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 August 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
3,931,231 on September 30, 1994. No other class of Common Stock exists.
PAGE 1
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 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
PAGE 2
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 Nine Months Ended
August 31 August 31
-------------------- ------------------
1994 1993 1994 1993
--------- --------- --------- ---------
Sales $108,376 $124,039 $302,318 $342,126
Cost of Goods Sold 82,012 90,377 225,785 246,985
--------- --------- --------- ---------
Gross Profit 26,364 33,662 76,533 95,141
Selling, General and
Administrative Expenses 21,850 26,973 65,934 81,259
Other Income 4,256 2,005 9,028 5,870
--------- --------- --------- ---------
Operating Profit 8,770 8,694 19,627 19,752
Interest Expense 2,672 2,934 8,158 8,866
--------- --------- --------- ---------
Income before Income Taxes 6,098 5,760 11,469 10,886
Provision for Income Taxes 2,440 3,002 4,588 4,899
--------- --------- --------- ---------
Income of Consolidated Companies 3,658 2,758 6,881 5,987
Equity in Earnings of
Affiliated Companies, net of tax 414 107 414 1,655
--------- --------- --------- ---------
Net Income $ 4,072 $ 2,865 $ 7,295 $ 7,642
========= ========= ========= =========
Net Income per Share $ 1.04 $ 0.72 $ 1.86 $ 1.96
========= ========= ========= =========
Cash Dividends per Share $ 0.32 $ 0.32 $ 0.96 $ 0.96
========= ========= ========= =========
Average Common and Equivalent
Shares Outstanding 3,922,854 3,894,201 3,922,854 3,894,201
========= ========= ========= =========
See accompanying notes to financial statements.
PAGE 3
Ameron, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands except share and per share data)
Aug. 31 Nov. 30
1994 1993
--------- ---------
ASSETS
Current Assets
Cash and cash equivalents $ 10,674 $ 15,738
Receivables, net 87,389 77,572
Inventories 71,976 61,661
Deferred income tax benefits 13,634 13,586
Prepaid expenses 7,068 8,590
--------- ---------
Total current assets 190,741 177,147
Investments, Advances and Equity in
Undistributed Earnings of Affiliated Companies 38,095 39,984
Property, Plant and Equipment, net 110,519 113,199
Other Assets 8,261 7,512
--------- ---------
Total Assets $347,616 $337,842
========= =========
LIABILITIES and STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ 4,770 $ 2,021
Current portion of long-term debt 5,826 5,978
Trade payables 25,374 25,309
Accrued liabilities 37,941 38,919
Reserve for contingencies 10,008 13,083
Income taxes 5,186 5,847
--------- ---------
Total current liabilities 89,105 91,157
Deferred Income Taxes 12,027 15,605
Long-term Debt, less current portion 92,255 89,590
Other Long-term Liabilities 32,902 25,976
--------- ---------
Total liabilities 226,289 222,328
Stockholders' Equity
Common stock, par value $2.50 a share,
Authorized 12,000,000 shares, Outstanding 3,927,329
shares at August 31, 1994 and 3,886,465 shares
at November 30, 1993, net of treasury shares 12,756 12,648
Additional paid-in capital 14,444 13,414
Retained earnings 137,350 133,812
Cumulative foreign currency translation adjustment 276 (861)
Minimum pension liability adjustment (720) (720)
Treasury stock (1,172,900 shares), at cost (42,779) (42,779)
--------- ---------
Total stockholders' equity 121,327 115,514
--------- ---------
Total Liabilities and Stockholders' Equity $347,616 $337,842
========= =========
See accompanying notes to financial statements
PAGE 4
Ameron, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
Nine Months Ended
August 31
1994 1993
--------- ---------
Cash Flow from Operating Activities
Net income $ 7,295 $ 7,642
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation 11,935 12,437
Equity in earnings of affiliated companies (414) (1,655)
Dividends from affiliated companies 1,973 3,677
Other, net (1,927) 3,846
Changes in operating assets and liabilities:
Change in receivables (9,776) (6,149)
Change in inventories (9,854) (7,306)
Change in other current assets 1,100 1,396
Change in trade payables and other current liabilities 746 2,113
--------- ---------
Net cash provided by operating activities 1,078 16,001
Cash Flow from Investing Activities
Proceeds from sale of assets 2,794 1,416
Additions to property, plant and equipment (8,695) (10,201)
Other (2,136) (1,068)
--------- ---------
Net cash used in investing activities (8,037) (9,853)
Cash Flow from Financing Activities
Net change in debt with maturities of 3 months or less 5,582 (269)
Issuance of debt 25
Repayment of debt (673) (10,342)
Dividends to common stockholders (3,757) (3,706)
Issuance of common stock 397 32
--------- ---------
Net cash provided by (used in) financing activities 1,549 (14,260)
Effect of Exchange Rate Changes on Cash and Equivalents 346 (691)
--------- ---------
Net Change in Cash and Equivalents (5,064) (8,803)
Beginning Cash and Equivalents Balance 15,738 26,447
--------- ---------
Ending Cash and Equivalents Balance $ 10,674 $ 17,644
========= =========
Other Cash Flow Information:
Interest paid $ 5,527 $ 6,411
========= =========
Income taxes paid $ 5,146 $ 3,088
========= =========
See accompanying notes to financial statements
PAGE 5
Ameron, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
August 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 August 31, 1994 and the consolidated
results of operations for the three- and nine-month periods ended August 31,
1994 and 1993, and cash flows for the nine-month periods ended August 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 August 31, 1994 and November 30, 1993 were
comprised of the following (in thousands):
Aug. 31 Nov. 30
1994 1993
--------- ---------
Finished products $ 36,719 $ 34,124
Products in process 18,280 11,689
Materials and supplies 16,977 15,848
--------- ---------
Total Inventories $ 71,976 $ 61,661
========= =========
PAGE 6
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 Nine Months Ended
August 31 August 31
-------------------- --------------------
1994 1993 1994 1993
--------- --------- --------- ---------
Net Sales $ 16,846 $ 17,189 $ 58,763 $ 55,824
Gross Profit $ 5,548 $ 3,779 $ 17,368 $ 13,842
Net Income $ 2,298 $ 732 $ 4,965 $ 4,782
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 nine-month periods ended July 31, 1994 and 1993 and operating
results for Ameron Saudi Arabia, Ltd. for the three- and nine-month periods
ended June 30, 1994 and 1993.
Summarized results of operations of Tamco, Bondstrand, Ltd., and Oasis Ameron,
Ltd. follow, U.S. dollars in thousands:
Three Months Ended Nine Months Ended
August 31 August 31
-------------------- --------------------
1994 1993 1994 1993
--------- --------- --------- ---------
Net Sales $ 37,419 $ 35,769 $ 96,819 $ 85,258
Gross Profit $ 5,648 $ 2,152 $ 7,789 $ 9,479
Net Income $ 2,126 $ 823 $ 1,045 $ 4,522
Amounts shown above include operating results for Tamco for the three- and
nine-month periods stated, and operating results for Bondstrand, Ltd. and
Oasis Ameron, Ltd. for the three- and nine-month periods ended June 30, 1994
and 1993.
PAGE 7
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 August 31, 1994 are as follows, U.S. dollars in
thousands:
Non-
Current Current
-------- --------
Deferred Tax Assets
Self-insurance and contingency reserves $ 1,567 $ 6,076
Employee benefits 4,795 3,721
Accounts receivable 3,064 -
Investments 831 -
Inventory 2,971 -
Miscellaneous 406 655
Alternative minimum tax credits - 2,206
Valuation allowance - (633)
-------- --------
Total Deferred Tax Asset $ 13,634 $ 12,025
======== ========
Deferred Tax Liabilities
Investments $ - $ 5,581
Fixed Assets - 18,470
-------- --------
Total Deferred Tax Liability $ - $ 24,051
======== ========
PAGE 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Ameron, Inc. and Subsidiaries
August 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 -- THIRD QUARTER 1994
Ameron earned $4.1 million, or $1.04 per share, on sales of $108.4 million
for the third quarter of 1994. For the same period last year, the Company
earned 72 cents per share on sales of $124.0 million. However, 1993 results
included significant sales and income from large fiberglass pipe projects in
North Africa that did not continue into the current year.
Ameron's worldwide protective coatings business posted slightly higher sales
for the quarter than in the prior year. Stronger sales in the U.S. were
partially offset by lower sales in Europe and Africa. The domestic business
benefitted from several major coatings projects, including two in which
Ameron's new patented PSX engineered siloxane technology was used; these
projects are expected to continue into next year.
Domestic fiberglass pipe sales were down somewhat for the quarter as compared
to the prior year period. European results continued to be lower than last
year, primarily because a substantial portion of 1993's business was from the
North African projects that ended last year. Ongoing recessionary trends in
Europe also inhibited performance.
Third quarter sales of concrete & steel Pipe were lower in 1994 as compared to
last year due to lengthy delivery delays of several projects. However,
shipments to a large delayed project have now begun. Following the end of the
quarter, this business segment was awarded the largest pipeline contract in
Ameron's history: a $38 million order for a major water project in Northern
California.
The construction & allied products businesses had improved sales during the
third quarter versus the prior year period. This was due, in part, to
continued work on several major public projects in Hawaii and increased
deliveries of concrete and steel poles from plants in California, Oklahoma and
Washington.
PAGE 9
The Company's gross profit margin declined from 27.1% during the third
quarter of 1993 to 24.3% during the same period in 1994. This was due
partially to a change in product mix within the fiberglass pipe and
protective coatings businesses and a decline in worldwide fiberglass pipe
production levels as compared to last year.
Selling, general and administrative expenses were $5.1 million lower during
the quarter as compared to the same period in 1993. This was due largely to
salaried staff reductions that took place as a result of the restructuring
actions taken in the fourth quarter of 1993. Other income includes a $2.1
million gain on the sale of a non-strategic steel fabrication subsidiary in
Colombia.
RESULTS OF OPERATIONS -- YEAR TO DATE
Earnings per share for the nine months ended August 31, 1994 were $1.86 on
sales of $302.3 million versus earnings of $1.96 per share on sales of
$342.1 million during the prior year period.
Worldwide sales of protective coatings were higher than last year, with
improved domestic sales offsetting lower sales from European operations.
Earnings from protective coatings businesses were greater than last year due
to efficiencies and cost reductions achieved as a result of the restructuring.
Sales and earnings from the Company's worldwide fiberglass pipe business were
lower compared to the same period in 1993. Last year's results included
significant shipments to two projects in North Africa. Sales and income from
domestic operations were higher than last year and results from foreign
operations excluding the North African projects were about even with last
year.
Concrete & Steel Pipe sales were lower than in the prior year period due to
delays on several key projects. Deliveries began on one major project in the
fourth quarter. The Company does not expect full-year sales from this segment
to match last years levels; however, the segment will begin next year with a
record order backlog.
Year-to-date sales of Hawaiian construction products were slightly lower than
the previous year, but earnings were improved as a result of the
restructuring actions taken in the fourth quarter of last year.
Sales and earnings of the pole products business were improved over the same
period in 1993 due to increased concrete and steel pole deliveries as well as
improved operating efficiencies and cost reductions.
Selling, general and administrative expenses were $65.9 million during the
nine month period as compared to $81.3 million in the same period last year.
The reduction is attributable principally to the favorable impact of staff
reductions on salaries, benefits and other personnel related costs. Other
income includes a $3.1 million gain on the sale of a non-strategic steel
fabrication subsidiary in Colombia.
PAGE 10
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $10.7 million at August 31, 1994, $5.1 million
lower than the balance at November 30, 1993.
Approximately $1.1 million was generated from operating activities in 1994.
Cash derived from earnings and dividends was partially offset by increases
in receivables and inventories during the nine-month period. Receivables
increased as a result of the timing of collections and terms extended on
several large orders. Numerous project delays in the concrete & steel pipe
segment were the principal reason for the increase in inventories from
November 30, 1993.
Investing activities included capital expenditures for a warehouse and
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 approximately $14 million
for capital expenditures, which will be funded from current cash balances,
funds generated from operations and existing credit facilities. Proceeds
from the sale of assets consist mainly of funds received from the sale of a
Colombian steel fabrication subsidiary and a small joint venture in the
Middle East.
At August 31, 1994, the Company had approximately $65 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
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 $6.6 million of consolidated
retained earnings was not restricted at August 31, 1994.
Item 6. Exhibits and Reports on Form 8-K
A report on Form 8-K was filed August 16, 1994 relating to a management
consolidation within the Company's worldwide fiberglass pipe business.
PAGE 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERON, INC.
Date: October 14, 1994
/s/ Allen R. Wilkie
_______________________________
Allen R. Wilkie
Vice President, Controller
PAGE 13
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