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, 1999
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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
incorporation or organization) Identification No.)
154 UNIVERSITY AVENUE, TORONTO, ONTARIO M5H 3Y9
--------------------------------------------------------
(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 February 28, 1999, there were 21,610,180 shares of Common Shares, no par
value, outstanding.
<PAGE>
AMERICAN ECO CORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-Q
Page
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets:
February 28, 1999 and November 30, 1998 ..................... 3
Consolidated Statement of Income:
Quarters Ended February 28, 1998
and February 28, 1999 ..................................... 5
Consolidated Statement of Changes in Financial Position:
Quarters Ended February 28, 1998
and February 28, 1999 ..................................... 6
Notes to Consolidated Financial Statements .................... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ............. 9
PART II. OTHER INFORMATION
Item 2. Changes in Securities ..................................... 12
Item 6. Exhibits and Reports on Form 8-K .......................... 13
Signatures ......................................................... 14
2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
PART I
FINANCIAL INFORMATION
AMERICAN ECO CORPORATION
CONSOLIDATED BALANCE SHEET
(United States Dollars in thousands)
(Unaudited)
ASSETS
February 28, November 30,
1999 1998
------------ ------------
CURRENT ASSETS
Cash .......................................... $ 15,801 $ 21,821
Accounts receivable, trade, less allowance for
doubtful accounts of $1,678 in 1999 and
$1,751 in 1998, respectively ................ 51,835 50,793
Current portion of notes receivables .......... 6,341 5,080
Costs and estimated earnings in excess of
billings .................................... 11,456 11,202
Inventory ..................................... 23,881 23,080
Refundable income taxes ....................... 2,419 2,419
Deferred income tax ........................... 12,228 9,464
Prepaid expenses and other current assets ..... 7,750 4,427
------------ ------------
TOTAL CURRENT ASSETS .................... 131,711 128,286
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, NET .............. 54,961 54,835
------------ ------------
OTHER ASSETS
Goodwill, net of accumulated amortization of
$3,058 in 1999 and $2,781 in 1998,
respectively ................................ 31,299 30,767
Notes receivable .............................. 23,019 17,504
Investments ................................... 2,608 13,855
Other assets .................................. 5,019 5,136
------------ ------------
TOTAL OTHER ASSETS ...................... 61,945 67,262
------------ ------------
TOTAL ASSETS ............................ $ 248,617 $ 250,383
============ ============
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
AMERICAN ECO CORPORATION
CONSOLIDATED BALANCE SHEET
(United States Dollars in thousands)
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
February 28, November 30,
1999 1998
------------ ------------
CURRENT LIABILITIES
Accounts payable and accrued liabilities ...... $ 28,331 $ 32,584
Notes payable ................................. 184 -
Current portion of long-term debt ............. 444 630
Billings in excess of costs and estimated
earnings .................................... 2,788 3,834
------------ ------------
TOTAL CURRENT LIABILITIES ............... 31,747 37,048
------------ ------------
LONG TERM LIABILITIES
Senior notes .................................. 118,000 118,000
Long-term debt ................................ 3,035 2,689
Deferred income tax liability ................. 975 1,334
Minority interest ............................. 3,373 -
Other liabilities ............................. 698 1,074
------------ ------------
TOTAL LONG-TERM LIABILITIES ............. 126,081 123,097
------------ ------------
TOTAL LIABILITIES ....................... 157,846 160,145
------------ ------------
SHAREHOLDERS' EQUITY
Share capital ................................. 89,852 89,854
Contributed surplus ........................... 2,846 2,845
Cumulative foreign exchange ................... (2,893) (2,470)
Retained earnings ............................. 984 9
------------ ------------
TOTAL SHAREHOLDERS' EQUITY .............. 90,789 90,238
------------ ------------
TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY ................................ $ 248,617 $ 250,383
============ ============
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
AMERICAN ECO CORPORATION
CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED FEBRUARY 28,
(United States Dollars in thousands)
(Unaudited)
1999 1998
------------ ------------
REVENUE ......................................... $ 73,765 $ 58,434
------------ ------------
COSTS AND EXPENSES
Direct costs of revenue ....................... 60,450 45,452
Selling, general, and administrative expenses . 8,170 7,869
Interest expense, net ......................... 2,511 760
Depreciation and amortization ................. 1,159 1,032
------------ ------------
TOTAL OPERATING COSTS ................... 72,290 55,113
------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES ........ 1,475 3,321
PROVISION FOR INCOME TAXES ...................... 500 1,162
------------ ------------
NET INCOME ...................................... $ 975 $ 2,159
============ ============
Earnings per common share:
Basic ......................................... $ 0.05 $ 0.11
============ ============
Fully diluted ................................. $ 0.05 $ 0.11
============ ============
Weighted average number of shares used in
computing earnings per common share:
Basic ......................................... 21,610,178 20,009,244
============ ============
Fully diluted ................................. 21,610,178 24,538,540
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
AMERICAN ECO CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE THREE MONTHS ENDED FEBRUARY 28,
(United States Dollars in thousands)
(Unaudited)
1999 1998
------------ ------------
CASH FLOW (USED IN) PROVIDED BY OPERATIONS: ..... (5,608) 2,794
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures .......................... (929) (999)
Proceeds from notes receivable ................ - 3,117
Decrease (increase) in investment ............. 1,131 (4,921)
------------ ------------
Net cash provided by (used in) investing
activities .................................... 202 (2,803)
------------ ------------
CASH FLOWS FROM FINANCING ACTITIVIES:
Proceeds from notes payable and long-term debt - 3,378
Principal payments on notes payable and
long-term debt .............................. (186) (495)
Issuance of common stock ...................... - 964
------------ ------------
Net cash provided by (used in) financing
activities .................................... (186) 3,847
------------ ------------
EFFECT OF FOREIGN EXCHANGE FLUCTUATIONS ON CASH . (428) 85
------------ ------------
NET DECREASE (INCREASE) IN CASH ................. (6,020) 1,764
CASH AT BEGINNING OF PERIOD ..................... 21,821 1,259
------------ ------------
CASH AT END OF PERIOD............................ $ 15,801 $ 3,023
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
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, 1998, 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, 1999 are not
necessarily indicative of results expected for an entire year. The November 30,
1998 balance sheet was derived from the audited financial statements but does
not include all disclosures required by generally accepted accounting
principles.
The accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries; Chempower, Inc., Specialty Management
Group, Inc. /d/b/a CCG, Industra Service Corporation ("Industra"), MM Industra,
Ltd. ("MMI"), Separation and Recovery Systems, Inc. ("SRS"), The Turner Group,
United Eco Systems, Inc., Cambridge Construction Service Corporation, and Lake
Charles Construction Company, Inc. As of November 1998, the Company owns
approximately 81.9% of the outstanding common stock of U.S. Industrial Services,
Inc. (USIS). Accordingly, the operating results of USIS are included in the
consolidated financial statements of the Company.
Recognition of Revenue: The Company recognizes revenues and profits on contracts
using the percentage-of-completion method. 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 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 know. 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.
Foreign Exchange: The functional currency for the Company is the U.S. dollar,
with the exception of American Eco Corporation, Industra, and MMI whose
functional currency is the Canadian dollar. The translation of the Canadian
dollar into U.S. dollars is performed for balance sheet accounts using current
exchange rates in effect at the balance sheet date and for revenue and expense
accounts using a weighted average exchange rate during the period. Gains and
losses resulting from the translation of American Eco Corporation, Industra, and
MMI's financial statements are classified as a component of shareholders'
equity.
Reclassifications: Certain reclassifications have been made to the prior year
financial statements to conform with the current year presentation.
NOTE 2. INVENTORY
The components of inventory at February 28, 1999 and November 30, 1998 are as
follows:
February 28, 1999 November 30, 1998
----------------- -----------------
Raw Materials $ 8,679 $ 8,388
Consumable Supplies 4,353 4,207
Finished Goods 10,849 10,485
-------- --------
$ 23,881 $ 23,080
======== ========
NOTE 3. INCOME TAXES
During the three months ended February 28, 1999, the Company has recorded a
provision for income taxes of $0.5 million based upon an effective tax rate of
34%. The effective tax rate was computed based on the statutory U.S. and
Canadian federal income tax rates, state and provincial tax rates. For the three
months ended February 28, 1998, a provision of $1.2 million was reflected.
7
<PAGE>
NOTE 4. U.S. INDUSTRIAL SERVICES, INC.
As of November 1998, the Company owns approximately 81.9% of the outstanding
common stock of U.S. Industrial Services, Inc. (USIS). Accordingly, the
operating results of USIS are included in the consolidated financial statements
of the Company.
In November 1998, USIS sold the assets of Manta and transferred related
liabilities, including the credit facility, to Kenny Industrial Services,
L.L.C., for $23.0 million consisting of a combination of cash and notes.
On December 31, 1998, USIS sold the assets of P.W. Stephens Residential Inc. and
transferred its liabilities, to American Temporary Sanitation Inc. for $2.4
million consisting of $1.0 million in cash and a five year promissory note for
$1.4 million payable quarterly through 2004, together with interest at prime
rate plus 2.5% per annum.
NOTE 5. SENIOR NOTES
In May 1998, the Company completed placement of $120,000,000 of 9-5/8% Senior
Notes that mature May 15, 2008. Interest on the notes is payable semi-annually
in arrears on May 15, and November 15 each year, commencing November 15, 1998.
The notes are redeemable at the option of the Company, in whole or in part, at
any time on or after May 15, 2003, at specified redemption prices.
The Notes are senior general unsecured obligations of the Company, ranking pari
passu in right of payment to any subordinated indebtedness, of the Company
incurred in the future. The Indenture contains certain covenants that among
other things, will limit the ability of the Company and certain of its
subsidiaries to incur additional indebtedness, pay dividends or make other
distributions, purchase equity interest or subordinated indebtedness, create
certain liens, enter into certain transactions with affiliates, issue or sell
capital stock of subsidiaries, engage in sale-and-leaseback transactions, sell
assets or enter into certain mergers or consolidations. In September 1998, the
Company repurchased $2.0 million of Senior notes on the open market at a
discounted price of $1.4 million.
NOTE 6. LITIGATION
At February 28, 1999, 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 7. 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").
For the three months ended February 28, 1999, there were no material variances
between accounting practices generally accepted in the United States and Canada.
In the last quarter of fiscal year 1998, the Company recorded a charge of $13.8
million related to the write-off of its investment in Dominion Bridge
Corporation. The Company has no continuing involvement in Dominion Bridge
Corporation. During the three months ended February 28, 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.
During the three months ended February 28, 1998, 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 for the three months ended February 28, 1998.
8
<PAGE>
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, 1999 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, 1998.
OVERVIEW
American Eco Corporation (the "Company" or "American Eco") through its
subsidiaries is a leading provider of industrial support, specialty fabrication
and environmental remediation services to principally three industry groups: (i)
energy, (ii) pulp and paper, and (iii) power generation. The Company also
provides construction management services to a select group of commercial owners
and developers. The Company offers its customers a single-source solution for an
extensive array of support services such as equipment and facility repair,
maintenance, refurbishment, retrofit and expansion. Specialty fabrication
services offered by the Company include the construction of decks, well jackets
and modules for offshore oil and gas platforms, the fabrication of piping,
pressure vessels and other equipment used in process industries, the erection of
structural steel support systems and the manufacture of electrical switch gear,
power distribution panels, bus ducts and control rooms. The Company also
manufactures, sells, installs and operates SAREX(C) oil filtration and
separation systems worldwide.
The Company has strategically positioned itself as a single-source provider of
support services, which can be performed by an outside service company with
greater efficiency, safety and cost-effectiveness. By outsourcing support
services, the Company's customers can focus on their core manufacturing
processes, reduce operating costs, improve safety and conserve human and capital
resources.
American Eco's business has benefited from several market trends. First is the
shift among industrial companies toward outsourcing maintenance and other
non-core services. Companies have increased their use of outside contractors to
control their internal labor and insurance costs and to eliminate the need for
maintaining expensive, under-utilized equipment. Second, the mounting costs of
training skilled employees, maintaining a satisfactory safety record and
complying with rapidly changing government regulations favors experienced
outsourcing providers. Third is a preference by customers to simplify vendor
management by working with larger, single-source providers which have broad
geographic coverage. These trends had driven American Eco's acquisition strategy
to consolidate regionally fragmented service providers in the United States and
Canada. American Eco has realized significant growth through acquiring companies
which provide services to several industries in different geographical regions.
Between fiscal 1993 and fiscal 1998, the Company acquired nine businesses,
including two environmental companies which were subsequently sold in August
1997. The Company's revenues and net operating income were $7.6 million and
$322,000 for the fiscal year ended November 30, 1993 and were $299.8 million and
a loss of $30.2 million for the fiscal year ended November 30, 1998. The
Company's strategy is to continue to broaden and deepen its geographic presence,
expand service offerings or client base and contribute to earnings growth.
American Eco believes it has achieved a competitively advantaged position in the
industrial support, specialty fabrication and construction management markets it
serves by consistently providing high-quality, cost-effective services on a safe
and timely basis. The Company's key competitive strengths include: (i)
long-standing customer relationships, (ii) an outstanding safety and quality
record, (iii) a broad offering of value-added services and capabilities, (iv)
the ability to provide its services in the United States and Canada, and (v) an
experienced management team in the field and at the corporate level.
At February 28, 1999, the Company operated primarily through the following first
and second tier subsidiaries: C.A. Turner Construction Company, a Delaware
corporation ("C.A. Turner" and, together with Action Contract Services Inc., a
Delaware corporation, the "Turner Group"); Cambridge Construction Service Corp.,
a Nevada corporation ("Cambridge"); Lake Charles Construction Company, a
Louisiana corporation ("Lake Charles Construction" and, together with its
wholly-owned subsidiaries, the "Lake Charles Group"); Industra Service
Corporation, a British Columbia, Canada corporation ("Industra Service"); MM
Industra, Limited, a Nova Scotia, Canada corporation ("MM Industra"); United Eco
Systems, Inc., a Delaware corporation ("United Eco"); Separation and Recovery
Systems, Inc., a Nevada corporation ("SRS"); Chempower, Inc., an Ohio
corporation ("Chempower"); and Specialty Management Group, Inc., d.b.a/CCG, a
Texas corporation ("CCG").
SEASONALITY AND QUARTERLY FLUCTUATIONS
The Company's revenues from its industrial support, environmental, specialty
fabrication, and construction management 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
9
<PAGE>
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 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 26% to $73.8 million in the First Quarter 1999
compared to $58.4 million for the three months ended February 28, 1998. The
$15.4 million increase in revenue is comprised of:
Consolidation of U.S. Industrial Services, Inc.
("USIS") Revenue $ 15.1
Increase in revenue from existing businesses 0.3
-------
$ 15.4
At November 1998, the Company owned approximately 81.9% of the outstanding
common Stock of USIS. The USIS Common Stock is traded on the OTC Bulletin Board.
In November 1998, USIS sold the assets, subject to the related liabilities, of
its subsidiary J.L. Manta, Inc., and in December 1998, USIS sold its P.W.
Stephens Residential Inc. subsidiary. USIS is engaged in asbestos abatement and
lead hazard removal primarily in the Midwest. USIS is seeking to refocus its
strategic business plan in other businesses.
Operating Expenses
The Company's direct costs of revenue increased 32.9% to $60.5 million in the
First Quarter 1999 compared to $45.5 million for the First Quarter 1998. The
increased costs are primarily due to the consolidation of USIS into American
Eco. Direct costs as a percentage of revenue increased to 82% in the First
Quarter 1999 compared to 77.8% in the First Quarter 1998. The increase is
attributable to an increase in low risk, lower margin maintenance work in the
First Quarter of 1999. There is a focus on control of direct costs during the
performance of contract and maintenance work. The Company requires all managers
to track costs indicators on key issues such as labor productivity and hourly
labor costs.
Selling, general and administrative expenses increased 3.8% to $8.2 million in
the First Quarter 1999 compared to $7.9 million for the First Quarter 1998. Of
this increase, $2.2 million was attributable to USIS selling, general and
administrative costs. Had the consolidation of USIS not been accounted for the
selling, general, and administrative expenses would have decreased 24.9% to $5.9
in the First Quarter 1999 compared to $7.9 million for the First Quarter 1998.
The Company believes that its selling, general and administrative costs in its
existing businesses will decline in future quarters as a result of the focus at
corporate and its business units to control costs.
Provision for Income Tax
During the three months ended February 28, 1999, the Company has recorded a
provision for income taxes of $0.5 million based upon an effective tax rate of
34%. The effective tax rate was computed based on the statutory U.S. and
Canadian federal income tax rates, state and provincial tax rates. For the three
months ended February 28, 1998, a provision of $1.2 million was reflected.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash decreased from $21.8 million on November 30, 1998 to $15.8
million at February 28, 1999. The Company utilized net cash in operating
activity of $6.6 million for the three months ended February 28, 1999 compared
to net cash provided by operations of $0.6 million for the same period in 1998.
The primary reason for the change is the payment of $6.3 million of accounts
payable during the quarter ended February 28, 1999.
Net cash provided by investing activities was $.2 million in 1999 compared to
cash used for investing activities of $2.8 million in 1998. The primary use of
cash in the first quarter of 1998 was $5.0 million for the purchase of Dominion
Bridge common stock which was partially offset by payments received for notes
receivable for $3.1 million.
Cash flows used for financing activities was $.2 million in 1999 compared to
cash provided from financing activities of $3.8 million in 1998. In the first
quarter of 1998, the company received $3.3 million in proceeds from notes
payable and long term debt.
As permitted by the Indenture under which the senior notes were issued, the
Company expects to obtain a line of credit facility of approximately $30 million
during the next 60 days secured by the Company's accounts receivable. The credit
facility would be used to assist the Company's working capital needs for
internal growth and help finance the Company's additional growth strategy
through acquisitions.
The Company's cash requirements consist of working capital needs, obligations
under its leasing and promissory notes, and funding for potential acquisitions.
The Company believes that its current cash position, the expected cash flow from
operations, and the anticipated availability of a line of credit should be
sufficient throughout the next 12 months to finance its working capital needs,
planned capital expenditures, debt service requirements and acquisition
strategy.
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.
11
<PAGE>
PART II
OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
There were no securities issued during the three months ended February 28, 1999.
12
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule.
(b) No Form 8-K was filed during the quarter.
13
<PAGE>
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 14, 1999 /s/ Michael E. McGinnis
------------------------
Michael E. McGinnis
Chief Executive Officer
Dated: April 14, 1999 /s/ Lanell Matlock
------------------------
Lanell Matlock
Assistant Vice President
Controller
14
<PAGE>
EXHIBIT INDEX
Exhibit Description Page
- ------- ----------------------------------- ----
27 Financial Data Schedule ........... 16
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHECULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AMERICAN ECO
CORPORATION'S FORM 10-Q FOR THE QUARTER ENDED FEBRUARY 28, 1999, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
16
</LEGEND>
<CIK> 0000868076
<NAME> American Eco Corporation
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Nov-30-1998
<PERIOD-START> Dec-01-1998
<PERIOD-END> Feb-28-1999
<CASH> 15,801
<SECURITIES> 0
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0
0
<COMMON> 89,852
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</TABLE>
