<PAGE>
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 November 30, 1993 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-9102
AMERON, INC.
(Exact name of registrant as specified in its charter)
Delaware 77-0100596
(State of Incorporation) (I.R.S. Employer Identification No.)
245 South Los Robles Avenue
Pasadena, CA 91101
(Address and Zip Code of principal executive offices)
Registrant's telephone number, including area code: (818) 683-4000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Name of each exchange
Title of each class on which registered
---------------------------- ---------------------
Common Stock $2.50 par value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
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 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. x
---
The Registrant estimates that as of February 9, 1994 the aggregate market
value of the shares of its Common Stock, $2.50 par value, held by non-affiliates
of the Registrant (that is, shares beneficially owned by other than executive
officers and directors) was in excess of $137 million.
On February 9, 1994 there were 3,893,748 shares of Common Stock, $2.50 par
value outstanding. This is the only class of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
1. PORTIONS OF AMERON'S 1993 ANNUAL REPORT TO STOCKHOLDERS (PARTS I, II AND
IV).
2. PORTIONS OF AMERON'S PROXY STATEMENT FOR THE 1994 ANNUAL MEETING OF
STOCKHOLDERS (PART III).
<PAGE>
PART 1
AMERON, INC.
AMERON, INC., a Delaware corporation, and its consolidated subsidiaries are
collectively referred to herein as "Ameron", the "Company", the "Registrant" or
the "Corporation" unless the context clearly indicates otherwise. The business
of the Company has been divided into business segments in Item 1(c)(1).
Substantially all activities relate to the manufacture and supply of goods and
services to the industrial, utility, marine and construction markets. All
references to "the year" or "the fiscal year" pertain to the twelve months ended
November 30, 1993. All references to the "Annual Report" pertain to the
Company's 1993 Annual Report to Stockholders.
ITEM 1 - BUSINESS
(A) GENERAL DEVELOPMENT OF BUSINESS.
Although the Company's antecedents date back to 1907, it evolved directly
from the merger of two separate firms in 1929, resulting in the
incorporation of American Concrete Pipe Co. on April 22, 1929. Various
name changes occurred between that time and 1942, at which time the
Company's name became American Pipe and Construction Co. By the late 1960s
the Company was almost exclusively engaged in manufacturing and had
expanded its product lines to include not only concrete and steel pipe but
also high-performance protective coatings, ready-mix concrete, aggregates
and reinforced thermosetting resin pipe and fittings.
At the beginning of 1970, the Company's name was changed to Ameron, Inc.
In the meantime, other manufactured products had been added to its product
lines. These included concrete and steel poles for street and area
lighting, and tapered steel vertical and cantilevered poles for traffic
signals. In 1984, the Company acquired a major domestic fiberglass pipe
business, including a manufacturing plant in Burkburnett, Texas, and
certain trade names and patent rights. In 1988, the Company expanded its
ability to serve the water transmission and distribution market through the
acquisition of a major steel pipe fabricating facility in Fontana,
California.
Further details or commentary on the year's operations can be found in the
Annual Report, which is Exhibit 13 to this report on Form 10-K, and which
should be read in conjunction with this report.
(B) FINANCIAL INFORMATION AS TO INDUSTRY SEGMENTS.
The information contained in Notes (1), (4) and (14) of Notes to
Consolidated Financial Statements on pages 38, 39, 43, 46 and 47 of the
Annual Report is incorporated herein by reference.
(C) NARRATIVE DESCRIPTION OF BUSINESS.
(1) For geographical and operational convenience, the Company is
organized into divisions. These divisions are combined into the
following groups serving the following-described industry segments.
a) The Protective Coatings Systems group develops, manufactures
and markets high-performance coatings and surfacer systems on
a world-wide basis. These products are utilized for the
preservation of major structures, such as metallic and
concrete facilities and equipment, to prevent their
degradation by corrosion, abrasion, marine fouling and other
forms of chemical and physical attack. The primary markets
served include marine, offshore, petrochemical, power
generation, petroleum, chemical, steel, pulp and paper,
railroad, bridges, mining, metal processing and original
equipment manufacturing. These products are marketed by
direct
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sales, as well as through manufacturers' representatives,
distributors and licensees. Competition is based upon
quality, price and service. Manufacture of these products is
carried out in the Company's plants in California and
Arkansas, by a wholly-owned subsidiary in The Netherlands, by
jointly-owned operations in Mexico and Saudi Arabia and by
various third party licensees. The Company licenses its
patents, trademarks, know-how and technical assistance to
various of its subsidiary and affiliated companies and to
various third party licensees.
b) The Fiberglass Pipe Systems group develops, manufactures and
markets filament-wound and molded fiberglass pipe and
fittings. These products are used by a wide range of process
industries, including industrial, petroleum, chemical
processing and petrochemical industries, for service station
replacement piping systems, aboard marine vessels and on
offshore oil platforms, and are marketed as an alternative to
metallic piping systems which ultimately fail under corrosive
operating conditions. These products are marketed by direct
sales, as well as through manufacturers' representatives,
distributors and licensees. Competition is based upon
quality, price and service. Manufacture of these products is
carried out in the Company's plants in Texas and South
Carolina, by wholly-owned subsidiaries in The Netherlands and
Singapore, and by a jointly-owned affiliate in Saudi Arabia.
c) The Concrete and Steel Pipe Systems group supplies products
and services used in the construction of pipeline facilities
for various utilities. Eight plants are located in three of
the continental western states. These plants manufacture
concrete cylinder pipe, prestressed concrete cylinder pipe,
steel pipe and reinforced concrete pipe for water
transmission, storm and industrial waste water and sewage
collection. These products are marketed by direct selling
using the Company's own personnel and by competitive bidding.
Customers include local, state and federal agencies,
developers and general contractors. Normally no one customer
or group of customers will account for sales equal to or
greater than 10 percent of the Company's consolidated revenue.
However, occasionally, when more than one unusually large
project is in progress, combined sales to all U.S. government
agencies and/or general contractors for those agencies can
reach those proportions. Besides competing with several other
concrete pipe manufacturers located in the market area,
alternative products such as ductile iron, asbestos cement,
and clay pipe compete with the Company's concrete and steel
pipe products, but ordinarily these other materials do not
offer the full diameter range produced by the Company.
Principal methods of competition are price, delivery schedule
and service. The Company's technology is used in the Middle
East through affiliated companies whose activities are not
reflected in the amounts reported for this industry segment.
This segment also includes the manufacturing and marketing on
a world-wide basis through direct sales of polyvinyl chloride
sheet lining for the protection of concrete pipe and cast-in-
place concrete structures from the corrosive effects of sewer
gases, acids and industrial chemicals. Competition is based
on quality, price and service. Manufacture of this product is
carried out in the Company's plant in California. This
segment also includes engineered design, fabrication and
direct sale of specialized proprietary equipment which is
outside the regular business of the other segments of the
Company's businesses. Competition for such work is based upon
quality, price and service. Manufacture of such equipment is
carried out in the Company's plant in California.
d) The Construction & Allied Products group includes the HC&D
division, which suppllies ready-mix concrete, crushed and
sized basaltic aggregates, dune sand, concrete pipe and box
culverts, primarily to the construction industry in Hawaii.
These products are marketed through direct sales. Ample raw
materials are available locally in Hawaii and, as to rock
products, the
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Company has exclusive rights to a quarry containing many
years' reserves. Within the market area there are competitors
for each of the segment's products. No single competitor
offers the full range of products sold by the Company in
Hawaii. The principal methods of competition are in price and
service, since an appreciable portion of the segment's
business is obtained through competitive bidding.
This segment also includes the operations of the Pole Products
& Systems division, which manufactures and markets concrete
and steel poles for highway, street and outdoor area lighting
and for traffic signals. Sales are nationwide, but with a
stronger concentration in the western states. Marketing is
handled by the Company's own sales force and by outside sales
agents. Competition for such products is mainly based on
price, but with some consideration for service and delivery.
Manufacture of these products is carried out in in two plants
in California, as well as plants in Washington and Oklahoma.
e) Except as individually shown in the above descriptions of
industry segments, the following comments or situations apply
to all segments:
(i) Because of the number of manufacturing locations and the
variety of raw materials essential to the business, no
critical situations exist with respect to supply of
materials. The Company has multiple sources for raw
materials. A program continues in operation to minimize
any potential effect which may be anticipated to result
from any foreseeable inadequacy of energy supplies. The
effects of increases in costs of energy are being
mitigated to the extent practical through conservation and
through addition or substitution of equipment to manage
the use and reduce consumption of energy.
(ii) The Company owns certain patents and trademarks, both U.S.
and foreign, related to its products. It licenses these
proprietary items to some extent in the U.S., and to a
greater degree abroad. These patents, trademarks, and
licenses do not constitute a material portion of the
Company's business. No franchises or concessions exist.
(iii) Many of the Company's products are used in connection with
capital goods, water and sewage transmission and
construction of capital facilities. Favorable or adverse
effects on general sales volume and earnings can result
from weather conditions. Normally, sales volume and
earnings will be lowest in the first fiscal quarter,
seasonal effects typically accelerate or slow the
business volume and normally do not bring about severe
changes in full-year activity.
(iv) With respect to working capital items, the Company does
not encounter any requirements which are not common to
other companies engaged in the same industries. No
unusual amounts of inventory are required to meet seasonal
delivery requirements. All of the Company's industry
segments turn their inventory between four and eleven
times annually. Average days' sales in accounts
receivable range between 39 and 81 for all segments.
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(v) The value of backlog orders at November 30, 1993 and 1992
by industry segment is shown below. Substantially all of
the November 30, 1993 backlog is expected to be billed and
recorded as sales during the year 1994.
<TABLE>
<CAPTION>
Industry Segment 1993 1992
---------------- --------- ---------
(In thousands)
<S> <C> <C>
Protective Coatings Systems $13,754 $ 9,059
Fiberglass Pipe Systems 14,507 40,243
Concrete and Steel Pipe Systems 40,658 62,685
Construction & Allied Products 11,903 17,896
------- -------
Total $80,822 $129,883
------- -------
------- -------
</TABLE>
Backlog at November 30, 1993 declined 37.8% from the prior
year's level. The $25.7 million decrease in the Fiberglass
Pipe Systems segment reflects the completion of several
large crude oil projects overseas. The lower backlog of the
Concrete and Steel Pipe Systems segment resulted from a
decline in public spending for large water transmission
systems and reduced construction activity in the Company's
geographic markets. Backlog declined in the Construction
and Allied Products segment because of reduced construction
activity in Hawaii. The increase in backlog for the
Protective Coatings Systems segment reflects an increase in
overseas project orders.
(vi) There was no significant change in competitive conditions or
the competitive position of the Company in the industries
and localities in which it operates. There is no knowledge
of any single competitive situation which would be material
to an understanding of the business.
(vii) Sales contracts in all of the Company's business segments
normally consists of purchase orders, which in some cases
are issued pursuant to master purchase agreements. Longer
term contracts seldom involve commitments of more than one
year by the Company, and exceptions are not deemed material
by management. Payment is normally due from 30 to 60 days
after shipment, with progress payments prior to shipment in
some circumstances. It is the Company's practice to require
letters of credit prior to shipment of foreign orders,
subject to limited exceptions. The Company does not
voluntarily extend long-term credit to purchasers of its
products.
(2) a) Approximate expense during each of the last three fiscal years
for Research and Development costs is shown under the caption
in Note (1) of Notes to Consolidated Financial Statements on
page 38 of the Annual Report, which information is incoporated
herein by reference.
b) The Corporation's business is not dependent on any single
customer or few customers, the loss of any one or more of whom
would have a material adverse effect on its business.
c) For many years the Corporation has been consistently
installing or improving devices to control or eliminate the
discharge of pollutants into the environment. Accordingly,
compliance with federal, state, and locally enacted provisions
relating to protection of the environment is not having, and
is not expected to have, a material effect upon the
Corporation's capital expenditures, earnings, or competitive
position.
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d) At year-end the Corporation and its consolidated subsidiaries
employed approximately 2,868 persons. Of those, approximately
1,340 were covered by labor union contracts, and there are six
separate bargaining agreements subject to renegotiation in
1994. Management does not presently anticipate a strike or
other labor disturbance in connection with renegotiation of
these agreements; however, the possibility of such an
occurrence exists.
(D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES.
The information contained in Notes (4) and (14) of Notes to Consolidated
Financial Statements on pages 39, 43, 46 and 47 of the Annual Report is
incorporated herein by reference.
Export sales in the aggregate from domestic operations during the last
three fiscal years were:
<TABLE>
<CAPTION>
In thousands
------------
<S> <C>
1993 $12,687
1992 9,663
1991 12,523
</TABLE>
ITEM 2 - DESCRIPTION OF PROPERTY
(A) The location and general character of principal plants and other materially
important physical properties used in the Company's operations is tabulated
below. Property is owned in fee except where otherwise indicated by
footnote. In addition to the property shown, the Company owns vacant land
adjacent to or in the proximity of some of its operating locations and
holds this property available for use when it may be needed to accommodate
expanded or new operations. Property listed does not include any temporary
project sites which are generally leased for the duration of the respective
projects. With the exception of the Kailua, Oahu property, shown under the
Construction & Allied Products industry segment, there are no material
leases with respect to which expiration or inability to renew would have
any material adverse effect on the Company's operations. The lease term on
the Kailua property extends to the year 2012. This is the principal source
of quarried rock and aggregates for the Company's operations on Oahu,
Hawaii and, in management's opinion, reserves are adequate for its
requirements during the term of the lease.
(B) The Company believes that its existing facilities are adequate for current
and presently foreseeable operations. Because of the cyclical nature of
certain of the Company's operations, and the substantial amounts involved
in some individual orders, the level of utilization of particular
facilities may vary significantly from time to time in the normal course of
operations.
INDUSTRY SEGMENT - GROUP
Division - Location Description
------------------- -----------
PROTECTIVE COATINGS SYSTEMS
Protective Coatings Systems division - USA
Brea, CA Office, Plant, Laboratory
Little Rock, AR Office, Plant
Ameron B.V.
Geldermalsen, The Netherlands Office, Plant
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FIBERGLASS PIPE SYSTEMS
Fiberglass Pipe Systems division - USA
Burkburnett, TX Office, Plant
Spartanburg, SC Plant
Ameron B.V.
Geldermalsen, The Netherlands Office, Plant
Ameron (Pte) Ltd.
Singapore *Office, Plant
CONCRETE AND STEEL PIPE SYSTEMS
Southern Division
Rancho Cucamonga, CA *Office
Etiwanda, CA Plant
Lakeside, CA Plant
South Gate, CA Plant
Palmdale, CA Plant
Phoenix, AZ Office, Plant
Northern Division
Tracy, CA Office, Plant
Portland, OR Office, Plant
Steel Fabrication division
Fontana, CA *Office, Plant
Protective Linings division
Brea, CA Office, Plant
Fabrication Plant
South Gate, CA Office, Plant
CONSTRUCTION & ALLIED PRODUCTS
HC&D division
Honolulu, Oahu, HI *Office, Plant
Kailua, Oahu, HI *Plant, Quarry
Barbers Point, Oahu, HI *Plant
Puunene, Maui, HI *Office, Plant, Quarry
Pole Products & Systems division
Fillmore, CA Office, Plant
Oakland, CA *Plant
Everett, WA *Office, Plant
Tulsa, OK *Office, Plant
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CORPORATE
Corporate Headquarters
Pasadena, CA *Office
Corporate Research & Engineering
South Gate, CA Office, Laboratory
*Leased
ITEM 3 - LEGAL PROCEEDINGS
On August 22, 1988, Fontana Pipe and Fabrication, Inc. filed a civil lawsuit
against the Company in the United States District Court, District of Oregon.
The action stemmed from the purchase by the Company in 1988 of the assets of a
steel fabrication plant located in Fontana, California which had been owned by
Kaiser Steel Corporation. The amounts claimed by the plaintiff were
substantial. The case went to trial in October, 1989 and resulted in a judgment
in favor of the Company. Following two appeals to the Ninth Circuit Court of
Appeals by plaintiff, this lawsuit was settled in September 1993 on terms deemed
to be favorable to the Company.
On January 24, 1992, the Central Arizona Water Conservation District ("CAWCD")
filed an action for damages against several parties, including the Company, in
United States District Court, District of Arizona, in connection with six
prestressed concrete pipe siphons furnished and installed in the 1970's as part
of the Central Arizona Project ("CAP"), a federal project to bring water from
the Colorado River to Arizona. The CAWCD also filed separate actions against
the U.S. Bureau of Reclamation ("USBR") in the United States Claims Court and
with the Arizona Projects Office of the USBR in connection with the CAP siphons.
The CAWCD alleges that the six CAP siphons are defective and that the USBR and
the defendants in the U.S. District Court action are liable for the repair or
replacement of those siphons at a claimed estimated cost of $146.7 million. The
Company has internally, as well as through independent third party consultants,
conducted engineering analyses regarding this issue and believes that the
siphons were manufactured in accordance with the project specifications and
other contract requirements, and therefore it is not liable for any claims
relating to the siphons. The Company has recorded reserves that it believes are
adequate to cover costs associated with the Company's vigorous defense of its
position in this matter. The Company and its legal counsel believe that it has
meritorious defenses to this action and that resultant liability, if any, should
not have a material adverse effect on the financial position of the Company and
its results of operations.
On July 22, 1992, the Company was served with a complaint in an action brought
by the City and County of San Francisco ("CCSF") in Superior Court, County of
San Francisco, State of California against the Company and two co-defendants, in
connection with a pipeline referred to as San Andreas Pipeline No. 3, a water
transmission pipeline that was installed between 1980 and 1982. The Company
furnished the pipe used in that pipeline. In its complaint, plaintiff alleges
that the pipeline is defective and seeks damages of approximately $44 million to
replace the entire pipeline. The Company has recorded reserves that it believes
are adequate to cover costs associated with the Company's vigorous defense of
its position in this matter. The Company believes that it has meritorious
defenses to this action and that resultant liability, if any, should not have a
material adverse effect on the financial position of the Company and its results
of operations.
In addition, certain other claims, suits and complaints, which arise in the
ordinary course of business, have been filed or are pending against the Company.
Management believes that these matters, and the matters discussed above, are
either adequately reserved, covered by insurance, or would not have an adverse
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material effect on the financial position of the Company and its results of
operations if disposed of unfavorably.
The Company is also subject to federal, state and local laws and regulations
concerning the environment and is currently participating in administrative
proceedings at several sites under these laws. It is difficult to estimate with
any certainty the total cost of remediation, the timing and extent of remedial
actions required by governmental authorities, and the amount of the Company's
liability, if any, in proportion to that of other potentially responsible
parties. While the Company finds it difficult to estimate with any certainty
the total cost of remediation at the several sites which are subject to
environmental regulatory proceedings, on the basis of currently available
information, the Company does not believe it likely that the outcome of such
environmental regulatory proceedings will have a material adverse effect on the
Company's financial position or its results of operations. This conclusion is
based on the location and type of contamination of each site, potential recovery
from insurance carriers and existing reserves. When it has been possible to
reasonably estimate the Company's liability with respect to these matters,
provisions have been made as appropriate.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(Not Applicable)
ITEM 4A - EXECUTIVE OFFICERS OF THE REGISTRANT
The following sets forth information with respect to individuals who served as
executive officers as of November 30, 1993 and who are not directors of the
Company. All executive officers are appointed by the Board of Directors to
serve at the discretion of the Board of Directors.
<TABLE>
<CAPTION>
Name Age Title and Year Elected as Officer
- ------------------- --- --------------------------------------------
<S> <C> <S> <C>
George J. Fischer 59 Senior Vice President, Human Resources 1992
Gordon G. Robertson 54 Senior Vice President, Technology 1992
James F. Slatic 62 Group Vice President 1989
Javier Solis 47 Senior Vice President of Administration,
Secretary & General Counsel 1984
Robert P. Steinkamp 47 Vice President, Manufacturing &
Environmental Affairs 1992
S. Daniel Stracner 47 Vice President, Communications &
Public Affairs 1993
Gary Wagner 42 Senior Vice President & Chief Financial
Officer, Treasurer 1990
</TABLE>
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All of the executive officers named above have held high level managerial or
executive positions with the Company for more than the past five years except
Mr. Steinkamp, who joined the Company in 1990 as Corporate Director of
Manufacturing and in 1992 was named Vice President, Manufacturing. He was
previously with Dayton Superior Corporation since 1982 where he was Vice
President, Northern Division and in 1987 Vice President, Operations.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Common Stock, $2.50 Par Value, of the Corporation, its only outstanding
class of common equity, is traded on the New York Stock Exchange, the only
exchange on which it is presently listed. On February 9, 1994, there were 1,925
stockholders of record of such stock.
Dividends have been paid each quarter during the prior two years and for many
years in the past. Information as to the amount of dividends paid during the
reporting period and the high and low sales prices of the Corporation's Common
Stock during that period are set out under the caption Per Share Data shown on
page 44 of the Annual Report, which information is incorporated herein by
reference.
Terms of lending agreements which place restrictions on cash dividends are
discussed in Note (9) of Notes to Consolidated Financial Statements on page 42
of the Annual Report, which is incorporated herein by reference.
ITEM 6 - SELECTED FINANCIAL DATA
The information required by this item is contained in the Selected Consolidated
Financial Information shown on page 29 of the Annual Report, which information
is incorporated herein by reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information required by this item with respect to fiscal years 1993 and 1992
is shown under Ameron 1993 Financial Review on pages 30-32 of the Annual Report,
which information is incorporated herein by reference. The information required
for 1991 is as follows:
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RESULTS OF OPERATIONS-1991 COMPARED WITH 1990
SALES. During 1991, sales rose 4.3 percent to $465 million. The higher
revenues were attributable primarily to sales of steel pipe, protective coatings
and linings, and fiberglass pipe products.
Protective coatings and linings sales were higher than in 1990, due principally
to the addition of operations in the United Kingdom and Spain, and increased
marine coatings sales to a United States government agency. However, domestic
and Canadian sales of industrial protective coatings were flat, reflecting
continued recessionary conditions in several markets. The European protective
coatings operation was impacted by the delay in the start-up of the next phase
of a large North African project, which resumed in 1992.
Sales of fiberglass pipe products increased because of continued strong domestic
demand for service station rehabilitation piping systems, and increased
deliveries to North Africa and the Middle East resulting from petroleum-related
and infrastructure development in those regions.
Concrete and steel pipe sales were higher than last year, due mainly to welded
steel pipe sold to two major water projects in Southern California, and sales of
prestressed concrete pipe for a large tunnel liner project. However, the
Company's concrete pipe operations were impacted by the economic downturn and
competitive pricing pressures, as well as limitations imposed by certain water
agencies on the utilization of prestressed concrete cylinder pipe as a result of
problems encountered with several pipelines in the United States. In addition,
at the beginning of 1992, the Central Arizona Water Conservation District filed
an action for damages in connection with six prestressed concrete pipe siphons
furnished and installed in the 1970s as part of the Central Arizona Project.
The Company's technical staff is working with water agencies and other concrete
pipe manufacturers to determine solutions to the pipeline problems. Although
near term revenues from this product are expected to be reduced, demand
increased in 1991 for welded steel pipe throughout California, thus offsetting
much of the effect of the drop-off in sales of prestressed concrete cylinder
pipe.
Construction product sales declined from 1990, due primarily to a decrease in
activity for both concrete and steel pole products as a result of delays in
public spending and the sharp drop-off in housing starts and construction.
Partially offsetting the reduced pole products sales were moderate gains by the
construction products operations in Hawaii, which continued to experience high
demand for ready-mix concrete and aggregates in both commercial and public
sector markets.
GROSS PROFIT. The gross profit margin decreased by .7 percent to 25.5 percent
in 1991. Profit margins on sales of protective coatings and linings increased
because of improved product pricing achieved by the domestic industrial and
marine coatings operations. Higher margins on fiberglass pipe product sales
were attributable to manufacturing efficiencies stemming from higher production
volumes and better pricing on fiberglass pipe products sold abroad. The decline
in construction activity during 1991 furthered price competition and lowered
production volumes at several of the concrete pipe operations, causing overall
margins on concrete pipe products to decrease. Construction products profit
margins declined as a result of significant price competition in steel traffic
and lighting pole markets and increased manufacturing costs resulting from lower
production volumes, as well as price competition for ready-mix concrete in
Hawaii.
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were higher than in 1990, due mainly to the addition of
the British and Spanish protective coatings operations, which were not included
in the 1990 consolidated results. Other factors affecting selling, general and
administrative expenses include increased costs associated with the expansion of
marine and protective coatings marketing activities, legal expenses, and
additional provisions for insurance, doubtful accounts, and other contingencies.
INTEREST EXPENSE. Interest expense increased marginally in 1991, due
principally to slightly higher borrowing levels maintained throughout the year.
WRITE DOWN OF ASSETS AND RESTRUCTURING COSTS. The Company recorded
repositioning costs of approximately $5.6 million and wrote down related fixed
assets of approximately $8.9 million after an in-depth evaluation by management
of the long-term profitability and rate of return on investment potential for
each of the Company's major product lines. Based on this evaluation, management
determined that the Company's overall long-term rate of return could be
increased if certain facilities were consolidated and if capital and management
were redeployed among certain product lines to those with the greatest long-term
potential. As a result, management decided to de-emphasize certain product
lines and promote and emphasize alternative products that it considered to be
more viable and technologically appropriate on a long-term basis. The Company's
restructuring activities were also a further response to the lingering effects
of the domestic recession and shifting of the Company's productive capabilities
to lower cost, more competitive products.
GAIN FROM SALE OF ASSETS. During the fourth quarter of 1991, the Company sold,
under the threat of condemnation, its headquarters facility for $21 million,
resulting in a pre-tax gain of $15 million.
OTHER INCOME. Royalties and fees from affiliated companies were higher than
last year because of the increased level of sales activity at licensees and
foreign affiliated companies. Gains from foreign currency transactions compared
favorably to the prior year's losses, reflecting the strength of the U.S. dollar
against the Dutch guilder and the Canadian dollar. Other income includes a
legal settlement of $770,000 received from resolution of a prior class action
lawsuit.
EQUITY IN LOSSES OF AFFILIATED COMPANIES. Equity in losses of jointly-owned
affiliated companies was primarily the result of economic downturns experienced
by several of the affiliates. The losses of Gifford-Hill-American, Inc., a 50-
percent-owned concrete pressure pipe manufacturer, reflect ongoing weak demand
in the Texas concrete pipe market, coupled with the bankruptcy loss of Gifford-
Hill-American's wholly-owned "Lock-Joint" subsidiary. Tamco, a 50-percent-
owned steel mini-mill, also reported lower operating results due to the downturn
in construction activity in California, while Ameron Saudi Arabia, Ltd., endured
the effects of the Gulf War. Partially offsetting these declines were the
improved performance of both Oasis-Ameron, Ltd. and Bondstrand, Ltd., which
benefitted from increased demand for protective coatings and fiberglass pipe,
respectively, in Saudi Arabia.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The Consolidated Financial Statements, the report thereon of Arthur Andersen &
Co. dated January 13, 1994, Notes to Consolidated Financial Statements and
Quarterly Financial Data, comprising pages 33 through 47 of the Annual Report,
are incorporated herein by reference.
11
<PAGE>
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
(Not applicable)
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS
Information with respect to the directors is contained under the section
entitled, "Election of Directors" in the Corporation's Proxy Statement which was
filed on February 25, 1994 in connection with the Annual Meeting of Stockholders
to be held on March 28, 1994. Such information is incorporated herein by
reference.
Information with respect to the executive officers of the Corporation is located
in Part I, Item 4A of this report.
ITEM 11 - EXECUTIVE COMPENSATION*
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT*
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS*
*The information required by Items 11, 12 and 13 is contained in the
Corporation's Proxy Statement which was filed on February 25, 1994 in connection
with the 1994 Annual Meeting of Stockholders to be held on March 28, 1994. Such
information is incorporated herein by reference.
12
<PAGE>
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(A) (1) FINANCIAL STATEMENTS:
The financial statements to be filed hereunder are
cross-referenced, in the index immediately following, to the Annual
Report, as to sections incorporated herein by reference.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page Reference
Statement to Annual Report
--------- ----------------
<S> <C>
Consolidated Balance Sheets at November 30, 1993
and 1992 34-35
Consolidated Statements of Operations for the years
ended November 30, 1993, 1992 and 1991 33
Consolidated Statements of Cash Flows for the years
ended November 30, 1993, 1992 and 1991 36
Consolidated Statements of Stockholders' Equity
for the years ended November 30, 1993, 1992 and 1991 37
Notes to Consolidated Financial Statements 38-43
</TABLE>
(i) Summarized information as to the financial condition and
results of operations for Gifford-Hill-American, Inc., Ameron
Saudi Arabia, Ltd., Bondstrand, Ltd, Oasis-Ameron, Ltd. and
Tamco are presented in Note (4) of Notes to Consolidated
Financial Statements on page 39 of the Annual Report, which
information is incorporated herein by reference.
(A) (2) FINANCIAL STATEMENT SCHEDULES:
The following additional financial data should be read in
conjunction with the consolidated financial statements in the 1993
Annual Report. Schedules not included with this additional
financial data have been omitted because they are either not
applicable, not required, not significant, or the required
information is provided in the consolidated financial statements or
notes thereto.
13
<PAGE>
<TABLE>
<CAPTION>
Pages of
Schedule Schedules of Ameron, Inc. and Subsidiaries This Report
-------- ------------------------------------------ -----------
<C> <S> <C>
Report of Independent Public Accountants 15
V Property, Plant and Equipment 16
VI Accumulated Depreciation of Property, Plant and Equipment 17
VIII Valuation and Qualifying Accounts and Reserves 18-20
IX Short Term Borrowings 21
X Supplementary Income Statement Information 22
<CAPTION>
Pages of
(A) (3) EXHIBITS This Report
-----------
<C> <S> <C>
3(i) Certificate of Incorporation 24
3(ii) Bylaws 25-35
4 Instrument Defining the Rights of Security Holders,
Including Indentures 36
10 Material Contracts 37-41
13 Annual Report 42
21 Subsidiaries of the Registrant 43
23 Consent of Independent Public Accountants 44
</TABLE>
(B) REPORTS ON FORM 8-K
No report on Form 8-K was filed by the Corporation during the last quarter
of the fiscal year ended November 30, 1993.
14
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and the Board of Directors, Ameron, Inc.:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in Ameron, Inc.'s Annual Report to
Stockholders incorporated by reference in this Form 10-K, and have issued our
report thereon dated January 13, 1994. Our audits were made for the purpose of
forming an opinion on those statements taken as a whole. The schedules listed
in the index above are the responsibility of the Company's management and are
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements. These
schedules have been subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
Los Angeles, California
January 13, 1994
15
<PAGE>
AMERON, INC. AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
(In thousands)
<TABLE>
<CAPTION>
Retire-
ments,
Balance Write-
at Addi- Downs Balance
Begin- tions and at
ning at Cost Sales Other End
Classification of Year (a) (b) (c) of Year
================================ =========== =========== =========== =========== ===========
<S> <C> <C> <C> <C> <C>
Year ended November 30, 1993
Land $ 21,457 $ 125 $ 37 $ (85) $ 21,460
Buildings 44,475 1,484 3,386 (362) 42,211
Machinery and equipment 201,604 14,230 29,531 4,769 191,072
Construction in progress 10,092 (1,142) 994 (592) 7,364
----------- ----------- ----------- ----------- -----------
$ 277,628 $ 14,697 $ 33,948 $ 3,730 $ 262,107
=========== =========== =========== =========== ===========
Year ended November 30, 1992
Land $ 20,177 $ 841 $ 95 $ 534 $ 21,457
Buildings 40,964 3,282 513 742 44,475
Machinery and equipment 184,630 17,933 1,224 265 201,604
Construction in progress 10,567 (1,029) 4 558 10,092
----------- ----------- ----------- ----------- -----------
$ 256,338 $ 21,027 $ 1,836 $ 2,099 $ 277,628
=========== =========== =========== =========== ===========
Year ended November 30, 1991
Land $ 16,736 $ 5,378 $ 1,631 $ (306) $ 20,177
Buildings 47,376 2,405 8,574 (243) 40,964
Machinery and equipment 181,853 15,726 13,852 903 184,630
Construction in progress 8,060 3,018 469 (42) 10,567
----------- ----------- ----------- ----------- -----------
$ 254,025 $ 26,527 $ 24,526 $ 312 $ 256,338
=========== =========== =========== =========== ===========
<FN>
(a) Additions at cost are net of transfers from construction in progress.
(b) Property, plant and equipment write-offs and write-downs of original costs
associated with restructuring activities totaled $27,400 in 1993 and
$8,891 in 1991.
(c) Primarily the effect of the translation from foreign currencies to
U.S. dollars and reclassifications.
</TABLE>
16
<PAGE>
AMERON, INC. AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
(In thousands)
<TABLE>
<CAPTION>
Addi-
Balance tions Retire-
at Charged ments Balance
Begin- to Costs and at
ning and Sales Other End
Classification of Year Expense (a) (b) of Year
================================ =========== =========== =========== =========== ===========
<S> <C> <C> <C> <C> <C>
Year ended November 30, 1993
Buildings $ 23,052 $ 2,402 $ 2,249 $ (105) $ 23,100
Machinery and equipment 126,446 14,042 19,062 4,382 125,808
----------- ----------- ----------- ----------- -----------
$ 149,498 $ 16,444 $ 21,311 $ 4,277 $ 148,908
=========== =========== =========== =========== ===========
Year ended November 30, 1992
Buildings $ 21,900 $ 2,275 $ 224 $ (899) $ 23,052
Machinery and equipment 112,237 13,374 815 1,650 126,446
----------- ----------- ----------- ----------- -----------
$ 134,137 $ 15,649 $ 1,039 $ 751 $ 149,498
=========== =========== =========== =========== ===========
Year ended November 30, 1991
Buildings $ 23,899 $ 2,193 $ 4,089 $ (103) $ 21,900
Machinery and equipment 102,348 14,511 4,368 (254) 112,237
----------- ----------- ----------- ----------- -----------
$ 126,247 $ 16,704 $ 8,457 $ (357) $ 134,137
=========== =========== =========== =========== ===========
<FN>
(a) Property, plant and equipment write-offs of accumulated depreciation
associated with restructuring activities totaled $16,285 in 1993.
(b) Primarily the effect of the translation from foreign currencies to
U.S. dollars and reclassifications.
</TABLE>
17
<PAGE>
AMERON, INC. AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEAR ENDED NOVEMBER 30, 1993
(In thousands)
<TABLE>
<CAPTION>
Addi- Deduc-
tions tions,
Balance Charged Pay- Reclas-
at to ments sifica- Balance
Begin- Costs and tions at
ning and Write- and End
Classification of Year Expense offs Others of Year
===================== =========== =========== =========== =========== ===========
Deducted from asset accounts
<S> <C> <C> <C> <C> <C>
Allowance for
doubtful accounts $ 5,614 $ 1,458 $ 2,296 $ (461) $ 4,315
Reserve for realization
of investments in
affiliates - $ 7,323 - - $ 7,323
Reserve for write-down
of assets related to
certain foreign
affiliates $ 8,632 $ 3,392 278 $ 244 $ 11,990
Included in current liabilities
Reserve for pending
claims and litigation $ 6,060 $ 6,523 $ 5,107 $ (288) $ 7,188
Restructuring reserve - $ 2,572 $ 246 $ 1,772 $ 4,098
Other reserves - $ 1,221 $ 339 $ 915 $ 1,797
Reserve for self-insured
programs $ 4,653 $ 11,432 $ 8,659 $ 115 $ 7,541
Included in long term liabilities
Reserve for pending
claims and litigation $ 2,257 $ 7,790 $ 842 $ 279 $ 9,484
Other reserves - $ 951 - $ 771 $ 1,722
Reserve for self-insured
programs $ 4,867 - - - $ 4,867
</TABLE>
18
<PAGE>
AMERON, INC. AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEAR ENDED NOVEMBER 30, 1992
(In thousands)
<TABLE>
<CAPTION>
Addi- Deduc-
tions tions,
Balance Charged Pay- Reclas-
at to ments sifica- Balance
Begin- Costs and tions at
ning and Write- and End
Classification of Year Expense offs Others of Year
===================== =========== =========== =========== =========== ===========
Deducted from asset accounts
<S> <C> <C> <C> <C> <C>
Allowance for
doubtful accounts $ 4,838 $ 1,705 $ 851 $ (78) $ 5,614
Reserve for write-down
of assets related to
certain foreign
affiliates $ 7,003 $ 1,629 - - $ 8,632
Included in current liabilities
Reserve for pending
claims and litigation $ 3,296 $ 4,149 $ 1,440 $ 55 $ 6,060
Reserve for self-insured
programs $ 3,769 $ 11,762 $ 10,278 $ (600) $ 4,653
Included in long term liabilities
Reserve for pending
claims and litigation $ 2,045 $ 511 $ 239 $ (60) $ 2,257
Reserve for self-insured
programs $ 3,962 - - $ 905 $ 4,867
</TABLE>
19
<PAGE>
AMERON, INC. AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEAR ENDED NOVEMBER 30, 1991
(In thousands)
<TABLE>
<CAPTION>
Addi- Deduc-
tions tions,
Balance Charged Pay- Reclas-
at to ments sifica- Balance
Begin- Costs and tions at
ning and Write- and End
Classification of Year Expense offs Others of Year
===================== =========== =========== =========== =========== ===========
Deducted from asset accounts:
<S> <C> <C> <C> <C> <C>
Allowance for
doubtful accounts $ 3,923 $ 1,404 $ 753 $ 264 $ 4,838
Reserve for write-down
of assets related to
certain foreign
affiliates $ 6,200 $ 712 - $ 91 $ 7,003
Included in current liabilities:
Reserve for pending
claims and litigation $ 2,200 $ 2,859 $ 3,163 $ 1,400 $ 3,296
Reserve for self-insured
programs $ 3,263 $ 12,698 $ 12,693 $ 501 $ 3,769
Included in long term liabilities:
Reserve for pending
claims and litigation $ 1,131 $ 620 $ 23 $ 317 $ 2,045
Reserve for self-insured
programs $ 4,266 - - $ (304) $ 3,962
</TABLE>
20
<PAGE>
AMERON, INC. AND SUBSIDIARIES
SCHEDULE IX - SHORT TERM BORROWINGS
(In thousands)
<TABLE>
<CAPTION>
Maximum Average
Amount Amount Weighted
Out- Out- Average
stand- stand- Interest
Balance Weighted ing ing Rate
at Average During During During
Category of Aggregate End Interest the the the
Short Term Borrowings of Year Rate Year Year Year
=============================================== ========== ======= ========== ========== =========
<S> <C> <C> <C> <C> <C>
Year ended November 30, 1993
Foreign $ 2,021 24.0% $ 3,179 $ 2,071 22.3%
Year ended November 30, 1992
Foreign $ 1,027 11.6% $ 15,884 $ 7,886 11.3%
Year ended November 30, 1991
Foreign $ 11,452 10.8% $ 17,157 $ 12,937 11.1%
</TABLE>
The increased interest rates in 1993 reflect a higher
percentage of short-term borrowings owed by the
Company's Colombian subsidiary.
21
<PAGE>
AMERON, INC. AND SUBSIDIARIES
SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
(In thousands)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
NOVEMBER 30,
========================================
Item 1993 1992 1991
==================================== ============ ============ ============
<S> <C> <C> <C>
Maintenance and repairs $ 18,632 $ 19,527 $ 21,912
</TABLE>
22
<PAGE>
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.
AMERON, INC.
By: /s/Javier Solis
_______________________________________________
Javier Solis, Senior Vice President & Secretary
Date: February 25, 1994
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.
Date: /s/James S. Marlen Chief Executive Officer, President
--------------------- and Director (Principal Executive
James S. Marlen Officer)
Date: /s/Gary Wagner Senior Vice President and Chief
--------------------- Financial Officer, Treasurer
Gary Wagner (Principal Financial and
Accounting Officer)
Date: /s/Donald H. Albrecht Director
---------------------
Donald H. Albrecht
Date: /s/Victor K. Atkins Director
---------------------
Victor K. Atkins
Date: /s/John F. King Director
---------------------
John F. King
Date: /s/William I. McKay Director
---------------------
William I. McKay
Date: /s/Richard J. Pearson Director
---------------------
Richard J. Pearson
Date: /s/Lawrence R. Tollenaere Director, Chairman of the Board
-------------------------
Lawrence R. Tollenaere
Date: ________________________________ Director
Robert Toxe
Date: ________________________________ Director
F. H. Fentener van Vlissingen
23
<PAGE>
CERTIFICATE OF INCORPORATION
----------------------------
Incorporated by reference to Annual Report on Form 10-K filed
with the Commission for Registrant's fiscal year ended November
30, 1988.
EXHIBIT 3(I)
24
<PAGE>
BYLAWS
AMERON, INC.
------------
(a Delaware corporation)
BYLAWS
(Restated with amendments
through June 14, 1993)
ARTICLE I
Offices
SECTION 1.01. Registered Office. The registered office
of AMERON, INC. (hereinafter called the Corporation) in the State
of Delaware shall be at 1209 Orange Street, City of Wilmington,
County of New Castle, and the name of the registered agent in
charge thereof shall be The Corporation Trust Company.
SECTION 1.02. Other Offices. The Corporation may also
have an office or offices at such other place or places, either
within or without the State of Delaware, as the Board of
Directors (hereinafter called the Board) may from time to time
determine or as the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
SECTION 2.01. Annual Meetings. Annual Meetings of the
stockholders of the Corporation for the purpose of electing
directors and for the transaction of such other proper business
as may come before such meetings may be held at such time, date
and place as the Board shall determine by resolution.
SECTION 2.02. Special Meetings. Special meetings of the
stockholders of the Corporation for any purpose may only be
called in accordance with the provisions of the Certificate of
Incorporation.
SECTION 2.03. Place of Meetings. All meetings of the
stockholders shall be held at such places, within or without the
State of Delaware, as may be designated by the Board.
25
<PAGE>
SECTION 2.04. Notice of Meetings. Except as otherwise
required by law, notice of each meeting of the stockholders,
whether annual or special, shall be given not less than ten (10)
nor more than sixty (60) days before the date of the meeting to
each stockholder of record entitled to vote at such meeting by
delivering a typewritten or printed notice thereof to him
personally, or by depositing such notice in the United States
mail, in a postage prepaid envelope, directed to him at his post
office address furnished by him to the Secretary of the
Corporation for such purpose or, if he shall not have furnished
to the Secretary his address for such purpose, then at his post
office address last known to the Secretary, or by transmitting a
notice thereof to him at such address by telegraph, cable, or
wireless. Except as otherwise expressly required by law, no
publication of any notice of a meeting of the stockholders shall
be required. Every notice of a meeting of the stockholders shall
state the place, date and hour of the meeting, and, in the case
of a special meeting, shall also state the purpose or purposes
for which the meeting is called. Notice of any meeting of
stockholders shall not be required to be given to any stockholder
to whom notice may be omitted pursuant to applicable Delaware law
or who shall have waived such notice and such notice shall be
deemed waived by any stockholder who shall attend such meeting in
person or by proxy, except as a stockholder who shall attend such
meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. Except as otherwise
expressly required by law, notice of any adjourned meeting of the
stockholders need not be given if the time and place thereof are
announced at the meeting at which the adjournment is taken.
SECTION 2.05. Quorum. Except as otherwise required by
law, the holders of record of a majority in voting interest of
the shares of stock of the Corporation entitled to be voted
thereat, present in person or by proxy, shall constitute a quorum
for the transaction of business at any meeting of the
stockholders of the Corporation or any adjournment thereof. In
the absence of a quorum at any meeting or any adjournment
thereof, a majority in voting interest of the stockholders
present in person or by proxy and entitled to vote thereat or, in
the absence therefrom of all the stockholders, any officer
entitled to preside at, or to act as secretary of, such meeting
may adjourn such meeting from time to time. At any such
adjourned meeting at which a quorum is present any business may
be transacted which might have been transacted at the meeting as
originally called.
SECTION 2.06. Voting.
(a) Each stockholder shall, at each meeting of the
stockholders, be entitled to vote in person or by proxy each
share or fractional share of the stock of the Corporation having
voting rights on the matter in question and which shall have been
held by him and registered in his name on the books of the
Corporation:
(i) on the date fixed pursuant to Section 6.05 of
these Bylaws as the record date for the determination of
stockholders entitled to notice of and to vote at such
meeting, or
(ii) if no such record date shall have been so
fixed, then (a) at the close of business on the day next
preceding the day on which notice of the meeting shall be
given or (b) if notice of the meeting shall be waived, at
the close of business on the day next preceding the day on
which the meeting shall be held.
(b) Shares of its own stock belonging to the Corporation
or to another corporation, if a majority of the shares entitled
to vote in the election of directors in such other corporation is
held, directly or indirectly, by the Corporation, shall neither
be entitled to vote nor be counted for quorum purposes. Persons
holding stock of the Corporation in a fiduciary capacity shall be
entitled to vote such stock. Persons whose stock is pledged
shall be entitled to vote, unless in the transfer by the pledgor
on the books of the Corporation he shall have expressly empowered
the pledges to vote thereon, in which case only the pledges, or
his proxy, may represent
26
<PAGE>
such stock and vote thereon. Stock having voting power standing
of record in the names of two or more persons, whether
fiduciaries, members of a partnership, joint tenants in common,
tenants by entirety or otherwise, or with respect to which two or
more persons have the same fiduciary relationship, shall be voted
in accordance with the provisions of the General Corporation Law
of the State of Delaware.
(c) Any such voting rights may be exercised by the
stockholder entitled thereto in person or by his proxy appointed
by an instrument in writing, subscribed by such stockholder or by
his attorney thereunto authorized and delivered to the secretary
of the meeting; provided, however, that no proxy shall be voted
or acted upon after three years from its date unless said proxy
shall provide for a longer period. The attendance at any meeting
of a stockholder who may theretofore have given a proxy shall not
have the effect of revoking the same unless he shall in writing
so notify the secretary of the meeting prior to the voting of the
proxy. At any meeting of the stockholders all matters, except as
otherwise provided in the Certificate of Incorporation, in these
Bylaws or by law, shall be decided by the vote of a majority in
voting interest of the stockholders present in person or by proxy
and entitled to vote thereat and thereon, a quorum being present.
The vote at any meeting of the stockholders on any question need
not be by ballot, unless so directed by the chairman of the
meeting. On a vote by ballot each ballot shall be signed by the
stockholder voting, or by his proxy, if there be such proxy, and
it shall state the number of shares voted.
SECTION 2.07. List of Stockholders. The Secretary of the
Corporation shall prepare and make, at least ten (10) days before
every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder
and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days
prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced
and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is
present.
SECTION 2.08. Judges. If at any meeting of the
stockholders a vote by written ballot shall be taken on any
question, the chairman of such meeting may appoint a judge or
judges to act with respect to such vote. Each judge so appointed
shall first subscribe an oath faithfully to execute the duties of
a judge at such meeting with strict impartiality and according to
the best of his ability. Such judges shall decide upon the
qualifications of the voters and shall report the number of
shares represented at the meeting and entitled to vote on such
question, shall conduct and accept the votes, and, when the
voting is completed, shall ascertain and report the number of
shares voted respectively for and against the question. Reports
of judges shall be in writing and subscribed and delivered by
them to the Secretary of the Corporation. The judges need not be
stockholders of the Corporation, and any officer of the
Corporation may be a judge on any question other than a vote for
or against a proposal in which he shall have a material interest.
SECTION 2.09. Action Without Meeting. No action shall be
taken by the stockholders except at an annual or special meeting
of stockholders. No action shall be taken by stockholders by
written consent.
27
<PAGE>
SECTION 2.10 Notice of Stockholder Business. At any
annual stockholders' meeting, only such business shall be
conducted as shall have been properly brought before the meeting.
To be properly brought before an annual stockholders' meeting,
business must be (i) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of
Directors; (ii) otherwise properly brought before the meeting by
or at the direction of the Board of Directors; or (iii) otherwise
properly brought before the meeting by a stockholder. For
business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be
timely, a stockholder's notice must be received at the principal
office of the Corporation not less than sixty (60) days nor more
than one hundred and twenty (120) days prior to the meeting;
provided, however, that in the event that the first public
disclosure (whether by mailing of a notice to shareholders, press
release or otherwise) of the date of the meeting is made less
than sixty-five (65) days prior to the date of the meeting,
notice by the stockholder will be timely if received not later
than the close of business on the tenth day following the day on
which such first public disclosure was made. A stockholder's
notice to the Secretary shall set forth, as to each matter the
stockholder proposes to bring before the annual meeting, (i) the
reasons for conducting such business at the annual meeting;
(ii) the name and address as they appear on the Corporation's
stock register, of the stockholder proposing such business;
(iii) the number of shares of capital stock of the Corporation
which are beneficially owned by the stockholder; and (iv) any
material interest of the stockholder in such business.
Notwithstanding any other provision of these Bylaws, no business
shall be conducted at an annual stockholders' meeting except in
accordance with the procedures set forth in this Section 2.10.
If the presiding officer of an annual stockholders' meeting
determines and declares that business was not properly brought
before the meeting in accordance with this Section 2.10, any such
business shall not be transacted.
ARTICLE III
Board of Directors
SECTION 3.01. General Powers. The property, business and
affairs of the Corporation shall be managed by the Board.
SECTION 3.02. Number and Term of Office. The number of
directors shall not be less than six (6) nor more than nine (9),
the exact number of which shall be fixed by Bylaw duly adopted by
the Board. The number of directors of the Corporation shall be
nine (9). The Board shall be divided into three classes, Class
I, Class II and Class III. Such classes shall be as nearly equal
in number of directors as possible. Each director shall serve
for a term ending on the third annual meeting following the
annual meeting at which such director was elected; provided,
however, that the directors first elected to Class I shall serve
for a term ending at the annual meeting to be held in 1987, the
directors first elected to Class II shall serve for a term ending
at the annual meeting to be held in 1988 and the directors first
elected to Class III shall serve for a term ending at the annual
meeting to be held in 1989. Directors need not be stockholders.
Each of the directors of the Corporation shall hold office until
his successor shall have been duly elected and shall qualify or
until he shall resign or shall have been removed in the manner
hereinafter provided.
SECTION 3.03. Election of Directors. In any election of
directors of the Corporation, a holder of any class or series of
stock then entitled to vote in such election shall be entitled to
as many votes as shall equal (i) the number of votes which
(except for this Section as to cumulative voting) he would be
entitled to cast for the election of directors with respect to
his shares of stock multiplied by (ii) the number of directors to
be elected in the election in which his class or series of shares
is entitled to vote, and each stockholder may cast all of such
votes for a single director or for any two or more of them as he
may see fit.
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SECTION 3.04. Resignations. Any director of the
Corporation may resign at any time by giving written notice to
the Board or to the Secretary of the Corporation. Any such
resignation shall take effect at the time specified therein, or,
if the time be not specified, it shall take effect immediately
upon its receipt; and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it
effective.
SECTION 3.05. Vacancies. Except as otherwise provided in
the Certificate of Incorporation, any vacancy in the Board,
whether because of death, resignation, disqualification, an
increase in the number of directors, or any other cause, may be
filled by vote of the majority of the remaining directors,
although less than a quorum. Each director so chosen to fill a
vacancy shall hold office for the unexpired term of his
predecessor or until his successor shall have been elected and
shall qualify or until he shall resign or shall have been removed
in the manner hereinafter provided.
SECTION 3.06. Place of Meeting, Etc. The Board may hold
any of its meetings at such place or places within or without the
State of Delaware as the Board may from time to time by
resolution designate or as shall be designated by the person or
persons calling the meeting or in the notice or a waiver of
notice of any such meeting. Directors may participate in any
regular or special meeting of the Board by means of conference
telephone or similar communications equipment pursuant to which
all persons participating in the meeting of the Board can hear
each other, and such participation shall constitute presence in
person at such meeting.
SECTION 3.07. First Meeting. The Board shall meet as
soon as practicable after each annual election of directors and
notice of such first meeting shall not be required.
SECTION 3.08. Regular Meetings. Regular meetings of the
Board may be held at such times as the Board shall from time to
time by resolution determine. If any day fixed for a regular
meeting shall be a legal holiday at the place where the meeting
is to be held, then the meeting shall be held at the same hour
and place on the next succeeding business day not a legal
holiday. Except as provided by law, notice of regular meetings
need not be given.
SECTION 3.09. Special Meetings. Special meetings of the
Board shall be held whenever called by the Chairman of the Board,
the President or a majority of the authorized number of
directors. Except as otherwise provided by law or by these
Bylaws, notice of the time and place of each such special meeting
shall be mailed to each director, addressed to him at his
residence or usual place of business, at least five (5) days
before the day on which the meeting is to be held, or shall be
sent to him at such place by telegraph or cable or be delivered
personally not less than twenty-four (24) hours before the time
at which the meeting is to be held. Except where otherwise
required by law or by these Bylaws, notice of the purpose of a
special meeting need not be given. Notice of any meeting of the
Board shall not be required to be given to any director who is
present at such meeting, except a director who shall attend such
meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
SECTION 3.10. Quorum and Manner of Acting. Except as
otherwise provided in these Bylaws or by law, the presence of a
majority of the number of directors then currently specified as
the size of the Board pursuant to
Section 3.02 of these Bylaws shall be required to constitute a
quorum for the transaction of business at any meeting of the
Board, and all matters shall be decided at any such meeting, a
quorum being present, by the affirmative votes of a majority of
the directors present. In the absence of a quorum, a majority of
directors present at any meeting may adjourn the same from time
to time until a quorum shall be present. Notice of any adjourned
meeting need not be given. The directors shall act only as a
Board, and the individual directors shall have no power as such.
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SECTION 3.11. Action by Consent. Any action required or
permitted to be taken at any meeting of the Board or of any
committee thereof may be taken without a meeting if a written
consent thereto is signed by all members of the Board or of such
committee, as the case may be, and such written consent is filed
with the minutes of proceedings of the Board or committee.
SECTION 3.12. Removal of Directors. Subject to the
provisions of the Certificate of Incorporation, a director may be
removed at any time, for cause only.
SECTION 3.13. Compensation. The directors shall receive
only such compensation for their services as directors as may be
allowed by resolution of the Board. The Board may also provide
that the Corporation shall reimburse each such director for any
expense incurred by him on account of his attendance at any
meetings of the Board or Committees of the Board. Neither the
payment of such compensation nor the reimbursement of such
expenses shall be construed to preclude any director from serving
the Corporation or its subsidiaries in any other capacity and
receiving compensation therefor.
SECTION 3.14. Committees. The Board may, by resolution
passed by a majority of the whole Board, designate one or more
committees, each committee to consist of one or more of the
directors of the Corporation. Any such committee, to the extent
provided in the resolution of the Board and except as otherwise
limited by law, shall have and may exercise all the powers and
authority of the Board in the management of the business and
affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it.
Any such committee shall keep written minutes of its meetings and
report the same to the Board at the next regular meeting of the
Board. In the absence or disqualification of a member of a
committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of
such absent or disqualified member.
SECTION 3.15. Notice of Director Nominations. Only
persons who are nominated in accordance with the procedures set
forth in this Section 3.15 shall be eligible for election as
Director at annual meeting of the stockholders. Nominations of
candidates for election to the Board of Directors of the
Corporation at any annual meeting may be made only by or at the
direction of the Board of Directors or by a stockholder entitled
to vote at such annual meeting. All such nominations, except
those made by or at the direction of the Board of Directors,
shall be made pursuant to timely notice in writing to the
Secretary of the Corporation of the stockholder's intention to
make such nomination. To be timely, any such notice must be
received at the principal office of the Corporation not less than
sixty (60) no more than one hundred twenty (120) days prior to
the date of such annual meeting; provided, however, that in the
event that the first public disclosure (whether by mailing of a
notice to stockholders, press release or otherwise) of the date
of such annual meeting is made less than sixty-five (65) days
prior to the date of such annual meeting, notice by the
stockholder will be timely if received not later than the close
of business on the tenth day following the day on which such
first public disclosure was made. Such stockholder's notice with
respect to a proposed nomination shall set forth (i) the name,
age, business and residence address and principal occupation or
employment of each nominee proposed in such notice; (ii) the name
and address of the stockholder giving the notice as the same
appears in the Corporation's stock register; (iii) the number of
shares of capital stock of the Corporation which are beneficially
owned by each such nominee and by such stockholder; and (iv) such
other information concerning each such nominee as would be
required, under the rules of the Securities and Exchange
Commission, in a proxy statement soliciting proxies for the
election of such nominee. Such notice must also include a signed
consent of each such nominee to serve as a director of the
Corporation, if elected.
In the event that a person is validly designated as a
nominee in accordance with the procedures specified above and
shall thereafter become unable or unwilling to stand for election
to the Board of Directors, the Board of Directors or the
stockholder who proposed such nominee, as the case may be, may
designate a substitute nominee; provided, however, that in the
case of persons not nominated by the Board of Directors,
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such a substitution may only be made if notice as provided above
in this Section 3.15 is received at the principal office of the
Corporation not later than the later of (i) thirty (30) days
prior to the date of the annual meeting or (ii) five (5) days
after the stockholder proposing the original nominee first
learned that such original nominee has become unable or unwilling
to stand for election.
ARTICLE IV
Officers
SECTION 4.01. Officers, Election and Removal. The
officers of the Corporation shall be a President, a Vice
President, a Secretary, and a Treasurer. The Corporation may
also have at the discretion of the Board of Directors an
Executive Vice President, one or more additional Vice Presidents,
one or more Assistant Secretaries, one or more Assistant
Treasurers, and such other officers as may be elected by the
Board of Directors. Any two or more offices may be held by the
same person except that the office of President and the office of
Secretary may not be held by the same person.
The officers of the Corporation shall be elected annually
by the Board of Directors at their first meeting after the annual
meeting of the stockholders and, unless they shall sooner resign,
be removed or become disqualified, shall hold office until their
respective successors shall be elected and qualify.
The Chairman of the Board and the President shall be
elected from among the Directors but the other officers need not
be Directors.
Any officer may be removed either with or without cause by
a majority of the Directors at the time in office at any regular
or special meeting of the Board of Directors.
SECTION 4.02. Chairman of the Board. The Chairman of the
Board, if there shall be one, shall preside at all meetings of
the stockholders and of the Board of Directors. He shall, ex
officio, be a member of all committees appointed or constituted
by the Board of Directors, including the Executive Committee.
SECTION 4.03. President, Executive Vice President and
Vice President. The President shall be responsible to the Board
of Directors for all actions and activities of the Corporation.
The Executive Vice President, if there shall be one, shall
act for the President in the President's absence. He shall have
such other powers and be required to perform such other duties as
the President and the Board of Directors shall prescribe.
The Vice President, or if there shall be more than one
such officer elected, shall have such powers and perform such
duties as may be delegated to him or them by the President or the
Board of Directors.
SECTION 4.04. Secretary. The Secretary shall issue
notices for all meetings, shall keep their minutes, shall have
charge of the seal and the Corporate books, and shall make such
reports and perform such other duties as are incident to his
office, or are properly required of him by the Board of
Directors. He shall also keep at the principal office of the
corporation or cause to be kept at the office of the
Corporation's transfer agent, a stock transfer book, and he shall
keep or cause to be kept by the Corporation's registrar, a share
registry book. The Secretary may be required to perform such
duties of the Treasurer as may be assigned to him from time to
time.
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SECTION 4.05. Treasurer. The Treasurer shall have the
custody of all moneys and securities of the Corporation and shall
keep regular books of account. He shall disburse the funds of
the Corporation in payment of the just demands against the
Corporation or as may be ordered by the Board of Directors,
taking proper vouchers for such disbursements, and shall render
to the President and to the Board of Directors from time to time
as may be required of him, an account of all his transactions as
Treasurer and of the financial condition of the Corporation. He
shall perform all other duties incident to his office or that are
properly required of him by the Board. He shall give the
Corporation a bond, if required by the Board of Directors, in a
sum, and with one or more sureties, satisfactory to the Board of
Directors, for the faithful performance of the duties of his
office, and for the restoration to the Corporation, in case of
his death, resignation, retirement, or removal from office, of
all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the
Corporation.
SECTION 4.06. Incapacity. In case of the absence or
inability of any officer of the Corporation to act and of any
person herein authorized to act in his place, the Board of
Directors may from time to time delegate the powers or duties of
such officer to any other officer or any Director or other person
whom they may select.
SECTION 4.07. Vacancies. Vacancies in any office arising
from any cause may be filled by the Directors at any regular or
special meeting.
SECTION 4.08. Other officers. The Board of Directors may
appoint such other officers and agents as it shall deem necessary
or expedient, who shall hold their offices for such terms and
shall exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors.
SECTION 4.09. Salaries. The salaries of all officers and
agents of the Corporation shall be fixed by the Board of
Directors. Nothing contained herein shall preclude any officer
from serving the Corporation, or any subsidiary corporation, in
any other capacity and receiving proper compensation therefor.
ARTICLE V
Contracts, Checks, Drafts, Bank Accounts, Etc.
SECTION 5.01. Execution of Contracts. The Board, except
as in these Bylaws otherwise provided, may authorize any officer
or officers, agent or agents, to enter into any contract or
execute any instrument in the name of and on behalf of the
Corporation, and such authority may be general or confined to
specific instances; and unless so authorized by the Board or by
these Bylaws, no officer, agent or employee shall have any power
or authority to bind the Corporation by any contract or
engagement or to pledge its credit or to render it liable for any
purpose or in any amount.
SECTION 5.02. Checks, Drafts, Etc. All checks, drafts or
other orders for payment of money, notes or other evidence of
indebtedness, issued in the name of or payable to the
Corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be
determined by resolution of the Board. Each such officer,
assistant, agent or attorney shall give such bond, if any, as the
Board may require.
SECTION 5.03. Deposits. All funds of the Corporation not
otherwise employed shall be deposited from time to time to the
credit of the Corporation in such banks, trust companies or other
depositories as the Board may select, or as may be selected by
any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such
power shall have been delegated by the Board and shall
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be drawn out only by check signed by persons designated, from
time to time, by resolution of the Board of Directors.
SECTION 5.04. General and Special Bank Accounts. The
Board may from time to time authorize the opening and keeping of
general and special bank accounts with such banks, trust
companies or other depositories as the Board may select or as may
be selected by any officer or officers, assistant or assistants,
agent or agents, or attorney or attorneys of the Corporation to
whom such power shall have been delegated by the Board. The
Board may make such special rules and regulations with respect to
such bank accounts, not inconsistent with the provisions of these
Bylaws, as it may deem expedient.
ARTICLE VI
Shares and Their Transfer
SECTION 6.01. Certificates for Stock. Every owner of
stock of the Corporation shall be entitled to have a certificate
or certificates, to be in such form as the Board shall prescribe,
certifying the number and class of shares of the stock of the
Corporation owned by him. The certificates representing shares
of such stock shall be numbered in the order in which they shall
be issued and shall be signed in the name of the Corporation by
the President or a Vice President, and by the Secretary or an
Assistant Secretary or by the Treasurer or an Assistant
Treasurer. Any of or all of the signatures on the certificates
may be a facsimile. In case any officer, transfer agent or
registrar who has signed, or whose facsimile signature has been
placed upon, any such certificate, shall have ceased to be such
officer, transfer agent or registrar before such certificate is
issued, such certificate may nevertheless be issued by the
Corporation with the same effect as though the person who signed
such certificate, or whose facsimile signature shall have been
placed thereupon, were such officer, transfer agent or registrar
at the date of issue. A record shall be kept of the respective
names of the persons, firms or corporations owning the stock
represented by such certificates, the number and class of shares
represented by such certificates, respectively, and the
respective dates thereof, and in case of cancellation, the
respective dates of cancellation. Every certificate surrendered
to the Corporation for exchange or transfer shall be cancelled,
and no new certificate or certificates shall be issued in
exchange for any existing certificate until such existing
certificate shall have been so cancelled, except in cases
provided for in Section 6.04.
SECTION 6.02. Transfers of Stock. Transfers of shares of
stock of the Corporation shall be made only on the books of the
Corporation by the registered holder thereof, or by his attorney
thereunto authorized by power of attorney duly executed and filed
with the Secretary, or with a transfer clerk or a transfer agent
appointed as provided in Section 6.03, and upon surrender of the
certificate or certificates for such shares properly endorsed and
the payment of all taxes thereon. The person in whose name
shares of stock stand on the books of the Corporation shall be
deemed the owner thereof for all purposes as regards the
Corporation. Whenever any transfer of shares shall be made for
collateral security, and not absolutely, such fact shall be so
expressed in the entry of transfer if, when the certificate or
certificates shall be presented to the Corporation for transfer,
both the transferor and the transferee request the Corporation to
do so.
SECTION 6.03. Regulations. The Board may make such rules
and regulations as it may deem expedient, not inconsistent with
these Bylaws, concerning the issue, transfer and registration of
certificates for shares of the stock of the Corporation. It may
appoint, or authorize any officer or officers to appoint, one or
more transfer clerks or one or more transfer agents and one or
more registrars, and may require all certificates for stock to
bear the signature or signatures of any of them.
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SECTION 6.04. Lost, Stolen, Destroyed, and Mutilated
Certificates. In any case of loss, theft, destruction, or
mutilation of any certificate of stock, another may be issued in
its place upon proof of such loss, theft, destruction, or
mutilation and upon the giving of a bond of indemnity to the
Corporation in such form and in such sum as the Board may direct;
provided, however, that a new certificate may be issued without
requiring any bond when, in the judgment of the Board, it is
proper so to do.
SECTION 6.05. Fixing Date for Determination of
Stockholders of Record. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, or
entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in
respect of any other change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board may fix, in
advance, a record date, which shall not be more than sixty (60)
nor less than ten (10) days before the date of such meeting, nor
more than sixty (60) days prior to any other action. If in any
case involving the determination of stockholders for any purpose
other than notice of or voting at a meeting of stockholders, the
Board shall not fix such a record date, the record date for
determining stockholders for such purpose shall be the close of
business on the day on which the Board shall adopt the resolution
relating thereto. A determination of stockholders entitled to
notice of or to vote at a meeting of stockholders shall apply to
any adjournment of such meeting; provided, however, that the
Board may fix a new record date for the adjourned meeting.
ARTICLE VII
Indemnification
SECTION 7.01. (DELETED MARCH 30, 1987)
ARTICLE VIII
Executive Committee
SECTION 8.01. Members and Powers. The Board, by
resolution adopted by majority of its total number, may annually
elect three or more of its number to constitute an Executive
Committee of the Board to have authority to exercise to the
extent permitted by law, in the intervals between meetings of the
Board, all powers of the Board, except to amend or repeal these
Bylaws, or to fill vacancies in its own membership or in the
Board, or to declare dividends. The actions of the Executive
Committee shall be ratified at the next succeeding meeting of the
Board.
SECTION 8.02. Meetings. The Executive Committee may
adopt rules governing the method of the notice of the time and
place of its meetings and the conduct of the proceedings thereat;
but, in the absence of such rules, meetings of the Executive
Committee may be called by any member of the Committee. Notice to
each member, regarding the time and place of holding the proposed
meeting, shall be given to each member verbally or by mail at least
twenty-four (24) hours before the time of the meeting. No notice
of a meeting will be required if all members of the Committee are
in attendance, or if notice is waived. The Executive Committee
shall keep a record of its acts and proceedings.
SECTION 8.03. Quorum. To constitute a quorum of the
Executive Committee for the transaction of business at any
meeting, a majority shall be present and the act of a majority of
the whole Committee shall be necessary to constitute the act of
the Committee.
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SECTION 8.04. Removal of Members. Any member of the
Executive Committee may be removed with or without cause by
resolution of the Board, adopted by a majority of its total
number then in office.
SECTION 8.05. Vacancies. Vacancies in the Executive
Committee shall be filled in the same manner as for the original
appointment to membership.
ARTICLE IX
Miscellaneous
SECTION 9.01. Seal. The Corporate seal of the
Corporation shall consist of two concentric circles, between
which is the name of the Corporation, and in the center shall be
inscribed the year of its incorporation and the words, "Corporate
Seal, Delaware."
SECTION 9.02. Waiver of Notices. Whenever notice is
required to be given by these Bylaws or the Certificate of
Incorporation or by law, the person entitled to said notice may
waive such notice in writing, either before or after the time
stated therein, and such waiver shall be deemed equivalent to
notice.
SECTION 9.03. Amendments. Except as otherwise provided
herein or in the Certificate of Incorporation, these Bylaws or
any of them, may be altered, amended, repealed or rescinded and
new Bylaws may be adopted, (i) by the Board, or (ii) by the
stockholders, at any annual meeting of stockholders, or at any
special meeting of stockholders, provided that notice of such
proposed alteration, amendment, repeal, rescission or adoption is
given in the notice of meeting.
EXHIBIT 3(II)
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INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES
-------------------------------------------------------------------------
Exhibit 4 is:
1. Note Agreement dated September 1, 1990 re: Senior Notes due
September 15, 2000, which document is incorporated by reference to
Annual Report on Form 10-K filed with the Commission for Registrant's
fiscal year ended November 30, 1990.
2. Note Agreement dated November 15, 1991 re: Senior Notes due
November 15, 1998, which document is incorporated by reference to Annual
Report on Form 10-K filed with the Commission for Registrant's fiscal year
ended November 30, 1991.
EXHIBIT 4
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MATERIAL CONTRACTS
Exhibit 10 is Employment Agreement between James S. Marlen and
Registrant
April 19, 1993
Mr. James S. Marlen
3773 Maple Leaf Hill
Fairlawn, Ohio 44333
Dear Jim,
On behalf of Larry Tollenaere and the Board of Directors of
Ameron, Inc., I am delighted to extend to you the position of
President and Chief Executive Officer. Following our earlier
meetings and discussions over the recent weeks, we feel strongly
that you are the right person to lead and direct Ameron and are
enthusiastic about you joining the company. Terms and conditions
of this offer, which you have orally accepted are as follows:
1. POSITION AND TITLE
. President and Chief Executive Officer
. Member of the Board of Directors
. Jim Marlen and Larry Tollenaere to develop specific written
responsibilities for new Chairman (non CEO) position.
. Larry Tollenaere to serve as Chairman until December
31, 1994.
. Jim Marlen and the Board agree that he will become Chairman of the
Board on January 1, 1995.
. Failure to meet this provision will be deemed to be a termination
under the employment contract similar to other major provisions of
this agreement.
2. BASE SALARY
. $400,000 per year
. Opportunity for future merit increases, annual reviews
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3. BUY-OUT/SIGN-ON BONUS
. Ameron to provide a lump sum cash payment of $600,000. This payment
represents compensation for stock and bonuses left behind as well
as an incentive for Jim Marlen to join the Company.
. If Jim Marlen voluntarily resigns from Ameron or is
terminated for cause during the first twelve months of
employment, he will return the full amount of this
payment in cash to the Company.
4. SHORT-TERM INCENTIVE BONUS
. Goals and guidelines to be approved by the Board of Directors
. Guaranteed bonus of $100,000 for fiscal year l993.
Guaranteed minimum bonus at 40% of base compensation
for fiscal year l994.
. At present, target bonus equal to 50% of base salary is
paid for attainment of 100% of goal; threshold bonus
equal to 40% of the base for attainment of 80% of goal;
and bonus awards for attainment exceeding 100% of goal
determined by the Board of Directors at its discretion.
5. STOCK OPTION PLAN
. Initial grant of 30,000 shares under Ameron's incentive stock
compensation plan.
. Stock to be split 50/50 between restricted stock and stock options.
. All option grants shall be exercisable over a five year period in
four installments each 25% at the completion of years one through
four.
. Subsequent annual stock options beginning in FY94 will
follow the current guideline of one times base
compensation. Awards greater than this guideline will
be at the discretion of the Board.
. The Board is willing to take under advisement formulas
or plans for payouts that exceed these guidelines.
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6. EMPLOYMENT CONTRACT
. Initial employment contract for three years.
. In the event of termination without cause at any time
during this three-year period, severance will be equal
to current base compensation plus highest bonus paid
during contract period, but not less than guaranteed
FY94 bonus, times a factor of three.
. Prior to the commencement of the 31st month of this
contract, the Board will review terms for the future
extension of the contract.
. If agreement cannot be reached on those terms, Jim
Marlen may exercise the severance provision under the
three-year agreement.
. In the event of termination for reasons other than
cause, including change of control, all shares (both
restricted and stock options) would fully vest.
. In the event of change of control (as defined under
Ameron's SERP plans, evidenced by a filing with the
Securities and Exchange Commission of certain actions
which, if consummated, would cause a change in
control), the severance payment would be 2.5 times
combined salary and highest bonus during the contract
period, but not less than FY94 bonus.
. If Jim Marlen voluntarily resigns or is terminated for
cause from Ameron, he will not be entitled to severance
provisions under his contract.
7. REAL ESTATE/RELOCATION
. Reimbursement of standard escrow and incidental costs
on the sale of present home plus moving expenses and
other directly related escrow and incidental costs
attributable to the purchase of a new residence in
Southern California.
. Use of Company's temporary condominium in Southern California until
permanent housing is located, not to exceed one year.
. For items listed above, Company to gross up income so
as to result in no tax impact to Jim Marlen.
. Housing subsidy of $5,000 per month for three years to
help offset the increased cost of Southern California
housing.
. If current residence not sold following good faith
effort by September 1993, company to purchase home at
appraised value. Jim Marlen to pick an appraiser,
Ameron to pick an appraiser and mutual agreement on a
prominent realty company to provide a third appraisal.
The average of the three appraisals to be the purchase
price of Jim Marlen's home if not sold by September 1993.
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8. PENSION
. Company agrees to provide Jim Marlen with pension
benefits that he leaves behind at GenCorp, roughly
estimated to be a pension benefit of $109,000 per year
beginning at age 65. In addition, Jim Marlen is
entitled to separate pension benefits under the Ameron
plan.
. In order for Company to provide pension benefits not
less than Jim Marlen's existing plan, it will add two
years of credit for each year of service during the
first 9 1/2 years of his employment.
. Vesting of pension benefits will begin with
commencement of employment.
. In the event Jim Marlen is terminated for reasons other
than cause and/or a change of control takes place, Jim
will be entitled to vested pension benefits plus three
years of additional service credit. In the event Jim
obtains new employment within three years of leaving
Ameron following termination, Jim is entitled only to
the vested pension benefits (not additional years of
service).
9. OTHER BENEFITS
. Under Ameron's executive supplemental life insurance plan,
insurance protection equal to three times base salary is provided
while employed with Ameron. At normal retirement from
Ameron, life insurance protection equal to one times final base
salary will be provided.
. Ameron offers several optional forms of standard
Company medical plans: basic medical, high option
medical, and various HMO's. Employee monthly
contributions, deductibles and coverages vary.
. In the event Jim Marlen is terminated other than for
cause or as a result of his resignation or retirement,
he will receive health and medical benefits (at
whatever cost he is paying at the time of termination)
for a period of two years or until he obtains other
employment, whichever comes first.
. Ameron offers two optional forms of standard Company
dental plans: basic dental plan and the Safeguard plan.
Employee monthly contributions, deductibles and
coverages vary.
. Ameron provides long-term disability insurance coverage
which provides 60% base salary continuation net of
other sources of income such as social security.
. Under Ameron's 401(k) Savings Plan, employee
contributions of up to 6% of base salary (subject to
certain IRS mandated maximums and discrimination
testing under IRS regulations) and are matched 50% by
Company contributions in the form of Ameron Stock.
. Initiation fees, dues and assessments for membership at
a local country club and the California Club.
40
<PAGE>
. American made company car equal to present car together with normal
maintenance, insurance and operating expenses.
. Ameron standard executive vacation, which is currently
four weeks annually.
. Reimbursement of up to $5,000 annually for financial/tax consulting.
10. OTHER
. In the event of death or long-term disability while
employed, all stock awards (restricted and/or options)
become fully vested
11. STARTING DATE
. To be established by Jim Marlen, estimated to be June 14, 1993.
* * * *
Jim, this offer, and the terms and conditions included will be
formalized in an employment contract to be completed at the
earliest possible date. The parties intend to be contractually
bound upon executing this memorandum of agreement, and the
subsequent formal employment contract shall not deviate in
substantive terms or add any burdensome conditions to the terms
signed hereof. We look forward to working with you at Ameron.
/s/ Richard J. Pearson
Chairman, Nominating Committee
Ameron Board of Directors
Please acknowledge your acceptance of the terms and conditions of
this offer by signing and returning one copy of this letter.
By: /s/ James S. Marlen
Date: 4-27-94
EXHIBIT 10
41
<PAGE>
ANNUAL REPORT
- -------------
Exhibit 13 is the information which is incorporated by reference into the 10-K
Report from the Corporation's 1993 Annual Report.
This 10-K Report should be read only in conjunction with that information.
In the event you do not already have a copy of the Annual Report, one may be
obtained by contacting the Corporate Secretary, Post Office Box 7007, Pasadena,
California 91109-7007. The telephone number is (818) 683-4000.
EXHIBIT 13
42
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Year ended November 30
--------------------------------------------------------------------
(Dollars in thousands except per share data) 1993 1992 1991 1990 1989
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER COMMON SHARE DATA
Net income (loss) $ (6.28)(1) $ 1.53 $ 2.01(2) $ 3.02 $ 3.54
Net income excluding restructuring and
related charges and unusual items 1.87 1.53 1.91 3.02 3.54
Dividends 1.28 1.28 1.28 1.28 1.24
Average shares(3) 3,861,872 3,827,540 3,805,781 3,783,881 3,978,212
Market price-high 38 3/4 36 1/2 47 1/8 52 1/2 41 1/2
Market price-low 31 29 31 3/4 34 1/2 30 1/4
Price/earnings ratio (range) NA 24-19 23-16 17-11 12-9
- --------------------------------------------------------------------------------------------------------------------------------
OPERATING RESULTS
Sales $ 453,357 $ 446,477 $ 465,136 $445,900 $ 426,464
Gross profit 119,869 118,528 118,399 116,661 107,156
Interest expense 12,689 10,990 14,105 13,644 10,735
Provision (benefit) for income taxes (9,732) 1,649 5,052 6,133 6,180
Equity in earnings (losses) of
affiliated companies, net of taxes 1,821 2,011 (976) 566 3,260
Net income (loss) (24,255)(1) 5,859 7,635(2) 11,427 14,101
Net income/sales -5.4% 1.3% 1.6% 2.6% 3.3%
Return on average equity -18.6% 4.1% 5.4% 8.4% 10.7%
- --------------------------------------------------------------------------------------------------------------------------------
FINANCIAL CONDITION AT YEAR END
Working capital $ 85,990 $ 107,086 $ 104,428 $ 103,396 66,322
Property, plant and equipment, net 113,199 128,130 122,201 127,778 110,071
Investments, advances and
equity in affiliated companies 39,984 47,882 45,901 48,857 50,201
Total assets 337,842 379,480 384,472 375,373 335,445
Long-term debt, less current portion 89,590 105,874 99,304 110,266 66,006
Market capitalization 142,342 128,214 128,679 143,586 154,658
PROPERTY, PLANT AND EQUIPMENT
Expenditures $14,697 $ 21,027 $ 26,527 $33,314 $ 25,868
Depreciation 16,444 15,649 16,704 14,286 12,686
<FN>
(1) Includes $31.5 million in fourth quarter charges or $8.15 per share, net of
income taxes, for restructuring and other related items.
(2) Includes $360,000, or $.10 per share, net of income taxes, related to the
sale of the Company's corporate headquarters facility, reduced by
restructuring charges and asset write-downs.
(3) Includes common stock equivalents in periods in which they have a dilutive
effect.
</TABLE>
29
<PAGE>
AMERON 1993 FINANCIAL REVIEW
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
During 1993, the Company generated $25.0 million of cash from operations. These
funds, along with a beginning cash balance of $26.4 million, were used to pay
down debt of $15.9 million, invest in new plant and equipment of $14.7 million
and pay common dividends of $5.0 million. Cash and cash equivalents at November
30, 1993, totaled $15.7 million.
The Company incurred a net loss of $24.3 million during 1993 as a result of
restructuring and related actions taken in the fourth quarter. These activities
related to facility and product line consolidation, severance of approximately
300 salaried employees, revaluation of underperforming assets and elimination
of several non-strategic and unprofitable operations. The charges recorded as a
result of these actions had very little cash impact in 1993, and management
expects that they will have a favorable impact on cash flow from operations in
the future.
Dividends from affiliated companies increased again in 1993 as several of the
Company's Middle Eastern affiliates continued to have favorable earnings. The
decrease in receivables resulted mainly from collections on accounts related to
fiberglass pipe shipments to North Africa. Inventories rose slightly company-
wide in anticipation of increased deliveries. The $10.9 million increase in
long-term liabilities is attributable to added reserves for contingencies for
litigation and environmental matters and, to a lesser extent, for an increase in
the Company's pension liability due to a change in actuarial assumptions.
Investing activities included capital expenditures for information processing
technology, the expansion of powder coatings production facilities, the
consolidation of the domestic Fiberglass Pipe Systems' administrative offices
and costs associated with the development of a proposed quarry site in Hawaii.
Remaining expenditures were primarily for replacement of machinery and equipment
and refurbishment of existing facilities. During the fiscal year ending November
30, 1994, the Company anticipates spending approximately $12 million to $15
million for capital expenditures, which will be funded from existing cash
balances and cash generated from operations.
During the first fiscal quarter of 1993, the Company's consolidated subsidiary
in The Netherlands repaid its 7.68% unsecured bank loan of approximately $5.2
million. During the fourth fiscal quarter of 1993, the Company repaid $6 million
of industrial revenue development bonds, which were secured by a concrete pipe
manufacturing plant. The Company has also paid down several foreign bank lines
of credit during fiscal 1993. Management believes that cash flows from
operations and current cash balances, together with currently available lines of
credit, will be sufficient to meet future operating requirements.
RESULTS OF OPERATIONS--1993 COMPARED WITH 1992
GENERAL
Ameron recorded a loss in 1993 of $24.3 million, compared to net income of $5.9
million in 1992. During the fourth quarter, the Company charged to costs and
expenses $45.8 million ($31.5 million after tax) for restructuring and related
activities. Of the $45.8 million, $33.8 million related directly to
restructuring and the write-down of related assets. An additional $9 million
provision was recorded for estimated costs related to certain environmental and
legal matters. A $3 million charge was also recorded against cost of sales in
the fourth quarter for the write-down of selected inventories identified as part
of the restructuring efforts. The total effect of these actions resulted in a
net loss of $6.28 per share for the year. However, excluding the additional
fourth quarter charges, net of their applicable tax benefits, net income per
share for the year would have been $1.87, an improvement over the $1.53 per
share earned in the prior year.
SALES
Sales in 1993 increased $6.9 million over the prior year. The primary reasons
for the slightly improved sales were increased shipments of fiberglass pipe and
protective coatings to projects in North Africa from the Company's subsidiary in
Europe. Additionally, domestic sales of fiberglass pipe increased in 1993.
However, these improvements were partially offset by reduced sales of concrete
and steel pipe and construction products sold in Southern California and Hawaii,
respectively. The proportion of European sales to U.S. sales increased again in
1993. However, this trend should reverse in 1994 since the major North African
fiberglass pipe projects were completed in the fourth fiscal quarter of 1993.
Sales of protective coatings declined $2.2 million from 1992. In the United
States, sales of industrial coatings improved over last year while revenues from
marine coatings declined due to a reduction in defense spending that impacted
government orders. Sales in Europe were lower because of recessionary trends,
but shipments to North Africa and the Middle East improved from Ameron B.V., the
Company's Dutch subsidiary. The Company anticipates improved industrial sales in
the United States as the domestic economy continues to improve; however, the
uncertain economic situation in Europe may have an adverse effect on revenues
from Ameron's European operations in the near future. Shipments of protective
coatings to North Africa should continue into 1994, offsetting the impact of
lower sales in Europe.
Significant shipments of fiberglass pipe from the Company's European operation
to several large crude oil projects in North Africa were the principal reason
for the $19.2 million increase in sales over last year from the Fiberglass Pipe
business segment. Additionally, sales in the United States improved throughout
all market areas, with the biggest increase coming from fuel-handling systems
used for service station rehabilitation. Partially offsetting these improvements
were lower sales to industrial customers in Europe. The large project shipments
to North Africa concluded in the fourth quarter of 1993, and no new projects of
this magnitude have been secured for 1994. This fact and the recessionary trends
in Europe are expected to lower sales and profits from this business segment in
1994. Prospects are good for additional large project work beyond 1994.
Concrete and steel pipe sales declined $3.2 million from the prior year.
Improved deliveries of concrete and steel pipe to projects in Northern
California and Nevada were offset by reduced sales in Southern California. This
business segment was impacted by reduced public spending for large water
transmission projects and a low level of construction activity in the Company's
geographic markets. The decline in construction activity resulted in increased
price competition among producers of non-pressure concrete pipe. Concrete and
steel pipe sales are expected to stabilize in 1994.
30
<PAGE>
Sales of Construction and Allied Products fell $7.O million from the prior year
as privately-funded construction activity continued to decline on the Hawaiian
Islands. However, deliveries of ready-mix concrete, sand and aggregates to
publicly-funded projects remained strong, while deliveries to residential
construction markets improved because of increased housing starts. It is
anticipated that overall construction activity in Hawaii will continue to
decline in 1994.
GROSS PROFIT
The gross profit margin remained unchanged from the prior year. Sales of
fiberglass pipe and protective coatings to North Africa and improved operating
efficiencies favorably impacted the overall gross profit margin. However, price
competition in Europe and in certain concrete pipe markets partially offset
these gains. As part of the restructuring process, an additional $3 million
charge was recorded in the fourth quarter to write down selected fiberglass pipe
and protective coatings inventories. This additional $3 million charge had the
effect of decreasing the gross profit margin from 27.1 % to 26.4% for the year
ended November 30, 1993.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Despite increased insurance costs, added expenses related to the North African
sales and the higher expenses of the Company's South American operations,
overall selling, general and administrative expenses changed little from last
year. This was principally the result of salaried staff reductions at the
beginning of the fourth quarter.
ENVIRONMENTAL AND LEGAL CLAIMS
Environmental and legal claims increased $7.8 million over 1992. As an outgrowth
of management's restructuring efforts, an additional $9 million was added to
reserves in the fourth quarter (see note 11, "Contingencies and Commitments").
Considering recorded reserves, the Company does not expect these matters to have
a material adverse effect on the Company's financial position or its results of
operations.
In the early 1970s, the Company disposed of certain quantities of waste at the
Stringfellow Hazardous Waste Site in Riverside County, California, which is one
of several priority sites on the Superfund list established by the EPA. The
Company, which accounted for less than one percent of the total waste deposited
at the site, was not named as a defendant. In a recent determination, the State
of California was found to be 75% to 85% liable for the remediation costs of
this Superfund site. However, the courts have yet to accept the determination.
Ameron maintains reserves which it believes to be adequate to cover expected
future costs associated with this matter.
The Company is subject to federal, state and local laws and regulations
concerning the environment and is currently participating in administrative
proceedings at several sites under these laws. While the Company finds it
difficult to estimate with any certainty the total cost of remediation at the
several sites, on the basis of currently available information and reserves
provided, the Company believes it unlikely that the outcome of such environ-
mental regulatory proceedings will have a material adverse effect on the
Company's financial position or its results of operations.
RESTRUCTURING CHARGES AND WRITE-DOWN OF ASSETS
During the fourth quarter, the Company charged $33.8 million against pretax
earnings for restructuring and the write-down of assets. The restructuring
actions included closing two and mothballing two concrete pipe plants in the
western United States; consolidating and scaling back protective coatings
production and distribution facilities and sales offices in the United States,
Canada and Europe; closing a coatings plant in England; and eliminating several
product lines within the Fiberglass Pipe & Construction and Allied Products
business segments. Also included in the restructuring was the company-wide
elimination of approximately 300 salaried staff positions, the planned divesture
of a non-strategic steel fabricator in South America and the write-down of the
Company's investments in selected affiliated companies, as well as other related
assets.
GAIN ON THE SALE OF ASSETS
The increase over the prior year is attributable to the gain on the sale of a
portion of the Company's interest in its affiliated company in Mexico.
OTHER INCOME
Royalty, fee and other income from affiliated companies and licensees increased
over 1992 due largely to a special dividend received from its Mexican affiliate.
Interest income declined because last year's amount included interest received
from a federal income tax refund and due to lower earnings in 1993 from short-
term investments. Miscellaneous income includes higher sublease rental income.
INTEREST EXPENSE
The $1.7 million increase in interest expense in 1993 can be attributed mainly
to accrued interest on income tax obligations related to prior years.
PROVISION FOR INCOME TAXES
Overall, the effective tax benefit rate in 1993 was 27.2% of the pretax loss.
The tax benefit attributable to the restructuring and related charges of $45.8
million was approximately $14.3 million; thus taxes attributable to pretax
income, excluding the restructuring and related charges, was $4.5 million, a 45%
effective rate. The significant difference in effective rate this year, compared
to last year's 30%, can be attributed primarily to losses generated by certain
of the Company's foreign subsidiaries for which no tax benefit was generated.
The Company will adopt Financial Accounting Standards Board Statement No. 109,
"Accounting for Income Taxes," in the first fiscal quarter of 1994. The
requirements and impact of this statement are discussed further in note 8 to the
financial statements.
EQUITY IN EARNINGS OF AFFILIATED COMPANIES
Equity in earnings of jointly-owned affiliated companies declined slightly from
1992. Sales and earnings of the Company's Middle Eastern affiliates continued to
match or improve on prior year's results. These affiliates include Oasis-
Ameron, Ltd.; Bondstrand, Ltd.; and Ameron Saudi Arabia, Ltd. Gifford-Hill-
American, Inc., the Company's pressure pipe affiliate in Texas, returned to
profitability in 1993, while Tamco, a steel mini-mill, reported a loss due to
increased material costs and price competition.
As part of the Company's restructuring efforts, which included increased focus
on core businesses, the Company recorded a write-down of its investments in its
concrete pipe affiliates to their expected net realizable value, based upon
anticipated future cash flows.
RESULTS OF OPERATIONS--1992 COMPARED WITH 1991
SALES
Sales declined $18.7 million in 1992 due principally to lower deliveries of
concrete and steel pipe and construction products. Overall, 1992 revenues
reflected a higher proportion of sales from foreign operations.
Because of the weak U.S. economic situation, sales in 1992 of protective
coatings to domestic commercial, utility, petrochemical and offshore markets
were near 1991 levels. However, shipments from foreign operations to European
and Middle Eastern customers and to a project in North Africa improved
significantly over 1991.
31
<PAGE>
Sales of fiberglass pipe domestically were lower in 1992 than the previous year,
mainly due to the shifting of oil exploration and recovery work from the United
States to countries abroad and the impact of the sluggish economy on the capital
spending plans of the Company's industrial, chemical and petroleum-related
customers. However, declines in U.S. markets were entirely offset by improved
sales overseas because of increased industrial development in the Far East and
parts of Europe, as well as shipments to several large crude oil projects in
North Africa.
Concrete and steel pipe sales declined in 1992 from 1991 largely because of
nonrecurring projects in 1991. The concrete and steel pipe business segment was
impacted by the decline in public spending for water transmission systems and
reduced construction activity in the Company's geographic markets. The
Southwest and Pacific Northwest were in cyclical downturns, and California's
depressed condition resulted in severe price competition.
Construction products sales declined in 1992 from 1991, due to an overall
decline in commercial construction activity in Hawaii that resulted in lower
demand for the Company's quarry and concrete pipe products. Commercial
construction spending in Hawaii declined because of the reduction in available
investment capital. Sales of concrete and steel poles remained flat due to slow
housing starts and continued delays in public spending in the western United
States.
GROSS PROFIT
The gross profit margin increased from the 1991 rate of 25.5% to 26.5% in 1992.
Although operations were impacted by continued price competition and low
production levels caused by weak domestic markets, increased sales on more
profitable contracts abroad and previously implemented manufacturing cost
reduction programs pushed the rate above the 1991 level. These improvements were
realized mainly by foreign operations due to increased shipments of fiberglass
pipe and protective coatings to Africa, the Middle East and the Far East. In
addition, improved profit margins were recognized on deliveries of concrete and
welded steel pressure pipe.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $7.1 million higher in 1992
than in 1991. The increase can be attributed to higher insurance charges,
reserves for assets related to certain affiliated companies and rent on the
corporate headquarters facility. The Company also increased spending to escalate
research and development efforts and to strengthen worldwide marketing and sales
networks.
ENVIRONMENTAL AND LEGAL CLAIMS
Claims expense increased $3.2 million in 1992, above the 1991 level. A large
portion of the increase was attributable to legal costs and a $2 million reserve
established in connection with a patent infringement lawsuit.
OTHER INCOME
Royalty and technical fee income increased slightly in 1992 from the prior year
as sales activities of the Company's licensees and affiliated companies remained
strong. Foreign currency losses were incurred as a result of the devaluation of
the British pound and the increased strength of the Dutch guilder. Interest
income was higher due to interest earned on short-term investments and a federal
income tax refund. In 1991, other income included $770,000 received from a class
action legal settlement.
INTEREST EXPENSE
Interest expense declined because of lower interest rates and a reduction in
debt outstanding.
PROVISION FOR INCOME TAXES
The Company's effective tax rate declined from 37% in 1991 to 30% in 1992. The
lower effective rate was attributable to a higher mix of income coming from
foreign operations in 1992 as compared to 1991.
EQUITY IN EARNINGS OF AFFILIATED COMPANIES
Equity earnings of jointly-owned affiliated companies improved $3 million in
1992 over 1991, due largely to strong performances by the Company's protective
coatings, fiberglass pipe and concrete pipe affiliates in the Middle East.
Ameron Saudi Arabia, Ltd. provided the greatest contribution to the rise in
equity income as it benefited from increased spending for infrastructure
development within the Kingdom of Saudi Arabia. However, Gifford-Hill-American,
Inc. incurred losses as a result of weak demand in its markets. Tamco reported
higher net income in 1992 because of slightly increased shipments of reinforcing
bar and favorable material costs. Bondstrand, Ltd. and Oasis-Ameron, Ltd.
produced improved operating results.
32
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended November 30
-----------------------------------------------------
1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $453,357,000 $446,477,000 $465,136,000
Cost of sales 333,488,000 327,949,000 346,737,000
----------------------------------------------------
Gross profit 119,869,000 118,528,000 118,399,000
Selling, general and administrative expenses 100,917,000 100,157,000 93,077,000
Environmental and legal claims 14,503,000 6,710,000 3,463,000
Restructuring charges and write-down of assets 33,797,000 -- 14,505,000
Gain from sale of assets 547,000 149,000 15,171,000
Other income 5,682,000 4,677,000 5,243,000
----------------------------------------------------
Operating profit (loss) (23,119,000) 16,487,000 27,768,000
Interest expense 12,689,000 10,990,000 14,105,000
----------------------------------------------------
Income (loss) before income taxes (35,808,000) 5,497,000 13,663,000
Provision (benefit) for income taxes (9,732,000) 1,649,000 5,052,000
----------------------------------------------------
Income (loss) of consolidated companies (26,076,000) 3,848,000 8,611,000
Equity in earnings (losses) of affiliated companies, net of taxes 1,821,000 2,011,000 (976,000)
----------------------------------------------------
Net income (loss) $(24,255,000) $ 5,859,000 $ 7,635,000
----------------------------------------------------
----------------------------------------------------
Net income (loss) per share $(6.28) $ 1.53 $ 2.01
----------------------------------------------------
----------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
33
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of November 30
--------------------------------
1993 1992
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 15,738,000 $ 26,447,000
Receivables, less allowance of $4,315,000 in
1993 and $5,614,000 in 1992 77,572,000 82,142,000
Inventories 61,661,000 59,914,000
Deferred income tax benefits 13,586,000 11,380,000
Prepaid expenses and other 8,590,000 8,396,000
--------------------------------
Total current assets 177,147,000 188,279,000
Investments, advances and equity in undistributed
earnings of affiliated companies 39,984,000 47,882,000
Property, plant and equipment
Land 21,460,000 21,457,000
Buildings 42,211,000 44,475,000
Machinery and equipment 191,072,000 201,604,000
Construction in progress 7,364,000 10,092,000
--------------------------------
262,107,000 277,628,000
Less - accumulated depreciation (148,908,000) (149,498,000)
---------------------------------
113,199,000 128,130,000
Other assets 7,512,000 15,189,000
--------------------------------
$337,842,000 $379,480,000
--------------------------------
--------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
34
<PAGE>
<TABLE>
<CAPTION>
As of November 30
--------------------------------
1993 1992
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings $ 2,021,000 $ 1,027,000
Current portion of long-term debt 5,978,000 5,939,000
Trade payables 25,309,000 35,001,000
Accrued liabilities
Taxes, interest and other 16,235,000 14,857,000
Compensation and benefits 14,277,000 10,539,000
Insurance 8,407,000 5,186,000
Reserve for contingencies 13,083,000 6,060,000
Income taxes 5,847,000 2,584,000
--------------------------------
Total current liabilities 91,157,000 81,193,000
Deferred income taxes 15,605,000 32,469,000
Long-term debt, less current portion 89,590,000 105,874,000
Other long-term liabilities 25,976,000 15,058,000
Commitments and contingencies
Stockholders' equity
Common stock, par value $2.50 a share
Authorized 12,000,000 shares
Outstanding 3,886,465 shares in 1993 and
3,841,630 shares in 1992, net of treasury shares 12,648,000 12,536,000
Additional paid-in capital 13,414,000 12,007,000
Retained earnings 133,812,000 163,017,000
Cumulative foreign currency translation adjustments (861,000) 105,000
Minimum pension liability adjustment (720,000) -
Less treasury stock (1,172,900 shares in 1993 and 1992), at cost (42,779,000) (42,779,000)
--------------------------------
Total stockholders' equity 115,514,000 144,886,000
--------------------------------
$337,842,000 $379,480,000
--------------------------------
--------------------------------
</TABLE>
35
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended November 30
----------------------------------------------------
1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $(24,255,000) $ 5,859,000 $ 7,635,000
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 16,444,000 15,649,000 16,704,000
Benefit for deferred income taxes (17,759,000) (958,000) (1,483,000)
Equity in (earnings) losses of affiliated companies (1,821,000) (2,011,000) 976,000
Dividends from affiliated companies 3,670,000 1,063,000 542,000
Gain from sale of assets (547,000) (149,000) (15,171,000)
Stock contributed to employee benefit plan 958,000 873,000 833,000
Non-cash restructuring and asset write-downs 28,668,000 - 8,891,000
Other, net (189,000) 331,000 384,000
Other changes in operating assets and liabilities:
Decrease in receivables 3,744,000 2,224,000 5,788,000
(Increase) decrease in inventories (2,489,000) 11,581,000 5,832,000
(Increase) decrease in other current assets 357,000 (5,088,000) (18,000)
Decrease in long-term assets 332,000 18,000 816,000
Increase in trade payables, accrued liabilities and
income taxes 7,468,000 6,443,000 8,407,000
Increase in long-term liabilities 10,466,000 3,471,000 307,000
----------------------------------------------------
Net cash provided by operating activities 25,047,000 39,306,000 40,443,000
----------------------------------------------------
INVESTING ACTIVITIES
Proceeds from sale of assets 1,850,000 22,211,000 1,802,000
Additions to property, plant and equipment (14,697,000) (21,027,000) (26,527,000)
Investment in life insurance policies (1,613,000) (960,000) (1,850,000)
Other (30,000) (2,095,000) (517,000)
-----------------------------------------------------
Net cash used in investing activities (14,490,000) (1,871,000) (27,092,000)
-----------------------------------------------------
FINANCING ACTIVITIES
Net change in debt with maturities of three months or less (221,000) (10,447,000) (2,727,000)
Issuance of debt - 15,572,000 25,000,000
Repayment of debt (15,728,000) (24,552,000) (22,491,000)
Dividends on common stock (4,950,000) (4,904,000) (4,862,000)
Issuance of common stock 70,000 67,000 341,000
----------------------------------------------------
Net cash used in financing activities (20,829,000) (24,264,000) (4,739,000)
----------------------------------------------------
Effect of exchange rate changes on cash
and cash equivalents (437,000) (260,000) (459,000)
----------------------------------------------------
Net change in cash and cash equivalents (10,709,000) 12,911,000 8,153,000
Cash and cash equivalents at beginning of year 26,447,000 13,536,000 5,383,000
----------------------------------------------------
Cash and cash equivalents at end of year $ 15,738,000 $26,447,000 $13,536,000
----------------------------------------------------
Other cash flow information: ----------------------------------------------------
Interest paid $ 11,903,000 $10,913,000 $12,486,000
----------------------------------------------------
----------------------------------------------------
Income taxes paid $ 3,535,000 $ 5,337,000 $ 2,954,000
----------------------------------------------------
----------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
36
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
---------------------------
SHARES ADDITIONAL RETAINED
OUTSTANDING AMOUNT PAID-IN CAPITAL EARNINGS OTHER
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, November 30, 1990 3,778,574 $12,379,000 $10,052,000 $159,289,000 $ 2,071,000
Net income - 1991 7,635,000
Exercise of stock options and issuance of stock
to employee savings plan 34,126 85,000 1,087,000
Dividends on common stock of $1.28 a share (4,862,000)
Foreign currency translation adjustments
(net of deferred income tax benefit of $669,000) (1,553,000)
-------------------------------------------------------------------------
Balance, November 30, 1991 3,812,700 12,464,000 11,139,000 162,062,000 518,000
Net income - 1992 5,859,000
Exercise of stock options and issuance of stock
to employee savings plan 28,930 72,000 868,000
Dividends on common stock of $1.28 a share (4,904,000)
Foreign currency translation adjustments
(net of deferred income tax benefit of $230,000) (413,000)
------------------------------------------------------------------------
BALANCE, NOVEMBER 30, 1992 3,841,630 12,536,000 12,007,000 163,017,000 105,000
NET LOSS - 1993 (24,255,000)
EXERCISE OF STOCK OPTIONS AND ISSUANCE OF STOCK
TO EMPLOYEE SAVINGS PLAN 44,835 112,000 1,407,000
DIVIDENDS ON COMMON STOCK OF $ 1.28 A SHARE (4,950,000)
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
(NET OF DEFERRED INCOME TAX BENEFIT OF $644,000) (966,000)
MINIMUM PENSION LIABILITY ADJUSTMENT (720,000)
--------------------------------------------------------------------------
Balance, November 30, 1993 3,886,465 $12,648,000 $13,414,000 $133,812,000 $(1,581,000)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Ameron, Inc. and
all significant wholly-owned subsidiaries (the Company). All material
intercompany accounts and transactions have been eliminated. Investments in
significant 30- to 50-percent-owned affiliates are accounted for by the equity
method, whereby the investment is carried at cost of acquisition, plus the
Company's equity in undistributed earnings or losses since acquisition, less
reserves.
The Company provides technical services and receives fees, royalties and other
income from several of its affiliates and licensees, which are included in
"Other income."
Certain prior year balances have been reclassified to conform with the current
year presentation.
CASH AND CASH EQUIVALENTS
Cash equivalents include time deposits with maturities of three months or less
when purchased. At November 30, 1993 and 1992 the Company had approximately
$7,200,000 and $17,300,000, respectively, invested in such securities. The
carrying value of cash and cash equivalents are a reasonable estimate of their
fair value.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost is principally
determined by either the first-in, first-out or average cost methods. Such cost
includes raw materials, direct labor and manufacturing overhead. Certain steel
inventories are valued using the last-in, first-out cost method.
PROPERTY, PLANT AND EQUIPMENT
Items capitalized as property, plant and equipment, including improvements to
existing facilities, are recorded at cost. Upon sale or retirement, the cost
and related accumulated depreciation are removed from the respective accounts
and any gain or loss is included in income. Maintenance and repair costs are
expensed as incurred. Interest costs applicable to the period of construction
of major plant and expansion projects totaling $104,000, $794,000 and $646,000
were capitalized in 1993, 1992 and 1991, respectively.
Depreciation is computed principally using the straight-line method based on
estimated useful lives of the assets. Annual rates of depreciation are as
follows:
<TABLE>
<CAPTION>
Percentage of Cost
- -----------------------------------------------------------------------------
<S> <C>
Buildings 2 1/2 - 10
Machinery and equipment
Autos, trucks and trailers 6 2/3 - 50
Cranes and tractors 10 - 15
Manufacturing equipment 6 2/3 - 33 1/3
Other 5 - 66 2/3
</TABLE>
FOREIGN CURRENCY TRANSLATION
The functional currency for the majority of the Company's foreign operations is
the applicable local currency. The translation from the applicable foreign
currencies to 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. The gains or
losses, net of applicable deferred income taxes, resulting from such translation
are included in stockholders' equity.
Gains or losses resulting from foreign currency transactions are included in
"Other income."
INCOME TAXES
The Company accounts for income taxes in accordance with Accounting Principles
Board Opinion No. 11 "Accounting for Income Taxes." Certain income and expense
items are recognized for financial reporting purposes and for income tax
reporting purposes in different fiscal periods. Deferred income taxes are
provided in the accompanying financial statements to account for significant
timing differences. Investment tax credits have been deferred and are being
amortized over the estimated average useful lives of the related assets.
NET INCOME PER SHARE
Net income per share is computed on the basis of the weighted average number of
common shares outstanding each year, plus common stock equivalents related to
dilutive stock options. The number of shares used in the computation of per
share data was 3,861,872 in 1993, 3,827,540 in 1992 and 3,805,781 in 1991.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred. Such costs were
approximately $4,100,000 in 1993, $4,000,000 in 1992 and $2,500,000 in 1991.
REVENUE RECOGNITION
Revenue from sales of protective coatings, fiberglass pipe, construction
products and certain other products is recorded at the time the goods are
shipped or when title passes. Revenue from sales of concrete and steel pipe is
recorded at the time the pipe is inspected and accepted by the customer.
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
NOTE 2 OTHER INCOME
Other income for the years ended November 30, included the following:
<TABLE>
<CAPTION>
(In thousands) 1993 1992 1991
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Royalties and fees from affiliated
companies and licensees $3,967 $3,284 $2,925
Foreign currency gain (loss) (147) (433) 275
Interest income 836 1,543 928
Legal recovery - - 770
Miscellaneous 1,026 283 345
----------------------------
$5,682 $4,677 $5,243
----------------------------
----------------------------
</TABLE>
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
NOTE 3 INVENTORIES
Inventories at November 30, were as follows:
<TABLE>
<CAPTION>
(In thousands) 1993 1992
- ---------------------------------------------------------------------------
<S> <C> <C>
Finished products $34,124 $36,310
Products in process 11,689 9,875
Materials and supplies 15,848 13,729
-------------------
$61,661 $59,914
-------------------
-------------------
</TABLE>
Certain steel inventories are valued using the last-in, first-out cost method.
These items comprised 7.1% and 6.5% of consolidated inventories at November 30,
1993 and 1992, respectively. If such inventories had been valued using the
first-in, first-out cost method, total inventories would have increased by
$1,834,000 and $1,538,000 at November 30, 1993 and 1992, respectively.
38
<PAGE>
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
NOTE 4 AFFILIATED COMPANIES
The Company's principal investments, which have been accounted for by the equity
method, are summarized as follows:
<TABLE>
<CAPTION>
Ownership
Business Affiliate Interest
- ---------------------------------------------------------------------------
<S> <C> <C>
Concrete Pipe Products Gifford-Hill-American, Inc. 50%
Ameron Saudi Arabia, Ltd. 30%
Steel Products Tamco 50%
Other Bondstrand, Ltd. 40%
Oasis-Ameron, Ltd. 40%
</TABLE>
<TABLE>
<CAPTION>
Concrete Steel
(In thousands) Pipe Products Products Other Total
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment, November 30, 1993
Cost $ 5,786 $ 8,482 $ 3,244 $17,512
Accumulated equity in
undistributed earnings 16,420 8,293 5,082 29,795
Realization reserves (7,323) (7,323)
---------------------------------------------------------
$14,883 $16,775 $ 8,326 $39,984
---------------------------------------------------------
---------------------------------------------------------
Investment, November 30,1992
Cost $ 5,786 $ 8,482 $ 3,214 $17,482
Accumulated equity in
undistributed earnings 17,013 9,043 4,344 30,400
---------------------------------------------------------
---------------------------------------------------------
$22,799 $17,525 $7,558 $47,882
</TABLE>
The Company provides income taxes on its equity in earnings of affiliated
companies to the extent that such earnings are expected to be distributed or
repatriated. The approximate accumulated amount of undistributed earnings
for which no tax has been provided was $7,000,000 at November 30, 1993 and
$6,500,000 at November 30,1992.
Summarized financial information for affiliates in the Concrete Pipe Products
business follows:
<TABLE>
<CAPTION>
Financial Condition (In thousands) 1993 1992
- ---------------------------------------------------------------------------
<S> <C> <C>
Current assets $56,169 $56,126
Noncurrent assets 42,668 43,854
----------------------
$98,837 $99,980
----------------------
----------------------
Current liabilities $28,810 $14,673
Noncurrent liabilities 1,985 16,653
Stockholders' equity 68,042 68,654
----------------------
$98,837 $99,980
----------------------
----------------------
</TABLE>
<TABLE>
<CAPTION>
Results of Operations (In thousands) 1993 1992 1991
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $81,144 $62,873 $49,815
-------------------------------------
-------------------------------------
Gross profit $21,305 $15,938 $ 7,511
-------------------------------------
-------------------------------------
Net income (loss) $ 5,367 $ 2,121 $(6,430)
-------------------------------------
-------------------------------------
</TABLE>
The Company's investment in Gifford-Hill-American, Inc., which manufactures
concrete pressure pipe, was recorded based on audited financial statements as
of June 30, 1993 and unaudited financial statements as of October 31, 1993.
The Company's investments in Ameron Saudi Arabia, Ltd., Bondstrand, Ltd. and
Oasis-Ameron, Ltd. were recorded based on audited financial statements as of
December 31, 1992 and unaudited financial statements as of September 30,
1993. The investment in Tamco was based on audited financial statements as
of November 30, 1993.
Summarized financial information for Tamco, Bondstrand, Ltd. and Oasis-
Ameron, Ltd. follows:
<TABLE>
<CAPTION>
Financial Condition (In thousands) 1993 1992
- ---------------------------------------------------------------------------
<S> <C> <C>
Current assets $46,476 $43,684
Noncurrent assets 34,025 39,436
----------------------
$80,501 $83,120
----------------------
----------------------
Current liabilities $21,045 $17,234
Noncurrent liabilities 4,151 7,542
Stockholders' equity 55,305 58,344
----------------------
$80,501 $83,120
----------------------
----------------------
</TABLE>
<TABLE>
<CAPTION>
Results of Operations (In thousands) 1993 1992 1991
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $118,845 $108,093 $123,762
--------------------------------------
--------------------------------------
Gross profit $ 10,953 $ 15,988 $ 13,105
--------------------------------------
--------------------------------------
Net income $ 2,805 $ 7,048 $ 4,630
--------------------------------------
--------------------------------------
</TABLE>
The amount of investments and accumulated equity in the undistributed
earnings in the Middle Eastern affiliates was approximately $22,200,000 and
$26,200,000 at November 30, 1993 and 1992, respectively.
Sales and technical services provided by the Company to affiliates in the
Middle East totaled approximately $4,100,000 in 1993, $4,300,000 in 1992 and
$2,600,000 in 1991, and related receivables aggregated approximately
$3,300,000 at November 30, 1993 and $4,500,000 at November 30,1992.
Receivables from all affiliated companies approximated $3,600,000 at November
30, 1993 and $5,200,000 at November 30,1992.
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
NOTE 5 SALE OF ASSETS
In the fourth quarter of 1991, the Company sold, under the threat of
condemnation, its corporate headquarters facility for $21.0 million. The net
pretax gain from the sale was $15,054,000.
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
NOTE 6 RESTRUCTURING CHARGES AND WRITE-DOWN OF ASSETS
In the fourth quarter of fiscal 1993, the Company recorded a pretax
restructuring charge of $31.9 million and wrote down related fixed assets of
$1.9 million. The restructuring charges included facility and product line
consolidation, severance of approximately 300 salaried employees, revaluation
of under performing assets to their expected realizable value and provision
for elimination of several non-strategic and unprofitable operations. These
costs reflect management's efforts to redeploy the Company's capital and
attention to those core businesses which are expected to yield returns
consistent with management's expectations and objectives.
During the fourth quarter of 1991, management completed an evaluation of the
net realizability of operating assets and developed repositioning plans for
several of the Company's businesses. As a result of these programs, the
Company recorded restructuring costs of $5.6 million and wrote down related
assets by $8.9 million. The repositioning efforts pertained primarily to the
consolidation of production facilities to eliminate excess capacity and the
refocusing of product offerings within selected markets of the concrete and
steel pipe, fiberglass pipe and construction products businesses.
39
<PAGE>
The following is a detail of restructuring charges and asset write-downs
incurred by the Company:
<TABLE>
<CAPTION>
(In thousands) 1993 1991
- -------------------------------------------------------------------------------
<S> <C> <C>
Facility and product line consolidation $11,367 $ 1,602
Revalue investments and related assets 9,403 363
Elimination of non-strategic operations 7,494 -
Employee severance costs 3,430 783
Fixed asset write downs 1,937 8,891
Environmental clean-up costs on
discontinued plant sites - 1,949
Other 166 917
----------------------
Total $33,797 $14,505
----------------------
----------------------
</TABLE>
The following is a detail of restructuring charges and asset write-
downs by business segment:
<TABLE>
<CAPTION>
(In thousands) 1993 1991
- -------------------------------------------------------------------------------
<S> <C> <C>
Protective Coatings $ 5,128 $ 658
Fiberglass Pipe 1,909 2,000
Concrete and Steel Pipe 10,604 6,605
Construction and Allied Products 3,723 3,569
Corporate 12,433 1,673
----------------------
Total $33,797 $14,505
----------------------
----------------------
</TABLE>
- ------------------------------------------------------------------------
NOTE 7 EMPLOYEE BENEFIT PLANS
The Company has qualified, defined benefit, noncontributory pension plans for
employees not covered by union pension plans, which are accounted for in
accordance with Financial Accounting Standards Board Statement No. 87.
Benefits paid to retirees are based upon age at retirement, years of credited
service and average compensation. The Company's funding policy is to make
contributions to these plans sufficient to meet the minimum funding
requirements of applicable laws and regulations, plus such additional
amounts, if any, as the Company's actuarial consultants recommend.
Assets of the Company plans are invested in a directed trust. Assets in the
trust are invested in equity securities of corporations (including $3,629,000
of the Company's common stock at November 30, 1993), U.S. government
obligations, derivative securities, corporate bonds and money market funds.
Provisions of Financial Accounting Standards Board Statement No. 87 require
the Company to record a minimum pension liability relating to certain
unfunded pension obligations, establish an intangible asset relating thereto
and reduce stockholders' equity. At November 30, 1993, this minimum pension
liability for the under funded plan was remeasured, as required by the
statement. As a result, the minimum pension liability was adjusted from
$4,261,000 at November 30, 1992 to $6,009,000 at November 30, 1993; the
related intangible asset was adjusted from $2,010,000 to $2,599,000 and
stockholders' equity reduced by $720,000 in 1993. The adjustment in the
minimum pension liability at November 30,1993 resulted mainly from an
increase in pension fund liabilities due to changes in plan assumptions
partially offset by an increase in pension fund assets as a result of
favorable investment returns during 1993.
A supplemental non-qualified, non-funded retirement plan for which the
Company has purchased cost recovery life insurance on the lives of the
participants was adopted in 1991. The Company is the sole owner and
beneficiary of such policies. The amount of the coverage is designed to
provide sufficient revenues to cover all costs of the plan if assumptions
made as to mortality experience, policy earnings and other factors are
realized. On November 30, 1993 and 1992 the cash surrender value of these
policies was $1,973,000 and $1,376,000.
Net periodic pension cost for the years ended November 3O, consists of the
following:
<TABLE>
<CAPTION>
(In thousands) 1993 1992 1991
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost:
Defined benefit plans $ 2,452 $ 2,675 $ 2,474
Supplemental plan 26 29 52
Interest cost:
Defined benefit plans 7,744 7,193 6,769
Supplemental plan 146 148 201
Return on plan assets (20,847) (8,125) (15,033)
Net (amortization) deferral:
Defined benefit plans 11,962 (857) 7,555
Supplemental plan 202 221 327
------------------------------------
Net periodic pension cost $ 1,685 $ 1,284 $ 2,345
------------------------------------
------------------------------------
</TABLE>
The following table sets forth the funding status of the qualified, defined
benefit plans and the amount recognized in the Company's
balance sheet at November 30:
<TABLE>
<CAPTION>
(In thousands) 1993 1992
- ------------------------------------------------------------------------------------------
Over Under Over Under
Funded Funded Funded Funded
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of:
Vested benefit obligation $72,330 $22,959 $57,111 $19,469
Non-vested benefits 657 209 322 75
----------------------------------------------------
Accumulated benefit obligation 72,987 23,168 57,433 19,544
Effect of salary increases 10,714 --- 14,205 ---
----------------------------------------------------
Actuarial present value of
projected benefit obligation 83,701 23,168 71,638 19,544
Less plan assets at market value 95,662 17,159 82,309 15,283
----------------------------------------------------
Plan assets (in excess of) under
projected benefit obligation (11,961) 6,009 (10,671) 4,261
Unrecognized (obligation) asset 13,332 (3,320) 13,130 (2,010)
Additional minimum liability --- 3,320 --- 2,010
----------------------------------------------------
Accrued pension cost in
consolidated balance sheets $ 1,371 $ 6,009 $ 2,459 $ 4,261
----------------------------------------------------
----------------------------------------------------
</TABLE>
The following table sets forth the status of the supplemental benefit
plan as of November 30:
<TABLE>
<CAPTION>
(In thousands) 1993 1992
- ---------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation $ 1,783 $ 1,699
Non-vested benefits 13 13
----------------------
Accumulated benefit obligation 1,796 1,712
Effect of salary increases 114 203
----------------------
Actuarial present value of
projected benefit obligation 1,910 1,915
Unrecognized obligation (852) (1,301)
Unrecognized net gain 333 364
----------------------
Accrued pension cost in consolidated
balance sheets $ 1,391 $978
----------------------
----------------------
</TABLE>
The 1993 actuarial computations for both the qualified, defined benefit plans
and the supplemental plan assumed a weighted average discount rate of 7.5% and
annual salary increases of 5%. The qualified defined benefit plans assumed an
expected long term rate of return of 8.5%.
During 1993 a curtailment of salaried staff resulted in the recognition of
pension gains and losses in accordance with Financial Accounting Standards Board
Statement No. 88 "Employers' Accounting for Settlements and Curtailments of
Defined Benefit Pension Plans and for Termination Benefits." For the qualified,
defined benefit plans a net gain decreased the accrued pension cost by
$1,309,000. The supplemental executive retirement plan experienced a net loss,
which increased accrued pension cost by $165,000.
40
<PAGE>
Approximately 16% of the Company's employees are covered by union sponsored,
collectively bargained, multi-employer pension plans. The Company contributed
and charged to expense $1,900,000 in 1993 and $1,800,000 in each of the years
1992 and 1991. These contributions are determined in accordance with the
provisions of negotiated labor contracts and generally are based on the number
of hours worked. Information from the plans' administrators is not available to
permit the Company to determine its share of unfunded vested benefits, if any.
The Company has no intention of withdrawing from any of these plans, nor is
there any intention to terminate such plans.
During 1991, the Company implemented an Executive Life Insurance Plan wherein
eligible executives are provided with life insurance protection based upon three
times base salary. Upon retirement, the executive is provided with life
insurance protection based upon final base salary. Benefits may be paid as a
lump sum or as an annual income to the identified survivor over ten years. The
expense for this plan was $50,000 in 1993, $51,000 in 1992 and $109,000 in
1991.
Also during 1991, the Company implemented a Deferred Compensation Plan providing
officers and key executives with the opportunity to participate in an unfunded,
deferred compensation program. Under the program, participants may defer up to
50% of their base compensation and 100% of bonuses earned, and earn interest on
their deferred amounts. The program is not qualified under Section 401 of the
Internal Revenue Code. The total of net participant deferrals, which is
reflected in accrued liabilities was $2,602,000 at November 30, 1993 and
$1,951,000 at November 30, 1992, The expense for this plan was $362,000 in 1993,
$506,000 in 1992 and $271,000 in 1991.
In connection with the above two plans, whole life insurance contracts were
purchased on the related participants. At November 30, 1993 and 1992 the cash
surrender value of these policies was $3,159,000 and $2,143,000, net of loans of
$1,901,000 and $1,473,000, respectively.
The Company provides to certain employees a savings plan under Section 401(k)
of the Internal Revenue Code ("the Savings Plan"). The Savings Plan allows for
deferral of income up to a certain percentage through contributions to the plan
and, within certain restrictions, Company matching contributions in the form of
the Company's common stock. In 1993, 1992 and 1991, the Company recorded
expenses for matching contributions of $958,000, $873,000 and $833,000,
respectively, while 27,635, 26,817, and 22,417 shares of common stock were
issued by the Company to the Savings Plan.
In December 1990, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 106 "Employers' Accounting for Postretirement
Benefits Other Than Pensions." This statement must be adopted no later than
fiscal 1994. The Company has post-retirement benefit plans at certain
locations. Since these plans are unfunded, the adoption of this statement will
require that the cost of these plans, which is immaterial, be accounted for on
an accrual basis.
In November 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 112 "Employers' Accounting for Postemployment
Benefits--An Amendment of FASB Statements No. 5 and 43." The Statement requires
a change in accounting for postemployment benefits and must be adopted by the
Company no later than the fiscal year ending November 30, 1995. This statement
requires employers to recognize obligations to provide postemployment benefits
if certain criteria are met. The Company does not expect implementation of this
statement to have a material effect on its financial position or its results of
operations.
NOTE 8 INCOME TAXES
The provision (benefit) for income taxes for the years ended November 30,
included the following:
<TABLE>
<CAPTION>
(In thousands) 1993 1992 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal $ 1,340 $ (24) $5,405
Foreign 6,542 2,463 185
State 145 168 945
-------------------------------------
8,027 2,607 6,535
-------------------------------------
Deferred
Federal (15,918) (1,508) (1,809)
Foreign (25) 1,153 559
State (1,816) (603) (233)
--------------------------------------
(17,759) (958) (1,483)
--------------------------------------
$(9,732) $1,649 $5,052
--------------------------------------
--------------------------------------
</TABLE>
The principal types of timing differences and the tax effect of each, which give
rise to the deferred tax benefit, for the years ended November 30, follow:
<TABLE>
<CAPTION>
(In thousands) 1993 1992 1991
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Accelerated depreciation $33 $(248) $(1,035)
Increase in nondeductible reserves (12,163) (608) (3,789)
Investment tax credits, net (42) (98) (136)
Sale of condemned property - (41) 6,039
Write down of fixed assets (3,472) 14 (2,493)
Federal alternative minimum tax credit (1,099) --- ---
Other, net (1,016) 23 (69)
---------------------------------------
$(17,759) $ (958) $(1,483)
---------------------------------------
---------------------------------------
</TABLE>
The tax provision represents effective tax rates of 27.2%, 30.0% and 37.0% of
pretax income for the years ended November 30, 1993, 1992 and 1991,
respectively. A reconciliation of income taxes provided at the effective income
tax rate and the amount computed at the federal statutory income tax rate of 34%
follows:
<TABLE>
<CAPTION>
(In thousands) 1993 1992 1991
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic pretax income (loss) $(45,011) $(2,469) $13,203
Foreign pretax income 9,203 7,966 460
---------------------------------------
$(35,808) $ 5,497 $13,663
---------------------------------------
---------------------------------------
Taxes at federal statutory rate $(12,175) $1,869 $ 4,645
State taxes (net of federal tax benefit) (1,103) (287) 470
Foreign losses with no federal benefit 2,591 891 632
Percentage depletion (486) (504) (514)
Investment tax credit amortization (42) (98) (136)
Write down affiliate investment 1,130 --- ---
Foreign withholding taxes 807 217 ---
Other, net (454) (439) (45)
---------------------------------------
$ (9,732) $1,649 $ 5,052
---------------------------------------
---------------------------------------
</TABLE>
In February, 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes." The
Company will adopt the new accounting and disclosure requirements beginning in
the first quarter of its year ending November 30 ,1994. The Company does not
expect adoption of the standard to have a material effect on net income.
The Company settled items disputed with the Internal Revenue Service relating to
the audit of fiscal years 1985 and 1986. The related payment was not material
to the Company's financial statements.
41
<PAGE>
NOTE 9 DEBT
Short-term borrowings include loans payable to banks by foreign subsidiaries
totaling $2,021,000 and $1,027,000 as of November 30, 1993 and 1992,
respectively. The average interest rate on these loans was approximately 24.0%
in 1993 and 11.6% in 1992. The increased rate in 1993 reflects a higher
percentage of short-term borrowings owed by the Company's Colombian subsidiary.
Domestically, the Company has uncommitted, short-term, bank credit lines
totaling $12,400,000 with interest at various money market rates. As of
November 30, 1993, no amount was borrowed under these short-term bank
facilities.
Long-term debt as of November 30, consisted of the following:
<TABLE>
<CAPTION>
(In thousands) 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C>
Unsecured notes payable to insurance companies:
8.63%, payable in annual installments of $5,000
commencing in 1994, plus accrued interest $25,000 $ 25,000
9.79%, payable in annual installments of $12,000
commencing in 1996, plus accrued interest 60,000 60,000
Variable-rate bank revolving credit facilities, payable
by a consolidated subsidiary in Dutch guilders - 4,856
10% mortgage loan, secured by land, with a book value
of $3,478 payable in 1995, plus interest 3,767 3,646
7.5% Industrial Revenue Development Bonds, secured
by a pipe manufacturing plant - 6,000
7.68% unsecured bank loan, payable by a consolidated
subsidiary in Dutch guilders - 5,189
Variable-rate unsecured bank loan, payable by a
consolidated subsidiary in Dutch guilders, with
annual installments of approximately $687
plus accrued interest through 2002 5,836 7,122
Other indebtedness with various interest rates
and maturities 965 -
-----------------
95,568 111,813
Less - Current portion 5,978 5,939
-----------------
$89,590 $105,874
-----------------
-----------------
</TABLE>
The Company maintains a $35,000,000 revolving credit facility with four banks.
The Company may at its option borrow at interest rates based on specified
margins over money market rates, at any time until June, 1994, when all
borrowings under the facility must be repaid. As of November 30, 1993 this
facility remained unused. Additionally, a consolidated subsidiary maintains
revolving credit facilities with three banks. The subsidiary may at its option
borrow in various currencies, at interest rates based on specified margins over
money market rates. The subsidiary is able to borrow up to the equivalent of
$6,900,000 at any time through September, 1996 under one facility, and
$3,400,000 through August, 1998 under a second facility. A third arrangement
permits borrowings up to $6,300,000, with the amount that can be borrowed
reducing semi-annually by $634,000. As of November 3O, 1993, no amount was
borrowed under these bank facilities.
Future payments due on long-term debt total $5,978,000 in 1994, $9,508,000 in
1995, $17,687,000 in 1996, $17,687,000 in 1997, and $17,687,000 in 1998.
The lending agreements contain various restrictive covenants including the
requirement to maintain specified amounts of working capital and net worth and
restrictions on cash dividends, borrowings, liens, investments and guarantees.
Under the most restrictive provisions of the Company's lending agreements,
approximately $1,300,000 of retained earnings was not restricted at November 30,
1993.
Certain note agreements contain provisions regarding the Company's ability to
grant security interests or liens in association with other debt instruments.
If the Company grants such a security interest or lien, then such notes will be
secured equally and ratably as long as such other debt shall be secured.
The following disclosure of the estimated fair value of the Company's debt is
made in accordance with the requirements of Financial Accounting Standards Board
Statement No. 107 "Disclosures about Fair Value of Financial Instruments." The
estimated fair value amounts have been determined by the Company using available
market information and appropriate valuation methodologies. Considerable
judgement is required to develop the estimates of fair value, thus the estimates
provided herein are not necessarily indicative of the amounts that could be
realized in a current market exchange.
<TABLE>
<CAPTION>
(In thousands) November 30,1993
- -------------------------------------------------------------------------------
Carrying Fair
Amount Value
---------------------------
<S> <C> <C>
Short-term borrowings $ 2,021 $ 2,021
Fixed-rate long-term debt 88,767 97,500
Variable-rate long-term debt 6,801 6,801
</TABLE>
The carrying value of short-term and variable-rate long-term debt are a
reasonable estimate of their fair value. The estimated fair value of the
Company's fixed-rate long-term debt is based on yields of U.S. government notes
plus an estimated spread at November 30, 1993 for similar securities with
similar remaining maturities.
The Company has guaranteed obligations of various unconsolidated foreign
affiliated and nonaffiliated companies of $1,700,000 as of November 30, 1993.
- --------------------------------------------------------------------------------
NOTE 10 LEASE COMMITMENTS
Rental expense under long-term operating leases of property, trucks and other
equipment was $6,068,000 in 1993, $5,512,000 in 1992 and $4,860,000 in 1991. At
November 30, 1993, future rental commitments under these leases totaled
$69,869,000. Future rental commitments are payable as follows:
<TABLE>
<CAPTION>
Year ending
(In thousands) November 30 Amount
- -------------------------------------------------------------------------------
<S> <C> <C>
1994 $6,888
1995 5,663
1996 5,248
1997 4,596
1998 4,612
1999-Beyond 42,862
-------
$69,869
-------
-------
</TABLE>
Minimum payments for leases have not been reduced by minimum noncancelable
sublease rentals aggregating $12,496,000 for operating leases.
- --------------------------------------------------------------------------------
NOTE 11 CONTINGENCIES AND COMMITMENTS
An action was filed in 1988 by a private litigant against the Company in U.S.
District Court for the District of Oregon in connection with the Company's 1988
acquisition of the steel fabrication assets of Kaiser Steel Corporation. The
amounts claimed by the plaintiff were substantial. Following trial and two
appeals to the Ninth Circuit Court of Appeals, this action was settled in
September 1993 on terms deemed to be favorable to the Company.
An action was filed in 1992 in the U.S. District Court for the District of
Arizona by the Central Arizona Water Conservation District ("CAWCD") seeking
damages against several parties, including the Company, in connection with six
prestressed concrete pipe siphons furnished and installed in the 1970's as part
of the Central Arizona Project ("CAP"), a federal project to bring water from
the Colorado River to Arizona. The CAWCD also filed separate actions against the
U.S. Bureau of Reclamation ("USBR") and with the Arizona Projects Office of the
USBR in connection with the CAP siphons. The CAWCD alleges that the six CAP
siphons are defective and
42
<PAGE>
that the USBR and the defendants in the U.S. District Court action are liable
for the repair or replacement of those siphons at a claimed estimated cost of
$146.7 million. The Company has internally, as well as through independent
third-party consultants, conducted engineering analyses regarding this issue and
believes that the siphons were manufactured in accordance with the project
specifications and other contract requirements; and, therefore, it is not liable
for any claims relating to the siphons. The Company has recorded reserves that
it believes are adequate to cover costs associated with the Company's continued
vigorous defense of its position in this matter. The Company continues to
believe that it has meritorious defenses to this action and that resultant
liability, if any, should not have a material adverse effect on the financial
position of the Company and its results of operations.
In July 1992 the Company was served with a complaint in an action brought by the
City and County of San Francisco in Superior Court of the State of California
against the Company and two co-defendants, in connection with a pipeline
referred to as San Andreas Pipeline No. 3, a water transmission pipeline which
was installed between 1980 and 1982. The Company furnished the pipe used in
that pipeline. Plaintiff alleges that the pipeline is defective and seeks
damages of $44.0 million to replace the entire pipeline. The Company has
recorded reserves that it believes are adequate to cover costs associated with
the Company's continued vigorous defense of its position in this matter. The
Company believes that it has meritorious defenses to this action and that
resultant liability, if any, should not have a material adverse effect on the
financial position of the Company and its results of operations.
In addition, certain other claims, suits and complaints which arise in the
ordinary course of business, have been filed or are pending against the Company.
Management believes that these matters, and the matters discussed above, are
either adequately reserved, covered by insurance, or would not have a material
adverse effect on the financial position of the Company or its results of
operations if disposed of unfavorably. The Company is also subject to federal,
state and local laws and regulations concerning the environment and is currently
participating in administrative proceedings at several sites under these laws.
While the Company finds it difficult to estimate with any certainty the total
cost of remediation at the several sites, on the basis of currently available
information and reserves provided, the Company believes that the outcome of such
environmental regulatory proceedings will not have a material adverse effect on
the Company's financial position or its results of operations.
At November 30, 1993, the Company had reserves of approximately $7.0 million for
potential environmental liabilities and approximately $9.7 million associated
with product liability and other legal claims.
The Company insures for property loss, workers' compensation, general liability
and automotive liability, subject to specific retention levels. Consulting
actuaries assist the Company in determining its liability for retained claims.
- -------------------------------------------------------------------------------
NOTE 12 CAPITAL STOCK
The certificate of incorporation in Delaware authorizes 12,000,000 shares of
$2.50 par value common stock, 1,000,000 shares of $1.00 par value preferred
stock and 100,000 shares of $1.00 par value series A junior participating
cumulative preferred stock. The preferred stock may be issued in series, with
the rights and preferences of each series to be established by the Board of
Directors. As of November 30, 1993, the Company had no shares of preferred
stock or series A junior participating cumulative preferred stock outstanding.
The Company has a Stockholders' Rights Agreement, which entitles stockholders to
purchase common stock if a party acquires 15% or more of the Company's common
shares or announces a tender offer for at least 15% of its common shares
outstanding.
- -------------------------------------------------------------------------------
NOTE 13 INCENTIVE STOCK COMPENSATION PLAN
On January 27, 1992, the Board of Directors of the Company adopted the Incentive
Stock Compensation Plan (the "1992 Incentive Plan"). On March 30, 1992, the
1992 Incentive Plan was approved by the stockholders at the Annual Stockholders'
Meeting. Under the terms of the 1992 Incentive Plan, 1.5 percent of the total
number of shares of Common Stock outstanding on the preceding December 31 are
available for grant of awards in the following calendar year to key employees.
The Company has reserved 146,850 shares of common stock for sale to employees
under the 1992 Incentive Plan at November 30, 1993. The plan provides for the
issuance of options to purchase not more than 250,000 shares of common stock in
the form of incentive options under the provisions of Section 422 of the
Internal Revenue Code. Options can be incentive stock options or nonqualified
options and may be granted for up to ten years.
A summary of all stock option transactions (including those under the 1992
Incentive Plan, as well as those under predecessor stock option plans) for 1993,
1992 and 1991 is as follows:
<TABLE>
<CAPTION>
Number of Shares Option Price per Share
- ---------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at November 30, 1990 106,988 $14.63 to $43.75
Granted 38,500 37.38
Exercised (12,950) 23.50 to 43.75
Expired (2,250) 43.75
-------
Outstanding at November 30, 1991 130,288 14.63 to 43.75
Granted 25,200 34.75
Exercised (2,113) 31.75
Expired (16,650) 31.75 to 43.75
-------
Outstanding at November 30,1992 136,725 14.63 to 43.75
Granted 40,700 31.00 to 32.75
Exercised (2,200) 32.00
Expired (28,375) 32.00 to 43.75
-------
Outstanding at November 30, 1993 146,850 14.63 to 43.75
-------
-------
</TABLE>
Options for 79,875 shares were exercisable at November 30, 1993. The remaining
outstanding options become exercisable in varying amounts through 1997.
Awards under the 1992 Incentive Plan may include but are not limited to stock
bonuses, stock options, convertible securities and restricted stock grants.
Restrictions may limit the sale, transfer, voting rights and dividends on these
shares. At November 30, 1993, 15,000 restricted shares were outstanding, and
65,549 shares were available for future grants.
- -------------------------------------------------------------------------------
NOTE 14 BUSINESS SEGMENTS AND GRAPHIC AREAS
Financial information for 1993, 1992 and 1991, with respect to the various
business segments of the Company, appears on pages 46 and 47.
43
<PAGE>
QUARTERLY FINANCIAL DATA
Summarized quarterly financial data for the years ended November 30, 1993 and
1992 follow (in thousands except per share data):
<TABLE>
<CAPTION>
1993
------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $96,454 $121,633 $124,039 $111,231
Gross Profit 27,002 34,477 33,662 24,728
Net Income (loss) 783 3,994 2,865 (31,897)(1)
Net Income (loss) per share .20 1.04 .72 (8.24)(1)
1992
------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $93,922 $117,000 $117,584 $117,971
Gross Profit 23,337 31,177 31,848 32,166
Net Income (loss) (1,963) 2,780 3,122 1,920
Net Income (loss) per share (.51) .72 .81 .51
<FN>
The Company traditionally experiences seasonal patterns associated with weather and contractor schedules, which result in lower
sales during the first quarter.
(1) Includes $31.5 million in fourth-quarter charges, or $8.15 per share, net of income taxes, for restructuring and other related
items.
</TABLE>
<TABLE>
<CAPTION>
PER SHARE DATA
Market Price Dividends
----------------------------------------
Quarters Ended 1993 1992 1993 1992
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
February 28 --High $35 $36 1/2 $.32 $.32
--Low 32 32 1/4
May 31 --High 33 34 3/4 .32 .32
--Low 31 29 3/4
August 31 --High 38 33 1/2 .32 .32
--Low 32 1/4 29
November 30 --High 38 3/4 35 .32 .32
--Low 35 3/4 31 1/8
</TABLE>
44
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Stockholders and the Board of Directors, Ameron, Inc.:
We have audited the accompanying consolidated balance sheets of Ameron, Inc. (a
Delaware corporation) and subsidiaries as of November 30, 1993 and 1992, and the
related consolidated statements of operations, cash flows and stockholders'
equity for each of the three years in the period ended November 30, 1993. 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 did not audit the financial statements of Gifford-Hill-American,
Inc. as of November 30, 1992 and 1991, the investment in which is reflected in
the accompanying financial statements using the equity method of accounting (see
Note 4). The investment in this company is insignificant to consolidated
assets. The equity in its net losses represents 15 and 17 percent of
consolidated net income for 1992 and 1991, respectively. Those statements were
audited by other auditors whose report has been furnished to us and our opinion,
insofar as it relates to the amounts included for that company, is based on the
report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. 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 includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
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 and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Ameron, Inc. and subsidiaries as of
November 30, 1993 and 1992, and the results of their operations and their cash
flows for each of the three years in the period ended November 30, 1993, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN & CO.
LOS ANGELES, CALIFORNIA
JANUARY 13, 1994
REPORT OF MANAGEMENT
- --------------------------------------------------------------------------------
We have prepared the accompanying consolidated financial statements and related
financial information of Ameron, Inc. and subsidiaries in conformity with
generally accepted accounting principles appropriate in the circumstances.
Management is primarily responsible for the integrity of the financial
information included in this Annual Report. In preparing the financial
statements, management makes estimates as necessary based upon currently
available information and judgments of current conditions and circumstances.
Ameron maintains a system of internal accounting controls supported by
documentation to provide reasonable assurance that assets are safeguarded and
the accounting records reflect the authorized transactions of the Company. We
believe the Company's system provides this appropriate balance in accordance
with established policies and procedures as implemented by qualified personnel.
The independent auditors, Arthur Andersen & Co., appointed by the Board of
Directors, are responsible for expressing their opinion as to whether the
consolidated financial statements present fairly in all material respects the
financial position, operating results and cash flows of the Company. In this
process, they evaluate the system of internal accounting controls to establish
the audit procedures. Their opinion appears on this page.
The Audit Committee of the Board of Directors is composed of four directors who
are not officers or employees of the Company. They meet periodically with
management, Arthur Andersen & Co. and the internal auditors to review the audit
scope and results, discuss internal control and financial reporting subjects,
and review management actions on these matters. Arthur Andersen & Co. and the
internal auditors have full and free access to the members of the Audit
Committee.
/s/ James S. Marlen
JAMES S. MARLEN
President & Chief Executive Officer
/s/ Gary Wagner
GARY WAGNER
Senior Vice President & Chief Financial
Officer, Treasurer
45
<PAGE>
BUSINESS SEGMENTS & GEOGRAPHIC AREAS
Ameron classifies its business operations into four segments: PROTECTIVE
COATINGS SYSTEMS--high-performance coatings and product finishes; FIBERGLASS
PIPE SYSTEMS--filament-wound fiberglass pipe, tubing and fittings; CONCRETE &
STEEL PIPE SYSTEMS--concrete and steel pressure pipe, concrete non-pressure pipe
and protective linings for pipe and fabricated products; CONSTRUCTION & ALLIED
PRODUCTS--ready-mix concrete, sand and aggregates,concrete pipe, and concrete
and steel lighting and traffic poles.
lntersegment sales were not significant. Operating profit (loss) for reportable
segments is exclusive of certain unallocated corporate income and expense.
Identifiable assets by segment are those assets that are used exclusively by
such segment. Corporate assets are principally cash, receivables, property and
equipment. Capital expenditures do not include plant and equipment from
business acquisitions. A summary of sales, operating profit (loss), assets,
depreciation and capital expenditures by segment follows.
<TABLE>
<CAPTION>
Business Segments
--------------------------------------------------------------------------------------
PROTECTIVE FIBERGLASS CONCRETE & CONSTRUCTION & CORPORATE &
(In thousands) COATINGS PIPE STEEL PIPE ALLIED PRODUCTS ADJUSTMENTS CONSOLIDATED
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1993
Sales $137,776 $ 92,947 $110,261 $112,373 $ -- $453,357
Operating profit (loss) 1,494 14,207 (15,067) 6,607 (30,360) (23,119)
Identifiable assets 66,958 58,481 72,838 58,973 40,608 297,858
Investments, advances and equity
in undistributed earnings of
affiliated companies 39,984 39,984
Capital expenditures 3,202 4,302 2,581 3,864 748 14,697
Depreciation 2,350 3,774 4,871 4,852 597 16,444
- -------------------------------------------------------------------------------------------------------------------------------
1992
Sales $139,948 $ 73,706 $113,417 $119,406 $ -- $446,477
Operating profit 4,807 7,357 6,578 13,745 (16,000) 16,487
Identifiable assets 69,518 67,569 80,830 62,308 51,373 331,598
Investments, advances and equity
in undistributed earnings of
affiliated companies 47,882 47,882
Capital expenditures 4,363 8,778 2,057 4,310 1,519 21,027
Depreciation 2,107 3,053 4,867 4,816 806 15,649
- -------------------------------------------------------------------------------------------------------------------------------
1991
Sales $132,145 $ 72,459 $136,214 $124,318 $ -- $465,136
Operating profit 4,965 5,690 4,391 12,257 465 27,768
Identifiable assets 66,668 55,990 93,994 65,188 56,731 338,571
Investments, advances and equity
in undistributed earnings of
affiliated companies 45,901 45,901
Capital expenditures 2,569 4,936 6,705 11,136 1,181 26,527
Depreciation 2,137 2,912 5,924 4,831 900 16,704
</TABLE>
46
<PAGE>
Sales for export or to any individual customer did not exceed 10% of
consolidated sales. Information with respect to the Company's geographic
segments is as follows:
<TABLE>
<CAPTION>
Geographic Areas
------------------------------------------------------------------------
UNITED INVESTMENTS &
(In thousands) STATES EUROPE OTHER ELIMINATIONS CONSOLIDATED
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1993
Sales to unaffiliated customers $339,993 $ 90,634 $ 22,730 $ -- $453,357
Intercompany sales between geographic areas 3,416 1,075 6,284 (10,775) --
---------------------------------------------------------------------
Total sales $343,409 $ 91,709 $ 29,014 $(10,775) $453,357
---------------------------------------------------------------------
---------------------------------------------------------------------
Operating profit (loss) $(32,398) $ 11,247 $ (1,968) $ -- $(23,119)
Identifiable assets 225,168 53,479 19,211 -- 297,858
Investments, advances and equity in undistributed
earnings of affiliated companies -- -- -- 39,984 39,984
- -------------------------------------------------------------------------------------------------------------------------------
1992
Sales to unaffiliated customers $349,644 $ 79,739 $ 17,094 $ -- $446,477
Intercompany sales between geographic areas 3,785 382 5,084 (9,251) --
---------------------------------------------------------------------
Total sales $353,429 $ 80,121 $ 22,178 $ (9,251) $446,477
---------------------------------------------------------------------
---------------------------------------------------------------------
Operating profit $ 3,956 $ 8,043 $ 4,488 $ -- $ 16,487
Identifiable assets 249,470 63,356 18,772 -- 331,598
Investments, advances and equity in undistributed
earnings of affiliated companies 47,882 47,882
- -------------------------------------------------------------------------------------------------------------------------------
1991
Sales to unaffiliated customers $386,676 $ 64,214 $ 14,246 $ -- $465,136
Intercompany sales between geographic areas 2,479 328 3,724 (6,531) --
---------------------------------------------------------------------
Total sales $389,155 $ 64,542 $ 17,970 $ (6,531) $465,136
---------------------------------------------------------------------
---------------------------------------------------------------------
Operating profit $ 23,939 $ 1,489 $ 2,340 $ -- $ 27,768
Identifiable assets 278,206 44,136 16,229 -- 338,571
Investments, advances and equity in undistributed
earnings of affiliated companies 45,901 45,901
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
47
<PAGE>
SUBSIDIARIES OF THE REGISTRANT
------------------------------
Parents
- -------
None
<TABLE>
<CAPTION>
Jurisdiction of Percent of
Subsidiaries Consolidated Incorporation Stock Owned
- ------------------------ --------------- -----------
<S> <C> <C>
American Pipe & Construction International California 100
Ameron B.V. The Netherlands 100
Ameron Canada, Inc. Canada 100
Ameron FSC Guam 100
Ameron (Hong Kong) Ltd. Hong Kong 100
Ameron (Pte) Ltd. Singapore 100
Subsidiaries Not Consolidated and
Fifty-Percent or Less Owned Companies
- -------------------------------------
Gifford-Hill-American, Inc. Texas 50
Tamco California 50
Bondstrand, Ltd. Saudi Arabia 40
Oasis-Ameron, Ltd. Saudi Arabia 40
Ameron Saudi Arabia, Ltd. Saudi Arabia 30
</TABLE>
Names of insignificant subsidiaries, other subsidiaries not consolidated and
fifty-percent or less owned companies are omitted because when considered in
the aggregate as a single subsidiary they do not constitute a significant
subsidiary.
EXHIBIT 21
43
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the
incorporation of our reports included and incorporated by
reference in this Form 10-K, into Ameron, Inc.'s previously filed
Registration Statements File No. 33-3400 and 33-57308.
ARTHUR ANDERSEN & CO.
Los Angeles, California
February 24, 1994
EXHIBIT 23
44
