%

$ —
—
$ 16.7
12.4%

On March 5, 2015, the Company filed a Current Report on Form 8-K with the Securities and Exchange Commission that
included an earnings release issued that same day reporting results for the fourth quarter of 2014, which was furnished as Exhibit
99.1 thereto (the Earnings Release). Between the issuance of the Earnings Release and the filing of this Annual Report on Form 10-
K, the Company became aware of additional new information affecting its earlier estimates and assumptions. As a result, the
Company recorded an income tax benefit of $0.7 million resulting in a decrease to overall tax expense and recorded a legal reserve,
workers compensation and general administrative expenses of $0.7 million resulting in a decrease to income from operations and
income before taxes for the year ended December 31, 2014. The net impact of these two adjustments had no impact on Net Income
or Diluted Earnings per share as initially reported for the year ended December 31, 2014.

To compare operating performance between the years ended December 31, 2014, 2013 and 2012, the Company has adjusted

GAAP operating income and GAAP net income to exclude (1) acquisition and integration related expenses, including legal,
accounting, and banking expenses, (2) amortization and contingent acquisition expenses, including amortization of acquisition related
intangibles, retention, severance, and earn-out expenses, (3) legal reserves, (4) inventory valuation and plant, property and
equipment valuation adjustments related to the Met-Pro acquisition, (5) foreign currency remeasurement with respect to intercompany
loans, and (5) with respect to net income, associated tax benefits of these charges. The Company has adjusted GAAP gross profit to
exclude inventory valuation and plant, property and equipment valuation adjustments related to the Met-Pro acquisition. See “Note
Regarding Use of Non-GAAP Financial Measures” above. The following tables present the reconciliation of GAAP gross profit and
GAAP gross margin to non-GAAP gross profit and non-GAAP gross profit margin, GAAP operating income and GAAP operating
margin to non-GAAP operating income and non-GAAP operating margin, and GAAP net income to non-GAAP net income:

(dollars in millions)
Gross profit as reported in accordance with GAAP
Gross profit margin in accordance with GAAP

Inventory valuation adjustment
Plant, property and equipment valuation adjustment

Non-GAAP gross profit

Non-GAAP Gross profit margin

2014
$ 84.8

32.2%

—
0.6

$ 85.4

32.4%

Year Ended December 31,
2013
$ 61.6

31.2%
1.1
0.2

$ 62.9

31.9%

2012
$ 42.4

31.4%

—
—

$ 42.4

31.4%

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(dollars in millions)
Operating income as reported in accordance with GAAP
Operating margin in accordance with GAAP
Inventory valuation adjustment
Plant, property and equipment valuation adjustment
Acquisition and integration expenses
Amortization and earn out expenses
Legal reserves

Non-GAAP operating income

Non-GAAP Operating margin

(dollars in millions)
Net income as reported in accordance with GAAP

Inventory valuation adjustment
Plant, property and equipment valuation adjustment
Acquisition and integration expenses
Amortization and earn out expenses
Legal reserves
Foreign currency remeasurement
Tax benefit of expenses

Non-GAAP net income

2014
$ 21.7

8.2%

—
0.6
1.3
10.1
0.3

$ 34.0

12.9%

Year Ended December 31,
2013
7.0
$
3.5%
1.1
0.2
7.2
6.8
3.5

$ 25.8

13.1%

Year Ended December 31,

2014
$ 13.1
—
0.6
1.3
10.1
0.3
2.9
(3.7)

$ 24.6

2013
6.6
$
1.1
0.2
7.2
6.8
3.5
(1.1)
(4.6)

$ 19.7

2012
$ 16.7

12.4%

—
—
—
0.3
—

$ 17.0

12.6%

2012
$ 10.9
—
—
—
0.3
—
—
(0.1)

$ 11.1

Comparison of the years ended December 31, 2014 and 2013

Consolidated sales in 2014 were $263.2 million compared with $197.3 million in 2013, an increase of $65.9 million. The

increase in sales was due to the acquisitions of Aarding at the end of February 2013, Met-Pro at the end of August 2013, HEE in mid-
August 2014, SAT at the end of September 2014, and Emtrol at the beginning of November 2014. These acquisitions aggregated to
an additional $71.6 million of sales in 2014, which was the primary reason for the increase in sales.

Gross profit increased by $23.2 million, or 37.7%, to $84.8 million in 2014 compared with $61.6 million in 2013. Gross profit as a
percentage of sales was 32.2% in 2014 compared with 31.2% in 2013. The increase gross profit was the result of the aforementioned
acquisitions. On a non-GAAP basis as adjusted for the non-GAAP items discussed above, non-GAAP gross profit was $85.4 million or
32.4% as a percentage of sales for 2014, an increase of $22.5 million compared with non-GAAP gross margin of $62.9 million or
31.9% as a percentage of sales in 2013.

Selling and administrative expenses were $51.4 million in 2014 compared with $37.1 million in 2013. The increase in selling and

administrative expenses were the result of the aforementioned acquisitions.

Acquisition and integration expenses of $1.3 million in 2014 and $7.2 million in 2013 relate to acquisition activities, which include

legal, accounting, and banking expenses.

Amortization and earnout expense was $10.1 million in 2014 and $6.8 million in 2013. This increase was the result of the

aforementioned acquisitions.

Legal reserves of $0.3 million in 2014 relate to the settlement of the Valero lawsuit. Legal reserves of $3.5 million in 2013 relate

to the settlement of the Sheet Workers’ Local Union No. 80 claim. See Note 12 to our consolidated financial statements for more
information.

Operating income for 2014 was $21.7 million, an increase of $14.7 million from $7.0 million in 2013. Operating income as a

percentage of sales for 2014 was 8.2% compared with 3.5% for 2013. The increase in

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operating income was attributable to the aforementioned acquisitions. On a non-GAAP basis as adjusted for the non-GAAP items
discussed above, non-GAAP operating income was $34.0 million for 2014, an increase of $8.2 million from 2013. Non-GAAP
operating income as a percentage of sales for 2014 was 12.9% compared with 13.1% for 2013, which is essentially flat year over
year.

Other (expense) income for 2014 was $(2.3) million compared with $1.0 million in 2013, and was comprised of foreign currency

transaction losses in 2014 and foreign currency transaction gains in 2013. The expense in 2014 and income in 2013 is primarily
attributable to a translation remeasurement on U.S. Dollar denominated intercompany debt at Aarding.

Interest expense increased to $3.1 million in 2014 from $1.5 million in 2013, due to higher debt levels in 2014, which debt was

incurred in connection with the Met-Pro and Emtrol acquisitions.

Income tax expense (benefit) was $3.1 million in 2014 compared to $(0.1) million in 2013. The effective tax rate for 2014 was

19.3% compared with (1.6)% in 2013. Included in the income tax provision calculation for 2013 is a $2.4 million tax benefit, net of
related uncertain tax position reserves, for research and development income tax credits earned during 2009 through 2013. This
credit was not factored in the 2012 tax provision because it was not evaluated until 2013. Along with the tax benefit of research and
development income tax credits, the effective tax rate is beneficially impacted by the domestic production activities deduction, offset
by nondeductible deal costs related to the Met-Pro acquisition.

Comparison of the years ended December 31, 2013 and 2012

Consolidated sales in 2013 were $197.3 million compared with $135.1 million in 2012, an increase of $62.2 million. The
increase in sales was due to the acquisitions of Adwest at the end of 2012, Aarding at the end of February 2013 and Met-Pro at the
end of August 2013. These acquisitions aggregated to $68.1 million of sales in 2013, and were partially offset by a decrease in the
Kirk and Blum business in 2013 compared with 2012.

Gross profit increased by $19.1 million, or 45.0%, to $61.6 million in 2013 compared with $42.4 million in 2012. Gross profit as a

percentage of sales was 31.2% in 2013 compared with 31.4% in 2012. The increase gross profit was the result of the Adwest,
Aarding and Met-Pro acquisitions. On a non-GAAP basis as adjusted for the non-GAAP items discussed above, non-GAAP gross
profit was $62.9 million or 31.9% as a percentage of sales in 2013, an increase of $20.5 million compared with non-GAAP gross
margin of $42.4 million or 31.4% as a percentage of sales in 2012.

Selling and administrative expenses were $37.1 million in 2013 compared with $25.4 million in 2012. The increase in selling and

administrative expenses were the result of the Adwest, Aarding and Met-Pro acquisitions.

Acquisition and integration expenses of $7.2 million in 2013 relate to acquisition activities, which include legal, accounting, and

banking expenses.

Amortization and earnout expense was $6.8 million in 2013 and $0.3 million in 2012. This increase was the result of the Aarding

and Met-Pro acquisitions.

Legal reserves of $3.5 million in 2013 relate to the settlement of the Sheet Workers’ Local Union No. 80 claim.

Operating income for 2013 was $7.0 million, a decrease of $9.7 million from $16.7 million in 2012. Operating income as a

percentage of sales for 2013 was 3.5% compared with 12.4% for 2012. The decrease in operating income was attributable to
acquisition and integration expenses, amortization and earn-out expenses and legal reserves. On a non-GAAP basis as adjusted for
the non-GAAP items discussed above, non-GAAP operating income was $25.8 million for 2013, an increase of $8.8 million from 2012.
Non-GAAP operating income as a percentage of sales for 2013 was 13.1% compared with 12.6% for 2012. Improved margins,
changes in product mix, and manufacturing improvements were the primary factors for the increases in operating income and
operating margin percentages.

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Other income (expense) for 2013 was $1.0 million compared with $(0.2) million in 2012, and was comprised of foreign currency

transaction gains in 2013 as compared with foreign currency losses in 2012. The increase in 2013 is primarily attributable to a
translation remeasurement gain on U.S. Dollar denominated intercompany debt at Aarding.

Interest expense increased to $1.5 million in 2013 from $1.2 million in 2012, due to higher debt levels in 2013, which debt was

incurred in connection with the Met-Pro acquisition.

Income tax (benefit) expense was ($0.1) million in 2013 compared to $4.5 million in 2012. The effective tax rate for 2013 was

(1.6)% compared with 29.4% in 2012. Included in the income tax provision calculation for 2013 is a $2.4 million tax benefit, net of
related uncertain tax position reserves, for research and development income tax credits earned during 2009 through 2013. This
credit was not factored in the 2012 tax provision because it was not evaluated until 2013. Along with the tax benefit of research and
development income tax credits, the effective tax rate is beneficially impacted by the domestic production activities deduction, offset
by nondeductible deal costs related to the Met-Pro acquisition.

Business Segments

The Company’s operations in 2014, 2013 and 2012 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 Consolidated 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.

Net Sales (less intra-, inter-segment sales)

Air Pollution Control Segment
Energy Segment
Fluid Handling and Filtration Segment
Corporate and Other (1)

Net sales

(1)

Includes adjustment for revenue on intercompany jobs.

Income (Loss) from Operations

Air Pollution Control Segment
Energy Segment
Fluid Handling and Filtration Segment
Corporate and Other (2)
Eliminations

Income from operations

2014

2013

2012

$127,707
70,285
65,638
(413)

$101,150
69,355
25,199
1,613

$ 88,582
40,194
6,191
85

$263,217

$197,317

$135,052

2014

2013

2012

$ 16,803
7,799
13,188
(14,297)
(1,830)

$ 15,422
9,336
1,443
(17,756)
(1,473)

$14,635
7,574
998
(6,460)
(64)

$ 21,663

$ 6,972

$16,683

(2)

Includes corporate compensation, professional services, information technology, acquisition and integration expenses, and
other general and administrative corporate expenses.

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Comparison of the years ended December 31, 2014 and 2013

Air Pollution Control Segment

Our APC segment net sales increased $26.6 million to $127.7 million in the year ended December 31, 2014 compared with
$101.2 million in the year ended December 31, 2013, an increase of 26.3%. The increase is primarily due to the Met-Pro and Emtrol
acquisitions, which accounted for an additional $17.1 million and $9.8 million in net sales, respectively, for the year ended
December 31, 2014.

Operating income from the APC segment increased $1.4 million to $16.8 million for the year ended December 31, 2014

compared with $15.4 million in the year ended December 31, 2013, an increase of 9.0%. The increase was due in part to the Met-Pro
and Emtrol acquisitions, which accounted for an additional $3.1 million and $1.2 million, respectively, for the year ended
December 31, 2014. We also benefited from increased operating income at Adwest of $2.0 million due to increased volume. There
were offsetting decreases at the FKI and Kirk & Blum operations of $2.3 million and $2.6 million, respectively.

Energy Segment

Our Energy segment net sales increased $0.9 million to $70.3 million in the year ended December 31, 2014 compared with
$69.4 million in the year ended December 31, 2013, an increase of 1.3%. There were no major changes in operations in 2014, as
such net sales were essentially flat.

Operating income from the Energy segment decreased $1.5 million to $7.8 million for the year ended December 31, 2014
compared with $9.3 million in the year ended December 31, 2013, a decrease of 16.1%. The decrease was due in part to a decline in
overall margins.

Fluid Handling and Filtration Segment

Our FHF segment net sales increased $40.4 million to $65.6 million in the year ended December 31, 2014 compared with $25.2
million in the year ended December 31, 2013, an increase of 160.3%. The increase is primarily due to the Met-Pro acquisition, which
accounted for an additional $39.3 million in net sales for the year ended December 31, 2014. The remaining $1.1 million increase
was due to an increase in the CECO Filters operations.

Operating income from the FHF segment increased $11.8 million to $13.2 million for the year ended December 31, 2014
compared with $1.4 million in the year ended December 31, 2013. The increase was due primarily to the Met-Pro acquisition, which
accounted for and additional $10.9 million for the year ended December 31, 2014. The remaining $0.9 million increase was due to an
increase in the CECO Filters operations.

Comparison of the years ended December 31, 2013 and 2012

Air Pollution Control Segment

Our APC segment net sales increased $12.6 million to $101.2 million in the year ended December 31, 2013 compared with
$88.6 million in the year ended December 31, 2012, an increase of 14.2%. The increase is primarily due to the Met-Pro and Adwest
acquisitions, which accounted for an additional $9.0 million and $9.5 million in net sales, respectively, for the year ended
December 31, 2013. These increases were offset by a decrease of $6.0 million in our contracting business driven primarily jobs that
were delayed or cancelled in 2013.

Operating income from the APC segment increased $0.8 million to $15.4 million for the year ended December 31, 2013

compared with $14.6 million in the year ended December 31, 2012, an increase of 5.5%. The increase was due in part to the Met-Pro
and Adwest acquisitions, which accounted for an additional $1.4 million and $0.4 million, respectively, for the year ended
December 31, 2013. These increases were offset by a decrease in our contracting business driven primarily by the decreases in
revenue.

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Energy Segment

Our Energy segment net sales increased $29.2 million to $69.4 million in the year ended December 31, 2013 compared with

$40.2 million in the year ended December 31, 2012, an increase of 72.6%. The increase is primarily due to the Aarding acquisition,
which accounted for an additional $27.0 million in net sales for the year ended December 31, 2013. The remaining amount of the
increases was due to increases in business at Effox.

Operating income from the Energy segment increased $1.7 million to $9.3 million for the year ended December 31, 2013
compared with $7.6 million in the year ended December 31, 2012, a decrease of 22.4%. The increase was due primarily to increased
operating income from our Effox business.

Fluid Handling and Filtration Segment

Our FHF segment net sales increased $19.0 million to $25.2 million in the year ended December 31, 2013 compared with $6.2

million in the year ended December 31, 2012. The increase is primarily due to the Met-Pro acquisition, which accounted for an
additional $20.4 million in net sales for the year ended December 31, 2013. There was an offsetting decrease of $1.4 million due to a
decrease in the CECO Filters operations.

Operating income from the FHF segment increased $0.4 million to $1.4 million for the year ended December 31, 2013
compared with $1.0 million in the year ended December 31, 2012. The increase is primarily due to the Met-Pro acquisition, which
accounted for an additional $0.7 million in operating income for the year ended December 31, 2013. There was an offsetting
decrease of $0.3 million due to a decrease in the CECO Filters operations.

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 December 31, 2014 was $140.1 million compared with $98.5 million as of December 31, 2013. The increase in backlog
at December 31, 2014 was primarily a result of the acquisitions of Emtrol, Zhongli, and HEE, which in the aggregate represent $40.8
million of our backlog at December 31, 2014. 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.

The following tables present the reconciliation of GAAP gross profit and GAAP gross margin to non-GAAP gross profit and non-

GAAP gross profit margin, GAAP operating income and GAAP operating margin to non-GAAP operating income and non-GAAP
operating margin:

(dollars in millions)
Net sales as reported in accordance with GAAP
Gross profit as reported in accordance with GAAP
Gross profit margin in accordance with GAAP

Inventory valuation adjustment
Plant, property and equipment valuation

adjustment

Non-GAAP gross profit

Gross profit margin

Three Months Ended December 31,

2013

2012

$
$

68.7
21.5
31.3%
0.7

0.1

22.3
32.4%

$
$

34.3
11.2
32.6%
—

—

11.2
32.6%

2014
$76.1
$22.6
29.7%
—

0.1

$22.7
29.8%

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Non-GAAP operating income
Operating margin

Three Months Ended
December 31,
2013
$ 3.7
5.4%
0.7
0.1
0.6
3.3
1.0

2014
$ 3.8
5.0%
—
0.1
0.9
2.8
—

$ 7.6
10.0%

$ 9.4
13.6%

2012
$ 4.4
12.8%
—
—
—
0.1
—

$ 4.5
12.8%

On a non-GAAP basis as adjusted for the non-GAAP items discussed above, non-GAAP gross profit was $22.7 million or 29.8%
as a percentage of sales for the three months ended December 31, 2014, an increase of $0.4 million compared with non-GAAP gross
margin of $22.3 million or 32.4% as a percentage of sales for the three months ended December 31, 2013. On a non-GAAP basis as
adjusted for the non-GAAP items discussed above, non-GAAP operating income was $7.6 million or 10.0% as a percentage of sales
for the three months ended December 31, 2014, a decrease of $1.8 million compared with $9.4 million or 13.6% as a percentage of
sales for the three months ended December 31, 2013.

On a non-GAAP basis as adjusted for the non-GAAP items discussed above, non-GAAP gross profit was $22.3 million or 32.4%

as a percentage of sales for the three months ended December 31, 2013, an increase of $11.1 million compared with non-GAAP
gross margin of $11.2 million or 32.6% as a percentage of sales for the three months ended December 31, 2012. On a non-GAAP
basis as adjusted for the non-GAAP items discussed above, non-GAAP operating income was $9.4 million or 13.6% as a percentage
of sales for the three months ended December 31, 2013, an increase of $4.9 million compared with $4.5 million or 12.8% as a
percentage of sales for the three months ended December 31, 2012.

Liquidity and Capital Resources

Our principal sources of liquidity are cash flow from operations and available borrowings under our Credit Facility (defined
below). Our principal uses of cash are operating costs, payment of principal and interest on our outstanding debt, dividends, working
capital and other corporate requirements, including acquisitions.

At December 31, 2014 and 2013, cash and cash equivalents totaled $19.4 million and $22.7 million, respectively. As of
December 31, 2014 and 2013, $11.7 million and $17.6 million, respectively, of our cash and cash equivalents were held by certain
non-U.S. subsidiaries, as well as being denominated in foreign currencies.

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Debt consisted of the following at December 31, 2014 and 2013:

(Table only in thousands)
Outstanding borrowings under Credit Facility. Term loan payable in quarterly
principal installments of $2.2 million through September 2016, $2.8 million
through September 2017, and $3.3 million thereafter with balance due upon
maturity in August 2018.

– Term loan
– U.S. Dollar revolving loans
– Multi-currency revolving loans
– Unamortized debt discount

Total outstanding borrowings under Credit Facility
Outstanding borrowings under Canadian dollar-denominated Flextor Facility

(defined below)

Outstanding borrowings (U.S. dollar equivalent) under Aarding Facility (defined

below)

Outstanding borrowings (U.S. dollar equivalent) under Euro-denominated note

payable to a bank, payable in quarterly installments of €25 ($30 as of
December 31, 2014), plus interest, at a fixed rate of 3.82%, maturing January
2016. Collateralized by the Heerenveen, Netherlands building.

Total outstanding borrowings
Less: current portion

Total debt, less current portion

United States Debt

December 31,
2014

December 31,
2013

90,072
24,000
—
(1,796)

112,276

—

63,781
22,000
—
(1,918)

83,863

—

4,909

152

$ 112,428
8,887

$ 103,541

310

89,082
9,922

79,160

On August 27, 2013, the Company entered into a credit agreement (the “Credit Agreement”) with various lenders (the

“Lenders”) and letter of credit issuers (each, an “L/C Issuer”), and Bank of America, N.A., as Administrative Agent (the “Agent”), swing
line lender and an L/C Issuer, providing for various senior secured credit facilities (collectively, the “Credit Facility”) comprised of a
$65.0 million senior secured term loan, a $70.5 million senior secured U.S. dollar revolving credit facility for U.S. dollar revolving loans
with sub-facilities for letters of credit and swing-line loans, and a $19.5 million senior secured multi-currency revolving credit facility for
U.S. dollar and specific foreign currency loans.

Concurrent with the closing of the Met-Pro acquisition (as defined below in Note 16 to our consolidated financial statements),

the Company borrowed $65.0 million in term loans and $52.0 million in U.S. dollar revolving loans and used the proceeds to
(i) finance the cash portion of the acquisition, (ii) pay off certain outstanding indebtedness of the Company and its subsidiaries
(including certain indebtedness of Met-Pro and its subsidiaries), and (iii) pay certain fees and expenses incurred in connection with
the Credit Agreement and the acquisition.

On November 18, 2014, the Company amended the Credit Agreement. Pursuant to the amendment (i) certain lenders provided

an additional term loan under the Credit Agreement in an aggregate principal amount of $35.0 million and certain lenders increased
their revolving credit commitments in an aggregate principal amount of up to $15.0 million, and (ii) the Credit Agreement was
amended to, among other things, (a) modify the calculation of Consolidated EBITDA to include certain pro forma adjustments related
to certain acquisitions and other transactions, (b) modify the Consolidated Leverage Ratio covenant and (c) permit additional
investments in foreign subsidiaries and additional indebtedness by foreign subsidiaries. The proceeds from the additional term loan
were used primarily to finance the acquisition of Emtrol and related expenses. The Company has the option to obtain additional
commitments for either the U.S. dollar revolving credit facility or the term loan facility in an aggregate principal amount not to exceed
$50.0 million.

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As of December 31, 2014 and 2013, $9.5 million and $1.3 million of letters of credit, respectively, were outstanding under the

Credit Facility. Total unused credit availability under the Credit Facility was $71.5 million and $66.7 million at December 31, 2014 and
2013, respectively. Revolving loans may be borrowed, repaid and reborrowed until August 27, 2018, at which time all amounts
borrowed pursuant to the Credit Facility must be repaid.

At the Company’s option, revolving loans and the term loans accrue interest at a per annum rate based on either the highest of
(a) the federal funds rate plus 0.5%, (b) the Agent’s prime lending rate, and (c) one-month LIBOR plus 1.00%, plus a margin ranging
from 0.5% to 1.5% depending on the Company’s consolidated leverage ratio (“Base Rate”), or a Eurocurrency Rate (as defined in the
Credit Agreement) plus 1.5% to 2.5% depending on the Company’s consolidated leverage ratio. Interest on swing line loans is the
Base Rate.

Accrued interest on Base Rate loans is payable quarterly in arrears on the last day of each calendar quarter and at maturity.

Interest on Eurocurrency Rate loans is payable on the last date of each applicable Interest Period (as defined in the agreement), but
in no event less than once every three months and at maturity. The weighted average interest rate on outstanding borrowings was
2.24% and 2.23% at December 31, 2014 and 2013, respectively.

The Company has granted a security interest in substantially all of its assets to secure its obligations pursuant to the Credit

Agreement. The Company’s obligations under the Credit Agreement are guaranteed by the Company’s U.S. subsidiaries and such
guaranty obligations are secured by a security interest on substantially all of the assets of such subsidiaries, including certain real
property. The Company’s obligations under the Credit Agreement may also be guaranteed by the Company’s material foreign
subsidiaries to the extent no adverse tax consequences would result to the Company.

The Credit Agreement contains customary affirmative and negative covenants, including the requirement to maintain

compliance with a consolidated leverage ratio of less than 3.25 and a consolidated fixed charge coverage ratio of more than 1.25.
The Credit Agreement also includes customary events of default and the occurrence of an event of default could result in an
increased interest rate equal to 2.0% above the applicable interest rate for loans, the acceleration of the Company’s obligations
pursuant to the Credit Agreement and an obligation of the subsidiary guarantors to repay the full amount of the Company’s
borrowings pursuant to the Credit Agreement.

As of December 31, 2014 and 2013, the Company was in compliance with all related financial and other restrictive covenants

under the Credit Agreement.

During 2014 and 2013, the Company capitalized $0.4 and $2.7 million, respectively, of other customary closing fees,

arrangement fees, administration fees, letter of credit fees and commitment fees for the Credit Agreement. As of December 31, 2014
and 2013, capitalized deferred financing costs of $0.5 million and $0.6 million, respectively, are included in deferred charges and
other assets and $1.8 million and $1.9 million, respectively, are included as a discount to debt in the accompanying condensed
consolidated balance sheets. Amortization expense was $0.6 million, $0.3 million and $0.2 million for 2014, 2013 and 2012,
respectively, and is classified as interest expense.

In connection with the execution of the Credit Agreement, the Company’s then existing credit facility was terminated effective

August 27, 2013, and all amounts outstanding under such facility, including the outstanding principal balance, were paid in full.

Foreign Debt

The Company had a $5.5 million facilities agreement (Canadian dollar denominated), originally dated November 28, 2007 (as

amended from time to time), made between our Canadian subsidiary, Flextor, Inc., as borrower and Caisse/branch Caisse Desjardins
du Mont-Saint-Bruno as the lender (“Flextor Facility”). The

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facilities agreement included (in Canadian dollars) a $2.5 million bank guarantee facility (under the PSG Program from Export
Development Canada), a $0.5 million line of credit specific to forward exchange contracts, and a $2.5 million variable (subject to asset
value limitations) line of credit for operations. The facility interest rate was the Caisse Central Desjardins’ prime rate plus 0.5%. All of
the borrower’s assets were pledged for the facility, and the borrower had to have a working capital ratio of at least 1.25:1, working
capital of at least $1.0 million, debt to adjusted tangible net worth ratio of less than 2.50:1, and minimum adjusted tangible net worth
of $1.3 million. During 2014, the Company cancelled this facilities agreement. There were no penalties for cancelling the agreement.

The Company has a €10.5 million facilities agreement, originally dated August 17, 2012 (as amended from time to time), made

between our Netherland’s subsidiaries ATA Beheer B.V. and Aarding Thermal Acoustics B.V., as borrowers and ING Bank N.V. as
the lender (“Aarding Facility”). During 2014, the Aarding Facility was increased from €7.0 to €10.5, all other terms of the agreement
remained the same. The facilities agreement includes a €7.0 million bank guarantee facility and a €3.5 million overdraft facility. The
bank guarantee interest rate is the three months Euribor plus 265 basis points (2.73% as of December 31, 2014) and the overdraft
interest rate is three months Euribor plus 195 basis points (2.03% as of December 31, 2014). All of the borrowers’ assets are pledged
for this facility, and the borrowers’ solvency ratio must be at least 30% and net debt/last twelve months EBITDA less than 3.0. As of
December 31, 2014, the borrowers were in compliance with all related financial and other restrictive covenants, and expect continued
compliance. As of December 31, 2014, €5.5 million ($6.7 million) of the bank guarantee and none of the overdraft facility was being
used by the borrowers. There is no stated expiration on this facilities agreement.

Total unused credit availability under our Credit Facility and other non-U.S. credit facilities and agreements, exclusive of any

potential asset base limitations, is as follows:

(dollars in millions)
Credit Facility, U.S. Dollar revolving loans

Draw down
Letters of credit open

Credit Facility, Multi-currency revolving facilities
Netherlands facilities (€10.5 million and €7.0 million at December 31, 2014 and

2013,respectively, in U.S. Dollar equivalent)

Letters of credit open

Canadian credit agreement (Canadian Dollar 5.5 million at December 31, 2013, in U.S. Dollar

equivalent)

Letters of credit open

Total unused credit availability

December 31,

2014

2013

$ 85.5
(24.0)
(9.5)
19.5

12.8
(6.7)

$ 70.5
(22.0)
(1.3)
19.5

9.6
(8.3)

—
—

5.1
—

$ 77.6

$ 73.1

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Overview of Cash Flows and Liquidity

(dollars in thousands)
Total operating cash flow provided by operating activities

Acquisitions of property and equipment
Net cash paid for acquisition
Net proceeds from sale of property and equipment

For the year ended
December 31,
2013
$ 24,181

(1,377)
(104,432)
215

2014
$ 16,263

(1,151)
(44,399)
7,738

2012
$16,829

(273)
(4,000)
382

Net cash used in investing activities

(37,812)

(105,594)

(3,891)

Net (repayments) borrowings on credit lines
Borrowings of long-term debt
Repayments of long-term debt
Deferred financing fees paid
Proceeds from exercise of stock options
Cash paid for repurchase of common shares
Excess tax benefit from stock options exercised
Dividends paid to common shareholders

Net cash provided by (used in) financing activities

Net (decrease) increase in cash and cash equivalents

$ (2,909)
$ 35,000
$ (8,867)
$
(370)
$ 1,383
(973)
$
$
923
$ (5,937)

$
3,366
$ 100,000
$ (14,218)
(2,730)
$
1,364
$
(2,365)
$
—
$
(4,337)
$

$ —
$ —
$ —
$ —
248
$
(456)
$
$ —
$ (2,460)

$ 18,250

$ 81,080

$ (2,668)

$ (3,299)

(333)

$10,270

In 2014, $16.3 million of cash was provided by operating activities as compared with $24.2 million provided in 2013. The
$7.9 million decrease in cash flow from operating activities was due primarily to a few unfavorable net working capital items in 2014
compared to 2013. The incremental cash provided was comprised of $2.5 million in accounts receivable, $2.0 million in inventories,
$1.5 million in accounts payable and accrued expenses and $0.6 million in prepaid expenses and other assets. The incremental cash
used was comprised of $6.6 million in costs in excess of billings, $2.2 million in billings in excess of costs, $1.2 million in income
taxes payable, $1.7 million in other liabilities and $2.5 million in accrued litigation settlement.

In 2013, $24.2 million of cash was provided by operating activities as compared with $16.8 million provided by operating
activities in 2012. The $7.4 million increase in cash flow from operating activities was due primarily to favorable net working capital
improvements in 2013 compared to 2012, which more than offset the reduction in net income in 2013 compared to 2012. The
incremental cash provided was comprised of $7.8 million in accounts receivable, $4.2 million in accounts payable and accrued
expenses, and $1.4 million in prepaid expenses. The incremental cash used was comprised of $5.8 million in costs in excess of
billings and $3.4 million in billings in excess of costs.

In 2014, $37.8 million of cash was used in investing activities as compared with $105.6 million in 2013. Investing activities in

2014 were comprised of $44.4 million cash paid for acquisitions and $1.2 million for capital expenditures for property and equipment
and offset by $7.7 million proceeds from sale of property and equipment, as compared with $104.4 million cash paid for acquisitions,
$0.2 million proceeds from sale of equipment and $1.4 million for capital expenditures for property and equipment in 2013.

In 2013, $105.6 million of cash was used in investing activities as compared with $3.9 million used in investing activities in 2012.

Investing activities in 2013 were comprised of $104.4 million cash paid for acquisitions and $1.4 million for capital expenditures for
property and equipment and offset by $0.2 million proceeds from sale of equipment, as compared with $4.0 million cash paid for
acquisitions, $0.4 million proceeds from sale of equipment and $0.3 million for capital expenditures for property and equipment in
2012.

Financing activities in 2014 provided net cash of $18.3 million, which consisted primarily of net borrowings of $35.0 million and

proceeds from exercise of options of $1.4 million, less dividends paid to our shareholders of

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$5.9 million, cash used to repurchase common stock of $1.0 million and repayments of long-term debt and borrowings of $11.8
million. Financing activities in 2013 provided net cash of $81.1 million, which consisted primarily of net borrowings of $89.1 million and
proceeds from exercise of options of $1.4 million, less dividends paid to our common shareholders of $4.3 million, cash used to
repurchase common stock of $2.4 million, repayments of long-term debt of $14.2 million, and deferred financing fees paid of $2.7
million.

Financing activities in 2013 provided net cash of $81.1 million, which consisted primarily of net borrowings of $89.1 million and

proceeds from exercise of options of $1.4 million, less dividends paid to our common stockholders of $4.3 million, cash used to
repurchase common stock of $2.4 million and deferred financing fees paid of $2.7 million. This compares to cash used in financing
activities in 2012 of $2.7 million comprised of $2.5 million dividends paid to our common stockholders, and cash paid for repurchase
of common stock of $0.5 million, offset by $0.3 million proceeds from exercise of stock options.

Our dividend policy and the payment of cash dividends under that policy are subject to the Board of Directors’ continuing
determination that the dividend policy and the declaration of dividends are in the best interest of the Company’s shareholders. Future
dividends and the dividend policy may be changed or cancelled at the Company’s discretion at any time. Payment of dividends is also
subject to the continuing compliance with our financial covenants under our Credit Facility. During 2014 and 2013, our Board declared
the following quarterly cash dividends on our common stock:

Dividend
Per Share
$0.060
$0.060
$0.060
$0.050
$0.050
$0.050
$0.050
$0.050

Record Date

December 19, 2014
September 16, 2014
June 13, 2014
March 19, 2014
December 17, 2013
September 16, 2013
June 14, 2013
March 18, 2013

Payment Date

December 30, 2014
September 30, 2014
June 27, 2014
March 31, 2014
December 31, 2013
September 30, 2013
June 28, 2013
March 28, 2013

On March 4, 2015, our Board of Directors declared a quarterly dividend of $0.066 per share. The dividend will be paid on

March 31, 2015 to all shareholders of record at the close of business on March 19, 2015.

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 strictly voluntary and is open only to existing shareholders. The Company may
periodically issue new shares of common stock under the Plan.

When we undertake large jobs, our working capital objective is to make these projects self-funding. We work 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.

In connection with the Met-Pro and Emtrol acquisitions, we took on significant additional debt to fund the transaction. See the

description of the Credit Facility above. We believe that cash flows from operating activities, together with our existing cash and
borrowings available under our Credit Facility, will be sufficient for at least the next twelve months to fund our current anticipated
uses of cash. After that, our ability to fund these expected uses of cash and to comply with the financial covenants under our debt
agreements will depend on the results of future operations, performance and cash flow. Our ability to fund these expected uses from
the results of future operations will be subject to prevailing economic conditions and to financial, business, regulatory, legislative and
other factors, many of which are beyond our control.

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Employee Benefit Obligations

Based on current assumptions, estimated contributions of $1.4 million may be required in 2015 for the pension plans and
$25,000 for the retiree healthcare plan. The amount and timing of required contributions to the pension trust depends on future
investment performance of the pension funds and interest rate movements, among other things and, accordingly, we cannot
reasonably estimate actual required payments. Currently, our pension plans are under-funded. As a result, absent major increases in
long-term interest rates, above average returns on pension assets and/or changes in legislated funding requirements, we will be
required to make contributions to our pension trust of varying amounts in the long-term.

Off Balance Sheet Arrangements

None.

Contractual Obligations

The following table summarizes the Company’s contractual obligations as of December 31, 2014:

Payments Due by Period

Long-term debt
Interest expense (estimated)
Unconditional purchase obligations (1)
Pension and post retirement obligations (2)
Operating lease obligations
Contingent liabilities related to acquisitions

Total

1-3 years

3-5 years

Less than 1
year

More than
5 years
$114,224 $ 8,887 $21,023 $84,314 $ —
—
—
—
3,386
—

8,621
43,424
2,836
14,258
22,695

2,459
43,424
1,360
3,568
8,214

1,888
—
914
2,354
—

4,274
—
562
4,950
14,481

Totals

$206,058 $ 67,912 $45,290 $89,470 $ 3,386

(1) Primarily consists of purchase obligations for various costs associated with uncompleted sales contracts.
(2) Future expected obligations under the Company’s pension plans are include in the contractual cash obligations table above, up

to, but not more than five years. The Company’s pension plan policy allows it to fund an amount, which could be in excess of
the pension cost expensed, subject to the limitations imposed by current tax regulations. The Company projects that it will
contribute $1.4 million to its pension plans during the fiscal year ended December 31, 2015.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in conformity with GAAP. The preparation of these financial statements
requires the use of estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the periods presented. We believe that, of our
significant accounting policies, the following accounting policies involve a higher degree of judgments, estimates, and complexity.

Use of Estimates

Preparation of the consolidated financial statements in accordance with accounting principles generally accepted in the United

States of America requires management to make estimates and assumptions affecting the reported amounts of assets, liabilities,
revenues and expenses and related contingent liabilities. On an on-going basis, we evaluate our estimates, including those related to
revenues, bad debts, share based compensation, income taxes, goodwill and intangible asset valuation, and contingencies and
litigation. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the
circumstances. Actual results may differ from these estimates under different assumptions or conditions.

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Revenue Recognition

A substantial portion of our revenue is derived from contracts, which are accounted for under the percentage of completion

method of accounting. Percentage completion is measured by the percentage of contract costs incurred to date compared with
estimated total contract costs to be the best available measure of progress on these contracts. Contract costs include direct material
and labor costs related to contract performance. This method requires a higher degree of management judgment and use of
estimates than other revenue recognition methods. The judgments and estimates involved include management’s ability to accurately
estimate the contracts’ percentage of completion and the reasonableness of the estimated costs to complete, among other factors, at
each financial reporting period. In addition, 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. Changes to job performance,
job conditions, and estimated profitability may result in revisions to contract revenue and costs and are recognized in the period in
which the revisions are made. Revenues are also recognized on a completed contract basis, when risk and title passes to the
customer, which is generally upon shipment of product.

Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. No

provision for estimated losses on uncompleted contracts was needed at December 31, 2014, 2013 and 2012.

Inventories

The Company’s inventories are primarily valued at the lower of cost or market using the first-in, first-out inventory costing

method as well as the last-in, first-out method. Approximately 12% of our inventory is valued on the last-in, first-out method.
Inventory quantities are regularly reviewed and provisions for excess or obsolete inventory are recorded primarily based on the
Company’s forecast of future demand and market conditions. Significant unanticipated changes to the Company’s forecasts could
require a change in the provision for excess or obsolete inventory.

Property, plant and equipment

Property, plant and equipment are carried at the cost of acquisition or construction and depreciated over the estimated useful
lives of the assets. Depreciation and amortization are provided using the straight-line method in amounts sufficient to amortize the
cost of the assets over their estimated useful lives (buildings and improvements—generally 10 to 40 years; machinery and equipment
—generally two to 15 years).

Intangible assets

Indefinite life intangible assets are comprised of tradenames, while finite life intangible assets are comprised of patents,
technology, customer lists, tradenames, non-compete agreements and employment contracts. Finite life intangible assets are
amortized on a straight line or accelerated basis over their estimated useful lives of 17 years for patents, seven to 10 years for
technology, five to 20 years for customer lists, 10 years for tradenames, five years for non-compete agreements and three years for
employment contracts.

Long-lived assets

Property, plant and equipment and finite life intangible assets are reviewed whenever events or changes in circumstances occur

that indicate possible impairment. If events or changes in circumstances occur that indicate possible impairment, our impairment
review is based on an undiscounted cash flow analysis at the lowest level at which cash flows of the long-lived assets are largely
independent of other groups of our assets and liabilities.
This analysis requires management judgment with respect to changes in technology, the continued success of product lines, and
future volume, revenue and expense growth rates. We conduct annual reviews for idle and underutilized equipment, and review
business plans for possible impairment. Impairment occurs when the

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carrying value of the assets exceeds the future undiscounted cash flows expected to be earned by the use of the asset or asset
group. When impairment is indicated, the estimated future cash flows are then discounted to determine the estimated fair value of the
asset or asset group and an impairment charge is recorded for the difference between the carrying value and the estimated fair value.

Additionally, we also evaluate the remaining useful life each reporting period to determine whether events and circumstances
warrant a revision to the remaining period of depreciation or amortization. If the estimate of a long lived asset’s remaining useful life is
changed, the remaining carrying amount of the asset is amortized prospectively over that revised remaining useful life.

We complete an annual (or more often if circumstances require) impairment assessment of indefinite life intangible assets. The

Company adopted the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Update No. 2012-02,
Intangibles—Goodwill and Other—Testing Indefinite-Lived Intangible Assets for Impairment (Topic 350) (“ASU”). ASU 2012-02
provides an option to first qualitatively assess whether current events or changes in circumstances lead to a determination that it is
more likely than not (defined as a likelihood of more than 50 percent) that the fair value of an asset is less than its carrying amount.
Absent a qualitative determination that the fair value of a particular asset is more likely than not to be less than its carrying value, we
do not need to proceed to the traditional estimated fair value test for that asset. If this qualitative assessment indicates a more likely
than not potential that the asset may be impaired, the estimated fair value is calculated by the relief from royalty method. If the
estimated fair value of an asset is less than its carrying value, an impairment charge is recorded for the amount by which the carrying
value of the asset exceeds its calculated implied fair value.

Goodwill

We complete an annual (or more often if circumstances require) impairment assessment of goodwill on a reporting unit level, at

or below the operating segment level. The Company applies the provisions of FASB ASU No. 2011-08, Intangibles—Goodwill and
Other (Topic 350) (“ASU 2011-08”). ASU 2011-08 provides an option to first qualitatively assess whether current events or changes
in circumstances lead to a determination that it is more likely than not (defined as a likelihood of more than 50 percent) that the fair
value of a reporting unit is less than its carrying amount. Absent a qualitative determination that the fair value of a particular reporting
unit is more likely than not to be less than its carrying value, the Company does not need to proceed to the traditional two-step
goodwill test for that reporting unit. If this qualitative assessment indicates a more likely than not potential that the asset may be
impaired, the estimated fair value is calculated by the discounted cash flow method. If the estimated fair value of a reporting unit is
less than its carrying value, an impairment charge is recorded for the amount by which the carrying value of the goodwill exceeds its
calculated implied fair value.

Income Taxes

Income taxes are determined using the asset and liability method of accounting for income taxes in accordance with FASB ASC

Topic 740, “Income Taxes”. Under ASC Topic 740, tax expense includes U.S. and international income taxes plus the provision for
U.S. taxes on undistributed earnings of international subsidiaries not deemed to be indefinitely reinvested. Tax credits and other
incentives reduce tax expense in the year the credits are claimed.

Deferred income taxes are provided using the asset and liability method whereby deferred tax assets are recognized for

deductible temporary differences and operating loss and tax credit carry-forwards and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and
their tax bases, and are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary
differences are expected to be recovered or settled. Deferred tax assets and liabilities are adjusted for the effects of changes in tax
laws and rates on the date of enactment.

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The Company has not recorded deferred income taxes on the undistributed earnings of its foreign subsidiaries because of
management’s intent to indefinitely reinvest such earnings. At December 31, 2014, the aggregate undistributed earnings of the
foreign subsidiaries amounted to $3.9 million. Upon distribution of these earnings in the form of dividends or otherwise, the Company
may be subject to U.S. income taxes and foreign withholding taxes. Determination of the amount of any unrecognized deferred
income tax liability on this temporary difference is not practicable.

In addition, from time to time, management must assess the need to accrue or disclose uncertain tax positions for proposed
potential adjustments from various federal, state and foreign tax authorities who regularly audit the Company in the normal course of
business. In making these assessments, management must often analyze complex tax laws of multiple jurisdictions, including many
foreign jurisdictions. The accounting guidance prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company records the
related interest expense and penalties, if any, as tax expense in the tax provision.

Pension and Postretirement Benefit Plan Assumptions

We sponsor pension plans for certain employees. We also sponsor a postretirement healthcare benefit plan for certain office
employees retiring before January 1, 1990. Several statistical and other factors that attempt to anticipate future events are used in
calculating the expense and liability related to these plans. These factors include key assumptions, such as a discount rate and
expected return on plan assets. In addition, our actuarial consultants use subjective factors such as withdrawal and mortality rates to
estimate these liabilities. The actuarial assumptions we use may differ materially from actual results due to changing market and
economic conditions, higher or lower withdrawal rates or longer or shorter life spans of participants. These differences may result in a
significant impact to the amount of pension or postretirement healthcare benefit expenses we have recorded or may record in the
future. An analysis for the expense associated with our pension plan is difficult due to the variety of assumptions utilized. For
example, one of the significant assumptions used to determine projected benefit obligation is the discount rate. At December 31,
2014, a 25 basis point change in the discount rate would change the projected benefit obligation by approximately $1.3 million and
the annual pension expense by approximately $7,000. Additionally, a 25 basis point change in the expected return on plan assets
would change the pension expense by approximately $67,000.

Stock Based Compensation

We measure the cost of employee services received in exchange for an award of equity instruments and recognize this cost over

the period during which an employee is required to provide the services, based on the fair value of the award at the date of the grant
as determined by the Black-Scholes valuation method.

Other significant accounting policies

Other significant accounting policies, not involving the same level of uncertainties as those discussed above, are nevertheless

important to an understanding of our financial statements. See Note 1 to the consolidated financial statements, Summary of
Significant Accounting Policies, which discusses accounting policies that must be selected by us when there are acceptable
alternatives.

New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, “Revenue From Contracts With
Customers.” ASU 2014-09 supersedes nearly all existing revenue recognition under U.S. GAAP. The core principle of ASU 2014-09
is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration
an entity expects to be entitled to for those goods or services using a defined five step process. More judgment and estimates may
be required to achieve this principle than under existing GAAP. ASU 2014-09 is effective for annual periods beginning after
December 15, 2016, including interim periods therein, using either of the following transition methods: (i) a full retrospective

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approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients or
(ii) a retrospective approach with the cumulative effect upon initial adoption recognized at the date of adoption which includes
additional footnote disclosures. The Company is currently evaluating the impact of the adoption of ASU 2014-09 on the Company’s
consolidated financial statements and has not yet determined the method of adoption.

In April 2014, the FASB issued ASU 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components

of an Entity.” ASU 2014-08 amends the definition of a discontinued operation and requires entities to disclose additional information
about disposal transactions that do not meet the discontinued-operations criteria. The FASB issued the ASU to provide more
decision-useful information and to elevate the threshold for a disposal transaction to qualify as a discontinued operation. ASU 2014-
08 is effective for disposals or classifications as held for sale of components of an entity that occur within annual periods beginning on
or after December 15, 2014, including interim periods within those years. The adoption of this standard is not expected to have a
significant impact on the Company’s consolidated financial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to certain market risks, primarily changes in interest rates. Market risk is the potential loss arising from adverse

changes in market rates and prices, such as foreign currency exchange and interest rates. For the Company, these exposures are
primarily related to changes in interest rates. We do not currently hold any derivatives or other financial instruments purely for trading
or speculative purposes.

The carrying value of the Company’s total long-term debt and current maturities of long-term debt at December 31, 2014 was

$112.4 million. Market risk was estimated as the potential decrease (increase) in future earnings and cash flows resulting from a
hypothetical 10% increase (decrease) in the Company’s estimated weighted average borrowing rate at December 31, 2014. Most of
the interest on the Company’s debt is indexed to either the LIBOR or EURIBOR market rates. The estimated impact of a hypothetical
10% change in the estimated weighted average borrowing rate at December 31, 2014 is $0.3 million on an annual basis.

The Company has wholly-owned subsidiaries located in the Netherlands, Canada, the People’s Republic of China, Mexico,
Great Britain, and Chile. In the past, we have not hedged our foreign currency exposure, and fluctuations in exchange rates have not
materially affected our operating results. Future changes in exchange rates may positively or negatively impact our revenues,
operating expenses and earnings. On March 31, 2014, Aarding entered into a one-month foreign exchange forward contract to
manage exposure to foreign currency fluctuations on a U.S. dollar-denominated transaction totaling $5.5 million. The contract expired
prior to December 31, 2014 and there are no such contracts outstanding as of December 31, 2014. Due to the fact that most of our
foreign sales are denominated in the local currency, we do not anticipate that exposure to foreign currency rate fluctuations will be
material in the year ending December 31, 2015.

Item 8.

Financial Statements and Supplementary Data

The consolidated financial statements of CECO Environmental Corp. and subsidiaries for the years ended December 31, 2014,
2013 and 2012 and other data are included in this report following the signature page of this report and incorporated into this Item 8
by reference:

Cover Page
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements for the Years Ended December 31, 2014, 2013 and 2012

F-1
F-2
F-3
F-4
F-5
F-6
F-7 to F-8
F-9 to F-47

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Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

(a) Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) are controls and other

procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports that we file or
submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s
rules and forms, and that such information is accumulated and made known to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

In connection with the preparation of this Annual Report on Form 10-K, our management, with the participation of our Chief

Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures as of December 31, 2014. Based on that evaluation, our management, including our Chief
Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were not effective due to the
material weakness in our internal control over financial reporting, that existed as of December 31, 2014, as discussed below.

(b) Management’s Report on Internal Control over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over financial
reporting (as defined in Rules 13a-15(f) under the Exchange Act). The management of the Company, under the supervision of the
Chief Executive Officer and Chief Financial Officer, carried out an assessment of the effectiveness of its internal control over financial
reporting for the Company as of December 31, 2014. The assessment was performed using the criteria for effective internal control
reflected in the Internal Control-Integrated Framework (2013 Framework) issued by the Committee of Sponsoring Organizations of the
Treadway Commission.

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and preparation of financial statements for external purposes in accordance with generally accepting accounting
principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of the effectiveness to future periods are subject to risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies and processes included in such control may deteriorate.

Management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the
internal controls of HEE, SAT, Emtrol, or Zhongli, which were acquired during the year ended December 31, 2014, and are included
in the consolidated balance sheet of the Company as of December 31, 2014, and the related consolidated statements of income,
comprehensive income, shareholders’ equity, and cash flows for the year then ended. In the aggregate, these acquired businesses
constituted approximately 23% and 9% of total assets and net assets, respectively, as of December 31, 2014, and approximately 5%
and 11% of net sales and net income, respectively, for the year ended December 31, 2014. Management did not assess the
effectiveness of internal control over financial reporting of these acquired businesses because of the timing of the acquisitions which
were completed during the year ended December 31, 2014.

As a result of our assessment, our management communicated to the Audit Committee of our Board of Directors and

represented to BDO USA, LLP, our independent auditors, that significant deficiencies in the financial reporting close process related
to the adequacy of accounting personnel and oversight, accounting for income taxes, and segregation of duties, among others, when
taken in the aggregate, amount to a material weakness in our internal control over financial reporting.

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With respect to our internal control over financial reporting, these significant deficiencies are being discussed among
management and our Audit Committee. Management intends to review, revise and improve our internal controls over financial
reporting until the material weaknesses in internal control over financial reporting are eliminated.

Management’s specific remediation to address these significant deficiencies will include among other items: a) enhancing

corporate financial reporting resources, particularly for oversight, process improvement and income tax review, b) improving
segregation of duties, and c) reinforcing internal policies with all process owners .

Based on the assessment described above, management of the Company believes that as of December 31, 2014, internal

control over financial reporting was not effective.

Our independent registered public accounting firm, BDO USA LLP, has issued an attestation report dated March 17, 2015, on

the Company’s internal control over financial reporting.

There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the

Exchange Act) that occurred during the fourth quarter of 2014 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.

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Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders
CECO Environmental Corp. and Subsidiaries
Cincinnati, Ohio

We have audited CECO Environmental Corp. and Subsidiaries’ (the “Company”) internal control over financial reporting as of
December 31, 2014, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). The Company’s management is responsible for
maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over
financial reporting, included in the accompanying “Item 9A, Management’s Report on Internal Control Over Financial Reporting”. Our
responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of
the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could
have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or
detected on a timely basis. A material weakness regarding the financial reporting close process related to the adequacy of accounting
personnel and oversight, accounting for income taxes, and segregation of duties, among others, has been identified and described in
management’s assessment. This material weakness was considered in determining the nature, timing, and extent of audit tests
applied in our audit of the 2014 financial statements, and this report does not affect our report dated March 17, 2015 on those
financial statements.

As indicated in the accompanying “Item 9A, Management’s Report on Internal Control over Financial Reporting”, management’s
assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of
Jianjyin Zhongli Industrial Technology Co. Ltd., SAT Technology, Inc., HEE Environmental Engineering, and Emtrol LLC (the “2014
Acquisitions”) which were acquired on December 15, 2014, November 3, 2014, September 26, 2014, and August 13, 2014,
respectively, and which are included in the consolidated balance sheet of the Company as of December 31,

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2014, and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for the year
then ended. The 2014 Acquisitions constituted 23% and 9% of total assets and net assets, respectively, as of December 31, 2014,
and 5% and 11% of revenues and net income, respectively, for the year then ended. Management did not assess the effectiveness of
internal control over financial reporting of the 2014 Acquisitions because of the timing of the acquisitions which were completed as
indicated above. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal
control over financial reporting of the 2014 Acquisitions.

In our opinion, CECO Environmental Corp. and Subsidiaries’ did not maintain, in all material respects, effective internal control over
financial reporting as of December 31, 2014, based on the COSO criteria.

We do not express an opinion or any other form of assurance on management’s statements referring to any corrective actions taken
or planned by the Company after the date of management’s assessment.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of CECO Environmental Corp. and Subsidiaries as of December 31, 2014 and 2013, and the related
consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the
period ended December 31, 2014 and our report dated March 17, 2015 expressed an unqualified opinion thereon.

/s/ BDO USA, LLP

Chicago, Illinois
March 17, 2015

Item 9B. Other Information

None.

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PART III

Item 10.

Directors, Executive Officers and Corporate Governance

The information called for by this Item 10 of Part III of Form 10-K is incorporated by reference to the information set forth in our

definitive proxy statement relating to our 2015 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A under the
Exchange Act within 120 days from December 31, 2014 (the “Proxy Statement”). Reference is also made to the information
appearing in Item 1 of Part I of this Annual Report on Form 10-K under the caption “Business— Executive Officers of the Registrant.”

Item 11.

Executive Compensation

The information called for by this Item 11 of Part III of Form 10-K is incorporated by reference to our Proxy Statement.

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information called for by this Item 12 of Part III of Form 10-K is incorporated by reference to our Proxy Statement.

Securities Authorized for Issuance Under Equity Compensation Plans

EQUITY COMPENSATION PLAN INFORMATION

December 31, 2014

(a)

(b)

Plan Category
Equity compensation plans approved by

security holders

1997 Stock Option Plan
1
2007 Equity Incentive Plan
2
Employee Stock Purchase Plan
3
Equity compensation plans not approved by

security holders

TOTAL

Number of securities
to be issued upon
exercise of outstanding
options, warrants and
rights

Weighted-average
exercise price of
outstanding options,
warrants and rights,
compensation plans

(c)
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))

80,000
1,653,444
3,966

—
1,737,410

$
$
$

$
$

12.03
10.02
13.21

—
10.12

—
308,651
1,438,079

—
1,746,730

The 1997 Stock Option Plan (the “1997 Plan”) was replaced with the 2007 Equity Incentive Plan. The 1997 Plan remains in
effect solely for the purpose of the continued administration of the options currently outstanding under the 1997 Plan.
The 2007 Equity Incentive Plan was approved by our shareholders on May 23, 2007. At a special meeting of our shareholders
held on August 26, 2013, shareholders approved an amendment to the 2007 Equity Incentive Plan to increase the number of
shares of common stock available for issuance by 600,000 shares. In 2014, 285,777 options were awarded to plan participants
under the 2007 Equity Incentive Plan.
The Employee Stock Purchase Plan was approved by our shareholders on May 21, 2009.

Item 13.

Certain Relationships and Related Transactions, and Director Independence

The information called for by this Item 13 of Part III of Form 10-K is incorporated by reference to our Proxy Statement.

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Item 14.

Principal Accountant Fees and Services

The information called for by this Item 14 of Part III of Form 10-K is incorporated by reference to our Proxy Statement.

PART IV

Item 15.

Exhibits and Financial Statement Schedules

1. Financial statements are set forth in this report following the signature page of this report.

2. Financial statement schedules are omitted because they are not applicable or because the required information is shown

in the financial statements or in the notes thereto.

3. Exhibit Index. The exhibits listed below, as part of Form 10-K, are numbered in conformity with the numbering used in

Item 601 of Regulation S-K and relate to SEC File No. 0-07099, unless otherwise indicated.

Exhibit
Number

2.1

2.2

2.3

2.4

2.5

Stock Purchase Agreement, dated as of December 31, 2012, by and among the Company, CECO Group, Inc. and
the sellers named therein. (Schedules, exhibits and similar attachments to the Stock Purchase Agreement have been
omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company will furnish supplementally a copy of any omitted
schedule, exhibit or similar attachment to the SEC upon request) (Incorporated by reference to Exhibit 2.1 to the
Company’s Current Report on Form 8-K filed with the SEC on January 7, 2013)

Share Purchase Agreement, dated as of February 28, 2013, by and among the Company, CECO Environmental
Netherlands B.V. and the sellers named therein. (Schedules, exhibits and similar attachments to the Share Purchase
Agreement that are not material have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company will
furnish supplementally a copy of any omitted schedule, exhibit or similar attachment to the SEC upon request)
(Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on March
4, 2013)

Agreement and Plan of Merger, dated as of April 21, 2013, by and among the Company, Met-Pro Corporation,
Mustang Acquisition Inc. and Mustang Acquisition II Inc. (Schedules, exhibits and similar attachments to the Share
Purchase Agreement that are not material have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The
Company will furnish supplementally a copy of any omitted schedule, exhibit or similar attachment to the SEC upon
request) (Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC
on April 22, 2013)

Amendment No. 1 to Agreement and Plan of Merger, dated as of August 5, 2013, by and among the Company, Met-
Pro Corporation, Mustang Acquisition Inc. and Mustang Acquisition II LLC (formerly known as Mustang Acquisition II
Inc.) (Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on
August 8, 2013)

Membership Interest Purchase Agreement, dated as of November 3, 2014, by and among the Company and the
sellers named therein. (Schedules, exhibits and similar attachments to the Membership Interest Purchase Agreement
that are not material have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company will furnish
supplementally a copy of any omitted schedule, exhibit or similar attachment to the SEC upon request) (Incorporated
by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 6, 2014)

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Exhibit
Number

3(i)

3(ii)

**10.1

**10.2

**10.3

**10.4

10.5

**10.6

**10.7

**10.8

**10.9

**10.10

**10.11

**10.12

**10.13

10.14

10.15

Certificate of Incorporation (Incorporated by reference to Exhibit 3(i) to the Company’s Annual Report on Form 10-
K for the fiscal year ended December 31, 2001)

Bylaws (Incorporated by reference to Exhibit 3(ii) to the Company’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2001)

CECO Filters, Inc. Savings and Retirement Plan (Incorporated by reference to the Company’s Annual Report on
Form 10-K for the fiscal year ended December 31, 1990)

CECO Environmental Corp. 1997 Stock Option Plan and Amendment (Incorporated by reference to Exhibit 4 to
the Company’s Form S-8 filed with the SEC on March 24, 2000)

Amended and Restated 2006 Executive Incentive Compensation Plan (Incorporated by reference to Exhibit 10.38
to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006)

Summary term sheet of arrangement governing consulting services provided by Icarus Investment Corp.
(Incorporated by reference to Exhibit 10.4 to the Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2012)

Warrant Agreement, dated as of December 28, 2006, by and between the Company and Icarus Investment Corp.
(Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on
December 28, 2006)

CECO Environmental Corp. 2007 Equity Incentive Plan (Incorporated by reference to Exhibit 10.1 to the
Company’s Quarterly Report on Form 10-Q filed with the SEC on August 7, 2014)

Form of Restricted Stock Award Agreement (Incorporated by reference to Exhibit 10.41 to the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2008)

Form of Incentive Stock Option Agreement (Incorporated by reference to Exhibit 10.12 to the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2010)

Form of Non-Statutory Stock Option Agreement (Incorporated by reference to Exhibit 10.13 to the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2010)

CECO Environmental Corp. Employee Stock Purchase Plan (Incorporated by reference to Exhibit A to the
Company’s definitive proxy statement on Schedule 14A filed with the SEC on April 13, 2009)

Executive Employment Agreement, effective as of February 15, 2010, by and between the Company and Jeffrey
Lang. (Incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed with the
SEC on May 14, 2010)

First Amendment to Executive Employment Agreement, effective as of September 4, 2013, by and between the
Company and Jeffrey Lang (Incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form
10-Q filed with the SEC on November 8, 2013)

Summary term sheet of arrangement governing consulting services provided by JMP Fam Holdings Inc. to the
Company (Incorporated by reference to Exhibit 10.22 to the Company’s Annual Report on From 10-K for the fiscal
year ended December 31, 2011)

Commitment Letter, dated as of April 21, 2013, from Bank of America, N.A. and Merrill Lynch, Pierce, Fenner &
Smith Incorporated (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed
with the SEC on April 22, 2013)

Credit Agreement, dated as of August 27, 2013, by and among the Company and certain subsidiaries of the
Company named therein, Bank of America, N.A., Fifth Third Bank, JPMorgan Chase Bank, N.A., RBS Citizens,
N.A. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (Incorporated by reference to Exhibit 10.1 to the
Form 8-K with the SEC on August 30, 2013)

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Exhibit
Number

10.16

10.17

10.18

**10.19

*10.20

10.21

*21

*23.1

*31.1

*31.2

*32.1

*32.2

Company Guaranty Agreement, dated as of August 27, 2013, by and between the Company and Bank of America,
N.A. (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC
on August 30, 2013)

Subsidiary Guaranty Agreement, dated as of August 27, 2013, by and between the Subsidiary Guarantors named
therein and Bank of America, N.A. (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on
Form 8-K filed with the SEC on August 30, 2013)

Security Agreement, dated as of August 27, 2013, by and between the Company, the Subsidiary Guarantors
named therein and Bank of America, N.A. (Incorporated by reference to Exhibit 10.4 to the Company’s Current
Report on Form 8-K filed with the SEC on August 30, 2013)

Letter agreement, effective as of September 3, 2013, by and between the Company and Neal Murphy.
(Incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on
November 8, 2013)

Amendment No. 1 to the Credit Agreement, dated as October 30, 2014, by and among the Company, the
Administrative Agent, the Lenders, the L/C Issuers and the Subsidiary Guarantors.

Amendment No. 2 to the Credit Agreement, dated as November 18, 2014, by and among the Company, the
Administrative Agent, the Lenders, the L/C Issuers and the Subsidiary Guarantors. (Incorporated by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 19, 2014)

Subsidiaries of the Company

Consent of BDO USA, LLP

Rule 13(a)/15d-14(a) Certification by Chief Executive Officer

Rule 13(a)/15d-14(a) Certification by Chief Financial Officer

Certification of Chief Executive Officer (18 U.S. Section 1350)

Certification of 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

Filed or furnished herewith

*
** Management contracts or compensation plans or arrangement

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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/ EDWARD J. PRAJZNER
Edward J. Prajzner
Chief Financial Officer and Secretary
March 17, 2015

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated:

Principal Executive Officer:

/S/ JEFFREY LANG
Jeffrey Lang
Chief Executive Officer and Director

March 17, 2015

Principal Financial and Accounting Officer:

/S/ EDWARD J. PRAJZNER
Edward J. Prajzner
Chief Financial Officer and Secretary

/S/ JASON DEZWIREK
Jason DeZwirek
Chairman of the Board and Director

/S/ ARTHUR CAPE
Arthur Cape
Director

/S/ ERIC M. GOLDBERG
Eric M. Goldberg
Director

/S/ LYNN J. LYALL
Lynn J. Lyall
Director

/S/ JONATHAN POLLACK
Jonathan Pollack
Director

/S/ SETH RUDIN
Seth Rudin
Director

/S/ DONALD A. WRIGHT
Donald A. Wright
Director

March 17, 2015

Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

F-1

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders
CECO Environmental Corp. and Subsidiaries
Cincinnati, Ohio

We have audited the accompanying consolidated balance sheets of CECO Environmental Corp. and Subsidiaries as of

December 31, 2014 and 2013 and the related consolidated statements of income, comprehensive income, shareholders’ equity, and
cash flows for each of the three years in the period ended December 31, 2014. These financial statements are the responsibility of
the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of CECO Environmental Corp. and Subsidiaries at December 31, 2014 and 2013, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 2014, in conformity with accounting principles generally
accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),

CECO Environmental Corp. and Subsidiaries internal control over financial reporting as of December 31, 2014, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) and our report dated March 17, 2015 expressed an adverse opinion thereon.

/s/ BDO USA, LLP

Chicago, Illinois
March 17, 2015

F-2

Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

($ in thousands, except per share data)

Current assets:

ASSETS

Cash and cash equivalents
Accounts receivable, net
Costs and estimated earnings in excess of billings on uncompleted contracts
Inventories, net
Prepaid expenses and other current assets
Prepaid income taxes
Assets held for sale

Total current assets

Property, plant and equipment, net
Goodwill
Intangible assets – finite life, net
Intangible assets – indefinite life
Deferred income tax asset, net
Deferred charges and other assets

Current liabilities:

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current portion of debt
Accounts payable and accrued expenses
Billings in excess of costs and estimated earnings on uncompleted contracts
Income taxes payable

Total current liabilities

Other liabilities
Debt, less current portion
Deferred income tax liability, net

Total liabilities

Commitments and contingencies
Shareholders’ equity:

December 31,

2014

2013

$ 19,362 $ 22,661
44,364
11,110
25,164
6,651
3,527
10,959

58,394
24,371
23,416
9,046
4,190
4,188

142,967
18,961
167,547
58,398
19,766
3,003
3,723

124,436
21,035
134,062
46,611
18,419
66
4,581

$414,365 $349,210

8,887 $

51,462
14,597
405

75,351
27,884
103,541
26,365

9,922
34,356
13,486
1,569

59,333
10,302
79,160
30,009

233,141

178,804

Preferred stock, $.01 par value; 10,000 shares authorized, none issued
Common stock, $.01 par value; 100,000,000 shares authorized, 26,404,869 and 25,724,519 shares

—

issued in 2014 and 2013, respectively

Capital in excess of par value
Accumulated earnings
Accumulated other comprehensive loss

Less treasury stock, at cost, 137,920 shares in 2014 and 2013

Total shareholders’ equity

264
168,886
19,051
(6,621)

257
159,566
11,911
(972)

181,580
(356)

170,762
(356)

181,224

170,406

$414,365 $349,210

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

F-3

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

Table of Contents

($ in thousands, except per share data)
Net sales
Cost of sales

Gross profit

Selling and administrative
Acquisition and integration expenses
Amortization and earn out expenses
Legal reserves

Income from operations
Other income (expense), net
Interest expense (including related parties interest of $0, $0 and $217,

respectively)

Income before income taxes

Income tax (benefit) expense

Net income

Earnings per share:

Basic
Diluted

Weighted average number of common shares outstanding:

Basic

Diluted

2014
263,217
178,394

Year Ended December 31,
2013
197,317
135,762

2012
135,052
92,609

84,823
51,440
1,269
10,151
300

21,663
(2,311)

(3,138)

16,214
3,137

13,077

0.51
0.50

$
$

61,555
37,098
7,224
6,761
3,500

6,972
982

(1,499)

6,455
(102)

6,557

0.33
0.32

42,443
25,429
—
331
—

16,683
(152)

(1,168)

15,363
4,513

10,850

0.73
0.65

$
$

25,750,972

20,116,991

14,813,186

26,196,901

20,719,951

17,246,058

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

F-4

Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

($ in thousands, except per share data)
Net income

Other comprehensive income (loss), net of tax:

Translation (loss) gain
Minimum pension/postretirement liability adjustment

Other comprehensive (loss) income

Comprehensive income

Year Ended
December 31,
2013

2012

2014

$13,077 $6,557 $10,850

(1,597)
(4,052)

(22)
1,362

(5,649)

1,340

59
(21)

$ 7,428 $7,897 $10,888

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

F-5

Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands)

Balance January 1, 2012
Net income for the year ended December 31, 2012
Common stock dividends
Exercise of stock options and dividend reinvestment issuances
Share based compensation earned
Conversion of debt to equity
Stock repurchase and retirement
Stock issued for acquisition
Adjustment for minimum pension/post retirement liability, net of tax of $(14)
Translation gain

Balance December 31, 2012
Net income for the year ended December 31, 2013
Common stock dividends
Exercise of stock options and dividend reinvestment issuances
Share based compensation earned
Stock repurchase and retirement
Stock issued for acquisitions
Adjustment for minimum pension/post retirement liability, net of tax of $870
Translation loss

Balance December 31, 2013
Net income for the year ended December 31, 2014
Common stock dividends
Exercise of stock options and dividend reinvestment issuances
Excess tax benefit from stock options exercised
Share based compensation earned
Stock repurchase and retirement
Stock issued for acquisitions
Adjustment for minimum pension/post retirement liability, net of tax of $(2,483)
Translation loss, net of tax of $(427)

Common Stock

Shares Amount
14,654 $

Capital in
excess
of
par value

Accum.
Other
Comp.
Loss

Accum.
Earnings

Treasury Stock

Shares Amount

Total

146 $ 44,249 $

1,301 $ (2,350)

(138) $

10,850
(2,460)

41
9

2,400

(63)
55

249
662
9,576
(456)
520

17,096 $

171 $ 54,800 $

316
3
(180)
8,490

1,361
1,100
(2,363)
(2)
85 104,668

(21)
59

9,691 $ (2,312)
6,557
(4,337)

(138) $

1,362
(22)

25,725 $

257 $ 159,566 $ 11,911 $ (972)

(138) $

13,077
(5,937)

247

7
(62)
488

(1)
5

1,380
923
1,659
(972)
6,330

(4,052)
(1,597)

(356) $ 42,990
10,850
(2,460)
249
662
9,600
(456)
521
(21)
59

(356) $ 61,994
6,557
(4,337)
1,364
1,100
(2,365)
104,753
1,362
(22)

(356) $170,406
13,077
(5,937)
1,383
923
1,659
(973)
6,335
(4,052)
(1,597)

Balance December 31, 2014

26,405 $

264 $ 168,886 $ 19,051 $ (6,621)

(138) $

(356) $181,224

Accumulated Other Comprehensive Loss

Components of accumulated other comprehensive loss in shareholders’ equity:

($ in thousands)
January 1, 2012
2012 activity

Balance December 31, 2012
2013 activity

Balance December 31, 2013
2014 activity

Balance December 31, 2014

Translation
(loss) gain
(183)
$
59

(124)
(22)

(146)
(1,597)

(1,743)

Minimum pension/
post retirement
liability
adjustment

(2,167)
(21)

(2,188)
1,362

(826)
(4,052)

(4,878)

Accumulated other
comprehensive loss
(2,350)
$
38

(2,312)
1,340

(972)
(5,649)

(6,621)

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

F-6

Table of Contents

($ in thousands)
Cash flows from operating activities:

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended
December 31,
2013

2014

2012

Net income
Adjustments to reconcile net income to net cash provided by operating activities:

$ 13,077

6,557

$10,850

Depreciation and amortization
Non-cash interest expense
Gain on sale of property and equipment
Share based compensation expense
Bad debt expense
Inventory reserve expense (benefit)
Excess tax benefit from stock options exercised
Deferred income tax (benefit) expense
Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable
Inventories
Costs and estimated earnings in excess of billings on uncompleted contracts
Prepaid expenses and other current assets
Deferred charges and other assets
Accounts payable and accrued expenses
Accrued litigation settlement
Billings in excess of costs and estimated earnings on uncompleted contracts
Income taxes payable
Other liabilities

11,268
561
(62)
1,659
299
566
(923)
(3,183)

2,492
1,993
(6,625)
577
789
1,465
(2,536)
(2,169)
(1,164)
(1,821)

6,647
304
(97)
1,100
99
(105)
—
1,126

2,753
1,680
(941)
1,894
567
4,472
—
(2,147)
(134)
406

1,250
227
(70)
662
176
102
—
454

(5,089)
458
4,823
527
203
319
—
1,303
465
169

Net cash provided by operating activities

16,263

24,181

16,829

Cash flows from investing activities:

Acquisitions of property and equipment
Net cash paid for acquisitions
Net proceeds from sale of assets

Net cash used in investing activities

Cash flows from financing activities:

Net (repayments) borrowings on revolving credit lines
Borrowings of long-term debt
Repayments of long-term debt
Deferred financing fees paid
Proceeds from exercise of stock options
Cash paid for repurchase of common shares
Excess tax benefit from stock options exercised
Dividends paid to common shareholders

Net cash provided by (used in) financing activities

Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Supplemental Schedule of Non-Cash Investing and Financing Activities:

Conversion of subordinated debt to common stock

Common stock issued in business acquisitions

(1,151)
(44,399)
7,738

(1,377)
(104,432)
215

(273)
(4,000)
382

(37,812)

(105,594)

(3,891)

(2,909)
35,000
(8,867)
(370)
1,383
(973)
923
(5,937)

18,250

(3,299)
22,661

3,366
100,000
(14,218)
(2,730)
1,364
(2,365)
—
(4,337)

—
—
—
—
248
(456)
—
(2,460)

81,080

(2,668)

(333)
22,994

10,270
12,724

$ 19,362

$ 22,661

$22,994

$ —

—

$ 9,600

$ 6,335

$ 104,753

521

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

F-7

Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

($ in thousands)
Cash paid during the year for:

Interest

Income taxes

Year Ended
December 31,
2013

2014

2012

$2,816

$1,838

$ 946

$8,665

$2,237

$2,637

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

F-8

Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2014, 2013 and 2012

Nature of Business and Summary of Significant Accounting Policies

Nature of business—CECO Environmental Corp. and its subsidiaries (the “Company,” “we,” or “our”) is a global environmental
technology company focused on critical solutions in the product recovery, air pollution control, fluid handling and filtration segments.
Through its brands, CECO provides a wide spectrum of products and services including dampers and diverters, cyclonic technology,
thermal oxidizers, filtration systems, scrubbers, fluid handling equipment and plant engineered services and engineered design build
fabrication. These products play a vital role in helping companies achieve exacting production standards, meeting increasing plant
needs and stringent emissions control regulations around the globe. CECO globally serves a broad range of markets and industries
including power, municipalities, chemical, industrial manufacturing, refining, petrochemical, metals, minerals & mining, hospitals and
universities.

Principles of consolidation—Our consolidated financial statements include the accounts of the following subsidiaries:

CECO Group, Inc.
CECO Group Global Holdings LLC
CECO Filters, Inc. and Subsidiaries (“CFI”)
The Kirk & Blum Manufacturing Company
CECO Abatement Systems, Inc.
EFFOX, Inc. (“Effox”)
Fisher-Klosterman, Inc. (“FKI”)
Flextor, Inc. (“Flextor”)
Adwest Technologies, Inc. (“Adwest”)
Aarding Thermal Acoustics B.V. (“Aarding”)
Met-Pro Technologies LLC (“Met-Pro”)

% Owned As Of
December 31, 2014

100%
100%
99%
100%
100%
100%
100%
100%
100%
100%
100%

CFI includes two wholly owned subsidiaries, New Busch Co., Inc. (“Busch”) and CECO Environmental India Private Limited

(f/k/a. CECO Filter India Private Limited). The non-controlling interest in CFI is not material.

FKI includes three wholly owned subsidiaries, AVC, Inc. (“AVC.”), Emtrol LLC (“Emtrol”) and SAT Technology, Inc. (“SAT”).

Met-Pro includes 11 wholly owned subsidiaries, Mefiag B. V., Met-Pro Recovery/Pollution Control Technologies, Inc., Strobic Air

Corporation, MPC Inc., Met-Pro Industrial Services, Bio-Reaction Industries, Inc., Mefiag (Guangzhou) Filter Systems Ltd., Met-Pro
(Hong Kong) Company Limited, Met-Pro Holding LLC, Jiangyin Zhongli Industrial Technology Co., Ltd. (“Zhongli’) and Met-Pro Chile
Limitada.

CECO Group, Inc. also has two wholly owned subsidiaries in Mexico, CECO Environmental Mexico S de RL de CV and CECO

Environmental Services Mexico S de RL de CV.

Met-Pro, a global provider of a wide range of products and services for industrial, commercial, municipal, and residential

markets, was acquired in August 2013.

Adwest, a designer and manufacturer of regenerative thermal oxidizers, was acquired in December 2012.

Aarding, a global provider of natural gas turbine exhaust systems and silencer applications, was acquired in February 2013.

F-9

Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

SAT, a leading provider of Volatile Organic Compounds (“VOCs”) abatement solutions for the Chinese air pollution control

market, was acquired in September 2014.

Emtrol, a designer and manufacturer of fluid catalytic cracking and industrial cyclone technology, was acquired in November

2014.

Zhongli, a leader in the design and manufacture of power industry damper, diverter and ball mill systems in China, was acquired

in December 2014.

Unless indicated, all balances within tables are in thousands except per share amounts. All intercompany balances and

transactions have been eliminated.

Use of estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the

United States of America (“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.

Cash equivalents—We consider all highly liquid investments with original maturities of three months or less to be cash

equivalents. At December 31, 2014 and 2013, included in Cash and Cash Equivalents is $1.2 million and $0.7 million, respectively, of
cash in support of letters of credit issued by one of the Company’s China subsidiaries related to warranty periods expiring in the
future.

Accounts Receivable—Trade receivables are generally uncollateralized customer obligations due under normal trade terms

requiring payment generally within 30 days from the invoice date unless otherwise determined by specific contract, generally due to
retainage provisions. The Company’s estimate of the allowance for doubtful accounts for trade receivables is primarily determined
based upon the length of time that the receivables are past due. In addition, management estimates are used to determine probable
losses based upon an analysis of prior collection experience, specific account risks and economic conditions. The Company has a
series of actions that occur based upon the aging of past due trade receivables, including letters, statements, direct customer contact
and liens. Accounts are deemed uncollectible based on past account experience and current account financial condition.

Inventories—The Company’s inventories are primarily valued at the lower of cost or market using the first-in, first-out inventory
costing method as well as the last-in, first-out method. Approximately 12% of our inventory is valued on the last-in, first-out method.
Inventory quantities are regularly reviewed and provisions for excess or obsolete inventory are recorded based on the Company’s
forecast of future demand and market conditions. Significant unanticipated changes to the Company’s forecasts could require a
change in the provision for excess or obsolete inventory.

Property, plant and equipment—Property, plant and equipment are carried at the cost of acquisition or construction and

depreciated over the estimated useful lives of the assets. Depreciation and amortization are provided using the straight-line method in
amounts sufficient to amortize the cost of the assets over their estimated useful lives (buildings and improvements—generally 10 to
40 years; machinery and equipment—generally two to 15 years). Upon sale or disposal of property, plant and equipment, the
applicable amounts of asset cost and accumulated depreciation are removed from the accounts, and the net amount, less any
proceeds from sale, is recorded in income.

F-10

Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

Intangible assets—Indefinite life intangible assets are comprised of tradenames, while finite life intangible assets are comprised
of patents, technology, customer lists, tradenames, non-compete agreements and employment contracts. Finite life intangible assets
are amortized on a straight line or accelerated basis over their estimated useful lives of 17 years for patents, seven to 10 years for
technology, five to 20 years for customer lists, 10 years for tradenames, five years for non-compete agreements and three years for
employment contracts.

Long-lived assets—Property, plant and equipment and finite life intangible assets are reviewed whenever events or changes in

circumstances occur that indicate possible impairment. If events or changes in circumstances occur that indicate possible
impairment, our impairment review is based on an undiscounted cash flow analysis at the lowest level at which cash flows of the
long-lived assets are largely independent of other groups of our assets and liabilities. This analysis requires management judgment
with respect to changes in technology, the continued success of product lines, and future volume, revenue and expense growth rates.
We conduct annual reviews for idle and underutilized equipment, and review business plans for possible impairment. Impairment
occurs when the carrying value of the assets exceeds the future undiscounted cash flows expected to be earned by the use of the
asset or asset group. When impairment is indicated, the estimated future cash flows are then discounted to determine the estimated
fair value of the asset or asset group and an impairment charge is recorded for the difference between the carrying value and the
estimated fair value.

Additionally, the Company also evaluates the remaining useful life each reporting period to determine whether events and

circumstances warrant a revision to the remaining period of depreciation or amortization. If the estimate of a long lived asset’s
remaining useful life is changed, the remaining carrying amount of the asset is amortized prospectively over that revised remaining
useful life.

The Company completes an annual (or more often if circumstances require) impairment assessment of its indefinite life

intangible assets. As a part of its annual assessment, the Company first qualitatively assesses whether current events or changes in
circumstances lead to a determination that it is more likely than not (defined as a likelihood of more than 50 percent) that the fair
value of an asset is less than its carrying amount. Absent a qualitative determination that the fair value of an asset is more likely than
not to be less than its carrying value, we do not need to proceed to the traditional estimated fair value test for that asset. If this
qualitative assessment indicates a more likely than not potential that the asset may be impaired, the estimated fair value is calculated
by the relief from royalty method. If the estimated fair value of an asset is less than its carrying value, an impairment charge is
recorded for the amount by which the carrying value of the asset exceeds its calculated implied fair value.

Goodwill—The Company completes an annual (or more often if circumstances require) impairment assessment of its goodwill

on a reporting unit level, at or below the operating segment level. In performing the goodwill impairment assessment, the carrying
values of the Company’s reporting units are compared to their estimated fair values, as calculated by the discounted cash flow
method. As a part of its annual assessment, the Company first qualitatively assesses whether current events or changes in
circumstances lead to a determination that it is more likely than not (defined as a likelihood of more than 50 percent) that the fair
value of a reporting unit is less than its carrying amount. Absent a qualitative determination that the fair value of a particular reporting
unit is more likely than not to be less than its carrying value, the Company does not need to proceed to the traditional two-step
goodwill test for that reporting unit. If this qualitative assessment indicates a more likely than not potential that the asset may be
impaired, the estimated fair value is calculated by the discounted cash flow method. If the estimated fair value of a reporting unit is
less than its carrying value, an impairment charge is recorded for the amount by which the carrying value of the goodwill exceeds its
calculated implied fair value.

F-11

Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

Deferred charges—Deferred charges include deferred financing costs, which are amortized to interest expense over the life of

the related loan. During 2014 and 2013, the Company capitalized deferred financing fees of $0.4 million and $2.7 million,
respectively. Amortization expense was $0.6 million, $0.3 million and $0.2 million for 2014, 2013 and 2012, respectively, and is
classified as interest expense. Deferred financing charges on the Company’s subordinated debt of $0.1 million were charged to
interest expense during the fourth quarter of 2012 upon the conversion of the debt to equity. As of December 31, 2014 and 2013,
remaining capitalized deferred financing costs of $0.5 million and $0.6 million, respectively, are included in deferred charges and
other assets and $1.8 million and $1.9 million, respectively, are included as a discount to debt in the accompanying consolidated
balance sheets.

Revenue recognition—Revenues from contracts 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. Revenues are also
recognized on a completed contract basis, when risk and title passes to the customer, which is generally upon shipment of product.

The asset “Costs and estimated earnings in excess of billings on uncompleted contracts” represents revenues recognized in

excess of amounts billed. The liability “Billings in excess of costs and estimated earnings on uncompleted contracts” represents
billings in excess of revenues recognized. Provisions for estimated losses on uncompleted contracts are made in the period in which
such losses are determined. Changes to job performance, job conditions, and estimated profitability may result in revisions to contract
revenue and costs and are recognized in the period in which the revisions are made. No provision for estimated losses on
uncompleted contracts was required at December 31, 2014, 2013 or 2012.

Cost of sales—Cost of sales amounts include materials, direct labor and associated benefits, inbound freight charges,
purchasing and receiving, inspection, warehousing, and depreciation. Customer freight charges are included in sales and actual
freight expenses are included in cost of sales.

Claims—Change orders arise when the scope of the original project is modified for a variety of reasons. The Company will
negotiate the extent of the modifications, its expected costs and recovery with the customer. Costs related to change orders are
recognized in the period they are incurred and added to the expected total cost of the project. In cases where contract revenues are
assured beyond a reasonable doubt to be increased in excess of the expected costs of the change order, incremental profit also is
recognized on the contract. Such assurance is generally only achieved when the customer approves in writing the scope and pricing
of the change order. Change orders that are in dispute are effectively handled as claims.

Claims are amounts in excess of the agreed contract price that the Company seeks to collect from customers or others for

customer-caused delays, errors in specifications and designs, contract terminations, change orders in dispute or unapproved as to
both scope and price. Costs attributable to claims are treated as contract costs as incurred.

The Company recognizes certain significant claims for recovery of incurred costs when it is probable that the claim will result in
additional contract revenue and when the amount of the claim can be reliably estimated. When the customer or other parties agree in
writing to the amount of the claim to be recovered by the Company, the amount of the claim becomes contractual and is accounted for
as an increase in the contract’s total estimated revenue and estimated cost. As actual costs are incurred and revenues are
recognized under percentage-of-completion accounting, a corresponding percentage of the revised total estimated profit will therefore
be recognized.

F-12

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CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

Should it become probable that the claim will not result in additional contract revenue, the Company removes the related
contract revenues from its previous estimate of total revenues, which effectively reduces the estimated profit margin on the job and
negatively impacts profit for the period.

Pre-contract costs—Pre-contract costs are not significant. The Company expenses all pre-contract costs as incurred regardless

of whether or not the bids are successful. A majority of our business is obtained through a bidding process and this activity is on-
going with multiple bids in process at any one time. These costs consist primarily of engineering, sales and project manager wages,
fringes and general corporate overhead and it is deemed impractical to track activities related to any one specific contract.

Selling and administrative expenses—Selling and administrative expenses on the Consolidated Statements of Income include
sales and administrative wages and associated benefits, selling and office expenses, professional fees, bad debt expense, changes
in life insurance cash surrender value and depreciation. Selling and administrative expenses are charged to expense as incurred.

Acquisition and integration expenses—Acquisition and integration expenses on the Consolidated Statements of Income are

related to acquisition activities, which include retention, legal, accounting, banking, and other expenses.

Amortization and earn out expenses—Amortization and earn out expenses on the Consolidated Statements of Income include

amortization of intangible assets, and earn-out and contingent compensation expenses related to acquisitions as more fully described
in Note 16.

Legal reserves—Legal reserves on the Consolidated Statements of Income are related to certain legal settlements, as more fully

described in Note 12.

Indirect Taxes—The Company records taxes collected from customers and remitted to governmental authorities on a net basis

in the Consolidated Statements of Income.

Product Warranties—The Company’s warranty reserve is to cover the products sold and is principally at our Effox, Aarding and
Duall subsidiaries. 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.

Advertising costs—Advertising costs are charged to operations in the year incurred and totaled $1.0 million, $0.5 million and

$0.2 million in 2014, 2013 and 2012, respectively.

Research and Development—Although not technically defined as research and development, a significant amount of time, effort

and expense is devoted to (a) custom engineering which qualifies products for specific customer applications, (b) developing
proprietary process technology and (c) partnering with customers to develop new products.

Income taxes—Income taxes are determined using the asset and liability method of accounting for income taxes in accordance
with FASB ASC Topic 740, Income Taxes. Under ASC Topic 740, tax expense includes U.S. and international income taxes plus the
provision for U.S. taxes on undistributed earnings of international subsidiaries not deemed to be indefinitely reinvested. Tax credits
and other incentives reduce tax expense in the year the credits are claimed.

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Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

Deferred income taxes are provided using the asset and liability method whereby deferred tax assets are recognized for

Earnings per share—The computational components of basic and diluted earnings per share for 2014, 2013 and 2012 are

below.

For the Year Ended December 31, 2014
Denominator
(Shares)

25,751

Numerator
(Income)
$ 13,077

Per Share
Amount
$ 0.51

—

$ 13,077

446

(0.01)

26,197

$ 0.50

For the Year Ended December 31, 2013
Denominator
(Shares)

20,117

Numerator
(Income)
$ 6,557

Per Share
Amount
$ 0.33

—

$ 6,557

603

(0.01)

20,720

$ 0.32

For the Year Ended December 31, 2012
Denominator
(Shares)

Per Share
Amount
$ 0.73

14,813

327
2,106

(0.08)

17,246

$ 0.65

Numerator
(Income)
$ 10,850

—
303

$ 11,153

Basic net income and earnings per share
Effect of dilutive securities:

Common stock equivalents arising from stock options and

employee stock purchase plan

Diluted net income and earnings per share

Basic net income and earnings per share
Effect of dilutive securities:

Common stock equivalents arising from stock options and

employee stock purchase plan

Diluted net income and earnings per share

Basic net income and earnings per share
Effect of dilutive securities and notes:

Common stock equivalents arising from stock options and

employee stock purchase plan

Subordinated convertible promissory notes

Diluted net income and earnings per share

F-14

Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

Options and warrants included in the computation of diluted earnings per share are so included on the treasury stock method.

Options and warrants to purchase 104 shares as of December 31, 2012 were not included in the computation of diluted earnings per
share due to their having an anti-dilutive effect. Pursuant to the if-converted method, diluted earnings per share for 2012 includes a
$303 after tax addback of interest expense to earnings and 2,106 additional shares related to the assumed conversion of the
convertible Investor Notes described in Note 10.

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. Should the Company declare 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 are no unvested restricted stock awards outstanding in 2014,
2013 or 2012 that are not expected to vest. 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 per share.

Foreign Currency Translation—The functional currencies of the Company’s subsidiaries in the Netherlands, Brazil, Canada,
China, Mexico, and India are the Euro, Real, Canadian Dollar, Renminbi, Peso, and Rupee, respectively, and their books and records
are maintained in the local currency. Translation adjustments, which are based upon the exchange rate at the balance sheet date for
assets and liabilities and weighted-average rate for the Consolidated Statements of Income, are recorded in Accumulated Other
Comprehensive Loss in Shareholders’ equity on the Consolidated Balance Sheets.

Transaction (loss)/gain of $(2.3) million, $1.0 million and $(0.1) million were recognized by the Company in 2014, 2013 and

2012, respectively. The transaction (loss)/gain is recorded on the “Other (expense) income” line of the Consolidated Statements of
Income.

Reclassifications—Certain prior year amounts have been reclassified in order to conform to the current year presentation.

New Financial Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue From Contracts With Customers. ASU 2014-09 supersedes nearly all
existing revenue recognition under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or
services are transferred to customers in an amount that reflects the consideration an entity expects to be entitled to for those goods
or services using a defined five step process. More judgment and estimates may be required to achieve this principle than under
existing U.S. GAAP. ASU 2014-09 is effective for annual periods beginning after December 15, 2016, including interim periods
therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in
each prior reporting period with the option to elect certain practical expedients or (ii) a retrospective approach with the cumulative
effect upon initial adoption recognized at the date of adoption which includes additional footnote disclosures. The Company is
currently evaluating the impact of the adoption of ASU 2014-09 on the Company’s consolidated financial statements and has not yet
determined the method of adoption.

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Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

In April 2014, the FASB issued ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components

of an Entity. ASU 2014-08 amends the definition of a discontinued operation and requires entities to disclose additional information
about disposal transactions that do not meet the discontinued-operations criteria. The FASB issued the ASU to provide more
decision-useful information and to elevate the threshold for a disposal transaction to qualify as a discontinued operation. ASU 2014-
08 is effective for disposals or classifications as held for sale of components of an entity that occur within annual periods beginning on
or after December 15, 2014, including interim periods within those years. The adoption of this standard is not expected to have a
significant impact on the Company’s consolidated financial statements.

Financial Instruments

Our financial instruments consist primarily of investments in cash and cash equivalents, receivables and certain other assets,
debt and accounts payable, which approximate fair value at December 31, 2014, due to their short-term nature or variable, market-
driven interest rates.

Concentrations of credit risk:

Financial instruments that potentially subject us to credit risk consist principally of cash and accounts receivable. We maintain

cash and cash equivalents with various major financial institutions. We perform periodic evaluations of the financial institutions in
which our cash is invested. Concentrations of credit risk with respect to trade and contract receivables are limited due to the large
number of customers and various geographic areas. Additionally, we perform ongoing credit evaluations of our customers’ financial
condition. As of December 31, 2014, the Company has $11.7 million of cash held internationally, principally in the Netherlands, China
and Canada.

Accounts Receivable

(Table only in thousands)
Trade receivables
Contract receivables
Allowance for doubtful accounts

2014
$15,875
43,218
(699)

2013
$18,815
26,249
(700)

$58,394

$44,364

Balances billed, but not paid by customers under retainage provisions in contracts, amounted to approximately $0.5 million and

$1.1 million at December 31, 2014 and 2013, respectively. Retainage receivables on contracts in progress are generally collected
within a year after contract completion.

Provision for doubtful accounts was approximately $0.3 million, $0.1 million and $0.2 million during 2014, 2013 and 2012,

respectively, while accounts charged to (recovered from) the allowance were $0.3 million, $(35,000) and $0.2 million during 2014,
2013 and 2012, respectively.

F-16

Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

Costs and Estimated Earnings on Uncompleted Contracts

(Table only in thousands)
Costs incurred on uncompleted contracts
Estimated earnings

Less billings to date

Included in the accompanying consolidated balance sheets under the following

captions:

Costs and estimated earnings in excess of billings on uncompleted contracts
Billings in excess of costs and estimated earnings on uncompleted contracts

Inventories

Inventories consisted of the following:

(Table only in thousands)
Raw materials
Work in process
Finished goods
Obsolescence allowance

2014
$ 97,979
28,328

126,307
(116,533)

2013
$ 61,416
21,505

82,921
(85,297)

9,774

$ (2,376)

$ 24,371
(14,597)

$ 11,110
(13,486)

9,774

$ (2,376)

2014
$18,848
2,644
2,492
(568)

2013
$19,541
3,172
2,987
(536)

$23,416

$25,164

Amounts credited to the allowance for obsolete inventory and charged to cost of sales amounted to $(0.6) million, $(0.1) million
and $0.1 million during 2014, 2013 and 2012, respectively. Items charged to the allowance for inventory write-offs were $0.5 million
during 2014, zero during 2013, and $0.1 million during 2012.

Property, Plant and Equipment

(Table only in thousands)
Land
Building and improvements
Machinery and equipment

Less accumulated depreciation

2014
$ 1,328
13,270
19,588

34,186
(15,225)

2013
$ 2,012
12,354
18,978

33,344
(12,309)

$ 18,961

$ 21,035

Depreciation expense was $3.7 million, $2.0 million and $0.9 million for 2014, 2013 and 2012, respectively.

F-17

Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

7. Goodwill and Intangible Assets

(Table only in thousands)
Balance of goodwill at December 31, 2012
2013 acquisitions
Foreign currency translation

Balance of goodwill at December 31, 2013
2014 acquisitions
Foreign currency translation

Balance of goodwill at December 31, 2014

Air Pollution

Control Segment
12,932
$
9,725
—

22,657
30,881
—

53,538

Energy
Segment
$ 6,386
7,595
193

14,174
3,757
(1,153)

Fluid Handling
and Filtration
Segment

230
97,001
—

97,231
—
—

Totals
$ 19,548
114,321
193

134,062
34,638
(1,153)

$16,778

97,231

$167,547

As of December 31, 2014, the Company has an aggregate amount of goodwill acquired of $184.6 million and an aggregate

amount of impairment losses of $17.1 million, which was recognized in 2009.

(Table only in thousands)
Beginning balance
Acquisitions and related adjustments
Foreign currency adjustments

Tradenames

2014
$18,419
1,730
(383)

2013
$ 3,526
14,775
118

$19,766

$18,419

In performing its goodwill assessment for 2014, the Company evaluated the following factors that affect future business
performance: macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, entity-
specific events, reporting unit factors and company stock price. As a result of the assessment of these qualitative factors, with the
exception of four reporting units, the Company has concluded that it is more likely than not that the fair values of the reporting units
with goodwill as of December 31, 2014 exceed the carrying values of these units. Accordingly, the first and second steps of the
goodwill impairment test as described in FASB ASC 350-20-35, which includes estimating the fair values of each reporting unit, are
not considered necessary for these reporting units and no goodwill impairment charges were recorded in 2014.

The analysis of these qualitative factors for four reporting units with total goodwill of $105.4 million as of December 31, 2014 led

to the conclusion that is was not more likely than not that the fair value for these reporting units exceeded the carrying value.
Accordingly, the first step of the two step goodwill impairment test as described in FASB ASC 350-20-35 was performed. The
resultant estimated fair value of the reporting units exceeded its carrying value as of December 31, 2014 and no goodwill impairment
charges were recorded. The aggregate excess of fair value of the reporting units over their carrying value was not significant.
Management’s projections used to estimate the undiscounted cash flows included increasing sales volumes and operational
improvements designed to reduce costs. Changes in the assumptions used, including if the Company does not successfully achieve
its 2015 operating plan, can materially affect the expected cash flows, and such impacts can result in material non-cash impairment
charges.

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Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

In performing its indefinite life intangible assets assessment for 2014, the Company evaluated the following factors that affect

future business performance: macroeconomic conditions, industry and market considerations, cost factors, overall financial
performance, entity-specific events, reporting unit factors and company stock price. As a result of the assessment of these qualitative
factors, with the exception of five reporting units, the Company has concluded that it is more likely than not that the fair values of the
indefinite life intangible assets as of December 31, 2014 exceed the carrying values of these assets. Accordingly, the next step of the
indefinite life intangible asset impairment test, which includes estimating the fair values of each indefinite life intangible assets, is not
considered necessary for these reporting units and no impairment charges were recorded in 2014.

The analysis of these qualitative factors for five reporting units with total indefinite life intangible assets of $13.5 million as of

December 31, 2014 led to the conclusion that is was not more likely than not that the fair value for these indefinite life intangible
assets exceeded their carrying value. Accordingly, the Company estimated the fair value of the indefinite life intangible assets. The
resultant estimated fair value of the indefinite life intangible assets exceeded their carrying value as of December 31, 2014 and no
impairment charges were recorded. The aggregate excess of fair value of the indefinite life intangible assets over their carrying value
was not significant. Management’s projections used to estimate the fair values included increasing sales volumes and operational
improvements designed to reduce costs. Changes in the assumptions used, including if the Company does not successfully achieve
its 2015 operating plan, can materially affect the expected cash flows, and such impacts can result in material non-cash impairment
charges.

Similarly, no goodwill or indefinite life intangible asset charges were recorded in 2013 or 2012.

The fair value measurement method used in the Company’s goodwill and indefinite life intangible assets impairment analyses
utilizes a number of significant unobservable inputs or Level 3 assumptions. These assumptions include, among others, projections of
our future operating results, the implied fair value of these assets using an income approach by preparing a discounted cash flow
analysis and other subjective assumptions.

(Table only in thousands)
Intangible assets – finite life
Patents
Employment agreements
Technology
Customer lists
Noncompetition agreements
Tradename
Foreign currency adjustments

2014

2013

Cost
$ 1,429
733
8,677
59,017
1,118
1,390
(800)

Accum.
Amort.
$ 1,427
461
2,412
9,094
34
23
(285)

Cost
$ 1,423
733
8,677
40,816
—
—
858

Accum.
Amort
$1,383
213
752
3,458
—
—
90

$71,564

$13,166

$52,507

$5,896

Amortization expense of finite life intangible assets was $7.6 million, $4.7 million and $0.3 million for 2014, 2013 and 2012,
respectively. Amortization over the next five years for finite life intangibles is $10.5 million in 2015, $9.2 million in 2016, $7.9 million in
2017, $6.3 million in 2018, and $5.2 million in 2019.

F-19

Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

Accounts Payable and Accrued Expenses

(Table only in thousands)
Trade accounts payable, including due to subcontractors
Compensation and related benefits
Accrued interest
Current portion of earn-out liability
Accrued warranty
Other accrued expenses

Senior debt

Debt consisted of the following at December 31, 2014 and 2013:

(Table only in thousands)
Outstanding borrowings under Credit Facility (defined below). Term loan payable
in quarterly principal installments of $2.2 million through September 2016, $2.8
million through September 2017, and $3.3 million thereafter with balance due
upon maturity in August 2018.

– Term loan
– U.S. Dollar revolving loans
– Multi-currency revolving loans
– Unamortized debt discount

Total outstanding borrowings under Credit Facility
Outstanding borrowings under Canadian dollar-denominated Flextor Facility

(defined below)

Outstanding borrowings (U.S. dollar equivalent) under Aarding Facility (defined

below)

Outstanding borrowings (U.S. dollar equivalent) under Euro-denominated note

payable to a bank, payable in quarterly installments of €25,000 ($30,000 as of
December 31, 2014), plus interest, at a fixed rate of 3.82%, maturing January
2016. Collateralized by the Heerenveen, Netherlands building.

Total outstanding borrowings
Less: current portion

Total debt, less current portion

United States Debt

2014
$31,882
2,976
193
8,738
936
6,737

2013
$23,108
2,412
399
1,812
1,107
5,518

$51,462

$34,356

December 31,
2014

December 31,
2013

90,072
24,000
—
(1,796)

112,276

—

63,781
22,000
—
(1,918)

83,863

—

4,909

152

$ 112,428
8,887

$ 103,541

310

89,082
9,922

79,160

On August 27, 2013, the Company entered into a credit agreement (the “Credit Agreement”) with various lenders (the

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Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

$70.5 million senior secured U.S. dollar revolving credit facility for U.S. dollar revolving loans with sub-facilities for letters of credit and
swing-line loans, and a $19.5 million senior secured multi-currency revolving credit facility for U.S. dollar and specific foreign currency
loans.

Concurrent with the closing of the Met-Pro acquisition (as defined below in Note 16), the Company borrowed $65.0 million in
term loans and $52.0 million in U.S. dollar revolving loans and used the proceeds to (i) finance the cash portion of the acquisition,
(ii) pay off certain outstanding indebtedness of the Company and its subsidiaries (including certain indebtedness of Met-Pro and its
subsidiaries), and (iii) pay certain fees and expenses incurred in connection with the Credit Agreement and the acquisition.

On November 18, 2014, the amended the Credit Agreement. Pursuant to the amendment (i) certain lenders provided an

additional term loan under the Credit Agreement in an aggregate principal amount of $35.0 million and certain lenders increased their
revolving credit commitments in an aggregate principal amount of up to $15.0 million, and (ii) the Credit Agreement was amended to,
among other things, (a) modify the calculation of Consolidated EBITDA to include certain pro forma adjustments related to certain
acquisitions and other transactions, (b) modify the Consolidated Leverage Ratio covenant and (c) permit additional investments in
foreign subsidiaries and additional indebtedness by foreign subsidiaries. The proceeds from the additional term loan were used
primarily to finance the acquisition of Emtrol and related expenses. Additionally, the Company has the option to obtain additional
commitments for either the U.S. dollar revolving credit facility or the term loan facility in an aggregate principal amount not to exceed
$50.0 million.

As of December 31, 2014 and 2013, $9.5 million and $1.3 million of letters of credit, respectively, were outstanding under the

Accrued interest on Base Rate loans is payable quarterly in arrears on the last day of each calendar quarter and at maturity.

The Company has granted a security interest in substantially all of its assets to secure its obligations pursuant to the Credit

The Credit Agreement contains customary affirmative and negative covenants, including the requirement to maintain

compliance with a consolidated leverage ratio of less than 3.25 and a consolidated fixed charge

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Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

coverage ratio of more than 1.25. The Credit Agreement also includes customary events of default and the occurrence of an event of
default could result in an increased interest rate equal to 2.0% above the applicable interest rate for loans, the acceleration of the
Company’s obligations pursuant to the Credit Agreement and an obligation of the subsidiary guarantors to repay the full amount of the
Company’s borrowings pursuant to the Credit Agreement.

As of December 31, 2014 and 2013, the Company was in compliance with all related financial and other restrictive covenants

under the Credit Agreement.

During 2014 and 2013, the Company capitalized $0.4 million and $2.7 million, respectively, of other customary closing fees,
arrangement fees, administration fees, letter of credit fees and commitment fees for the Credit Agreement. As of December 31, 2014
and 2013, capitalized deferred financing costs of $0.5 million and $0.6 million, respectively, are included in deferred charges and
other assets and $1.8 million and $1.9 million, respectively, are included as a discount to debt in the accompanying condensed
consolidated balance sheets. Amortization expense was $0.6 million, $0.3 million and $0.2 million for 2014, 2013 and 2012,
respectively, and is classified as interest expense.

In connection with the execution of the Credit Agreement, the Company’s then-existing credit facility terminated effective
August 27, 2013, and all amounts outstanding under such facility, including the outstanding principal balance, were paid in full.

Foreign Debt

The Company had a $5.5 million facilities agreement (Canadian dollar denominated), originally dated November 28, 2007 (as

amended from time to time), made between our Canadian subsidiary, Flextor, Inc., as borrower and Caisse/branch Caisse Desjardins
du Mont-Saint-Bruno as the lender (“Flextor Facility”). The facilities agreement included (in Canadian dollars) a $2.5 million bank
guarantee facility (under the PSG Program from Export Development Canada), a $0.5 million line of credit specific to forward
exchange contracts, and a $2.5 million variable (subject to asset value limitations) line of credit for operations. The facility interest rate
was the Caisse Central Desjardins’ prime rate plus 0.5%. All of the borrower’s assets were pledged for the facility, and the borrower
had to have a working capital ratio of at least 1.25:1, working capital of at least $1.0 million, debt to adjusted tangible net worth ratio
of less than 2.50:1, and minimum adjusted tangible net worth of $1.3 million. During 2014, the Company cancelled this facilities
agreement. There were no penalties for cancelling the agreement.

The Company has a €10.5 million facilities agreement, originally dated August 17, 2012 (as amended from time to time), made

F-22

Table of Contents

10. Shareholders’ Equity

Dividends

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

Our dividend policy and the payment of cash dividends under that policy are subject to the Board of Director’s continuing
determination that the dividend policy and the declaration of dividends are in the best interest of the Company’s shareholders. Future
dividends and the dividend policy may be changed or cancelled at the Company’s discretion at any time. Payment of dividends is also
subject to the continuing compliance with our financial covenants under our Credit Facility. During 2014, 2013 and 2012, our Board
declared the following quarterly cash dividends on our common stock:

Dividend
Per Share
$0.060
$0.060
$0.060
$0.050
$0.050
$0.050
$0.050
$0.050
$0.045
$0.045
$0.035
$0.035

Record Date
December 19, 2014
September 16, 2014
June 13, 2014
March 19, 2014
December 17, 2013
September 16, 2013
June 14, 2013
March 18, 2013
December 17, 2012
September 16, 2012
June 14, 2012
March 18, 2012

Payment Date
December 30, 2014
September 30, 2014
June 27, 2014
March 31, 2014
December 31, 2013
September 30, 2013
June 28, 2013
March 28, 2013
December 31, 2012
September 30, 2012
June 28, 2012
March 28, 2012

On March 4, 2015, our Board of Directors declared a quarterly dividend of $0.066 per share. The dividend will be paid on

March 31, 2015 to all shareholders of record at the close of business on March 19, 2015.

Effective August 13, 2012, the Company implemented a Dividend Reinvestment Plan (the “Plan”), under which the Company

Share-Based Compensation

The 2007 Equity Incentive Plan (the “2007 Plan”) was approved by shareholders on May 23, 2007 and replaced the 1997 Stock

Option Plan (the “1997 Plan”). The 1997 Plan remains in effect solely for the purpose of the continued administration of the options
outstanding under the 1997 Plan. The plans are administered by the Compensation Committee (the “Committee”) of the Board of
Directors. The 2007 Plan permits the granting of stock options and stock awards which are granted at a price equal to or greater than
the fair market value of the Company’s common stock at the date of grant. Generally, stock options or stock awards granted to non-
employee directors vest in periods of one to three years from the date of grant. Stock options granted to employees generally vest
equally over a period of three to five years from the date of grant. Stock awards granted to employees generally vest equally over a
period of up to three years from the date of grant for awards subject to service requirements. Stock awards may be granted and vest
based on the achievement of certain performance requirements as established by the Committee. Stock awards also may be granted
without service or performance requirements, as determined by the Committee. The Committee, at its discretion, may establish other
vesting periods and performance requirements when appropriate. During 2014, 280,000 stock options and 6,000

F-23

Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

restricted stock awards were granted to plan participants under the 2007 Plan. During 2013, 923,000 stock options were granted to
plan participants under the 2007 Plan. No stock awards were granted in 2014, 2013 or 2012. Also, there are no performance-based
awards outstanding at either December 31, 2014 or 2013. The number of shares reserved for issuance under the 2007 Plan is
2,600,000, of which 309,000 shares were available for future grant as of December 31, 2014.

Share-based compensation expense for stock options and restricted stock awards under these plans of $1.7 million, $1.1 million

and $0.7 million was recorded in the years ended December 31, 2014, 2013 and 2012, respectively. The tax benefit related to stock
based compensation expense was $0.2 million, $0.3 million, and zero in 2014, 2013 and 2012, respectively. No equity compensation
expense has been capitalized in inventory or fixed assets.

Employee Stock Purchase Plan

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

The ESPP is administered by the Committee. The aggregate maximum number of shares of the Company’s common stock that
may be granted under the ESPP is 1,500,000 shares over the ten-year term of the ESPP, subject to adjustment in the event there is
a reorganization, merger, consolidation, recapitalization, reclassification, stock split-up, or similar transaction with respect to the
common stock.

The ESPP allows employees to purchase shares of common stock at a 15% discount from market price and pay for the shares

through payroll deductions. Eligible employees can enter the plan at specific “offering dates” that occur in six month intervals.

The Company recognized employee stock purchase plan expense of $19,000, $19,000 and $16,000 during the years ended

December 31, 2014, 2013 and 2012, respectively.

In addition to the Company’s share-based compensation plans, certain other warrants have been issued that are not

compensatory in nature. See further discussion in the “Warrants to Purchase Common Stock” section below.

Employees’ Stock Ownership Trust:

The Company sponsors an employee stock ownership plan under which it may make discretionary contributions to the trust,
either in cash or in shares of Company common stock, for certain salaried employees of Met-Pro in the United States who are eligible
to participate in the Plan. There were no contributions to the Employees’ Stock Ownership Trust for the years ended December 31,
2014, 2013 and 2012. All shares are considered to be allocated to participants or to be released for allocation to participants, and are
included in the earnings per share computations.

Stock Options and Restricted Awards

The weighted-average fair value of stock options granted during 2014, 2013 and 2012 was estimated at $6.48, $6.18 and $3.81

per option, respectively, using the Black-Scholes option-pricing model based on the following assumptions:

Expected Volatility: The Company utilizes a volatility factor based on the Company’s historical stock prices for a period of

time equal to the expected term of the stock option utilizing weekly price observations.

F-24

Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

For 2014, 2013 and 2012, the Company utilized weighted-average volatility factors of 55%, 57% and 60%, respectively.

Expected Term: Due to limited historical exercise data, the Company utilizes the simplified method of determining the
expected term based on the vesting schedules and terms of the stock options. For 2014, 2013 and 2012, the Company utilized
weighted-average expected term factors of 6.3 years, 6.5 years and 6.2 years, respectively.

Risk-Free Interest Rate: The risk-free interest rate factor utilized is based upon the implied yields currently available on
U.S. Treasury zero-coupon issues over the expected term of the stock options. For 2014, 2013 and 2012, the Company utilized
a weighted-average risk-free interest rate factor of 2.2%, 2.2% and 1.2%, respectively.

Expected Dividends: The Company utilized a weighted average expected dividend rate of 1.7%, 1.6% and 1.9% to value

options granted during 2014, 2013 and 2012, respectively.

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

Information related to all stock options under the 2007 Plan and 1997 Plan for the years ended December 31, 2014, 2013 and

2012 is shown in the tables below:

(Shares in thousands)
Outstanding at December 31, 2013
Granted
Forfeitures
Exercised

Outstanding at December 31, 2014

Exercisable at December 31, 2014

(Shares in thousands)
Outstanding at December 31, 2012
Granted
Forfeitures
Exercised

Outstanding at December 31, 2013

Exercisable at December 31, 2013

Weighted
Average
Remaining
Contractual

Term
7.7 years

Aggregate
Intrinsic
Value
($000)

Weighted
Average
Exercise

Price
$ 9.05
13.78
12.45
5.18

Shares
1,807
280
(121)
(239)

1,727

10.12

8.2 years

$ 9,390

655

5.02

5.8 years

$ 5,332

Weighted
Average
Exercise

Price
$ 5.18
12.72
9.83
4.41

9.05

5.76

Shares
1,244
923
(44)
(316)

1,807

557

F-25

Weighted
Average
Remaining
Contractual

Term
6.8 years

Aggregate
Intrinsic
Value
($000)

7.7 years

$12,830

5.2 years

$ 5,786

Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

(Shares in thousands)
Outstanding at December 31, 2011
Granted
Forfeitures
Exercised

Outstanding at December 31, 2012

Exercisable at December 31, 2012

Weighted
Average
Exercise

Price
$ 4.74
7.96
5.87
5.95

5.18

5.36

Shares
1,174
163
(52)
(41)

1,244

614

Weighted
Average
Remaining
Contractual

Term
7.3 years

Aggregate
Intrinsic
Value
($000)

6.8 years

$ 6,198

5.9 years

$ 3,086

Information related to all restricted stock awards under the 2007 Plan for the year ended December 31, 2014 is shown in the

table below. No restricted stock awards were outstanding during the years ended December 31, 2013 and 2012.

(Shares in thousands)
Nonvested at December 31, 2013
Granted
Vested
Forfeited

Nonvested at December 31, 2014

Weighted
Average
Grant Date
Fair Value
$ —
14.41
—
—

14.41

Shares
—
6
—
—

The Company received $1.2 million in cash from employees exercising options during the year ended December 31, 2014, $1.4

million in cash from employees exercising options during the year ended December 31, 2013 and $0.2 million from employees
exercising options during the year ended December 31, 2012. The intrinsic value of options exercised during the years ended
December 31, 2014, 2013 and 2012 was $2.4 million, $2.7 million and $0.1 million, respectively. Unrecognized compensation
expense related to nonvested shares of stock options and restricted stock was $5.4 million at December 31, 2014 and will be
recognized over a weighted average vesting period of 4.0 years.

Warrants to Purchase Common Stock

The Company has historically issued warrants to purchase common shares in conjunction with business acquisitions, debt

issuances and employment contracts. The estimated fair value of warrants granted in conjunction with employment agreements is
reflected as compensation expense over their related vesting periods, none of which extended into 2014, 2013 or 2012. Fair value of
warrants was determined using a Black-Sholes valuation model with assumptions similar to the ones we used to value stock option
awards.

On December 28, 2006, the Company issued warrants to purchase 250,000 shares to Icarus Investment Corp. (“Icarus”), a

related party, at an exercise price of $9.07 and an expiration date of December 26, 2016. These warrants represent the only
outstanding warrants as of December 31, 2014 and 2013.

F-26

Table of Contents

Stock Purchase

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

During 2014, the Company repurchased 61,500 shares of common stock from a former director for a total cost of $1.0 million.

The shares were immediately retired.

During 2013, pursuant to the approval of the Board of the Directors of the Company, the Company purchased 180,000 shares of
common stock held by the Company’s Chief Executive Officer. The shares were purchased at the then-current market price of $13.14
for a total transaction value of $2.4 million and the shares were immediately retired.

During 2012, the Company purchased 63,000 shares of common stock for a total of $0.5 million pursuant to a stock repurchase

program announced in August 2011 under which the Company was able to repurchase up to 500,000 shares of the Company’s
common stock over an eighteen-month period. The repurchased shares were immediately retired.

Convertible Debt

During 2012, subordinated convertible promissory notes (“Investor Notes”) in the aggregate principal amount of $9.6 million
were converted into 2,400,000 shares of common stock. The Investor Notes were with a group of investors including the following
related parties: Icarus, which is controlled by Jason DeZwirek, our Chairman; JMP Fam Holdings, Inc., which is controlled by
Jonathan Pollack, one of our directors; and Harvey Sandler Revocable Trust, which owns over 10% of our outstanding common
stock.

11. 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.

The Company acquired two defined benefit pension plans covering eligible employees in the United States in connection with

the acquisition of Met-Pro. These plans are funded in accordance with the funding requirements of the Employee Retirement Income
Security Act of 1974. Met-Pro had frozen the accrual of future benefits for all participants, effective December 31, 2008.

F-27

Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

The following tables set forth the plans’ changes in benefit obligations, plan assets and funded status on the measurement

dates, December 31, 2014, 2013 and 2012, and amounts recognized in our consolidated balance sheets as of those dates.

(Table only in thousands)
Change in projected benefit obligation:

2014

Pension Benefits
2013

2012

2014

Other Benefits
2013

2012

Projected benefit obligation at beginning of year
Accumulated postretirement benefit obligation
Projected benefit obligation from acquisition
Service cost
Interest cost
Amendments
Actuarial (gain)/loss
Administrative expenses
Benefits paid

$ 32,311
n/a
—
204
1,428
—
6,015
(174)
(1,576)

$ 8,535
n/a
24,364
126
676
—
(509)
(126)
(755)

$ 7,886
n/a
—
58
328
—
629
—
(366)

n/a
$ 116
—
—
5
24
38
—
(28)

n/a
$ 89
—
—
3
44
8
—
(28)

n/a
$ 146
—
—
6
—
(43)
—
(20)

Projected benefit obligation at end of year

38,208

32,311

8,535

155

116

Change in plan assets:

Fair value of plan assets at beginning of year
Fair value of plan assets from acquisition
Actual return on plan assets
Employer contribution
Administrative expenses
Benefits paid

25,822
—
1,404
1,826
(174)
(1,576)

5,549
18,654
2,291
209
(126)
(755)

5,020
—
603
292
—
(366)

—
—
—
28
—
(28)

—
—
—
20
—
(20)

Fair value of plan assets at end of year

27,302

25,822

5,549

—

Funded status

$(10,906)

$ (6,489)

$(2,986)

$(155)

$(116)

$ (89)

Defined benefit liabilities included in accounts payable and

accrued expenses

Defined benefit liabilities included in other liabilities
Deferred tax benefit (expense) associated with accumulated

$ —
(10,906)

$ —
(6,489)

$ —
(2,986)

$ (25)
(130)

$ (21)
(95)

$ (15)
(74)

other comprehensive loss (income)

Accumulated other comprehensive loss (income), net of tax

2,983
4,865

608
856

1,505
2,257

8
14

(18)
(27)

(45)
(67)

Net amount recognized

Other comprehensive income (loss):

Net loss (gain)
Prior service cost
Amortization of prior service cost
Amortization of net actuarial loss

$ (3,058)

$ (5,025)

776

$(133)

$(161)

$(201)

$ 6,561
—
(4)
(173)

$ (1,926)
—
(1)
(370)

404
—
(1)
(332)

$ 38
24
(6)
11

8
44
—
14

$ (43)
—
—
8

Total recognized in other comprehensive income

$ 6,384

$ (2,297)

$ 67

$ 66

$ (35)

Accumulated other comprehensive income (loss):

Net (gain) loss
Prior service cost

Amount recognized in accumulated other comprehensive

$ 7,848
—

$ 1,460
4

$ 3,757
5

$ (40)
62

$ (89)
44

$(112)
—

income (loss)

$ 7,848

$ 1,464

$ 3,761

$ 22

$ (45)

$(112)

Weighted-average assumptions used to determine benefit

obligations for the year ended December 31:

Discount rate
Compensation increase rate

3.75%
n/a

4.50%
n/a

3.75%
n/a

4.50%
n/a

3.75%
n/a

F-28

Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

Benefits under the plans are not based on wages and, therefore, future wage adjustments have no effect on the projected

benefit obligations.

During 2014, the Company updated the mortality table (RP-2014 Total Mortality Table) in the underlying assumptions used to

determine benefit obligations.

Included in other comprehensive income for our defined benefit plans, net of related tax effect, were an increase in the minimum

liability of $4.0 million in 2014, a decrease of $1.4 million in 2013 and an increase of $21,000 in 2012.

The details of net periodic benefit cost for pension benefits included in the accompanying Consolidated Statements of Income for

the years ended December 31, 2014, 2013 and 2012 are as follows:

(Table only in thousands)
Service cost
Interest cost
Expected return on plan assets
Net amortization and deferral

Net periodic benefit cost

Weighted-average assumptions used to determine net

periodic benefit costs for the years ended December 31:

Discount rate
Expected return on assets
Compensation increase rate

2014

$
204
1,428
(1,950)
177

$ (141)

2013

126
676
(871)
370

301

2012
$ 58
328
(377)
333

$ 342

4.50%
7.50%

n/a

3.75% to 4.50%
7.50%
n/a

4.25%
7.50%
n/a

The basis of the long-term rate of return assumption reflects the current asset mix for the pension plans of approximately 30 to

40% debt securities and 60 to 70% equity securities with assumed average annual returns of approximately 4% to 6% for debt
securities and 8% to 12% for equity securities. The investment portfolio for the pension plans will be adjusted periodically to maintain
the current ratios of debt securities and equity securities. Additional consideration is given to the historical returns for the pension plan
as well as future long range projections of investment returns for each asset category.

The net loss and prior service cost for the defined benefit pension plan that will be amortized from accumulated other

comprehensive loss into net periodic benefit cost during 2015 are $0.2 million and $-0-, respectively. The net gain and prior service
cost for the healthcare plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost during
2015 is $(3,000) and $9,000, respectively.

The net periodic benefit cost (representing interest cost and amortization of net actuarial loss only) for the healthcare plan

included in the accompanying Consolidated Statements of Income was $-0-, $(11,000) and $(3,000) for the years ended
December 31, 2014, 2013 and 2012, respectively. The weighted average discount rate to determine the net periodic benefit cost for
2014, 2013 and 2012 was 4.50%, 3.75% and 4.25%, respectively.

Changes in health care costs have no effect on the plan as future increases are assumed by the retirees.

F-29

Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

Pension plan assets are invested in trusts comprised primarily of investments in various debt and equity funds. A fiduciary
committee establishes the target asset mix and monitors asset performance. The expected rate of return on assets includes the
determination of a real rate of return for equity and fixed income investment applied to the portfolio based on their relative weighting,
increased by an underlying inflation rate. Our defined benefit pension plan asset allocation by asset category is as follows:

Asset Category:
Equity securities
Debt securities

Total

Target
Allocation
2015

Percentage of
Plan Assets

2014

2013

70%
30%

100%

64% - 67%
33% - 36%

64% - 73%
27% - 36%

100%

Estimated pension plan cash obligations are $1.7 million, $1.8 million, $1.8 million, $1.9 million, and $2.0 million for 2015—
2019, respectively, and a total of $10.9 million for the years 2020 through 2024. Estimated healthcare plan cash obligations are
$25,000, $23,000, $21,000, $18,000, and $16,000 for 2015–2019, respectively, and a total of $54,000 for the years 2020 through
2024.

Fair Value Measurements of Pension Plan Assets

Following is a description of the valuation methodologies used for pension assets measured at fair value:

•

Cash and cash equivalents: Cash and cash equivalents consist primarily of cash on deposit in money market funds. Cash

and cash equivalents are stated at cost, which approximates fair value.

Equity securities: Equity securities consist of various managed funds that invest primarily in common stocks. These

securities are valued at the net asset value of shares held by the plans at year-end. The net asset value is calculated
based on the underlying shares and investments held by the funds.

•

Debt securities: Debt securities consist of U.S. government and agency securities, corporate bonds and notes, and

managed funds that invest in fixed income securities. U.S governmental and agency securities are valued at closing prices
reported in the active market in which the individual securities are traded. Corporate bonds and notes are valued using
market inputs including benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets,
benchmark securities, bids, offers and reference data including market research publications. Inputs may be prioritized
differently at certain times based on market conditions. Managed funds are valued at the net asset value of shares held by
the plans at year end. The net asset value is calculated based on the underlying investments held by the fund.

The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or
reflective of future fair values. Furthermore, although the Company believes its valuation methods are appropriate and consistent with
other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial
instruments could result in a different fair value measurement at the reporting date.

The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may

affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.

F-30

Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

The levels assigned to the defined benefit plan assets as of December 31, 2014, are summarized in the tables below:

(Table only in thousands)
Pension assets, at fair value:

Cash and cash equivalents
Equity securities
Debt securities

Total assets

Level 1

Level 2

Level 3

Total

$ 1,310
18,274
7,718

$27,302

$ —
—
—

$ —

$ —
—
—

$ —

$ 1,310
18,274
7,718

$27,302

The levels assigned to the defined benefit plan assets as of December 31, 2013, are summarized in the tables below:

(Table only in thousands)
Pension assets, at fair value:

Cash and cash equivalents
Equity securities
Debt securities

Total assets

Level 1

Level 2

Level 3

Total

$ 1,106
17,590
7,126

$25,822

$ —
—
—

$ —

$ —
—
—

$ —

$ 1,106
17,590
7,126

$25,822

The Company contributes to a number of multiemployer defined benefit pension plans under the terms of collective-bargaining

agreements that cover its union-represented employees. The risks of participating in these multiemployer plans are different from
single-employer plans in the following aspects:

•

Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other

participating employers.

If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the

remaining participating employers.

If the Company chooses to stop participating in some of its multiemployer plans, CECO may be required to pay those

plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

F-31

Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

The Company participation in these plans for the annual period ended December 31, 2014, is outlined in the table below. The

“EIN/Pension Plan Number” column provides the Employee Identification Number and the three-digit plan number, if applicable.
Unless otherwise noted, the most recent Pension Protection Act zone status available in 2014, 2013 and 2012 is for the plan’s year-
end at December 31, 2013, December 31, 2012 and December 31, 2011, respectively. The zone status is based on information that
the Company received from the plan and is certified by the plan’s actuary. Among other factors, plans in the red zone are generally
less than 65 percent funded, plans in the yellow zone are less than 80 percent funded, and plans in the green zone are at least 80
percent funded. The “FIP/RP Status Pending/Implemented” column indicates plans for which a financial improvement plan (FIP) or a
rehabilitation plan (RP) is either pending or has been implemented. The last column lists the expiration date(s) of the collective-
bargaining agreement(s) to which the plans are subject.

Pension
Protection
Act Zone
Status
2012

EIN/Pension
Plan Number

FIF/RP Status Pending/
Implemented

Surcharge
Imposed

Expiration
of Collective
Bargaining
Agreement

52-6112463/001 Yellow FIF: Yes -Implemented RP: Yes - Implemented

various

Pension Fund
Sheet Metal Workers’

National Pension Fund
Sheet Metal Workers Local

224 Pension Plan

31-6171353/001

Red RP: Yes - Implemented

No May 31, 2016

Sheet Metal Workers Local
No. 20, Indianapolis Area
Pension fund

Sheet Metal Workers Local
No. 177 Pension Fund

51-0168516/001 Green Is not subject

62-6093256/001 Green Is not subject

No May 31, 2017

No May 1, 2018

Kirk and Blum was listed in the Sheet Metal Workers Local No. 177 Pension Fund’s Form 5500 as providing more than five

percent of total contributions for the year ended December 31, 2013. The Company was not listed in any of the other plans’ Forms
5500 as providing more than five percent of the total contributions for the plans and plan years. At the date the financial statements
were issued, Forms 5500 were not available for the plan years ended December 31, 2014.

We have no current intention of withdrawing from any plan and, therefore, no liability has been provided in the accompanying

consolidated financial statements.

Amounts charged to pension expense under the above plans including the multi-employer plans totaled $0.8 million, $1.6 million

and $1.8 million in 2014, 2013 and 2012, respectively.

We have a profit sharing and 401(k) savings retirement plan for employees of certain of our subsidiaries. The plan covers

substantially all employees who have 30 days of service, and who have attained 18 years of age. The plan allows us to make
discretionary contributions and provides for employee salary deferrals of up to 100%. We increased, effective January 1, 2008, the
matching contributions to 100% of the first 1% and 50% of the next 5% of the employee deferral for a maximum match of 3.5%.
Effective January 1, 2014, the matching contribution was increased to 100% of the first 3% and 50% of the next 3% of the employee
deferral for a maximum match of 4.5%. We made aggregate matching contributions and discretionary contributions of $1.1 million,
$0.4 million, and $0.4 million during 2014, 2013, and 2012, respectively.

The Company has a 401(k) profit sharing plan in which former employees of Met-Pro in the United States are eligible to

participate, following the completion of one year of service and after attaining age 21. Pursuant to

F-32

Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

this plan, employees can contribute up to 25% of their compensation to the Plan. The Company will match up to 50% of the
employee’s contribution up to 4% of compensation, plus an additional discretionary contribution ranging from 2% to 4%, based on age
and years of service. The Company provided cash contributions to this legacy Met-Pro 401(k) profit sharing plan of $0.2 million for the
four months ended December 31, 2013. Effective January 1, 2014, this was merged into the CECO 401(k) retirement savings plan.

12. Commitments and Contingencies

Rent

We lease certain facilities on a year-to-year basis. We also have future annual minimum rental commitments under

noncancellable operating leases as follows:

(Table only in thousands)
December 31,
2015
2016
2017
2018
2019
2020 and thereafter

Commitment
3,568
$
2,895
2,055
1,658
696
3,386

$ 14,258

Total rent expense under all operating leases for 2014, 2013 and 2012 was $2.9 million, $2.5 million and $1.8 million,

respectively.

Legal Proceedings

Our subsidiary, Met-Pro, beginning in 2002 began to be named in asbestos-related lawsuits filed against a large number of
industrial companies including, in particular, those in the pump and fluid handling industries. In management’s opinion, the complaints
typically have been vague, general and speculative, alleging that Met-Pro, along with the numerous other defendants, sold
unidentified asbestos-containing products and engaged in other related actions which caused injuries (including death) and loss to the
plaintiffs. Counsel has advised that more recent cases typically allege more serious claims of mesothelioma. The Company’s insurers
have hired attorneys who, together with the Company, are vigorously defending these cases. Many cases have been dismissed after
the plaintiff fails to produce evidence of exposure to Met-Pro’s products. In those cases where evidence has been produced, the
Company’s experience has been that the exposure levels are low and the Company’s position has been that its products were not a
cause of death, injury or loss. The Company has been dismissed from or settled a large number of these cases. Cumulative
settlement payments from 2002 through December 31, 2014 for cases involving asbestos-related claims were $0.8 million which
together with all legal fees other than corporate counsel expenses, have been paid by the Company’s insurers. The average cost per
settled claim, excluding legal fees, was approximately $25,000.

Based upon the most recent information available to the Company regarding such claims, there were a total of 195 cases

F-33

Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

discovery, although a number of cases are on schedules leading to, or are scheduled for trial. The Company believes that its
insurance coverage is adequate for the cases currently pending against the Company and for the foreseeable future, assuming a
continuation of the current volume, nature of cases and settlement amounts. However, the Company has no control over the number
and nature of cases that are filed against it, nor as to the financial health of its insurers or their position as to coverage. The Company
also presently believes that none of the pending cases will have a material adverse impact upon the Company’s results of operations,
liquidity or financial condition.

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. The Company settled this claim with the Union
and recorded $3.5 million of legal reserve expense in 2013.

One of our subsidiaries, FKI, was a defendant party in a products liability lawsuit filed in Harris County, Texas on August 23,

2010 by three Valero refining companies. The plaintiffs claimed that FKI (and its co-Defendants) used an allegedly defective
refractory material included in cyclones it supplied to Valero that caused damages to refineries they own and operate. Plaintiffs
claimed to have suffered property damages, including catalyst loss, regenerator repair costs, replacement part costs, damage to
other property and business interruption loss. During 2014, the Company reached a settlement with the plaintiffs for $0.5 million and,
accordingly, recorded a corresponding charge to operations. In addition, the Company reached an agreement with a supplier to
recover $0.2 million related to this matter. The recovery was also recorded during 2014. The Company’s insurer, who had paid for the
legal defense in this matter, initiated a new case in the Southern District of Ohio against the Company seeking, among other things,
recoupment of past legal costs paid. The Company is vigorously disputing this claim and believes the insurer had the duty to defend
the Company.

On October 3, 2014, Viron International (“Viron”) filed a complaint against us and our subsidiary, the Kirk and Blum

Manufacturing Company (“Kirk & Blum”), in the United States District Court for the Western District of Texas (the “Court”) seeking
damages against us and Kirk & Blum for alleged breach of contract. After a trial on January 12, 2015, on February 27, 2015, the
Court issued Findings of Fact and Conclusions of Law that provide that we and Kirk & Blum breached our contract with Viron and that
Viron is entitled to damages in the amount of approximately $0.6 million plus attorneys’ fees. Additionally, the Court concluded that
we and Kirk & Blum are not entitled to an offset for the invoiced amounts of $0.2 million not paid by Viron under the contract. The
Company is vigorously defending this claim and believes it has complied with the provisions of the contract.

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. In accordance with ASC 450, Contingencies, and related guidance, we record
reserves for estimated losses relating to claims and lawsuits when available information indicates that a loss is probable and the
amount of the loss, or range of loss, can be reasonably estimated. The Company expenses legal costs as they are incurred.

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, results of operations, or cash flows.

F-34

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CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

13.

Income Taxes

Income before income taxes was generated in the United States and globally as follows:

(Table only in thousands)
Domestic
Foreign

2014
$14,638
1,576

2013
$5,442
1,013

2012
$13,745
1,618

$16,214

$6,455

$15,363

Income tax provision consisted of the following for the years ended December 31:

(Table only in thousands)
Current:

Federal
State
Foreign

Deferred:

Federal
State
Foreign

The income tax provision differs from the statutory rate due to the following:

(Table only in thousands)
Tax expense at statutory rate
Increase (decrease) in tax resulting from:

State income tax, net of federal benefit
Domestic Production Activities deduction
Change in uncertain tax position reserves
Permanent differences
Impact of foreign rate differences and adjustments
Current and prior years R&D tax credits
Other
Non-deductible transaction costs

F-35

2014

2013

2012

$ 4,672
947
1,624

$(1,660)
(191)
623

$2,765
805
489

7,243

(1,228)

4,059

(3,033)
(367)
(706)

1,000
178
(52)

(4,106)

1,126

377
110
(33)

454

$ 3,137

$ (102)

$4,513

2014
$ 5,675

2013
$ 2,194

2012
$ 5,223

416
(670)
388
58
296
(3,026)
—
—

311
(295)
599
510
(295)
(3,649)
112
411

694
(415)
110
—
(94)
(1,100)
95
—

$ 3,137

$ (102)

$ 4,513

Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

Deferred income taxes reflect the future tax consequences of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for income tax purposes and tax credit carry forwards. The net
deferred tax liabilities consisted of the following at December 31:

(Table only in thousands)
Gross deferred tax assets:

Accrued expenses
Reserves on assets
Stock-based compensation awards
Revaluation of debt
State, foreign and local net operating loss carry-forwards
Deferred state taxes
Valuation allowances

Gross deferred tax liabilities:

Foreign deferral on assets
Depreciation
Goodwill and intangibles
Prepaid expenses
Inventory
Revaluation of debt
Minimum pension / post retirement

Net deferred liabilities

Reconciliation to amounts reported in the balance sheet follows:

Net current deferred tax assets included in other current assets
Net non-current deferred tax assets
Net current deferred tax liabilities included in accounts payable and accrued

expenses

Net non-current deferred tax liabilities

Net deferred tax liability

2014

2013

106
870
43
721
206
885
(87)

120
805
552
—
242
—
(149)

2,744

1,570

(739)
(2,189)
(21,867)
(719)
(868)
—
(397)

(348)
(3,215)
(24,904)
(551)
(790)
(283)
(1,423)

(26,779)

(31,514)

$(24,035)

$(29,944)

2014
$ 1,066
3,003

2013

699
66

(1,739)
(26,365)

—
(30,009)

$(24,035)

$(29,244)

As of December 31, 2014, the Company has state and local net operating loss carry forwards of $1.9 million which expire from
2018 to 2031. The Company has recorded a valuation allowance on these state and local net operating loss carry forwards to reflect
expected realization. The Company also has net operating loss carry forwards in overseas jurisdictions totaling $2.6 million. A full
valuation allowance has been established against these losses. As of both December 31, 2014 and 2013, the Company has
recorded a valuation reserve in the amount of $0.1 million. The changes in the valuation allowance resulted in additional income tax
expense (benefit) of $0.1 million, $8,000, and $(43,000) in 2014, 2013, and 2012, respectively.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion
or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation
of future taxable income during the periods in which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities

F-36

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CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

(including the impact of available carryback and carry forward periods), projected future taxable income, and tax-planning strategies in
making this assessment. Based on this assessment, management believes it is more likely than not that the Company will realize the
benefits of these deductible differences, net of the existing valuation allowances at December 31, 2014. The amount of the deferred
tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the
carryforward period are reduced.

The Company accounts for uncertain tax positions pursuant to FASB ASC Topic 740. The Company recognizes the effect of

income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are
measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are
reflected in the period in which the change in judgment occurs. The reserve for uncertain tax positions is not expected to change
significantly in the next twelve months. A reconciliation of the beginning and ending amount of uncertain tax position reserves included
in other liabilities on the Consolidated Balance Sheets is as follows:

(Table only in thousands)
Balance as of January 1,
Additions for tax positions current year
Additions for tax positions taken in prior years
Reductions for expirations on tax positions of prior years

Balance as of December 31,

2014
$ 763
188
266
(51)

$1,166

2013
$162
120
481
—

$763

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. The favorable
settlement of all uncertain tax positions would impact the Company’s effective income tax rate. Tax years going back to 2009 remain
open for examination by Federal and all significant state and foreign authorities.

14. Related Party Transactions

During 2014, 2013 and 2012, we paid fees of $0.4 million per year to Icarus for management consulting services. These

services were provided by Jason DeZwirek and Phillip DeZwirek, our Chairman of our Board and retired Chairman of the Board,
respectively, through Icarus. During 2014, 2013 and 2012, we paid fees of $0.1 million, $0.3 million and $0.1 million, respectively, for
consulting services to JMP Fam Holdings Inc., through which Jonathan Pollack, a member of the Board of Directors, provides
services.

15. Major Customers and Foreign Sales

No single customer represented greater than 10% of consolidated net sales or accounts receivable for 2014 or 2013.

For 2014, 2013 and 2012, sales to customers outside the United States, including export sales, accounted for approximately

30%, 22% and 14%, respectively, of consolidated net sales. The largest portion of export sales was destined for Europe, China, and
Canada. Generally, sales are denominated in U.S. dollars. Of consolidated long lived assets, $49.2 million and $35.4 million were
located outside of the United States as of December 31, 2014 and 2013, respectively.

F-37

Table of Contents

16. Acquisitions

Zhongli

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

On December 15, 2014, the Company acquired 100% of the equity interests of Zhongli for $7.0 million in cash. As additional

consideration, the former owners are entitled to earn-out payments based upon a multiple of specified financial results through
December 31, 2017. There is no maximum amount of earn-out, under the terms of the Framework Agreement. Based on projections
at the acquisition date, the Company estimated the fair value of the earn-out to be $17.1 million. There were no adjustments to fair
value of the earn-out at December 31, 2014. The first year of the estimated earn-out payable of $6.1 million is recorded in “Accounts
payable and accrued expenses” and the balance of $11.0 million is recorded in “Other liabilities” on the Consolidated Balance
Sheets.

Zhongli is a leader in the design and manufacture of power industry damper, diverter and ball mill systems in China, which
complements our Energy Segment businesses. The following table summarizes the approximate fair values of the assets acquired
and liabilities assumed at the date of closing.

(Table only in thousands)
Current assets (including cash of $1,025)
Property and equipment
Goodwill
Intangible – finite life, net
Intangible – indefinite life

Total assets acquired
Current liabilities assumed
Deferred tax liabilities

Net assets acquired

$16,223
1,477
3,757
4,262
960

26,679
(845)
(1,739)

$24,095

During 2014, Zhongli accounted for $0.1 million of revenue and zero of net income included in the Company’s results.

Emtrol

On November 3, 2014, the Company acquired 100% of the membership interests of Emtrol. The Company paid cash at closing
of $31.9 million, which was financed with additional debt. The Company also issued 453,858 shares of the Company’s common stock
with an agreed upon value of $6.0 million computed based on the average closing price of the Company’s common stock for the thirty
trading days immediately preceding the acquisition date. The shares of common stock issued to the former members contain
restrictions on sale or transfer for periods ranging from one to two years from the acquisition date. Accordingly, the preliminary fair
value of the common stock issued has been determined to be $5.8 million, which reflects the estimated fair value of the shares based
on the closing price of the Company’s common stock on the acquisition date and a discount related to the sale and transfer
restrictions.

F-38

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CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

Emtrol and its subsidiary are engaged in the business of designing and manufacturing of fluid catalytic cracking and industrial

cyclone technology for a variety of industries including the refinery, petrochemical, and chemical sectors, which complements our Air
Pollution Control Segment businesses. The following table summarizes the approximate fair values of the assets acquired and
liabilities assumed at the date of closing.

(Table only in thousands)
Current assets (including cash of $1,738)
Property and equipment
Goodwill
Intangible – finite life, net

Total assets acquired
Current liabilities assumed

Net assets acquired

$ 11,285
125
23,635
12,890

47,935
(10,173)

$ 37,762

During 2014, Emtrol accounted for $9.8 million of revenue and $1.3 million of net income included in the Company’s results.

SAT

On September 26, 2014, the Company acquired 100% of the stock of SAT for $1.4 million in cash. The Company is holding

back $0.2 million of this cash until certain working capital requirements are determined to be met, as defined in the agreement. As
additional consideration, the former owners are entitled to earn-out payments upon the achievement of specified financial results
through September 30, 2017. Based on projections at the acquisition date, the Company estimated the fair value of the earn-out to be
$1.0 million, which is the maximum amount of the earnout. There were no adjustments to fair value of the earn-out at December 31,
2014. The first year of the estimated earn-out payable of $0.3 million is recorded in “Accounts payable and accrued expenses” and
the balance of $0.7 million is recorded in “Other liabilities” on the Consolidated Balance Sheets.

SAT is a leading provider of volatile organic compounds abatement solutions for the Chinese air pollution control market, which

complements our Air Pollution Control Segment businesses. The following table summarizes the approximate fair values of the assets
acquired and liabilities assumed at the date of closing.

(Table only in thousands)
Current assets
Property and equipment
Goodwill
Intangible – finite life, net
Intangible – indefinite life

Total assets acquired
Current liabilities assumed
Deferred tax liabilities

Net assets acquired

$ 1,831
10
1,602
840
260

4,543
(1,868)
(275)

$ 2,400

During 2014, SAT accounted for $1.0 million of revenue and zero net income included in the Company’s results.

F-39

Table of Contents

HEE

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

On August 13, 2014, the Company acquired certain assets and liabilities of HEE for $7.0 million in cash. The Company also
issued 34,626 shares of the Company’s common stock with an agreed upon value of $0.5 million computed based on the average
closing price of the Company’s common stock for the thirty trading days immediately preceding the acquisition date. The shares of
common stock issued to the former owners contain restrictions on sale or transfer for a period of six months from the acquisition date.
Accordingly, the preliminary fair value of the common stock issued has been determined to be $0.5 million, which reflects the
estimated fair value of the shares based on the closing price of the Company’s common stock on the acquisition date and a discount
related to the sale and transfer restrictions. As additional consideration, the former owners are entitled to earn-out payments upon the
achievement of specified financial results through July 31, 2017. Based on projections at the acquisition date, the Company estimated
the fair value of the earn-out to be $2.0 million which is the maximum amount of the earnout. There were no adjustments to fair value
of the earn-out at December 31, 2014. The first year of the estimated earn-out payable of $0.7 million is recorded in “Accounts
payable and accrued expenses” and the balance of $1.3 million is recorded in “Other liabilities” on the Consolidated Balance Sheets.

HEE is a leading North American designer and manufacturer of scrubbers and fans for the air pollution control market, which
complements our Air Pollution Control Segment businesses. The following table summarizes the approximate fair values of the assets
acquired and liabilities assumed at the date of closing.

(Table only in thousands)
Current assets
Property and equipment
Goodwill
Intangible – finite life, net
Intangible – indefinite life

Total assets acquired
Current liabilities assumed

Net assets acquired

$ 913
158
5,644
2,690
510

9,915
(415)

$9,500

During 2014, HEE accounted for $2.3 million of revenue and $0.1 million net income included in the Company’s results.

For the acquisitions which occurred during 2014, the approximate fair values of the assets acquired and liabilities assumed, and
the related tax balances, are based on preliminary estimates and assumptions. The fair value measurement method used to measure
the assets acquired and liabilities assumed utilizes a number of significant unobservable inputs or Level 3 assumptions. These
assumptions include, among others, projections of the acquired businesses future operating results, the implied fair value of assets
using an income approach by preparing a discounted cash flow analysis and other subjective assumptions. These preliminary
estimates and assumptions could change significantly during the purchase price measurement period as we finalize the valuations of
the assets acquired and liabilities assumed, and the related tax balances. Such changes could result in material variances between
the Company’s future financial results and the amounts presented in the unaudited pro forma information, including variances in the
estimated purchase price, fair values recorded and expenses associated with these items.

F-40

Table of Contents

Aarding

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

On February 28, 2013, the Company acquired Aarding. Aarding is a global provider of natural gas turbine exhaust systems and

silencer applications and is now part of our Engineered Equipment Technology and Parts Group. The purchase price included cash of
$24.4 million and 763,673 shares of restricted common stock. The preliminary fair value of the common stock issued has been
determined to be $6.8 million which reflects the closing price of the Company’s common stock on the closing date and a discount
related to the sale and transfer restrictions on the shares. The cash paid was funded by the Company’s cash reserves. Of the total
consideration paid, €4.0 million ($4.9 million as of December 31, 2014) is contingent upon the future employment by the sellers and,
therefore, has been classified as prepaid compensation by the Company. As of December 31, 2014 and 2013, the current portion of
the prepaid compensation of $1.0 million and $1.1 million, respectively, is in “Prepaid expenses and other current assets,” while the
non-current portion of $2.1 million and $3.5 million, respectively, is in “Deferred charges and other assets” on the Consolidated
Balance Sheets. For the twelve months ended December 31, 2014 and 2013, $1.1 million and $0.9 million, respectively, of
compensation expense has been recorded in “Amortization and earn out expenses” on the Consolidated Statements of Income.
Additionally, the former owners of Aarding are entitled to earn-out payments of up to €5.5 million ($6.7 million as of December 31,
2014) upon the attainment of specified financial targets through December 31, 2017. Such earn out payments are contingent upon
the continued employment of the sellers. Accordingly, no value for the potential earnout consideration has been allocated to the
purchase price of Aarding as any such payments will be reported as future compensation expense by the Company. For the twelve
months ended December 31, 2014 and 2013, $1.5 million and $1.3 million, respectively, of earn-out expense has been recorded in
“Amortization and earn out expenses” on the Consolidated Statements of Income. As of December 31, 2014 and 2013, an accrual of
$1.1 million and $1.3 million, respectively, relating to the earn-out is included within “Accounts payable and accrued expenses” on the
Consolidated Balance Sheets.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of closing after the

Company finalized purchase accounting during 2014.

(Table only in thousands)
Current assets
Property and equipment
Goodwill
Intangible – finite life, net
Intangible – indefinite life

Total assets acquired
Current liabilities assumed
Deferred income tax liability

Net assets acquired

Met-Pro

$15,062
959
7,595
13,477
2,865

39,958
(8,277)
(4,086)

$27,595

On August 27, 2013, the Company completed its acquisition of Met-Pro. Met-Pro’s shareholders had the option to elect to
exchange each share of Met-Pro common stock for either (i) $13.75 in cash, without interest, or (ii) shares of the Company’s common
stock valued at $13.75, based on the volume weighted average trading price of the Company’s common stock for the 15-trading day
period ending on August 26, 2013, the last trading day before the closing of the merger, subject to a collar so that there was a
maximum exchange ratio of 1.3520

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Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

shares of the Company’s common stock for each share of Met-Pro common stock and a minimum of 1.0000 share of the Company’s
common stock for each share of Met-Pro common stock, subject to certain exceptions and with overall elections subject to proration.

Approximately 51.6% of the shares of Met-Pro common stock converted into the right to receive the $13.75 cash consideration,

for an approximate total of $104.4 million. The Company’s common stock trading price for the 15 day period was $12.6814. As a
result, each of the remaining shares of Met-Pro common stock converted into the right to receive 1.0843 shares of Company common
stock, or an approximate total of 7,726,235 shares of Company common stock in aggregate.

In accordance with the proration and reallocation provisions of the merger agreement, because the $13.75 per share cash

consideration was oversubscribed by Met-Pro shareholders prior to the election deadline, (a) each Met-Pro share for which a valid
stock election was made or for which no valid cash or stock election was made was automatically cancelled and converted into the
right to receive the stock consideration and (b) each Met-Pro shareholder of record that made a valid cash election received (i) the
cash consideration for approximately 77.56% of such holder’s Met-Pro shares for which a valid cash election was made and (ii) the
stock consideration for approximately 22.44% of such holder’s Met-Pro Shares for which a valid cash election was made. The value
of stock recorded was $98.0 million.

In addition, holders of outstanding Met-Pro options and restricted stock units received an aggregate amount of cash equal to

approximately $4.9 million as consideration for the cancellation of the options and restricted stock units held by them as of
immediately prior to the merger.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of closing after the

Company finalized purchase accounting during 2014.

(Table only in thousands)
Current assets
Property and equipment
Other assets
Assets held for sale (a)
Goodwill
Intangible – finite life, net
Intangible – indefinite life

Total assets acquired
Current liabilities assumed
Deferred income tax liability
Long term liabilities assumed

Net assets acquired

$ 68,766
15,773
1,375
10,886
106,726
35,810
11,910

251,246
(13,638)
(28,958)
(6,078)

$202,572

(a) The assets held for sale consists of primarily real property, and are valued at the estimated proceeds less cost to sell. The

Company has not recorded a gain or loss on the classification of the subject assets to Held for Sale. The Company expects to
complete the sale of the subject assets within the next twelve months. Three properties were sold during 2014 for total proceeds
of $6.7 million.

Goodwill related to the Aarding, Met-Pro, HEE, and Emtrol acquisitions is not deductible for tax purposes. Goodwill related to the

Zhongli and SAT acquisitions is deductible for tax purposes.

F-42

Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

The following unaudited pro forma information represents the Company’s results of operations as if the HEE, SAT, Emtrol, and

Zhongli acquisitions had occurred as of January 1, 2013, and the Met-Pro and Aarding acquisitions had occurred as of January 1,
2012:

(Table only in thousands)
Net sales
Net income
Earnings per share:

Basic
Diluted

2014
$335,101
$ 16,619

Year Ended December 31,
2013
$337,767
$ 15,958

2012
$281,345
$ 12,933

$
$

0.64
0.62

$
$

0.67
0.61

$
$

0.55
0.51

The pro forma results have been prepared for informational purposes only and include adjustments to amortize acquired
intangible assets with finite life, eliminate acquisition related expenses, eliminate intercompany transactions between the Company
and Aarding, reflect foregone interest income on cash paid for the acquisitions, reflect additional interest expense on debt used to
fund the acquisitions, and to record the income tax consequences of the pro forma adjustments. Shares used to calculate the basic
and diluted earnings per share were adjusted to reflect the additional shares of common stock issued to fund a portion of the
acquisition price. These pro forma results do not purport to be indicative of the results of operations that would have occurred had the
purchases been made as of the beginning of the periods presented or of the results of operations that may occur in the future.

Goodwill recognized on all of the above acquisitions represents value the Company expects to be created by combining the

various operations of the acquired businesses with the Company’s operations, including the expansion into markets within existing
business segments, access to new customers and potential cost savings and synergies.

Acquisition and integration expenses on the Consolidated Statements of Income are related to acquisition activities, which

include retention, legal, accounting, banking, and other expenses.

17. 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 Consolidated
Statements of Income. The accounting policies of the segments are the same as those in the consolidated financial statements.
Except for the information reported on a segment basis, the Company does not accumulate net sales information by product or
service and therefore, the Company does not disclose net sales by product or service because to do so would be impractical. The
Company’s reportable segments are however organized as groups of similar products and services.

Effective January 1, 2014, the Company implemented an internal reorganization related to the integration of recent acquisitions,

which resulted in three reportable segments, defined as follows:

Air Pollution Control Segment

Our Air Pollution Control Segment is comprised of Adwest, HEE-Duall Air and Odor Technologies, Busch, Buell Energy

Cyclones, Emtrol, Flex-Kleen Dust Collection Technologies, FKI, Kirk & Blum, KB Duct, and

F-43

Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

SAT. This segment provides the design and manufacture of product recovery and air pollution control technologies that enable our
customers to meet compliance targets for toxic emissions, fumes, volatile organic compounds, process and industrial odors. These
products and solutions include chemical and biological scrubbers, fabric filters and cartridge collectors, thermal and catalytic oxidation
systems, cyclones, separators, gas absorbers and industrial ventilation systems. This segment also provides component parts for
industrial air systems and provides cost effective alternatives to traditional duct components, as well as custom metal engineered
fabrication services. These products and services are applicable to a wide variety of industries.

Energy Segment

Our Energy Segment is comprised of Aarding, Effox, Flextor, AVC, Zhongli. This segment provides the design and manufacture

of technologies for flue gas and diverter dampers, non-metallic expansion joints, natural gas turbine exhaust systems, and silencer
and precipitator applications, primarily for coal-fired and natural gas power plants, refining, oil production and petrochemical
processing, as well as a variety of other industries.

Fluid Handling and Filtration Segment

Our Fluid Handling and Filtration Segment is comprised of Met-Pro Global Pump Solutions, Mefiag Filtration Solutions, Keystone

Filtration Solutions, CECO Filters and Strobic Air Corporation. This segment provides the design and manufacture of technologies
including high quality centrifugal pumps for corrosive, abrasive and high temperature liquids, filter products for air and liquid filtration,
as well as product recovery equipment, and technologically advanced air movement and exhaust systems. These products are
applicable to a wide variety of industries, particularly the aquarium/aquaculture, plating and metal finishing, food and beverage,
chemical/petrochemical, wastewater treatment, desalination and pharmaceutical markets.

Net Sales (less intra-, inter-segment sales)
(Table only in thousands)

Air Pollution Control Segment
Energy Segment
Fluid Handling and Filtration Segment
Corporate and Other (1)

Net sales

(1)

Includes adjustment for revenue on intercompany jobs.

Income (Loss) from Operations
(Table only in thousands)

Air Pollution Control Segment
Energy Segment
Fluid Handling and Filtration Segment
Corporate and Other (2)
Eliminations

Income from operations

2014

2013

2012

$127,707
70,285
65,638
(413)

$101,150
69,355
25,199
1,613

$ 88,582
40,194
6,191
85

$263,217

$197,317

$135,052

2014

2013

2012

$ 16,803
7,799
13,188
(14,297)
(1,830)

$ 15,422
9,336
1,443
(17,756)
(1,473)

$ 21,663

$ 6,972

$14,635
7,574
998
(6,460)
(64)

$16,683

(2)

Includes corporate compensation, professional services, information technology, acquisition and integration expenses, and
other general and administrative corporate expenses.

F-44

Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

Property and Equipment Additions
(Table only in thousands)

Air Pollution Control Segment
Energy Segment
Fluid Handling and Filtration Segment
Corporate and Other

Property and equipment additions

Depreciation and Amortization
(Table only in thousands)

Air Pollution Control Segment
Energy Segment
Fluid Handling and Filtration Segment
Corporate and Other

Depreciation and amortization

Identifiable Assets
(Table only in thousands)

Air Pollution Control Segment
Energy Segment
Fluid Handling and Filtration Segment
Corporate and Other (3)

Identifiable assets

(3) Corporate assets primarily consist of cash and income tax related assets.

(Table only in thousands)
Air Pollution Control Segment
Energy Segment
Fluid Handling and Filtration Segment

Goodwill

F-45

December 31,

2014

2013

2012

$ 486
136
486
43

$ 266
476
628
7

$1,151

$1,377

$225
26
—
22

$273

2014

2013

2012

$ 2,263
2,329
6,545
131

$1,264
2,174
3,048
161

$ 747
255
36
212

$11,268

$6,647

$1,250

December 31,

2014

2013

$133,899
91,850
172,779
15,837

$ 74,556
76,960
186,320
11,374

$414,365

$349,210

December 31,

2014

2013

$ 53,538
16,778
97,231

$ 22,657
14,174
97,231

$167,547

$134,062

Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

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:

Year Ended December 31, 2014

Less Inter-Segment Sales

Total Sales

Intra-Segment
Sales

APC

Energy

FHF

Corp
and
Other

Net Sales to
Outside
Customers

Net Sales
(Table only in thousands)

Air Pollution Control Segment
Energy Segment
Fluid Handling and Filtration Segment
Corporate and Other (4)

$136,544 $
76,302
67,558
—

(7,089) $ — $(1,403) $(345) $ — $ 127,707
70,285
(5,964)
65,638
(1,845)
(413)
—

—
—
—

—
—
(413)

(53)
(75)
—

—
—
—

Net Sales

$280,404 $ (14,898) $(128) $(1,403) $(345) $(413) $ 263,217

Year Ended December 31, 2013

Less Inter-Segment Sales

Total Sales

Intra-Segment
Sales

APC Energy

FHF

Corp
and
Other

Net Sales to
Outside
Customers

Net Sales
(Table only in thousands)

Air Pollution Control Segment
Energy Segment
Fluid Handling and Filtration Segment
Corporate and Other (4)

$108,939 $
71,455
26,181
1,478

(6,552) $ — $(831) $(406) $ — $ 101,150
69,355
(1,921)
25,199
(721)
1,613
—

—
—
—

(179)
(261)
—

—
—
135

Net Sales

$208,053 $

(9,194) $(440) $(831) $(406) $135 $ 197,317

Year Ended December 31, 2012

Less Inter-Segment Sales

Total Sales

Intra-Segment
Sales

APC Energy

FHF

Corp
and
Other

Net Sales to
Outside
Customers

Net Sales
(Table only in thousands)

Air Pollution Control Segment
Energy Segment
Fluid Handling and Filtration Segment
Corporate and Other (4)

$ 95,358 $
40,650
6,229
19

(5,451) $ — $(346) $(979) $— $ 88,582
40,194
6,191
85

—
—
—

(449)
(38)
—

—
—
—

—
—
66

(7)
—
—

Net Sales

$142,256 $

(5,458) $(487) $(346) $(979) $ 66 $ 135,052

(4)

Includes adjustment for revenue on intercompany jobs.

F-46

Table of Contents

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2014, 2013 and 2012

18. Quarterly Data (Unaudited)

Earnings per share amounts are computed independently each quarter. Accordingly, the sum of each quarter’s per share

amount may not equal the total per share amount for the respective year.

(Table only in thousands)
Year ended December 31, 2014

Net sales
Gross profit
Net income
Basic earnings per share
Diluted earnings per share

Year ended December 31, 2013

Net sales
Gross profit
Net income (loss)
Basic earnings per share
Diluted earnings per share

First

Second

Third

Fourth

Quarter

$57,170
19,729
3,021
0.12
$
0.12
$

$66,641
21,449
4,493
0.18
$
0.17
$

$63,300
21,058
3,703
0.14
$
0.14
$

$76,106
22,587
1,860
0.07
$
0.07
$

$34,361
11,184
2,208
0.13
$
0.12
$

$44,433
14,297
3,043
0.17
$
0.17
$

$49,796
14,554
(1,461)
$ (0.07)
$ (0.07)

$68,727
21,520
2,767
0.11
$
0.11
$

F-47

AMENDMENT NO. 1 TO CREDIT AGREEMENT AND LIMITED CONSENT

THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT AND LIMITED CONSENT dated as of October 30, 2014 (this

“Amendment”), is among CECO ENVIRONMENTAL CORP., a Delaware corporation (the “Company”), BANK OF AMERICA, N.A., in
its capacities as the Administrative Agent (in such capacity, the “Administrative Agent”), a Lender and an L/C Issuer, each of the
other Lenders party hereto, each of the L/C Issuers party hereto and each of the Subsidiary Guarantors party hereto.

Exhibit 10.20

Recitals:

A. The Company, the Lenders and the L/C Issuers party thereto and the Administrative Agent have entered into a Credit
Agreement dated as of August 27, 2013 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”). Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Credit
Agreement.

B. The Subsidiary Guarantors and the Administrative Agent have entered into a Subsidiary Guaranty Agreement dated of even

date with the Credit Agreement (as amended, restated, supplemented or otherwise modified from time to time, the “Subsidiary
Guaranty”).

C. The Company has advised the Administrative Agent and the Lenders that it desires to consummate, either directly or

indirectly through one of its Subsidiaries, the Acquisition of Emtrol LLC, a New York limited liability company (the “Emtrol Acquisition”),
however, the Emtrol Acquisition is not currently permitted by the terms of the Credit Agreement.

D. In connection with the Emtrol Acquisition, the Company has further advised the Administrative Agent, the Lenders and the

L/C Issuers of its desire to amend the Credit Agreement to provide for an increased Letter of Credit Sublimit.

E. Subject to the terms and conditions set forth below, the Administrative Agent, the Lenders and the L/C Issuers party hereto

have agreed to consent to the consummation of the Emtrol Acquisition and so amend the Credit Agreement.

In furtherance of the foregoing, the parties agree as follows:

Section 1. Amendment to Credit Agreement. Subject to the terms and conditions set forth herein and in reliance upon the

representations and warranties set forth herein, the definition of “Letter of Credit Sublimit” set forth in Section 1.01 of the Credit
Agreement is hereby amended by replacing the reference to “$10,000,000” therein with “$20,000,000”.

The amendment to the Credit Agreement is limited to the extent specifically set forth above and no other terms, covenants or

provisions of the Loan Documents are intended to be affected hereby.

Section 2. Limited Consent. Subject to the terms and conditions set forth herein and in reliance upon the representations and

warranties set forth herein, each of the Administrative Agent and the Lenders signatory hereto hereby consents to the Emtrol
Acquisition, so long as (a) at the time of the consummation thereof, the Emtrol Acquisition would constitute a Permitted Acquisition
permitted under Section 7.02(g)(i) of the Credit Agreement were it not for the fact that the pro forma Consolidated Leverage Ratio
calculated in accordance with clause (d) of the definition of Permitted Acquisition for the Emtrol Acquisition is greater than 2.25 to
1.00, (b) at the time of the consummation thereof, the pro forma Consolidated Leverage Ratio calculated in accordance with clause
(d) of the definition of Permitted Acquisition for the Emtrol Acquisition shall not exceed 2.60 to 1.00, (c) the consummation of the
Emtrol Acquisition occurs on or prior to November 30, 2014 and (d) the Emtrol Acquisition is consummated in all material respects in
accordance with the terms of the acquisition documents delivered pursuant to Section 3(b) below, without giving effect to any
modifications, amendments, consents or waivers thereto that are material and adverse to the interests of the Lenders, as reasonably
determined by the Administrative Agent.

The foregoing consent is limited to the extent specifically set forth above and no other terms, covenants or provisions of the

Loan Documents are intended to be affected hereby.

Section 3. Conditions Precedent. The effectiveness of this Amendment and the amendment and consent contemplated hereby

is subject to the satisfaction of the following conditions precedent:

(a) The Administrative Agent shall have received counterparts of this Amendment, duly executed and delivered by the
Company, the Subsidiary Guarantors, the Administrative Agent, the Lenders constituting Required Lenders and the L/C Issuers.

(b) Each of the Administrative Agent and the Lenders signatory hereto shall have received, and completed a satisfactory review

of, executed copies (or the most recent available drafts) of the material acquisition documents relating to the Emtrol Acquisition.

Upon satisfaction of the conditions set forth in this Section 3 and the effectiveness of this Amendment, the Administrative Agent

shall provide notice of such effectiveness to the Company and the Lenders.

Section 4. Representations And Warranties.

(a) In order to induce the Administrative Agent, the Lenders and the L/C Issuers to enter into this Amendment, the Company

represents and warrants to the Administrative Agent, the Lenders and the L/C Issuers as follows:

(i) The representations and warranties of the Company and each other Loan Party contained in Article V of the Credit

Agreement or in any other Loan Document are true and correct in all material respects on and as of the date hereof, except
(A) that if a qualifier relating to materiality, Material Adverse Effect or a similar concept applies, such representation or warranty
shall be required to be true and correct in all respects, (B) to the extent that such representations and warranties specifically
refer to an earlier date (except that if a qualifier relating to materiality, Material Adverse Effect or a similar concept applies, such
representation or warranty shall be required to be true and correct in all respects as of such earlier date), in which case they are
true and correct in all material respects as of such earlier date, and (C) that for purposes of this Amendment, the representations
and warranties contained in Sections 5.05(a) and (b) of the Credit Agreement shall be deemed to refer to the most recent
statements furnished pursuant to Sections 6.01(a) and (b), respectively, of the Credit Agreement.

(ii) Since December 31, 2012, there has been no event or circumstance, either individually or in the aggregate, that has

had or could reasonably be expected to have a Material Adverse Effect.

(iii) No Default or Event of Default has occurred and is continuing or will exist after giving effect to this Amendment.

(b) In order to induce the Administrative Agent, the Lenders and the L/C Issuers to enter into this Amendment, each of the
Company and each Subsidiary Guarantor represents and warrants to the Administrative Agent, the Lenders and the L/C Issuers that
this Amendment has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, except
as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting
creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity
or at law).

Section 5. Miscellaneous.

(a) Ratification and Confirmation of Loan Documents. Each of the Company and each Subsidiary Guarantor hereby consents,
acknowledges and agrees to the amendment and consent set forth herein and hereby confirms and ratifies in all respects the Loan
Documents to which such Person is a party (including without limitation, with respect to each Subsidiary Guarantor, the continuation
of its payment and performance obligations under the Subsidiary Guaranty and, with respect to both the Company and each
Subsidiary Guarantor, the continuation and extension of the liens granted under the Collateral Documents to secure the Secured
Obligations, in each case after giving effect to the amendment and consent contemplated hereby).

(b) Fees and Expenses. The Company shall pay on demand all reasonable costs and expenses of the Administrative Agent in

connection with the preparation, negotiation, execution, and delivery of this Amendment and any other documents prepared in
connection herewith, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Administrative
Agent, in each case, as set forth in Section 10.04(a) of the Credit Agreement.

(c) Headings. Section and subsection headings in this Amendment are included herein for convenience of reference only and

shall not constitute a part of this Amendment for any other purpose or be given any substantive effect.

(d) Governing Law; Jurisdiction; Waiver of Jury Trial; Etc. This Amendment shall be governed by and construed in accordance

with the laws of the State of New York, and shall be further subject to the provisions of Sections 10.14 and 10.15 of the Credit
Agreement.

(e) Counterparts. This Amendment may be executed in any number of counterparts, each of which when executed and delivered

shall be deemed to be an original, and all of which when taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of a signature page of this Amendment by facsimile or electronic transmission (including .pdf file) shall be
effective as delivery of a manually executed counterpart hereof.

(f) Entire Agreement. This Amendment, together with all the Loan Documents (collectively, the “Relevant Documents”), sets forth

the entire understanding and agreement of the parties hereto in relation to the subject matter hereof and supersedes any prior
negotiations and agreements among the parties relating to such subject matter. No promise, condition, representation or warranty,
express or implied, not set forth in the Relevant Documents shall bind any party hereto, and no such party has relied on any such
promise, condition, representation or warranty. Each of the parties hereto acknowledges that, except as otherwise expressly stated in
the Relevant Documents, no representations, warranties or commitments, express or implied, have been made by any party to the
other in relation to the subject matter hereof or thereof. None of the terms or conditions of this Amendment may be changed,
modified, waived or canceled orally or otherwise except in writing in accordance with Section 10.01 of the Credit Agreement.

(g) Enforceability. Should any one or more of the provisions of this Amendment be determined to be illegal or unenforceable as

to one or more of the parties hereto, all other provisions nevertheless shall remain effective and binding on the parties hereto.

(h) Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their

respective successors and assigns (subject to Section 10.06 of the Credit Agreement).

[Remainder of Page Intentionally Left Blank; Signature Pages Follow]

The following parties have caused this Amendment to be executed as of the date first written above.

COMPANY:

CECO ENVIRONMENTAL CORP.,
a Delaware corporation

/s/ Edward J. Prajzner

By:
Name: Edward J. Prajzner
Title: Chief Financial Officer

SUBSIDIARY GUARANTORS:

AARDING THERMAL ACOUSTICS USA INC.
ADWEST TECHNOLOGIES, INC.
AVC, INC.
CECO ABATEMENT SYSTEMS, INC.
CECO FILTERS, INC.
CECO GROUP, INC.
CECO MEXICO HOLDINGS LLC
CECOAIRE, INC.
EFFOX INC.
FISHER-KLOSTERMAN, INC.
GMD ENVIRONMENTAL TECHNOLOGIES, INC.
MET-PRO TECHNOLOGIES LLC
(f/k/a Mustang Acquisition II, LLC)
MUSTANG ACQUISITION, INC.
NEW BUSCH CO., INC.
THE KIRK & BLUM MANUFACTURING COMPANY

/s/ Edward J. Prajzner

By:
Name: Edward J. Prajzner
Title: Chief Financial Officer

CECO GROUP GLOBAL HOLDINGS LLC
FKI, LLC

/s/ Edward J. Prajzner

By:
Name: Edward J. Prajzner
Title: Chief Financial Officer

AMENDMENT NO. 1 TO CREDIT AGREEMENT AND LIMITED CONSENT
Signature Page

H.M. WHITE, INC.

/s/ Edward J. Prajzner

By:
Name: Edward J. Prajzner
Title: Chief Financial Officer

KBD/TECHNIC, INC.

/s/ Edward J. Prajzner

By:
Name: Edward J. Prajzner
Title: Chief Financial Officer

BIO-REACTION INDUSTRIES INC.
MET-PRO HOLDINGS LLC
MPC INC.
PRISTINE WATER SOLUTIONS INC.
STROBIC AIR CORPORATION

/s/ Edward J. Prajzner

By:
Name: Edward J. Prajzner
Title: Chief Financial Officer

MET-PRO INDUSTRIAL SERVICES, INC.

/s/ Edward J. Prajzner

By:
Name: Edward J. Prajzner
Title: Chief Financial Officer

AMENDMENT NO. 1 TO CREDIT AGREEMENT AND LIMITED CONSENT
Signature Page

ADMINISTRATIVE AGENT:

BANK OF AMERICA, N.A.,
as Administrative Agent

By:

/s/ Anthony W. Kell

Name: Anthony W. Kell
Title: Vice President

AMENDMENT NO. 1 TO CREDIT AGREEMENT AND LIMITED CONSENT
Signature Page

LENDERS:

BANK OF AMERICA, N.A., as a Lender and an L/C
Issuer

/s/ Joseph R. Jackson

By:
Name: Joseph R. Jackson
Title: Vice President

AMENDMENT NO. 1 TO CREDIT AGREEMENT AND LIMITED CONSENT
Signature Page

FIFTH THIRD BANK, N.A., as a Lender and an L/C
Issuer

/s/ Nick Jevic

By:
Name: Nick Jevic
Title: Vice President

AMENDMENT NO. 1 TO CREDIT AGREEMENT AND LIMITED CONSENT
Signature Page

CITIZENS BANK, NATIONAL ASSOCIATION,
as a Lender and an L/C Issuer

/s/ Dale R. Carr

By:
Name: Dale R. Carr
Title: Senior Vice President

AMENDMENT NO. 1 TO CREDIT AGREEMENT AND LIMITED CONSENT
Signature Page

JPMORGAN CHASE BANK, N.A., as a Lender

/s/ Steven P. Sullivan

By:
Name: Steven P. Sullivan
Title: Authorized Officer

AMENDMENT NO. 1 TO CREDIT AGREEMENT AND LIMITED CONSENT
Signature Page

ASSOCIATED BANK, NATIONAL ASSOCIATION,
as a Lender

By:

/s/ Mark Palazzo

Name: Mark Palazzo
Title: Senior Vice President

AMENDMENT NO. 1 TO CREDIT AGREEMENT AND LIMITED CONSENT
Signature Page

BRANCH BANKING AND TRUST COMPANY,
as a Lender

/s/ Ryan T. Hamilton

By:
Name: Ryan T. Hamilton
Title: Assistant Vice President

AMENDMENT NO. 1 TO CREDIT AGREEMENT AND LIMITED CONSENT
Signature Page

THE HUNTINGTON NATIONAL BANK,
as a Lender

/s/ Joshua D. Elsea

By:
Name: Joshua D. Elsea
Title: Vice President

AMENDMENT NO. 1 TO CREDIT AGREEMENT AND LIMITED CONSENT
Signature Page

PNC BANK, NATIONAL ASSOCIATION,
as a Lender

/s/ Gregory Buchanan

By:
Name: Gregory Buchanan
Title: Senior Vice President

AMENDMENT NO. 1 TO CREDIT AGREEMENT AND LIMITED CONSENT
Signature Page

TD BANK, N.A., as a Lender

/s/ Susan Schwartz

By:
Name: Susan Schwartz
Title: Vice President

AMENDMENT NO. 1 TO CREDIT AGREEMENT AND LIMITED CONSENT
Signature Page

SUBSIDIARIES OF THE COMPANY

Exhibit 21

Direct subsidiaries of CECO Environmental Corp.

CECO Group, Inc., a Delaware corporation
Flextor Inc., a Quebec company
CECO Group Global Holdings LLC, a Delaware limited liability company

Direct subsidiaries of CECO Group, Inc.

Adwest Technologies, Inc., a California corporation
CECO Filters, Inc., a Delaware corporation
CECO Abatement Systems, Inc., a Delaware corporation
H.M. White, Inc. (f/k/a CECO Energy, Inc.), a Delaware corporation
CECOaire, Inc., a Delaware corporation
The Kirk & Blum Manufacturing Company, an Ohio corporation
Effox, Inc., a Delaware corporation
GMD Environmental Technologies, Inc., a Delaware corporation (f/k/a GMD Acquisition Corp.)
Fisher-Klosterman, Inc., a Delaware corporation (f/k/a FKI Acquisition Corp.)
CECO Mexico Holdings LLC, a Delaware limited liability company

Direct subsidiaries of CECO Filters, Inc.

CECO India Pvt. Ltd., an Indian company (f/k/a CECO Filters India Pvt. Ltd.)
New Busch Co., Inc., a Delaware corporation

Direct subsidiaries of Fisher-Klosterman, Inc.

FKI, LLC, a Delaware limited liability company
Fisher-Klosterman-Buell Shanghai Co., Ltd., a China company (f/k/a Kentucky Fabrication (Shanghai Co., Ltd.))
AVC, Inc., a Delaware corporation
SAT Technology, Inc., a Delaware corporation
Emtrol LLC, a New York limited liability company

Direct subsidiaries of Emtrol LLC

Emtrol Ltd., an Ontario company

Direct subsidiaries of SAT Technology, Inc.

SAT Technology, Inc., a Chinese corporation based in Shanghai

Direct subsidiaries of H.M. White, Inc.

CECO Environmental Mexico S. de R.L. de C.V., a Monterrey, Mexico company
CECO Environmental Services S. de R.L. de C.V., a Monterrey, Mexico company

Direct subsidiaries of Flextor Inc.

Flextor Chile S.A., a Chile company
Flextor do Brasil Importacao e Exportacao Ltda., a Brazil company

Direct subsidiaries of CECO Group Global Holdings LLC

CECO Environmental Netherlands B.V., a Netherlands company

Direct subsidiaries of CECO Environmental Netherlands B.V.

ATA Beheer B.V., a Netherlands company

Direct subsidiaries of ATA Beheer B.V.

Aarding Thermal Acoustics B.V., a Netherlands company
Aarding Thermal Acoustics USA, Inc., a Delaware company

Direct subsidiaries of ATA Beheer B.V. and Aarding Thermal Acoustics B.V.

Aarding do Brasil Fornecimento de Produtos Termo-Acusticos Equipamentos Ltda., a Brasil company

Direct subsidiaries of Met-Pro Technologies LLC

Mefiag B.V., a Netherlands company
Met-Pro Product Recovery/Pollution Control Technologies Inc., a Canada company
Strobic Air Corporation, a Delaware company
MPC Inc., a Delaware company
Met-Pro Industrial Services Inc., a Pennsylvania company
Bio-Reaction Industries, a Delaware company
Met-Pro (Hong Kong) Company Limited, a Hong Long Company
Met-Pro Holdings LLC, a Delaware company
Met-Pro Chile Limitada, a Chile company

Direct subsidiaries of Met-Pro (Hong Kong) Company Limited

Mefiag (Guangzhou) Filter Systems Ltd., a China company
Jiangyin Zhongli Industrial Technology Co. Ltd., a China company

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Exhibit 23.1

Board of Directors and Shareholders
CECO Environmental Corp. and Subsidiaries
Cincinnati, Ohio

We hereby consent to the incorporation by reference in Registration Statement Nos. 333-130294 and 333-183275 on Form S-3 and
Registration Statements Nos. 333-33270, 333-143527, and 333-159948 on Forms S-8 of our reports dated March 17, 2015, relating
to the consolidated financial statements and the effectiveness of CECO Environmental Corp. and Subsidiaries’ internal control over
financial reporting, which appear in this Form 10-K. Our report on the effectiveness of internal control over financial reporting
expresses an adverse opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31,
2014.

/s/ BDO USA, LLP

Chicago, Illinois
March 17, 2015

Exhibit 31.1

RULE 13a-14(a)/15d-14(a) CERTIFICATION BY CHIEF EXECUTIVE OFFICER

I, Jeffrey Lang, certify that:

I have reviewed this report on Form 10-K for the year ended December 31, 2014, of CECO Environmental Corp.;

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;

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;

The Registrant’s other certifying officer(s) 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:

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;

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;

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

Disclosed in this report any change in 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

The Registrant’s other certifying officer(s) 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):

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

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
March 17, 2015

Exhibit 31.2

RULE 13a-14(a)/15d-14(a) CERTIFICATION BY CHIEF FINANCIAL OFFICER

I, Edward J. Prajzner, certify that:

I have reviewed this report on Form 10-K for the year ended December 31, 2014, of CECO Environmental Corp.;

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/ EDWARD J. PRAJZNER
Edward J. Prajzner
Chief Financial Officer
March 17, 2015

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

Exhibit 32.1

In connection with the Annual Report of CECO Environmental Corp. (the “Company”) on Form 10-K for the period ending
December 31, 2014, 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. Section 1350, as adopted pursuant to Section 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; 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
March 17, 2015

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

Exhibit 32.2

In connection with the Annual Report of CECO Environmental Corp. (the “Company”) on Form 10-K for the period ending
December 31, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Edward J. Prajzner,
Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 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; 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/ EDWARD J. PRAJZNER
Edward J. Prajzner
Chief Financial Officer
March 17, 2015