UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 1998
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 001-10621
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AMERICAN ECO CORPORATION
------------------------------------
(Exact name of registrant as specified in its charter)
Ontario, Canada 52-1742490
--------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
154 UNIVERSITY AVENUE, TORONTO, ONTARIO M5H 3Y9
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(Address or principal executive offices) (Zip Code)
(416) 340-2727
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(Registrant's telephone number, including area code)
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
----- -----
As of April 15, 1998, there were 21,644,856 shares of Common
Shares, no par value, outstanding.
AMERICAN ECO CORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-Q
PART I. FINANCIAL INFORMATION Page No.
--------
Item 1. Financial Statements
Consolidated Balance Sheets:
February 28, 1998 and November 30, 1997 . . . 3
Consolidated Statement of Income:
Quarters Ended February 28, 1998
and February 28, 1997 . . . . . . . . . . . . 5
Consolidated Statement of Changes in Financial
Position:
Quarters Ended February 28, 1998
and February 28, 1997 . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . 10
PART II. OTHER INFORMATION
Item 2. Changes in Securities . . . . . . . . . . . . 13
Item 6. Exhibits and Reports on Form 8-K . . . . . . . 13
Signatures . . . . . . . . . . . . . . . . . . . . . . . 14
ITEM 1. FINANCIAL STATEMENTS
PART I
FINANCIAL INFORMATION
AMERICAN ECO CORPORATION
CONSOLIDATED BALANCE SHEET
(United States Dollars in thousands)
(Unaudited)
February 28, November 30,
1998 1997
------------ -----------
ASSETS
------
CURRENT ASSETS
Cash . . . . . . . . . . . . . . . . . . . $ 3,023 $ 1,259
Accounts receivable, trade, less allowance
for doubtful accounts of $1,751 in 1998 and
$2,078 in 1997, respectively . . . . . . . 45,068 50,349
Current portion of notes receivable . . . 15,073 17,757
Costs and estimated earnings in excess of
billings . . . . . . . . . . 17,321 13,145
Inventory . . . . . . . . . . . . . . . . 19,098 18,079
Deferred income tax . . . . . . . . . . . 986 1,133
Prepaid expenses and other current assets 5,922 6,920
-------- --------
TOTAL CURRENT ASSETS . . . . . . . . 106,491 108,642
-------- --------
PROPERTY, PLANT AND EQUIPMENT, net 33,152 33,023
-------- --------
OTHER ASSETS
Goodwill, net of accumulated amortization
of $1,754 in 1998 and $1,592 in 1997,
respectively . . . . . . . . . . . . . . . 31,847 30,484
Notes receivable . . . . . . . . . . . . . 28,145 28,578
Investments . . . . . . . . . . . . . . . 17,876 9,142
Other assets . . . . . . . . . . . . . . . 1,912 1,917
-------- --------
TOTAL OTHER ASSETS . . . . . . . . . 79,780 70,121
-------- --------
TOTAL ASSETS . . . . . . . . . . . . $219,423 $211,786
======== ========
The accompanying notes are an integral part of these financial statements.
AMERICAN ECO CORPORATION
CONSOLIDATED BALANCE SHEET
(United States dollars in thousands)
(Unaudited)
February 28, November 30,
1998 1997
----------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 28,741 $ 28,400
Notes payable . . . . . . . . . . . . . 11,650 8,904
Current portion of long-term debt . . . 7,790 8,081
Billings in excess of costs and 1,132 3,350
estimated earnings . . . . . . . . . . . . . -------- --------
TOTAL CURRENT LIABILITIES . . . . . 49,043 48,735
-------- --------
LONG-TERM LIABILITIES
Long-term debt . . . . . . . . . . . . . 52,150 51,722
Deferred income tax liability . . . . . 4,307 3,144
Other liabilities . . . . . . . . . . . 973 1,086
-------- ---------
TOTAL LONG-TERM LIABILITIES 57,430 55,952
-------- ---------
TOTAL LIABILITIES . . . . . . . . . 106,473 104,687
-------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Share capital . . . . . . . . . . . . . 79,184 75,577
Contributed surplus . . . . . . . . . . 2,845 2,845
Cumulative foreign exchange . . . . . . (1,426) (1,511)
Retained earnings . . . . . . . . . . . 32,347 30,188
-------- --------
TOTAL SHAREHOLDERS' EQUITY 112,950 107,099
-------- --------
TOTAL LIABILITIES & SHAREHOLDERS' $219,423 $211,786
EQUITY . . . . . . . . . . . . . . . . . . . ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
AMERICAN ECO CORPORATION
CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED FEBRUARY 28,
(United States dollars in thousands)
(Unaudited)
1998 1997
---- ----
$ 58,434 $ 45,236
REVENUE . . . . . . . . . . . . . . . . . . ---------- ---------
COSTS AND EXPENSES
Direct costs of revenue . . . . . . . 45,452 36,142
Selling, general and administrative
expenses . . . . . . . . . . . . . . 7,869 4,228
Interest expense, net . . . . . . . . 760 415
Depreciation and amortization . . . . 1,032 906
--------- ---------
55,113 41,691
--------- ---------
INCOME BEFORE PROVISION FOR INCOME TAXES . 3,321 3,545
PROVISION FOR INCOME TAXES . . . . . . . . 1,162 --
--------- ---------
NET INCOME . . . . . . . . . . . . . . . . $ 2,159 $ 3,545
========== ==========
Earnings per common share
Basic $ 0.11 $ 0.25
======== ==========
Fully diluted . . . . . . . . . . . . $ 0.11 $ 0.21
======== ==========
Weighted average number of shares used in
computing earnings per common share
Basic . . . . . . . . . . . . . . . . 20,009,244 14,432,926
========== ==========
Fully diluted . . . . . . . . . . . . 24,538,540 17,755,735
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
AMERICAN ECO CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE THREE MONTHS ENDED FEBRUARY 28,
(United States dollars in thousands)
(Unaudited)
1998 1997
==== ====
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . $ 2,159 $ 3,545
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization . . . . . 1,032 906
Changes in deferred income taxes . . . 1,310 -
Changes in accounts receivable . . . . 5,281 (8,038)
Changes in costs and estimated earnings
in excess of billing . . . . . . . . . (4,176) 187
Change in inventory . . . . . . . . . . (1,019) -
Change in prepaid expenses . . . . . . (1,697) -
Change in other assets . . . . . . . . 5 (151)
Change in accounts payable . . . . . . 71 (8,680)
Change in billings in excess of costs
and estimated earning . . . . . . . . . (2,218) 915
Change in other liabilities . . . . . . (113) (117)
-------- --------
Net cash provided by (used in) operating 635 (11,433)
activities . . . . . . . . . . . . . . . . . . . -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . (999) 4,746
Increase in goodwill . . . . . . . . . . . . .-. (271)
Proceeds from notes receivable . . . . . . . 3,117 (1)
Increase in investment . . . . . . . . . . . (4,921) -
-------- --------
Net cash provided by (used in) investing (2,803) 4,474
activities . . . . . . . . . . . . . . . . . . . -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable . . . . . . . . 3,150 -
Proceeds from long-term debt . . . . . . . . 228 12,940
Principal payments on notes payable . . . . (404) -
Principal payments on long-term debt . . . . (91) -
Stock issuance costs . . . . . . . . . . . . (10) -
Issuance of common stock . . . . . . . . . . 974 3,531
-------- --------
Net cash provided by financing activities . . . . 3,847 16,471
-------- ---------
EFFECT OF FOREIGN EXCHANGE FLUCTUATIONS ON
CASH . . . . . . . . . . . . . . . . . . . . . 85 .-.
-------- --------
NET INCREASE IN CASH . . . . . . . . . . . . . . 1,764 9,512
CASH AT BEGINNING OF PERIOD . . . . . . . . . . . 1,259 317
-------- --------
CASH AT END OF PERIOD . . . . . . . . . . . . . . $ 3,023 $ 9,829
========= ========
The accompanying notes are an integral part of these consolidated financial
statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The accompanying consolidated financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and the instructions
to Form 10-Q and Article 10 of Regulation S-X promulgated by the
Securities and Exchange Commission. Such financial statements do
not include all disclosures required by generally accepted
accounting principles for annual financial statement reporting
purposes. However, there has been no material change in the
information disclosed in the Company's annual consolidated
financial statements dated November 30, 1997, except as disclosed
herein. Accordingly, the information contained herein should be
read in conjunction with such annual consolidated financial
statements and related disclosures. The accompanying financial
statements reflect, in the opinion of management, all adjustments
(consisting of normal recurring adjustments) necessary for a fair
presentation of the results for the interim periods presented.
Results of operations for the quarter ended February 28, 1998 are
not necessarily indicative of results expected for an entire
year. The November 30, 1997 balance sheet was derived from the
audited financial statements but does not include all disclosures
required by generally accepted accounting principles.
NOTE 1. INVENTORY
The components of inventory at February 28, 1998 and November 30,
1997 are as follows:
February 28, 1998 November 30, 1997
----------------- -----------------
Raw Materials $06,716 $06,358
Consumable Supplies 3,533 3,345
Finished Goods 8,849 8,376
-------- --------
$19,098 $18,079
======= =======
NOTE 2. INCOME TAXES
The accompanying consolidated financial statements reflect no
provision for income taxes for the period ended February 28, 1997
due to the application of unrecorded net operating loss carry
forwards.
NOTE 3. DOMINION BRIDGE CORPORATION
On February 20, 1988, the Company and Dominion Bridge Corporation
("Dominion Bridge") entered into a non-binding Letter of Intent
which provided for a) the purchase of $5.0 million of Dominion
Bridge common stock and warrants to purchase Dominion Bridge
common stock by the Company, b) a working capital loan facility
of up to $25.0 million to be provided by the Company to Dominion
Bridge, c) the engagement of the Company to provide certain
management services to Dominion Bridge, and d) the acquisition by
the Company of the business and assets of Dominion Bridge.
The purchase of $5.0 million dollars of Dominion Bridge stock was
consummated on February 20, 1998. The amount is included in the
accompanying consolidated balance sheet under the caption
"Investments".
On March 23, 1998, the Company announced that it had withdrawn
the Letter of Intent and terminated negotiations for any further
transactions due to complexities of the transaction and the time
constraints for its completion.
NOTE 4. EIF HOLDINGS, INC.
The Company has loaned money to EIF Holdings, Inc., a Hawaii
corporation ("EIF"), to a maximum amount of $20.0 million. On
February 18, 1998, the Company extended the maturity date of this
line of credit to August 18, 1998. At February 28, 1998, the
amount due from EIF was $17.3 million.
7
NOTE 5. LITIGATION
At February 28, 1998, there were various claims and disputes
incidental to the business. The Company believes that the
disposition of all such claims and disputes, individually or in
the aggregate, should not have a material adverse affect upon the
Company's financial position, results of operations or cash
flows.
NOTE 6. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in
Canada ("Canadian Basis") which differ in certain respects from
those principles and practices that the Company would have
followed had its consolidated financial statements been prepared
in accordance with accounting practices generally accepted in the
United States ("U.S. Basis").
On February 20, 1998, the Company purchased 1,923,077 shares of
Dominion Bridge for $5.0 million. Under Canadian Basis, this
investment is accounted for as a long-term investment and the
Company has determined that an other than temporary decline in
value has not occurred in this investment as of February 28,
1998. Under U.S. Basis, the Company's investment in Dominion
Bridge would be accounted for pursuant to Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Under SFAS No. 115,
the Company's investment in Dominion Bridge would be classified
as an available-for-sale investment which would require the
Company to carry the investment at its market value of $3.7
million at February 28, 1998 with a difference in the Company's
carrying value presented as an unrealized loss of marketable
securities in shareholders' equity.
Under U.S. Basis, utilization of pre-acquisition net operating
loss carry forwards would be credited to goodwill, to the extent
generated, rather than as a reduction of the income tax
provision, as in practice under Canadian Basis. Therefore, under
U.S. Basis, the goodwill and income tax provision would have been
adjusted by approximately $150,000 and $715,000 for the three
months ended February 28, 1998 and 1997, respectively.
During the three months ended February 28, 1997, the Company sold
$16.0 million aggregate principal amount of convertible
debentures (the "Debentures"). Under Canadian Basis, the total
amount allocated to the conversion feature of approximately $3.0
million was being charged to interest expense over ten years.
Had the U.S. Basis been followed, the $3.0 million would have
been charged to interest expense immediately as the conversion
feature of the Debentures were "in the money" and the Debentures
were immediately convertible.
Commencing with the three months ended February 28, 1997, the
Company accounted for its investment in EIF pursuant to the
equity method of accounting. Under Canadian Basis, the change is
accounted for prospectively. Under U.S. Basis, however, this
change is accounted for retroactively to when the Company first
invested in EIF, which would have resulted in an additional
charge to earnings in the period ended February 28, 1997 of
approximately $1.5 million.
The following is a reconciliation of net income under Canadian
Basis to net income under U.S. Basis.
Canadian Basis U.S. Basis
-------------- ----------
at February 28, at February 28,
--------------- ---------------
1998 1997 1998 1997
---- ---- ---- ----
Pretax income 3,321 3,545 3,321 (955)
Income tax provision 1,162 0 1,312 715
Net income 2,159 3,545 2,009 (1,670)
8
In February 1997, the Financial Accounting Standards Board issued
SFAS No. 128, "Earnings per Share", which is effective beginning
with the Company's three months ended February 28, 1998. This
statement replaces the presentation of primary and fully diluted
EPS and will require a dual presentation of basic and diluted
EPS. Basic earnings per share is computed using the weighted
average number of common shares. Diluted earnings per share is
computed using the weighted average number of common shares and
potentially dilutive common shares outstanding during the period.
In 1998, potentially dilutive common shares consist primarily of
stock options and warrants. For purposes of this reconciliation,
earnings per share amounts for all periods, under U.S. Basis,
have been restated to conform to the requirements of SFAS No.
128.
At February 28,
---------------
1998 1997
---- ----
Net income 2,009 (1,670)
Net income per share
Basic $0.10 $(0.12)
Diluted $0.09 $(0.12)
Weighted average number of shares
Basic 20,009,244 14,432,926
Diluted 21,433,769 14,432,926
The options, warrants and convertible debentures have not been
included in the calculation of diluted earnings per share for
1997 as their impact would be antidilutive.
9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The results of operations for the three months ended
February 28, 1998 are not necessarily indicative of the results
for future periods. The following discussion should be read in
conjunction with the unaudited financial statements included
herein and the notes thereto, and with the audited financial
statements and notes thereto for the year ended November 30,
1997.
OVERVIEW
The Company entered into its current lines of business in
November 1992 when it acquired Eco Environmental, Inc. ("Eco
Environmental"), and it has continued to expand its service
capabilities, geographic presence and customer base primarily by
acquiring other companies. The Company acquired nine businesses
between fiscal 1993 and fiscal 1997, and its revenues grew from
$7.6 million in fiscal 1993 to $220.4 million in fiscal 1997
primarily as a result of such acquisitions. In fiscal 1997, the
Company accelerated its acquisition program by adding Chempower,
Inc., an Ohio corporation ("Chempower") and Specialty Management
Group, Inc., d.b.a/CCG, a Texas corporation ("CCG"), while
disposing of Eco Environmental and Environmental Evolutions, Inc.
("Environmental Evolutions"). There were no acquisitions or
dispositions of businesses during the three months ended February
28, 1998 (the "First Quarter 1998").
The Company intends to continue to expand its business
through the acquisition of companies in the industrial support
and specialty fabrication businesses. The Company's acquisition
strategy entails the potential risks inherent in assessing the
value, strengths, weaknesses, contingent liabilities and
potential profitability of acquisition candidates and in
integrating the operations of acquired companies. There can be
no assurance that acquisition opportunities will continue to be
available, that the Company will have access to the capital
required to finance potential acquisitions or that any business
acquired will be integrated successfully or prove profitable.
The Company's acquisition strategy has led to rapid growth
in the Company's operations over the past five fiscal years. The
Company s operations generally are managed at each of its
subsidiaries, but core administrative, financing and strategic
planning functions are performed at the holding company level.
This rapid growth has increased, and may continue to increase,
the operation complexity of the Company as well as the level and
responsibility for both existing and new management personnel at
the holding company level. The Company's ability to manage its
expansion effectively will require it to retain new management
personnel at the holding company level and to continue to
implement and improve its operational and financial systems. The
Company's inability to effectively manage its expansion could
have a materially adverse effect on its results of operations and
financial position.
SEASONALITY AND QUARTERLY FLUCTUATIONS
The Company's revenues from its industrial, environmental
and specialty fabrication segments may be affected by the timing
of scheduled outages at its industrial customers' facilities and
by weather conditions with respect to projects conducted
outdoors. Historically, the Company has experienced decreased
activity during the first quarter of a fiscal year due to slower
plant turnaround activity in the refinery and power generating
industries in the northern United States and Canada. The effects
of seasonality may be offset by the timing of large individual
contracts, particularly if all or a substantial portion of the
contracts fall within a one-to-two quarter period. Accordingly,
the Company's quarterly results may fluctuate and the results of
one fiscal quarter should not be deemed to be representative of
the results of any other quarter or for the full fiscal year.
RECOGNITION OF REVENUES
The Company recognizes revenues and profits on contracts
using the percentage-of-completion method of accounting. Under
the percentage-of-completion method, contract revenues are
accrued based upon the percentage that accrued costs to date bear
to total estimated costs. As contracts can extend over more than
one
10
accounting period, revisions in estimated total costs and profits
during the course of work are reflected during the period in
which the facts requiring the revisions become known. Losses on
contracts are charged to income in the period in which such
losses are first determined. The percentage-of-completion method
of accounting can result in the recognition of either costs and
estimated profits in excess of billings, or billings in excess of
costs and estimated profits on uncompleted contracts, which are
classified as current assets and liabilities, respectively, in
the Company's balance sheet.
RESULTS OF OPERATIONS
Revenues
--------
The Company's revenues grew 29.2% to $58.4 million in the
First Quarter 1998 compared to $45.2 million for the three months
ended February 28, 1997 (the "First Quarter 1997"). The $13.2
million increase in revenue is comprised of:
Acquisitions in 1997 subsequent to First Quarter 1997 $ 19.5
Disposition in 1997 of environmental subsidiaries (2.5)
Reduction in revenue from existing businesses (3.8)
-------
$ 13.2
=======
The acquisitions in 1997 represent the Company's Chempower and
CCG subsidiaries which were acquired on February 28, 1997 and
September 1, 1997, respectively. The Company's environmental
subsidiaries, Eco Environmental and Environmental Evolutions were
included in the 1997 operations until their disposal date of
August 31, 1997. The reduction in revenues from existing
businesses was attributable to slower plant turnaround activity
in the refinery and power generating industries. The Company
believes that this activity will increase during the next two
quarters.
Operating Expenses
------------------
The Company's direct costs of revenue increased 25.8% to $45.5
million in the First Quarter 1998 compared to $36.1 million for
the First Quarter 1997. The increased costs are as a result of
the revenue growth for the period. Direct costs, as a percentage
of revenue, decreased to 77.8% in the First Quarter 1998 compared
to 79.9% in the First Quarter 1997. The decline as a percent of
revenue is attributable to a modest shift in revenue to higher
margin specialty fabrication work from lower margin industrial
support services and a continued focus on control of direct costs
during the performance of contract work. The Company requires
managers to track cost control indicators such as labor
productivity and consumables.
Selling, general and administrative expenses increased 86.1%
to $7.9 million in the First Quarter 1998 compared to $4.2
million for the First Quarter 1997. Of this increase, $2.6
million represents selling, general and administrative expenses
at Chempower and CCG which were acquired subsequent to February
28, 1997. Also included in the First Quarter 1998 figures is
approximately $200,000 of costs related to the unsuccessful
acquisition of Dominion Bridge. While the selling general and
administrative costs have increased substantially during the 1997
fiscal year, and into First Quarter 1998 the Company has been
building an administrative infrastructure of staff and systems to
manage a much larger company than previously existed. Many of
these costs are either fixed or semi-variable.
The Company believes that its selling general and
administrative costs will decline in future quarters as a percent
of revenue as the revenue base continues to expand while these
fixed costs can be spread over a larger base.
11
Provision for Income Tax
------------------------
In the First Quarter 1998 the Company recorded a tax provision
of $1.2 million. There was no corresponding provision for First
Quarter 1997 as the Company applied unrecorded net operating loss
carry forwards to its pre-tax income, which substantially ended
in fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's existing capital resources consist of cash and
funds available under its line of credit. The Company's cash
increased by $1.8 million from November 30, 1997 to $3.0 million
at February 28, 1998. Typically, the Company maintains cash
levels of between $1.5 million and $3.0 million for general
corporate needs, with any excess cash used to reduce borrowings
under the Company's line of credit. In First Quarter 1998, the
net cash provided by operating activities was $635,000 compared
to a usage of cash in First Quarter 1997 of $11.4 million. The
primary difference between the periods related to a significant
reduction in accounts receivable, offset in part by an increase
in costs and estimated earnings in excess of billings. The
Company's investing activities in First Quarter 1998 used net
cash of $2.8 million primarily representing the $5.0 million
Dominion Bridge investment partially offset by payments on notes
receivable.
Financing activities in First Quarter 1998 provided $3.8
million of cash primarily due to an increase in notes payable.
The Company's cash requirements consist of working capital
needs, obligations under its leases and promissory notes and the
funding of potential acquisitions. Management believes that the
Company's cash and funds available under its credit facilities
are sufficient to meet its anticipated cash requirements, subject
to raising additional capital as necessary for possible
acquisitions. The Company is seeking to raise additional capital
by issuing debt (straight or convertible) or equity securities in
private or public offerings. There can be no assurance that the
Company will be able to issue its securities to coincide with the
funding of certain capital requirements.
INFORMATION REGARDING FORWARD LOOKING STATEMENTS.
The Company is including the following cautionary statement in
its Report on Form 10-Q to make applicable and take advantage of
the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 for any forward-looking statements made by, or
on behalf of the Company. Forward-looking statements include
statements concerning plans, objectives, goals, strategies,
future events or performance and underlying assumptions and other
statements which are other than statements of historical facts.
Certain statements contained herein are forward looking
statements and accordingly involve risks and uncertainties which
could cause actual results or outcomes to differ materially from
those expressed in the forward-looking statements. The Company's
expectations, beliefs and projects are expressed in good faith
and are believed by the Company to have a reasonable basis,
including without limitations, management's examination of
historical operating trends, data contained in the Company's
records and other data available from third parties, but there
can be no assurance that management's expectations, beliefs or
projections will result or be achieved or accomplished. In
addition to other factors and matters discussed elsewhere herein,
the following are important factors that, in the view of the
Company, could cause actual results to differ materially from
those discussed in the forward-looking statements: the ability of
the Company to continue to expand through acquisitions, the
availability of debt or equity capital to fund the Company's
expansion program and capital requirements, the ability of the
Company to manage its expansion effectively, economic conditions
that could affect demand for the Company's services, the ability
of the Company to complete projects profitably and severe weather
conditions that could delay projects. The Company disclaims any
obligation to update any forward-looking statements to reflect
events or circumstances after the date hereof.
12
PART II
OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
In February 1998, the Company issued 845,856 common shares upon
the exercise of warrants which had been issued by the Company to
institutional investors in private placements in May 1996 and
January 1997. The issuances of the common shares underlying the
warrants were exempt from registration under the Securities Act
of 1933, as amended (the "Securities Act"), by virtue of Section
4(2) therof.
During the first quarter of fiscal 1998, the Company issued
an aggregate of 128,000 common shares in connection with the final
payment of a prior acquisition and the initial payment of a
subsequent acquisition. Such issuances of common shares were
exempt from registration under the Securities Act by virtue of
Section 4(2) thereof.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule.
(b) Form 8-K
The Company filed a Form 8-K for an event of February 20, 1998
to report on Item 5 thereof the entry into a non-binding
letter of intent with Dominion Bridge Corporation.
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
AMERICAN ECO CORPORATION
(Registrant)
Dated: April 20, 1998 /s/ Michael E. McGinnis
---------------------------
Michael E. McGinnis
Chief Executive Officer
Dated: April 20, 1998 /s/ Bruce D. Tobecksen
----------------------------
Bruce D. Tobecksen
Chief Financial Officer
14
EXHIBIT INDEX
Exhibit Description
------- -----------
27 Financial Data Schedule.