FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from...............to..................
Commission File No. 1 - 9102
AMERON, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 77-0100596
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
245 South Los Robles Avenue
Pasadena, California 91101-2894
(Address of principal executive offices)
Telephone Number (818) 683-4000
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
The number of shares outstanding of Common Stock, $2.50 par value, was
3,925,297 on June 30, 1994. No other class of Common Stock exists.
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AMERON, INC.
INDEX
Page
-------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations 3
Consolidated Balance Sheets 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9-11
PART II. OTHER INFORMATION
Item 2. Changes in Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Ameron, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except share and per share data)
Three Months Ended Six Months Ended
May 31 May 31
------------------- ------------------
1994 1993 1994 1993
-------- -------- -------- --------
Sales $100,612 $121,633 $193,942 $218,087
Cost of Goods Sold 73,609 87,156 143,773 156,608
-------- -------- -------- --------
Gross Profit 27,003 34,477 50,169 61,479
Selling, General and
Administrative Expenses 21,356 27,759 44,084 54,286
Other Income 2,374 2,064 4,772 3,865
-------- -------- -------- --------
Operating Profit 8,021 8,782 10,857 11,058
Interest Expense 2,799 3,167 5,486 5,932
-------- -------- -------- --------
Income before Income Taxes 5,222 5,615 5,371 5,126
Provision for Income Taxes 2,088 2,078 2,148 1,897
-------- -------- -------- --------
Income of Consolidated Companies 3,134 3,537 3,223 3,229
Equity in Earnings of
Affiliated Companies, net of tax - 457 - 1,548
-------- -------- -------- --------
Net Income $ 3,134 $ 3,994 $ 3,223 $ 4,777
======== ======== ======== ========
Net Income per Share $ 0.80 $ 1.04 $ 0.82 $ 1.24
======== ======== ======== ========
Cash Dividends per Share $ 0.32 $ 0.32 $ 0.64 $ 0.64
======== ======== ======== ========
Average Common and Equivalent
Shares Outstanding 3,921,334 3,859,962 3,921,334 3,859,962
========= ========= ========= =========
See accompanying notes to financial statements.
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Ameron, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands except share and per share data)
May 31 Nov. 30
1994 1993
-------- --------
ASSETS
Current Assets
Cash and cash equivalents $ 9,110 $ 15,738
Receivables, net 82,590 77,572
Inventories 67,815 61,661
Deferred income tax benefits 13,991 13,586
Prepaid expenses 7,422 8,590
-------- --------
Total current assets 180,928 177,147
Investments, Advances and Equity in
Undistributed Earnings of Affiliated Companies 38,511 39,984
Property, Plant and Equipment, net 110,903 113,199
Other Assets 8,343 7,512
-------- --------
Total Assets $338,685 $337,842
======== ========
LIABILITIES and STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ 3,091 $ 2,021
Current portion of long-term debt 5,811 5,978
Trade payables 26,733 25,309
Accrued liabilities 33,509 38,919
Reserve for contingencies 11,474 13,083
Income taxes 4,519 5,847
-------- --------
Total current liabilities 85,137 91,157
Deferred Income Taxes 10,156 15,605
Long-term Debt, less current portion 90,730 89,590
Other Long-term Liabilities 34,714 25,976
-------- --------
Total liabilities 220,737 222,328
Stockholders' Equity
Common stock, par value $2.50 a share,
Authorized, 12,000,000 shares,
Outstanding, 3,920,786 shares at
May 31, 1994 and 3,886,465 shares
at November 30, 1993, net of treasury shares 12,734 12,648
Additional paid-in capital 14,156 13,414
Retained earnings 134,535 133,812
Cumulative foreign currency translation adjustment 22 (861)
Minimum pension liability adjustment (720) (720)
Treasury stock (1,172,900 shares), at cost (42,779) (42,779)
-------- --------
Total stockholders' equity 117,948 115,514
-------- --------
Total Liabilities and Stockholders' Equity $338,685 $337,842
======== ========
See accompanying notes to financial statements
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Ameron, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
Six Months Ended
May 31
1994 1993
-------- --------
Cash Flow from Operating Activities
Net income $ 3,223 $ 4,777
Adjustments to reconcile to net cash
provided by (used in) operating activities:
Depreciation 7,861 8,318
Equity in earnings of affiliated companies - (1,548)
Dividends from affiliated companies 961 2,518
Other, net (171) 701
Changes in operating assets and liabilities:
Change in receivables (5,040) (1,130)
Change in inventories (6,264) (11,194)
Change in other current assets 1,146 2,217
Change in trade payables and
other current liabilities (2,193) (4,203)
-------- --------
Net cash provided by (used in) operating activities (477) 456
Cash Flow from Investing Activities
Proceeds from sale of assets 1,151 1,093
Additions to property, plant and equipment (5,666) (5,801)
Other (1,679) (64)
-------- --------
Net cash used in investing activities (6,194) (4,772)
Cash Flow from Financing Activities
Net change in debt with maturities
of three months or less 2,608 1,708
Repayment of debt (526) (5,388)
Dividends to common stockholders (2,500) (2,465)
Issuance of common stock 397 -
-------- --------
Net cash used in financing activities (21) (6,145)
Effect of Exchange Rate Changes
on Cash and Equivalents 64 (187)
-------- --------
Net Change in Cash and Equivalents (6,628) (10,648)
Beginning Cash and Equivalents Balance 15,738 26,447
-------- --------
Ending Cash and Equivalents Balance $ 9,110 $ 15,799
======== ========
Other Cash Flow Information:
Interest paid $ 4,894 $ 5,431
======== ========
Income taxes paid $ 3,347 $ 1,186
======== ========
See accompanying notes to financial statements
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Ameron, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
May 31, 1994
Note 1. Basis Of Presentation
The consolidated financial statements for the interim periods included herein
are unaudited, however, they contain all normal recurring accruals which, in
the opinion of management, are necessary to present fairly the consolidated
financial position of the Company at May 31, 1994 and the consolidated results
of operations for the three- and six-month periods ended May 31, 1994 and
1993, and cash flows for the six-month periods ended May 31, 1994 and 1993.
Accounting measurements at interim dates inherently involve greater reliance
on estimates than at year end, thus the results of operations for the period
presented, are not necessarily indicative of the results to be expected for
the full year.
Certain prior year balances have been reclassified to conform with the current
year presentation.
The accompanying consolidated financial statements do not include footnotes
and certain financial presentations normally required under generally accepted
accounting principles and, therefore, should be read in conjunction with the
Annual Report on Form 10-K for the year ended November 30, 1993.
Note 2. Inventories
Inventories are stated at the lower of cost (principally first-in, first-out)
or market. Inventories at May 31, 1994 and November 30, 1993 were comprised
of the following (in thousands):
May 31 Nov. 30
1994 1993
-------- --------
Finished products $ 36,515 $ 34,124
Products in process 13,684 11,689
Materials and supplies 17,616 15,848
-------- --------
Total Inventories $ 67,815 $ 61,661
======== ========
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Note 3. Affiliated Companies
Summarized operating results of affiliated companies in the Concrete and Steel
Pipe Products segment follow, U.S. dollars in thousands:
Three Months Ended Six Months Ended
May 31 May 31
------------------- -------------------
1994 1993 1994 1993
-------- -------- -------- --------
Net Sales $ 19,905 $ 21,309 $ 41,917 $ 38,635
Gross Profit $ 4,822 $ 5,391 $ 11,820 $ 10,063
Net Income $ 1,074 $ 2,206 $ 2,667 $ 4,050
Equity in earnings of affiliated companies is recorded in the Company's net
income partly on a lag basis, net of taxes and net of reserves for amounts
that management anticipates will not be distributed to the company. Amounts
shown above represent operating results for Gifford-Hill-American, Inc. for
the three- and six-month periods ended April 30, 1994 and 1993 and operating
results for Ameron Saudi Arabia, Ltd. for the three- and six-month periods
ended March 31, 1994 and 1993.
Summarized results of operations of Tamco, Bondstrand, Ltd., and Oasis Ameron,
Ltd. follow, U.S. dollars in thousands:
Three Months Ended Six Months Ended
May 31 May 31
------------------- -------------------
1994 1993 1994 1993
-------- -------- -------- --------
Net Sales $ 28,533 $ 27,408 $ 59,400 $ 49,489
Gross Profit $ 1,644 $ 3,163 $ 2,141 $ 7,327
Net Income (Loss) $ (89) $ 1,477 $ (1,081) $ 3,699
Amounts shown above include operating results for Tamco for the three- and
six-month periods stated, and operating results for Bondstrand, Ltd. and
Oasis Ameron, Ltd. for the three- and six-month periods ended March 31, 1994
and 1993.
PAGE 7 <PAGE>
Note 4. Income Taxes
Effective December 1, 1993, the Company adopted FAS 109 "Accounting for Income
Taxes." This standard requires the use of the asset and liability approach
for financial accounting and reporting of income taxes. The effect of this
accounting change did not have a material effect on the accompanying financial
statements. The deferred tax assets and deferred tax liabilities recorded on
the balance sheet as of May 31, 1994 are as follows, U.S. dollars in thousands:
Non-
Current Current
-------- --------
Deferred Tax Assets
Self-insurance and contingency reserves $ 2,032 $ 6,547
Employee benefits 4,687 3,577
Accounts receivable 3,065 -
Investments 831 -
Inventory 2,971 -
Miscellaneous 405 655
Alternative minimum tax credits - 2,206
Valuation allowance - (633)
-------- --------
Total Deferred Tax Asset $ 13,991 $ 12,352
======== ========
Deferred Tax Liabilities
Investments $ - $ 4,256
Fixed Assets - 18,252
-------- --------
Total Deferred Tax Liability $ - $ 22,508
======== ========
PAGE 8 <PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Ameron, Inc. and Subsidiaries
May 31, 1994
INTRODUCTION
Management's Discussion and Analysis should be read in conjunction with the
same discussion included in the Company's 1993 Annual Report on Form 10-K.
Reference should also be made to the financial statements included in this
Form 10-Q for comparative consolidated balance sheets and statements of
operations and cash flows.
RESULTS OF OPERATIONS - SECOND QUARTER 1994
Ameron earned 80 cents per share on sales of $100.6 million for the second
quarter of 1994. This compares to earnings per share of $1.04 on sales of
$121.6 million for the prior year period. It is important to note that 1993
results included equity in earnings of affiliated companies and significant
income from large fiberglass pipe projects in North Africa that ended in the
fourth quarter of last year. Also, as was disclosed in the company's first
quarter report, management is now taking a more conservative approach to
recording equity in earnings of affiliated companies than in past years,
recognizing income only to the extent that cash dividends are anticipated.
Excluding 1993 equity in earnings of affiliates and profits for the completed
North African projects, overall base-business results from the Company's four
core business segments improved substantially in 1994. This indicates that
the restructuring actions taken by management in the fourth quarter of 1993
are continuing to have a positive effect on Ameron's operations. The actions
were the primary reason that selling, general and administrative expenses
declined to $21.4 million in the second quarter of 1994 from $27.8 million
during the prior year period.
The Company's worldwide protective coatings business posted improved sales and
earnings for the second quarter, mainly as a result of stronger sales in the
U.S. due to the improved economy. Sales for the second quarter in Europe were
down slightly because of the weaker European economy, but earnings improved
due to the Company's restructuring actions. In early May, the Company
officially introduced its new PSX line of patented Engineered Siloxane,
high-performance coatings at the Offshore Technology Conference in Houston.
These products are expected to enhance the Company's global competitive
position.
Compared to the same period last year, worldwide fiberglass pipe sales and
earnings were down significantly this year because a substantial part of last
year's results were from the major North African projects described earlier.
The soft economy in Europe also continued to inhibit sales growth.
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Unexpected delays of two major pipeline projects in Southern California
impacted sales and earnings for concrete and steel pipe operations in the
second quarter, and unseasonably inclement weather hampered pipe installations
at various job sites. Backlog continued to increase during the quarter with
the acquisition of two major contracts totaling over $27 million.
Despite labor unrest in the Hawaiian Islands throughout the quarter, as well
as extremely heavy rains in March that delayed quarrying and concrete
deliveries, the construction products business still achieved improved
earnings for the quarter as compared to the prior year period. The improved
performance is particularly noteworthy given the ongoing slow down of
privately-funded construction in the Islands. Work continues, however, on
several large, publicly-funded projects, including an interstate highway and
the new Honolulu International Airport. Several more major public projects
are scheduled to bid in the near future.
The Company's pole products business reported its second straight quarter of
improved sales and earnings as compared to 1993 due to higher demand for
concrete poles in the western states and increases in steel pole shipments.
RESULTS OF OPERATIONS - YEAR TO DATE
Earnings per share for the six months ending May 31, 1994 were 82 cents on
sales of $193.9 million versus earnings of $1.24 per share on sales of $218.1
million during the same period last year. As was the case in the second
quarter, year-to-date results last year included substantial equity in
earnings from affiliated companies and significant sales and income from the
North African fiberglass pipe projects. Before considering these two items,
earnings from Ameron's base-business operations during the first half exceeded
that of the same period last year.
The improvement in first-half results over 1993 is significant given the fact
that the winter of 1993-1994 was the most severe of the century in many of
Ameron's markets. The main reason for the change was the positive impact of
the restructuring actions taken by management in the fourth quarter of 1993.
These actions were the primary reason that selling, general and administrative
expenses declined to $44.1 million in the first half of 1994 from $54.3
million during the same period last year.
Overall earnings from Ameron's worldwide protective coatings operations
improved over the prior year period due to the restructuring and higher
domestic sales. However, European sales were lower because of sluggish
economic conditions.
First-half sales and earnings from the Company's worldwide fiberglass pipe
business were down from the same period in 1993. Last year's results included
significant shipments to two projects in North Africa. Sales and income from
domestic operations rose this year as compared to 1993 due to increased export
shipments and improved deliveries of fuel-handling systems. European results
unrelated to the North African projects were down slightly compared to last
year due to the soft economy. Sales and earnings in Asian markets were also
lower as compared to the prior year period.
Page 10 <PAGE>
Concrete and steel pipe operations reported lower first-half results as
compared to 1993 due mainly to lengthy delays on several large projects.
Deliveries on these projects are expected to begin later this year.
Sales of construction products in Hawaii for the first half of the year were
slightly lower than last year, but earnings were improved due to the
restructuring and a favorable product mix.
The pole products business posted higher sales and earnings during the
six-month period as compared to 1993 due to increased deliveries of concrete
poles to west coast markets and improved steel pole shipments. Higher
earnings were also attributable to the restructuring.
LIQUIDITY AND CAPITAL RESOURCES
At May 31, 1994, cash and cash equivalents were $9.1 million, $6.6 million
lower than the balance at November 30, 1993.
Approximately $.5 million of cash was used in operating activities mainly as a
result of an increase in working capital partially offset by earnings before
depreciation expense, and dividends from affiliated companies. Receivables
increased domestically and inventories rose in anticipation of a seasonal
increase in sales.
Investing activities included capital expenditures for enhancements to a large
diameter welded steel pipe facility. 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 between $12 and $15 million for capital expenditures,
which will be funded from existing cash balances and cash generated from
operations. Proceeds from the sale of assets consists mainly of funds
received from the sale of one of the Company's smaller joint ventures in the
Middle East.
At May 31, 1994, the Company had approximately $70 million in unused credit
lines available from foreign and domestic banks.
The Company believes that cash and cash equivalents on hand, anticipated cash
flows from operations and funds available from existing lines of credit will
be sufficient to meet its future operating requirements.
Page 11 <PAGE>
Part II. OTHER INFORMATION
Item 2. Changes in Securities
Terms of lending agreements place restrictions on cash dividends, borrowings,
investments and guarantees and require maintenance of specified minimum
working capital and certain current ratios. Under the most restrictive
provisions of these agreements, approximately $6.3 million of consolidated
retained earnings was not restricted at May 31, 1994.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on March 28, 1994.
Represented at the meeting, in person or by proxy, were 3,357,135 shares of
common stock (83.0% of the total shares outstanding). Stockholders voted on
the following matters at this meeting:
Election of Directors:
The four nominees named in the Company's proxy statement, Messrs. John F.
King, James S. Marlen, William I. McKay and Richard J. Pearson were re-elected
to serve for another term, each receiving not less than 3,205,638 votes.
Other continuing directors are: Donald H. Albrect, Victor K. Atkins, Lawrence
R. Tollenaere, Robert Toxe and F. H. Fentener van Vlissingen.
Proposal to Ratify Appointment of Independent Public Accountants:
3,206,133 (99.2%) of the shares represented at the meeting were voted in favor
of the approval of the proposal to ratify the appointment of Arthur Andersen &
Co. as independent public accountants of the Company for fiscal year 1994 and
6,048 shares were voted against the proposal. 20,440 shares of the votes cast
abstained from voting on this matter.
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended May 31, 1994.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERON, INC.
Date: July 14, 1994
/s/ Allen R. Wilkie
_______________________________
Allen R. Wilkie
Vice President, Controller
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