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Gold/Mining/Energy : American Eco (ECGOF, ECX on Toronto exchange) -- Ignore unavailable to you. Want to Upgrade?

To: david james who wrote (2349)	4/9/1998 1:49:00 AM
From: Nero	Read Replies (2) \| Respond to of 2841

Thanks again for your thorough research and posting corporate communication, David. I hope you're right about a shorter recovery timeframe. Sorry to hear that the DBCO ''investment'' might not show up until the 2nd quarter. I forgot that ECGOF's quarter closed in February. I'd prefer that all the bad news and red numbers come out sooner than later. This is somewhat of a sword hanging over us. Earnings growth before taxes would be impressive at $6 million. This is what keeps me in ECGOF. The earnings growth and management's ability to turn a profit providing industrial services (as opposed to buyout blunders) will one day be reflected in the stock price. nero

To: david james who wrote (2349)	4/10/1998 2:31:00 PM
From: Duncan	Read Replies (2) \| Respond to of 2841

<<Hopefully the balance sheet will look clean with some positive cash flow. The $5 mill "invested" in DBCO will affect cash flow - but I don't think that was put in until 2nd quarter.>> Yes, we all hope the internal bleeding stops. Just a minor point, but "cash flows" are reported on the "Statement of Cash Flows," not the Balance Sheet. In my opinion, ECO MUST show positive cash flows if it wants to regain the trust of Wall Street. For a 1-2 year period, one can make the P/L look rosy, but cash flows ALWAYS show the efficiencies or inefficiencies of running the business--in essence, a company's bottom line. And in ECO case, it just so happens that management was raising cash through convertible debt and equity arrangements faster than they were growing the business...which is why EPS increased just 33% WHEN revenues increased 84% and net income increased 99%. While 33% is terrific growth, it's the relative disappointment that forces one to look at the underlying business. Plain and simple, ECO had to raise cash to stay afloat...and was forced to dilute shareholders substantially. That, among other things, is why Wall Street sits on the side lines. Wall Street wants to invest in a fast growing companies; companies that grow EPS at a similiar rate to top line growth...and more importantly, generate POSITIVE cash flow from OPERATIONS--the crux of their business. In ECO's case, they did a terrific job of growing earnings and net income a similar rates...but EPS fell short because the company had to float substantial levels of equity to stay afloat. As an 18 month follower of ECO, most posters have focused on EPS...when perhaps the focus should be on cash flows. I should also point out that a companies often post positive cash flows in total...like ECO has done...but the inflow of cash generally comes from FINANCING and INVESTING activities...which are not as important as OPERATING activities. And if memory serves correct, ECO reported approx. $18 million in OUTFLOWS from OPERATIONS for the last fiscal year. While it's important to look at ECO's FINANCING and INVESTING activities (such as EIFH and DBCO), as it conveys the judgment of management, the most important section on a Statement of Cash Flow is the top third, labeled Cash Flows provided by (or used in) Operations. As for EIFH, Mike McGinnis has personally given my 3 different stories in the 5 months...and frankly, they supposedly had a buyer set to close back in February...which should tell us all that the interest in EIFH is slim pickens. While they may reap a profit on this investment, it's been a poor use of time and dollar resources, IMO...particularly when that cash could be invested in their own growth at an 84% clip. And for the $5 million investment in DBCO, this is the first time in my career that I've seen a staged acquisition deal not include a forced "buy back" provision of shares if the buyer purchased the shares well above the active trading price ($5 versus approx. $2 at the time)....and if the deal unravels...which it did. One can attribute these mistakes to inexperience, poor legal counsel, etc...but it all comes down to judgment...and I personally have lost a lot of faith in ECO's management...so I'll watch from the sidelines for a quarter or two...and reevaluate the fundamentals at that time. Good luck to all. I honestly want this stock to go up for all the long term investors...and would really like to see some positive cash flows from OPERATIONS in the current quarter...with the expectation that the non-mobilized contracts from Q4 were posted in Q1. We'll find out next week. Duncan