<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, 1994 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 10, 1995 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 $112 million.
On February 10, 1995 there were 3,939,725 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 1994 ANNUAL REPORT TO STOCKHOLDERS (PARTS I, II AND
IV).
2. PORTIONS OF AMERON'S PROXY STATEMENT FOR THE 1995 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, 1994. All references to the "Annual Report" pertain to the
Company's 1994 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 42, 43, 48, 50 and 51 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 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 sales, as well as through manufacturers' representatives,
distributors and licensees. Competition is based upon
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quality, price and service. Manufacture of these products is
carried out in the Company's plant in 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 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 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 supplies 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 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
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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
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 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. 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 simply 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 three and eleven times annually.
Average days' sales in accounts receivable range between 38
and 120 for all segments.
(v) The value of backlog orders at November 30, 1994 and 1993 by
industry segment is shown below. A substantial portion of
the November 30, 1994 backlog is expected to be billed and
recorded as sales during the year 1995.
<TABLE>
<CAPTION>
Industry Segment 1994 1993
---------------- -------- -------
(in thousands)
<S> <C> <C>
Protective Coatings Group $ 7,558 $13,754
Fiberglass Pipe Group 20,666 14,507
Concrete and Steel Pipe Group 116,715 40,658
Construction & Allied Products Group 11,566 11,903
-------- -------
Total $156,505 $80,822
-------- -------
-------- -------
</TABLE>
3
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The order backlog at November 30, 1994 increased
significantly from the prior year's level. The backlog
totalled $156.5 million at November 30, 1994, nearly double
the $80.8 million level of November 30, 1993. The
improvement reflects increased order activity in the
Concrete and Steel Pipe segment (up $76.0 million) as a
result of a number of large orders for water transmission
systems in California that were awarded in 1994. Included
in the backlog for Concrete and Steel Pipe is the Los
Vasqueros Reservoir System ($38.0 million), which represents
the largest single contract received in Ameron's history.
The lower backlog in the Protective Coatings Group ($6.2
million) is the result of lower European orders. The
increase in the backlog in the Fiberglass Pipe Group ($6.2
million) is due to increased activity in Europe. The
backlog in the Construction and Allied Products Group
remained essentially equal to last year's level reflecting
the generally stable market conditions in Hawaii.
(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
typically 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 42
of the Annual Report, which information is incorporated herein by
reference.
b) The Company'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 Company 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 Company's capital
expenditures, earnings, or competitive position.
d) At year-end the Company and its consolidated subsidiaries
employed approximately 2,987 persons. Of those, approximately
1,490 were covered by labor union contracts, and there are five
separate bargaining agreements subject to renegotiation in 1995.
Management does not presently anticipate a strike or other labor
disturbance in connection with renegotiation of these agreements
that would have a material adverse impact on the Company;
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 43, 48, 50 and 51 of the Annual Report is
incorporated herein by reference.
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Export sales in the aggregate from domestic operations during the last
three fiscal years were:
<TABLE>
<CAPTION>
In thousands
<S> <C>
1994 $13,648
1993 12,687
1992 9,663
</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 GROUP
Protective Coatings Division - USA
Brea, CA Office, Plant, Laboratory
Little Rock, AR Office, Plant
Ameron B.V.
Geldermalsen, The Netherlands Office, Plant
FIBERGLASS PIPE GROUP
Fiberglass Pipe Division - USA
Burkburnett, TX Office, Plant
Spartanburg, SC Plant
Ameron B.V.
Geldermalsen, The Netherlands Office, Plant
Ameron (Pte) Ltd.
Singapore *Office, Plant
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CONCRETE AND STEEL PIPE GROUP
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
AMERICAN PIPE & CONSTRUCTION INTERNATIONAL
Bogota, Colombia Office, Plant
Cali, Colombia Plant
CONSTRUCTION & ALLIED PRODUCTS GROUP
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 Division
Fillmore, CA Office, Plant
Oakland, CA *Plant
Everett, WA *Office, Plant
Tulsa, OK *Office, Plant
CORPORATE
Corporate Headquarters
Pasadena, CA *Office
Corporate Research & Engineering
South Gate, CA Office, Laboratory
*Leased
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ITEM 3 - LEGAL PROCEEDINGS
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. On September 14, 1994, the U.S. District Court granted
the Company's motion to dismiss the CAWCD action and entered judgment against
the CAWCD and in favor of the Company and its co-defendants. CAWCD has filed a
notice of appeal with the Ninth Circuit Court of Appeals. 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. The plaintiff alleges that the
pipeline is defective. The plaintiff originally sought damages of approximately
$44 million to replace the entire pipeline, but in June 1994 it filed its third
amended complaint which alleges damages according to proof and in excess of the
jurisdictional minimum of $25,000. 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
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.
7
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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, 1994 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> <C> <C>
George J. Fischer 60 Senior Vice President, Human Resources 1992
Gordon G. Robertson 55 Senior Vice President, Technology 1992
Javier Solis 48 Senior Vice President of Administration,
Secretary & General Counsel 1984
S. Daniel Stracner 48 Vice President, Communications &
Public Affairs 1993
Gary Wagner 43 Senior Vice President & Chief Financial
Officer, Treasurer 1990
Allen R. Wilkie 44 Vice President, Controller 1994
</TABLE>
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. Wilkie, who joined the Company in 1994 as Vice President, Financial
Planning, Analysis and Management Information Systems and has since been named
Vice President, Controller. Prior to joining the Company, he was Corporate
Director of Information Systems with GenCorp in Akron, Ohio.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Common Stock, $2.50 Par Value, of the Company, 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 10, 1995, there were 1,895
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 Company's Common Stock
during that period are set out under the caption Per Share Data shown on page 48
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 46
of the Annual Report, which is incorporated herein by reference.
8
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ITEM 6 - SELECTED FINANCIAL DATA
The information required by this item is contained in the Selected Consolidated
Financial Information shown on page 32 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 1994 and 1993
is shown under Ameron 1994 Financial Review on pages 33-36 of the Annual Report,
which information is incorporated herein by reference. The information required
for 1992 is as follows:
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 African improved
significantly over 1991.
Sales of Fiberglass pipe domestically were lower in 1992 then 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 of 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 1992 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.
9
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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 benefitted 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.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements, the report thereon of Arthur Andersen LLP
dated January 19, 1995, Notes to Consolidated Financial Statements and Quarterly
Financial Data, comprising pages 37 through 49
of the Annual Report, are incorporated herein by reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
(Not applicable)
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PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to the directors is contained under the section
entitled, "Election of Directors" in the Company's Proxy Statement which was
filed on February 24, 1995 in connection with the Annual Meeting of Stockholders
to be held on March 27, 1995. Such information is incorporated herein by
reference.
Information with respect to the executive officers of the Company 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 Company's
Proxy Statement which was filed on February 24, 1995 in connection with the 1995
Annual Meeting of Stockholders to be held on March 27, 1995. Such information
is incorporated herein by reference.
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.
11
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page Reference
Statement to Annual Report
--------- ----------------
Consolidated Balance Sheets at November 30, 1994
and 1993 38-39
Consolidated Statements of Operations for the years
ended November 30, 1994, 1993 and 1992 37
Consolidated Statements of Cash Flows for the years
ended November 30, 1994, 1993 and 1992 40
Consolidated Statements of Stockholders' Equity
for the years ended November 30, 1994, 1993 and 1992 41
Notes to Consolidated Financial Statements 42-48
(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 43 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 1994 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.
Pages of
Schedule Schedules of Ameron, Inc. and Subsidiaries This Report
-------- ------------------------------------------ -----------
Report of Independent Public Accountants 13
II Valuation and Qualifying Accounts and Reserves 14-16
12
<PAGE>
(a) (3) EXHIBITS This Report
-----------
3(i) Certificate of Incorporation 18
3(ii) Bylaws 19
4 Instrument Defining the Rights of Security
Holders, Including Indentures 20
10 Material Contracts 21
13 Annual Report 22
21 Subsidiaries of the Registrant 23
23 Consent of Independent Public Accountants 24
(b) REPORTS ON FORM 8-K
A report on Form 8-K was filed by the Company on September 15, 1994
reporting under Item 5 the dismissal of an action for damages filed by
the Central Arizona Water Conservation District against several parties,
including the Company. This matter is discussed in more detail under
Part I, Item 3 of this report.
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 19, 1995. Our audits were made for the purpose of
forming an opinion on those statements taken as a whole. The schedule listed in
the index above is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states 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 LLP
Los Angeles, California
January 19, 1995
13
<PAGE>
AMERON, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEAR ENDED NOVEMBER 30, 1994
(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
- - - - ------------------------------------- -------- -------- ------- -------- ----------
<S> <C> <C> <C> <C> <C>
Deducted from asset accounts
Allowance for
doubtful accounts $ 4,315 $ 1,314 $ 1,793 $ 299 $ 4,135
Reserve for investments
in affiliates $ 7,323 $ 2,425 - - $ 9,748
Reserve for write-down
of assets related to
certain foreign
affiliates $11,990 $ 236 9,259 $ 249 $ 3,216
Included in current liabilities
Reserve for pending
claims and litigation $ 7,188 $ 2,232 $ 2,844 $ (358) $ 6,218
Restructuring reserve $ 4,098 - $ 1,185 $ (32) $ 2,881
Other reserves $ 1,797 $ 732 $ 493 $ (700) $ 1,336
Reserve for self-insured
programs $ 7,541 $ 5,997 $ 8,782 $ (364) $ 4,392
Included in long-term liabilities
Reserve for pending
claims and litigation $ 9,484 $ 120 $ 963 $ 1,788 $ 10,429
Other reserves $ 1,722 $ - 771 $ (951) $ -
Reserve for self-insured
programs $ 4,867 - - $ 1,904 $ 6,771
</TABLE>
14
<PAGE>
AMERON, INC. AND SUBSIDIARIES
SCHEDULE II - 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
- - - - ------------------------------------- -------- -------- ------- -------- ----------
<S> <C> <C> <C> <C> <C>
Deducted from asset accounts
Allowance for
doubtful accounts $ 5,614 $ 1,458 $ 2,296 $ (461) $ 4,315
Reserve for 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>
15
<PAGE>
AMERON, INC. AND SUBSIDIARIES
SCHEDULE II - 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
- - - - ------------------------------------- -------- -------- ------- -------- ----------
<S> <C> <C> <C> <C> <C>
Deducted from asset accounts
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>
16
<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:
--------------------------------------------------
Javier Solis, Senior Vice President & Secretary
Date: February 27, 1995
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.
<TABLE>
<CAPTION>
<S> <C> <S>
Date: Director, Chairman of the Board, President and
----------------------------------- Chief Executive Officer (Principal Executive Officer)
James S. Marlen
Date: Senior Vice President & Chief Financial Officer,
----------------------------------- Treasurer (Principal Financial Officer)
Gary Wagner
Date: Vice President, Controller
----------------------------------- (Principal Accounting Officer)
Allen R. Wilkie
Date: Director
-----------------------------------
Donald H. Albrecht
Date: Director
-----------------------------------
Victor K. Atkins
Date: Director
-----------------------------------
A. Frederick Gerstell
Date: Director
-----------------------------------
J. Michael Hagan
Date: Director
-----------------------------------
John F. King
Date: Director
-----------------------------------
Richard J. Pearson
Date: Director
-----------------------------------
Lawrence R. Tollenaere
Date: Director
-----------------------------------
F. H. Fentener van Vlissingen
</TABLE>
17
<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)
<PAGE>
BYLAWS
EXHIBIT 3(II)
<PAGE>
AMERON, INC.
(a Delaware corporation)
BYLAWS
(Restated with amendments
through January 1, 1995)
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.
<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:
-2-
<PAGE>
(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 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
-3-
<PAGE>
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.
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
-4-
<PAGE>
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 ten (10), 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.
-5-
<PAGE>
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
-6-
<PAGE>
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.
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
-7-
<PAGE>
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, 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.
-8-
<PAGE>
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.
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<PAGE>
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.
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.
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<PAGE>
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 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
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<PAGE>
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.
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.
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<PAGE>
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
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<PAGE>
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.
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.
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<PAGE>
INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES
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
<PAGE>
MATERIAL CONTRACTS
Exhibit 10 is an Employment Agreement between James S. Marlen and the Company
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, 1993.
EXHIBIT 10
<PAGE>
ANNUAL REPORT
Exhibit 13 is the Corporation's 1994 Annual Report to Stockholders.
This 10-K Report should be read only in conjunction with that Annual Report.
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
<PAGE>
FINANCIAL
SECTION
- - - - - Selected Consolidated Financial Information 32
- - - - - Management's Discussion and Analysis of
Financial Condition and Results of
Operations 33
- - - - - Consolidated Statements of Operations 37
- - - - - Consolidated Balance Sheets 38
- - - - - Consolidated Statements of Cash Flows 40
- - - - - Consolidated Statements of Stockholders'
Equity 41
- - - - - Notes to Consolidated Financial Statements 42
- - - - - Quarterly Financial Data 48
- - - - - Per Share Data 48
- - - - - Report of Independent Public Accountants 49
- - - - - Report of Management 49
- - - - - Business Segments & Geographic Areas 50
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Year ended November 30
......................................................................
(Dollars in thousands except per share data) 1994 1993 1992 1991 1990
...................................................................................................................
<S> <C> <C> <C> <C> <C>
PER COMMON SHARE DATA
Net income (loss) $ 2.75(1) $ (6.28)(2) $ 1.53 $ 2.01(3) $ 3.02
Net income excluding restructuring and
related charges and unusual items 2.29 1.87 1.53 1.91 3.02
Dividends 1.28 1.28 1.28 1.28 1.28
Average shares(4) 3,924,456 3,861,872 3,827,540 3,805,781 3,783,881
Stock price--high 43 1/8 38 3/4 36 1/2 47 1/8 52 1/2
Stock price--low 31 7/8 31 29 31 3/4 34 1/2
Price/earnings ratio (range) 16-12 NA 24-19 23-16 17-11
- - - - -------------------------------------------------------------------------------------------------------------------
OPERATING RESULTS
Sales $ 417,682 $ 453,357 $ 446,477 $ 465,136 $ 445,900
Gross profit 103,975 119,869 118,528 118,399 116,661
Interest expense 11,191 12,689 10,990 14,105 13,644
Provision (benefit) for income taxes 6,971 (9,732) 1,649 5,052 6,133
Equity in earnings (losses) of
affiliated companies, net of taxes 1,359 1,821 2,011 (976) 566
Net income (loss) 10,790(1) (24,255)(2) 5,859 7,635(3) 11,427
Net income/sales 2.6% -5.4% 1.3% 1.6% 2.6%
Return on equity 9.0% -18.6% 4.1% 5.4% 8.4%
- - - - -------------------------------------------------------------------------------------------------------------------
FINANCIAL CONDITION AT YEAR END
Working capital $ 101,005 $ 85,990 $ 107,086 $ 104,428 $ 103,396
Property, plant and equipment, net 112,953 113,199 128,130 122,201 127,778
Investments, advances and
equity in affiliated companies 37,315 39,984 47,882 45,901 48,857
Total assets 350,856 337,842 379,480 384,472 375,373
Long-term debt, less current portion 92,847 89,590 105,874 99,304 110,266
- - - - -------------------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT
Expenditures $ 14,934 $ 14,697 $ 21,027 $ 26,527 $ 33,314
Depreciation 15,855 16,444 15,649 16,704 14,286
<FN>
(1) Includes $1.8 million gain, net of income taxes, or $.46 per share, on the
sale of a Colombian subsidiary.
(2) Includes $31.5 million, net of income taxes, in fourth quarter charges, or
$8.15 per share, for restructuring and other related items.
(3) Includes $360,000, net of income taxes, or $.10 per share, related to the
sale of the Company's corporate headquarters facility, reduced by
restructuring charges and asset write-downs.
(4) Includes common stock equivalents in periods in which they have a dilutive
effect.
</TABLE>
<PAGE>
AMERON 1994 FINANCIAL REVIEW
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
................................................................................
LIQUIDITY AND CAPITAL RESERVES
During 1994, the Company generated $3.5 million of cash from operations and $4.7
million from the sale of certain assets. These funds, along with a beginning
cash balance of $15.7 million and additional net borrowings of $7.9 million,
were used for investments in new plant and equipment of $14.9 million, payment
of dividends on common stock of $5.0 million and other investment activities of
$2.9 million. Cash and cash equivalents at November 30, 1994 totaled $9.0
million.
The cash provided by operations decreased in 1994 primarily as a result of an
increase in investment in working capital due to the timing of production and
shipments associated with several major concrete and steel pipe projects in
progress at November 30, 1994.
Investing activities included capital expenditures for construction of a
protective coatings warehouse in The Netherlands, upgrades to a large diameter
steel pipe facility and installation of improved information processing
technology across all business segments. During the fiscal year ending November
30, 1995, the Company expects that capital expenditures will be consistent with
the level of spending in 1994 and 1993 and approximately equal to depreciation.
Capital expenditures will be funded from existing cash balances and cash
generated from operations.
During 1994, the Company began repayment of its 8.63% unsecured $25 million
notes payable to an insurance company. The annual installment aggregates $5.0
million plus accrued interest. 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: 1994 COMPARED WITH 1993
GENERAL
Ameron earned $2.75 per share ($10.8 million after taxes) on sales of $417.7
million for 1994, compared to a net loss of $6.28 per share (loss of $24.3
million after taxes) in 1993 on sales of $453.4 million. During 1993, Ameron
recognized costs totaling $45.8 million ($31.5 million after taxes) associated
with a comprehensive restructuring of the Company. Excluding the after-tax
effect of restructuring charges, earnings per share for 1993 would have been
$1.87. During 1994, a non-strategic steel fabrication subsidiary in Colombia was
sold as part of the restructuring program; the sale resulted in a net after-tax
gain of $1.8 million or $.46 per share. Adjusting for the gain on the sale of
this subsidiary, earnings per share for 1994 were $2.29, a 22% increase over
equivalent 1993 earnings of $1.87 per share.
The earnings improvement was due principally to the positive impact of the
restructuring on Ameron's business segments, as well as continued growth of the
Protective Coatings business and the Construction & Allied Products segment. The
Concrete & Steel Pipe business had lower earnings as a result of project delays,
and the Fiberglass Pipe business declined because of completion of major
fiberglass pipe projects in North Africa during 1993.
SALES
Compared to 1993, sales declined $35.7 million or 8% in 1994, primarily because
of completion of major fiberglass pipe projects in North Africa; lower shipments
of protective coatings from Ameron B.V., the Company's subsidiary in The
Netherlands; and project delays in California that reduced shipments of concrete
and steel pipe. The sales decline was offset partially by stronger Protective
Coatings sales in the United States and improved market penetration by the Pole
Products business within the Construction & Allied Products Group.
Total Protective Coatings sales were $134.2 million in 1994, compared to $137.8
million in 1993. The modest decline of $3.6 million reflects relatively flat
market conditions in Europe and lower shipments to North Africa. Sales of
industrial coatings and product finishes in the United States reached record
high levels in 1994. The favorable sales performance resulted in part from the
successful introduction of PSX, Ameron's proprietary new polysiloxane
technology. Also contributing were market share gains in product finishes for
the original equipment manufacturer market and several large protective coatings
projects. The Company anticipates ongoing sales growth in the United States and
market expansion gains associated with the PSX product line. Shipments from
Ameron B.V. are expected to be lower; however, the Company expects continued
growth in the Asian market.
<PAGE>
Total Fiberglass Pipe segment sales were $66.2 million in 1994, compared with
$92.9 million in 1993. The sales decrease ($26.7 million) was attributable to
completion of several major crude oil projects in North Africa in 1993. Sales in
the United States were down in 1994 mostly due to the general softness in
oilfield markets and reduced demand for fuel-handling systems used for service
station rehabilitation. The near-term outlook in Europe for Fiberglass Pipe is
favorable. The United States market is expected to remain relatively soft across
most traditional market segments.
Concrete & Steel Pipe segment sales totaled $101.6 million in 1994, compared to
$110.3 million in 1993. The sales decline ($8.7 million) occurred primarily
because of delivery delays on several major projects in California. The outlook
for Concrete & Steel Pipe is positive since the business entered fiscal year
1995 with a backlog of $116.7 million, the highest ever achieved by the segment.
Construction & Allied Products sales totaled $115.6 million in 1994, compared
with $112.4 million in 1993. The main reason for the $3.2 million increase was
sales growth achieved by the Pole Products business, which more than offset a
slight sales decline at Ameron HC&D, the largest supplier of ready-mix concrete
in Hawaii. The growth in the Pole Products business was due to market share
gains in the steel pole product line for traffic and street lighting
applications, generally stronger market demand, and successful market expansion
programs. Continued softness in the private construction sector on the Hawaiian
Islands accounted for the modest sales decline at HC&D. Growth should continue
in the Pole Products business, but economic conditions in Hawaii are expected to
stay soft for the short term.
GROSS PROFIT
Gross profit margin of $104.0 million or 24.9% of sales in 1994 was lower than
the $119.9 million or 26.4% of sales reported in 1993. The decline in gross
profit ($15.9 million) in 1994 was due principally to the lower sales volume in
1994, particularly in the European Fiberglass Pipe operations. The lower gross
profit margin rate resulted mainly from the completion of Fiberglass Pipe
projects in North Africa that had favorably affected 1993 operations. The gross
profit of the Concrete & Steel Pipe segment was unfavorably impacted by price
competition, product mix and project delivery delays in California. Protective
Coatings had a slightly lower gross profit margin due to product mix, while
Construction & Allied Products had a higher gross profit margin because of
productivity gains and favorable pricing.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses totaled $84.4 million in 1994,
compared with $100.9 million in 1993. The $16.5 million decrease was
attributable principally to the significant reduction in the Company's overhead
structure resulting from the comprehensive restructuring in 1993. The decrease
also reflects reduced selling expenses as a result of lower sales volume.
ENVIRONMENTAL AND LEGAL CLAIMS
Charges to income for environmental and legal claims decreased $12.2 million in
1994 compared to 1993, when an additional $9.0 million was reserved for
environmental and legal matters as part of the restructuring. For discussion on
pending environmental and legal claims, refer to Note 11: "Contingencies and
Commitments." Given 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 U.S.
Environmental Protection Agency. Ameron waste accounted for less than one
percent of the total waste deposited at the site. In 1993, 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 this determination.
Ameron maintains reserves that 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, in addition to the Stringfellow site, 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 environmental regulatory proceedings will have a
material adverse effect on the Company's financial position or its results of
operations.
RESTRUCTURING
During 1994, the Company disbursed approximately $3.5 million for plant
consolidation and employee severance costs in connection with its 1993
restructuring plan. At November 30, 1994, $1.9 million of accrued liabilities
related to the 1993 restructuring remained in the Company's balance sheet.
<PAGE>
GAIN ON THE SALE OF ASSETS
The gains from the sale of assets in 1994 were realized principally from the
divestiture of a wholly-owned Concrete & Steel Pipe subsidiary in Colombia.
OTHER INCOME
Other income consisted of royalties and fees received from affiliated companies
and licensees, as well as interest income and miscellaneous income earned from
various sources.
INTEREST EXPENSE
Interest expense totaled $11.2 million in 1994, a decrease of $1.5 million from
1993. Interest expense in 1993 was higher because of the recording of accrued
interest on income tax obligations related to prior years.
PROVISION FOR INCOME TAXES
Income tax expense aggregated $7.0 million in 1994, which represents an overall
effective tax rate of 42.5% of pretax income. This compares to the effective tax
rate of 45.0% in 1993 after adjusting for restructuring and related charges. The
Company adopted Financial Accounting Standards Board Statement No. 109,
"Accounting for Income Taxes," in 1994. The requirements and impact of this
statement are discussed in Note 8 in the financial statements.
EQUITY IN EARNINGS OF AFFILIATED COMPANIES
Equity in earnings of jointly-owned affiliated companies recorded in 1994
totaled $1.4 million, a slight decline from the $1.8 million recorded in 1993.
During 1994, the Company refined its method for equity income recognition to a
more conservative approach under which equity income is recognized only to the
extent that cash dividends are anticipated. Two affiliates,
Gifford-Hill-American, Inc., a pressure pipe affiliate in Texas, and Tamco, a
steel mini-mill in Southern California, reported sizable improvements in sales
and earnings in 1994. Sales and earnings of the Company's Saudi Arabian
affiliates, Oasis-Ameron, Ltd., Bondstrand, Ltd., and Ameron Saudi Arabia, Ltd.,
were lower than in 1993.
................................................................................
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 of 1993, 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 due to higher shipments
of fiberglass pipe and protective coatings to projects in North Africa. These
improvements were partially offset by reduced sales of concrete and steel pipe
and construction products.
Sales of protective coatings declined $2.2 million from 1992. In the United
States, sales of industrial coatings improved over 1992, 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.
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 1992 in the Fiberglass Pipe
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.
Concrete & Steel Pipe sales declined $3.2 million from 1992. 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.
<PAGE>
Construction & Allied Products sales fell $7.0 million from 1992 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.
GROSS PROFIT
The gross profit margin remained unchanged from 1992. 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, a $3 million charge was recorded in the
fourth quarter to write down selected inventories, which had the effect of
decreasing the gross profit margin from 27.1% to 26.4%.
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 1992.
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 part of
management's restructuring efforts, an additional $9 million was added to
reserves.
RESTRUCTURING CHARGES AND WRITE-DOWN OF ASSETS
During 1993, 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
facilities, 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 and Construction & Allied Products
groups. Also included in the restructuring was the company-wide elimination of
approximately 330 salaried staff positions, the planned divestiture 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.
OTHER INCOME
Royalty, fee and other income from affiliated companies and licensees increased
over 1992, due largely to a special dividend received from a Mexican affiliate.
INTEREST EXPENSE
The $1.7 million increase in interest expense in 1993 is attributable 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, were $4.5 million, a
45% effective rate. The significant difference in effective rate in 1993,
compared to 30% in 1992, was due primarily to losses generated by certain
foreign subsidiaries for which no tax benefit was generated.
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 Saudi Arabian affiliates were equal to
or higher than prior year's results. 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, the Company recorded a
write-down of the investments in certain affiliates to their estimated net
realizable value.
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended November 30
................................................
(Dollars in thousands except per share data) 1994 1993 1992
...................................................................................................................
<S> <C> <C> <C>
Sales $417,682 $453,357 $446,477
Cost of sales 313,707 333,488 327,949
------------------------------------------------
Gross profit 103,975 119,869 118,528
Selling, general and administrative expenses 84,415 100,917 100,157
Environmental and legal claims 2,352 14,503 6,710
Restructuring charges and write-down of assets -- 33,797 --
Gain from sale of assets 4,188 547 149
Other income 6,197 5,682 4,677
------------------------------------------------
Income (loss) before interest expense and income taxes 27,593 (23,119) 16,487
Interest expense 11,191 12,689 10,990
------------------------------------------------
Income (loss) before income taxes 16,402 (35,808) 5,497
Provision (benefit) for income taxes 6,971 (9,732) 1,649
------------------------------------------------
Income (loss) of consolidated companies 9,431 (26,076) 3,848
Equity in earnings of affiliated companies, net of taxes 1,359 1,821 2,011
------------------------------------------------
Net income (loss) $ 10,790 $(24,255) $ 5,859
------------------------------------------------
------------------------------------------------
Net income (loss) per share $ 2.75 $ (6.28) $ 1.53
------------------------------------------------
------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of November 30
.............................
(Dollars in thousands except per share data) 1994 1993
...................................................................................................................
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 9,030 $ 15,738
Receivables, less allowance of $4,135 in 1994 and $4,315 in 1993 97,519 77,572
Inventories 71,644 61,661
Deferred income tax benefits 4,706 13,586
Prepaid expenses and other 5,192 8,590
-----------------------------
Total current assets 188,091 177,147
Investments, advances and equity in undistributed
earnings of affiliated companies 37,315 39,984
Property, plant and equipment
Land 21,589 21,460
Buildings 43,991 42,211
Machinery and equipment 192,483 191,072
Construction in progress 10,028 7,364
-----------------------------
268,091 262,107
Less - accumulated depreciation (155,138) (148,908)
-----------------------------
112,953 113,199
Other assets 12,497 7,512
-----------------------------
$ 350,856 $ 337,842
-----------------------------
-----------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
As of November 30
.............................
1994 1993
...................................................................................................................
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings $ 2,931 $ 2,021
Current portion of long-term debt 9,674 5,978
Trade payables 25,507 25,309
Accrued liabilities
Taxes, interest and other 17,952 16,235
Compensation and benefits 11,382 14,277
Insurance 4,392 8,407
Claims and other 10,435 13,083
Income taxes 4,813 5,847
-----------------------------
Total current liabilities 87,086 91,157
Deferred income taxes 5,759 15,605
Long-term debt, less current portion 92,847 89,590
Other long-term liabilities 40,357 25,976
Commitments and contingencies
Stockholders' equity
Common stock, par value $2.50 a share
Authorized 12,000,000 shares
Outstanding 3,935,711 shares in 1994 and
3,886,465 shares in 1993, net of treasury shares 12,772 12,648
Additional paid-in capital 14,658 13,414
Retained earnings 139,586 133,812
Cumulative foreign currency translation adjustments 570 (861)
Minimum pension liability adjustment -- (720)
Less treasury stock (1,172,900 shares in 1994 and 1993), at cost (42,779) (42,779)
-----------------------------
Total stockholders' equity 124,807 115,514
-----------------------------
$ 350,856 $ 337,842
-----------------------------
-----------------------------
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended November 30
.................................................
(Dollars in thousands) 1994 1993 1992
...................................................................................................................
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 10,790 $(24,255) $ 5,859
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 15,855 16,444 15,649
Provision (benefit) for deferred income taxes 9,414 (17,759) (958)
Equity in earnings of affiliated companies (1,359) (1,821) (2,011)
Dividends from affiliated companies 1,755 3,670 1,063
Gain from sale of assets (4,188) (547) (149)
Stock contributed to employee benefit plan 967 958 873
Non-cash restructuring and asset write-downs -- 28,668 --
Other, net (479) (189) 331
Other changes in operating assets and liabilities:
(Increase) decrease in receivables (17,109) 3,744 2,224
(Increase) decrease in inventories (9,383) (2,489) 11,581
(Increase) decrease in other current assets 3,374 357 (5,088)
(Increase) decrease in long-term assets (2,390) 332 18
Increase (decrease) in trade payables,
accrued liabilities and income taxes (9,899) 7,468 6,443
Increase in long-term liabilities 6,184 10,466 3,471
------------------------------------------------
Net cash provided by operating activities 3,532 25,047 39,306
------------------------------------------------
INVESTING ACTIVITIES
Proceeds from sale of assets 4,688 1,850 22,211
Additions to property, plant and equipment (14,934) (14,697) (21,027)
Investment in life insurance policies (2,872) (1,613) (960)
Other (420) (30) (2,095)
------------------------------------------------
Net cash used in investing activities (13,538) (14,490) (1,871)
------------------------------------------------
FINANCING ACTIVITIES
Net change in debt with maturities of
three months or less 395 (221) (10,447)
Issuance of debt 13,041 -- 15,572
Repayment of debt (5,953) (15,728) (24,552)
Dividends on common stock (5,016) (4,950) (4,904)
Issuance of common stock 401 70 67
------------------------------------------------
Net cash provided by (used in) financing activities 2,868 (20,829) (24,264)
------------------------------------------------
Effect of exchange rate changes on cash
and cash equivalents 430 (437) (260)
------------------------------------------------
Net change in cash and cash equivalents (6,708) (10,709) 12,911
Cash and cash equivalents at beginning of year 15,738 26,447 13,536
------------------------------------------------
Cash and cash equivalents at end of year $ 9,030 $ 15,738 $26,447
------------------------------------------------
------------------------------------------------
Other cash flow information:
Interest paid $ 10,365 $ 11,903 $ 10,913
------------------------------------------------
------------------------------------------------
Income taxes paid $ 1,581 $ 3,535 $ 5,337
------------------------------------------------
------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
........................
Shares Additional Retained
(Dollars in thousands except per share data) Outstanding Amount Paid-in Capital Earnings Other
........................................................................................................................
<S> <C> <C> <C> <C> <C>
Balance, November 30, 1991 3,812,700 $12,464 $11,139 $162,062 $ 518
Net income--1992 5,859
Exercise of stock options and issuance of stock
to employee savings plan 28,930 72 868
Dividends on common stock of $1.28 a share (4,904)
Foreign currency translation adjustments
(net of deferred income tax benefit of $230) (413)
-------------------------------------------------------------------
Balance, November 30, 1992 3,841,630 12,536 12,007 163,017 105
Net loss--1993 (24,255)
Exercise of stock options and issuance of stock
to employee savings plan 44,835 112 1,407
Dividends on common stock of $1.28 a share (4,950)
Foreign currency translation adjustments
(net of deferred income tax benefit of $644) (966)
Minimum pension liability adjustment (720)
-------------------------------------------------------------------
Balance, November 30, 1993 3,886,465 12,648 13,414 133,812 (1,581)
Net income--1994 10,790
Exercise of stock options and issuance of stock
to employee savings plan 49,246 124 1,244
Dividends on common stock of $1.28 a share (5,016)
Foreign currency translation adjustments
(net of deferred income tax of $954) 1,431
Minimum pension liability adjustment 720
-------------------------------------------------------------------
Balance, November 30, 1994 3,935,711 $12,772 $14,658 $139,586 $ 570
-------------------------------------------------------------------
-------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<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, 1994 and 1993, the Company had approximately
$22,000 and $7,200,000, respectively, invested in such securities. The carrying
value of cash and cash equivalents approximates 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 of $104,000 and $794,000 applicable to the
period of construction of major plant and expansion projects were capitalized in
1993 and 1992, 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
In December 1993, the Company adopted Statement of Financial Accounting
Standards No. 109 (FAS 109), Accounting for Income Taxes. The adoption of FAS
109 changes the Company's method of accounting for income taxes from the
deferred method (APB 11) to an asset and liability approach. Previously the
company deferred the past tax affects of timing differences between financial
reporting and taxable income. The asset and liability approach requires the
recognition of deferred tax liabilities and assets for the expected future tax
consequences of temporary differences between the carrying amounts and the tax
bases of assets and liabilities.
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 3,924,456 in 1994, 3,861,872 in 1993 and 3,827,540 in 1992.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred. Such costs were
approximately $4,700,000 in 1994, $4,100,000 in 1993 and $4,000,000 in 1992.
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) 1994 1993 1992
- - - - ---------------------------------------------------------------------------
<S> <C> <C> <C>
Royalties and fees from affiliated
companies and licensees $4,018 $3,967 $3,284
Foreign currency loss (205) (147) (433)
Interest income 684 836 1,543
Miscellaneous 1,700 1,026 283
--------------------------
$6,197 $5,682 $4,677
--------------------------
--------------------------
</TABLE>
Note 3 Inventories
Inventories at November 30, were as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
- - - - ---------------------------------------------------------------------------
<S> <C> <C>
Finished products $34,664 $34,124
Products in process 20,175 11,689
Materials and supplies 16,805 15,848
-----------------
$71,644 $61,661
-----------------
-----------------
</TABLE>
Certain steel inventories are valued using the last-in, first-out cost method.
These items comprised 9.2% and 7.1% of consolidated inventories at November 30,
1994 and 1993, respectively. If such inventories had been valued using the
first-in, first-out cost method, total inventories would have increased by
$2,265,000 and $1,834,000 at November 30, 1994 and 1993, respectively.
<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
Products 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, 1994
Cost $ 5,786 $ 8,482 $ 3,706 $17,974
Accumulated equity in
undistributed earnings 17,520 8,760 2,809 29,089
Reserves (9,281) (467) (9,748)
-------------------------------------
$14,025 $16,775 $ 6,515 $37,315
-------------------------------------
-------------------------------------
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
Reserves (7,323) (7,323)
-------------------------------------
$14,883 $16,775 $ 8,326 $39,984
-------------------------------------
-------------------------------------
</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 U.S. tax has been provided was $2,000,000 at November 30, 1994 and
1993.
Summarized financial information for affiliates in the concrete pipe products
business follows:
<TABLE>
<CAPTION>
Financial Condition (In thousands) 1994 1993
- - - - ---------------------------------------------------------------------------
<S> <C> <C>
Current assets $ 70,100 $56,169
Noncurrent assets 39,802 42,668
------------------
$109,902 $98,837
------------------
------------------
Current liabilities $ 39,125 $28,810
Noncurrent liabilities 3,371 1,985
Stockholders' equity 67,406 68,042
------------------
$109,902 $98,837
------------------
------------------
<CAPTION>
Results of Operations (In thousands) 1994 1993 1992
- - - - ---------------------------------------------------------------------------
Net sales $80,230 $81,144 $62,873
---------------------------
---------------------------
Gross profit $23,715 $21,305 $15,938
---------------------------
---------------------------
Net income $ 5,688 $ 5,367 $ 2,121
---------------------------
---------------------------
</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, 1994 and unaudited financial statements as of October 31, 1994.
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, 1993 and unaudited financial statements as of September 30, 1994.
The investment in Tamco was based on audited financial statements as of November
30, 1994.
Summarized financial information for Tamco, Bondstrand, Ltd. and Oasis-Ameron,
Ltd. follows:
<TABLE>
<CAPTION>
Financial Condition (In thousands) 1994 1993
- - - - ---------------------------------------------------------------------------
<S> <C> <C>
Current assets $48,074 $46,476
Noncurrent assets 28,131 34,025
-----------------
$76,205 $80,501
-----------------
-----------------
Current liabilities $18,768 $21,045
Noncurrent liabilities 4,312 4,151
Stockholders' equity 53,125 55,305
-----------------
$76,205 $80,501
-----------------
-----------------
<CAPTION>
Results of Operations (In thousands) 1994 1993 1992
- - - - ---------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $136,790 $118,845 $108,093
----------------------------
----------------------------
Gross profit $ 17,637 $ 10,953 $ 15,988
----------------------------
----------------------------
Net income $ 3,886 $ 2,805 $ 7,048
----------------------------
----------------------------
</TABLE>
The amount of investments and accumulated equity in the undistributed earnings
in the Middle Eastern affiliates was approximately $19,000,000 and $22,200,000
at November 30, 1994 and 1993, respectively.
Sales and technical services provided by the Company to affiliates in the Middle
East totaled approximately $3,500,000 in 1994, $4,100,000 in 1993 and $4,300,000
in 1992, and related receivables aggregated approximately $2,400,000 at November
30, 1994 and $3,300,000 at November 30, 1993.
Receivables from all affiliated companies approximated $2,800,000 at November
30, 1994 and $3,600,000 at November 30, 1993.
................................................................................
NOTE 5 SALE OF ASSETS
During the third quarter of 1994, the Company completed the sale of a
non-strategic steel fabrication subsidiary in Colombia. This sale resulted in
an after tax gain of $1.8 million or $.46 per share, for the year.
................................................................................
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 330 salaried employees, revaluation of
underperforming 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 to those core
businesses that are expected to yield returns consistent with management's
expectations and objectives.
The following is a summary of restructuring charges and asset write-downs
recorded by the Company:
<TABLE>
<CAPTION>
(In thousands) 1993
- - - - ---------------------------------------------------------------------------
<S> <C>
Facility and product line consolidation $11,367
Revalue investments and related assets 9,403
Elimination of non-strategic operations 7,494
Employee severance costs 3,430
Fixed asset write downs 1,937
Other 166
-------
Total $33,797
-------
-------
</TABLE>
<PAGE>
The following is a summary of restructuring charges and asset write-downs by
business segment:
<TABLE>
<CAPTION>
(In thousands) 1993
- - - - ---------------------------------------------------------------------------
<S> <C>
Protective Coatings $ 5,128
Fiberglass Pipe 1,909
Concrete & Steel Pipe 10,604
Construction & Allied Products 3,723
Corporate 12,433
-------
Total $33,797
-------
-------
</TABLE>
................................................................................
NOTE 7 EMPLOYEE BENEFIT PLANS
The Company has a qualified, defined benefit, noncontributory pension plan for
employees not covered by union pension plans, which is 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
the plan 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 defined benefit plan are invested in a directed trust. Assets in
the trust are invested in equity securities of corporations (including
$3,220,000 of the Company's common stock at November 30, 1994), U.S. government
obligations, derivative securities, corporate bonds and money market funds.
During 1994, the overfunded and underfunded pension plans were combined so that
the assets of each predecessor pension plan are available to satisfy the
previously existing obligations of the other.
The Company has a supplemental non-qualified, non-funded retirement plan, for
which the Company has purchased cost recovery life insurance on the lives of the
participants. 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, 1994 and 1993, the cash
surrender value of these policies was $3,314,000 and $1,973,000, respectively.
Net periodic pension cost for the years ended November 30, consists of the
following:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
- - - - ---------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost:
Defined benefit plans $ 2,111 $ 2,452 $ 2,675
Supplemental plan 25 26 29
Interest cost:
Defined benefit plans 7,663 7,744 7,193
Supplemental plan 186 146 148
Return on plan assets 508 (20,847) (8,125)
Net (amortization) deferral:
Defined benefit plans (9,701) 11,962 (857)
Supplemental plan 268 202 221
---------------------------
Net periodic pension cost $ 1,060 $ 1,685 $ 1,284
---------------------------
---------------------------
</TABLE>
The following table sets forth the funding status of the qualified, defined
benefit plan and the amount recognized in the Company's balance sheet at
November 30:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
- - - - ---------------------------------------------------------------------------
Over Under
Funded Funded
----------------------------
<S> <C> <C> <C>
Actuarial present value of:
Vested benefit obligation $ 88,108 $ 72,330 $22,959
Non-vested benefits 621 657 209
----------------------------
Accumulated benefit obligation 88,729 72,987 23,168
Effect of salary increases 8,349 10,714 --
----------------------------
Actuarial present value of
projected benefit obligation 97,078 83,701 23,168
Less plan assets at market value 104,381 95,662 17,159
----------------------------
Plan assets (in excess of) under
projected benefit obligation (7,303) (11,961) 6,009
Unrecognized (obligation) asset 11,820 13,332 (3,320)
Additional minimum liability -- -- 3,320
----------------------------
Accrued pension cost in
consolidated balance sheets $ 4,517 $ 1,371 $ 6,009
----------------------------
----------------------------
</TABLE>
The following table sets forth the status of the supplemental plan as of
November 30:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
- - - - ---------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation $2,172 $1,783
Non-vested benefits 5 13
----------------
Accumulated benefit obligation 2,177 1,796
Effect of salary increases 124 114
----------------
Actuarial present value of
projected benefit obligation 2,301 1,910
Unrecognized obligation (965) (852)
Unrecognized net gain 353 333
----------------
Accrued pension cost in consolidated balance sheets $1,689 $1,391
----------------
----------------
</TABLE>
During 1993, a curtailment of salaried employees was recognized and decreases in
liability were noted. As a result of the curtailment, the defined benefit plan's
expected future service cost declined 13% and the projected benefit obligation
declined $1,427,000. For the supplemental plan, the expected future service cost
declined 18% and the projected benefit obligation declined $22,000.
The 1994 actuarial computations for both the qualified, defined benefit plan and
the supplemental plan assumed a discount rate of 8.75% and annual salary
increases of 6.25%. The qualified, defined benefit plan assumed an expected long
term rate of return of 9.75%.
Approximately 22% of the Company's employees are covered by union sponsored,
collectively bargained, multi-employer pension plans. The Company contributed
and charged to expense $2,400,000 in 1994 and $1,900,000 and $1,800,000 in 1993
and 1992, respectively. 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.
<PAGE>
Effective December 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions." The Statement requires the Company to accrue the estimated
cost of retiree benefit payments during the years the employees provide
services. The Statement allows recognition of the cumulative effect of the
liability in the year of the adoption or the amortization of the obligation
over a period of up to 20 years. The Company has elected to recognize the
initial postretirement benefit obligation of $1,330,000 over a period of 20
years.
The accumulated postretirement benefit obligation in the Company's balance sheet
at November 30, follows:
<TABLE>
<CAPTION>
(In thousands) 1994
- - - - ---------------------------------------------------------------------------
<S> <C>
Retirees $ (297)
Actives eligible (462)
All others (571)
-------
Postretirement benefit obligation (1,330)
Unrecognized net transition obligation 1,353
Unrecognized gains 154
-------
Accrued postretirement cost in the balance sheet $ 131
-------
-------
</TABLE>
Net periodic postretirement benefit cost for the year ended November 30,
consisted of the following components:
<TABLE>
<CAPTION>
(In thousands) 1994
- - - - ---------------------------------------------------------------------------
<S> <C>
Service cost $ 55
Interest cost 111
Net amortization 71
-------
Net periodic postretirement benefit expense $ 237
-------
-------
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 9.5% to 10% in 1994; it is assumed that
the rate will decline gradually to 6% by the year 2001. The assumed discount
rate used in determining the accumulated postretirement benefit obligation was
7.5% at December 1, 1993 and 8.5% at November 30, 1994. The salary increase rate
used was 5.0%.
The Company has 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 $3,208,000 at November 30, 1994 and $2,602,000 at
November 30, 1993. The expense for this plan was $136,000 in 1994, $362,000 in
1993 and $506,000 in 1992.
The Company has a 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 $60,000 in
1994, $50,000 in 1993 and $51,000 in 1992.
In connection with the above two plans, whole life insurance contracts were
purchased on the related participants. At November 30, 1994 and 1993, the cash
surrender value of these policies was $4,690,000 and $3,159,000, net of loans of
$2,043,000 and $1,901,000, respectively.
The Company provides to certain employees a savings plan under Section 401(k) of
the Internal Revenue Code. 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 1994, 1993 and 1992, the Company recorded expenses for matching
contributions of $967,000, $958,000 and $873,000, respectively, while 25,996,
27,635, and 26,817 shares of common stock were issued by the Company to the
savings plan.
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
In February 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes." The
Company adopted the new accounting and disclosure requirements beginning in the
first quarter of its year ended November 30, 1994. Adoption of the standard did
not have a material effect on net income.
The provision (benefit) for income taxes for the years ended November 30,
included the following:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
- - - - ---------------------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal $(3,730) $ 1,340 $ (24)
Foreign 1,287 6,542 2,463
State -- 145 168
---------------------------
(2,443) 8,027 2,607
---------------------------
Deferred
Federal 8,566 (15,918) (1,508)
Foreign (157) (25) 1,153
State 1,005 (1,816) (603)
---------------------------
9,414 (17,759) (958)
---------------------------
$ 6,971 $ (9,732) $ 1,649
---------------------------
---------------------------
</TABLE>
The principal types of timing differences and the tax effect of each, which give
rise to the deferred tax provision (benefit), for the years ended November 30,
follow:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
- - - - ---------------------------------------------------------------------------
<S> <C> <C> <C>
Accelerated depreciation $ (150) $ 33 $(248)
Change in nondeductible reserves 8,799 (12,163) (608)
Investment tax credits, net -- (42) (98)
Sale of condemned property -- -- (41)
Write down of fixed assets -- (3,472) 14
Federal alternative minimum tax credit (314) (1,099) --
Other, net 1,079 (1,016) 23
--------------------------
$9,414 $(17,759) $(958)
--------------------------
--------------------------
</TABLE>
<PAGE>
Deferred tax liabilities/(assets) are comprised of the following as of
November 30:
<TABLE>
<CAPTION>
(In thousands) 1994
- - - - ---------------------------------------------------------------------------
<S> <C>
Non-current deferred taxes
Self insurance/contingency reserves $(8,738)
Investments 4,795
Employee benefits (6,741)
Fixed assets 20,225
Federal alternative minimum tax credits &
State net operating loss carryforwards (3,612)
Other (170)
-------
Net non-current deferred liability 5,759
Current deferred taxes
Employee benefits (1,420)
Accounts receivable (1,926)
Inventory (2,064)
Other 704
-------
Net current deferred asset (4,706)
-------
Net deferred taxes $ 1,053
-------
-------
</TABLE>
The tax provision represents effective tax rates of 42.5%, 27.2% and 30.0% of
pretax income for the years ended November 30, 1994, 1993 and 1992,
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 35%
for the year ended November 30, 1994, and 34% for the years ended November 30,
1993 and November 30, 1992 follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
- - - - ---------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic pretax income (loss) $14,438 $(45,011) $(2,469)
Foreign pretax income 1,964 9,203 7,966
---------------------------
$16,402 $(35,808) $ 5,497
---------------------------
---------------------------
Taxes at federal statutory rate $ 5,741 $(12,175) $ 1,869
State taxes (net of federal tax benefit) 653 (1,103) (287)
Foreign losses with no federal benefit 199 2,591 891
Percentage depletion (457) (486) (504)
Investment tax credit amortization -- (42) (98)
Write down affiliate investment -- 1,130 --
Foreign branch/withholding taxes 481 807 217
Other, net 354 (454) (439)
---------------------------
$ 6,971 $ (9,732) $ 1,649
---------------------------
---------------------------
</TABLE>
The Internal Revenue Service completed the examination of the Company's 1987
through 1989 Federal income tax returns, and issued an assessment. The Company
agreed and paid the tax on a portion of the assessment, and filed an appeal with
respect to the portion that is in dispute. The resolution of this matter is not
expected to have a material effect on the Company's results of operations.
................................................................................
NOTE 9 DEBT
Short-term borrowings consist of loans payable to banks by foreign subsidiaries
totaling $2,931,000 and $2,021,000 as of November 30, 1994 and 1993,
respectively. The average interest rate on these loans was approximately 19.5%
in 1994 and 24.0% in 1993. The high interest rates relate to borrowings by the
Company's Colombian subsidiary.
Domestically, the Company has uncommitted, short-term, bank credit lines
totaling $12,500,000 with interest at various money market rates.
Long-term debt as of November 30, consisted of the following:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
- - - - ---------------------------------------------------------------------------
<S> <C> <C>
Unsecured notes payable to insurance companies:
8.63%, payable in annual installments of $5,000,
plus accrued interest $ 20,000 $ 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 facility 13,041 --
10% mortgage loan, secured by land with a book
value of $3,478, payable in 1995, plus interest 3,888 3,767
Variable-rate unsecured bank loan, payable by a
consolidated subsidiary in Dutch guilders, with
annual installments of approximately $739
plus accrued interest through 2002 5,545 5,836
Other indebtedness with various interest rates
and maturities 47 965
------------------
102,521 95,568
Less - Current portion 9,674 5,978
------------------
$ 92,847 $89,590
------------------
------------------
</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 April 1996, when all
borrowings under the facility must be repaid.
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 $7,400,000 at any time
through September 1996 under one facility, and $3,700,000 through August 1998
under a second facility. A third arrangement permits borrowings up to
$6,800,000; this availability declines by $683,000 semi-annually. As of November
30, 1994, no amount was borrowed under these bank facilities.
Future payments due on long-term debt total $9,674,000 in 1995, $30,780,000 in
1996, $17,739,000 in 1997, $17,739,000 in 1998, and $12,739,000 in 1999.
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 $8,000,000 of retained earnings was not restricted at November 30,
1994.
<PAGE>
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, 1994
- - - - ---------------------------------------------------------------------------
Carrying Fair
Amount Value
-----------------------
<S> <C> <C>
Short-term borrowings $ 2,931 $ 2,931
Fixed-rate long-term debt 83,888 83,884
Variable-rate long-term debt 18,633 18,633
</TABLE>
The carrying values 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 LIBOR and U.S. government notes
plus an estimated spread at November 30, 1994 for similar securities with
similar remaining maturities.
The Company has guaranteed obligations of various unconsolidated foreign
affiliated and nonaffiliated companies of $1,300,000 as of November 30, 1994.
................................................................................
NOTE 10 LEASE COMMITMENTS
Rental expense under long-term operating leases of property, vehicles and other
equipment was $6,532,000 in 1994, $6,068,000 in 1993 and $5,512,000 in 1992. At
November 30, 1994, future rental commitments under these leases totaled
$65,006,000. Future rental commitments are payable as follows:
<TABLE>
<CAPTION>
Year ending
(In thousands) November 30 Amount
- - - - ---------------------------------------------------------------------------
<S> <C> <C>
1995 $ 6,419
1996 5,816
1997 5,060
1998 4,692
1999 4,515
2000-Beyond 38,504
-------
$65,006
-------
-------
</TABLE>
Minimum payments for leases have not been reduced by minimum noncancelable
sublease rentals aggregating $5,069,000 for operating leases.
................................................................................
NOTE 11 CONTINGENCIES AND COMMITMENTS
An action was filed in 1992 in the U.S. District 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") in the U.S. Court of Claims and with the
Arizona Projects Office of the USBR in connection with the CAP siphons. The
CAWCD alleged that the six CAP siphons were defective and that the USBR and the
defendants in the U.S. District Court action were liable for the repair or
replacement of those siphons at a claimed estimated cost of $146.7 million. The
Company 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. On September 14, 1994, the U.S. District granted the
Company's motion to dismiss the CAWCD action and entered judgment against the
CAWCD and in favor of the Company and its co-defendants. CAWCD has filed a
notice of appeal with the Ninth Circuit Court of Appeals. The Company has
recorded provisions deemed adequate by the Company to permit it to continue to
vigorously defend 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 or its results of operations.
In July 1992, the Company was served with a complaint in an action brought by
the City & 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. The plaintiff alleges that the pipeline is defective. The plaintiff
originally sought damages of $44 million to replace the entire pipeline, but in
June 1994 it filed its third amended complaint which alleges damages according
to proof and in excess of the jurisdictional minimum of $25,000. The Company has
recorded provisions deemed adequate by the Company to permit it to continue to
vigorously defend 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, or
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, 1994, the Company had reserves of approximately $7.8 million for
potential environmental liabilities and approximately $8.9 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, 1994, 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.
<PAGE>
................................................................................
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% 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 210,334 shares of common stock for sale to employees
under the 1992 Incentive Plan at November 30, 1994. 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 1994,
1993 and 1992 is as follows:
<TABLE>
<CAPTION>
Number of Shares Option Price per Share
- - - - ---------------------------------------------------------------------------
<S> <C> <C>
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
Granted 121,184 37.00 to 42.00
Exercised (23,250) 14.63 to 34.75
Expired (34,450) 31.00 to 43.75
-------
Outstanding at November 30, 1994 210,334 31.00 to 43.75
-------
-------
</TABLE>
Options for 60,150 shares were exercisable at November 30, 1994. The remaining
outstanding options become exercisable in varying amounts through 2004.
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, 1994, 11,250 restricted shares were outstanding, and
9,265 shares were available for future grants.
................................................................................
NOTE 14 BUSINESS SEGMENTS AND GEOGRAPHIC AREAS
Financial information for 1994, 1993 and 1992, with respect to the various
business segments of the Company, appears on pages 50 and 51.
................................................................................
QUARTERLY FINANCIAL DATA
Summarized quarterly financial data for the years ended November 30, 1994 and
1993 follow:
<TABLE>
<CAPTION>
1994
-------------------------------------
(In thousands except First Second Third Fourth
per share data) Quarter Quarter Quarter Quarter
- - - - ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $93,330 $100,612 $108,376 $115,364
Gross Profit 23,166 27,003 26,364 27,442
Net Income(1) 89 3,134 4,072 3,495
Net Income per Share(1) .02 .80 1.04 .89
<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)(2) 783 3,994 2,865 (31,897)
Net Income (Loss) per Share(2) .20 1.04 .72 (8.24)
<FN>
The Company traditionally experiences seasonal patterns associated with weather
and contractor schedules, which result in lower sales during the first quarter.
(1) Includes $1.8 million gain, net of income taxes, or $.46 per share on the
sale of a Colombian subsidiary.
(2) Includes $31.5 million, net of income taxes, in fourth-quarter charges, or
$8.15 per share, for restructuring and other related items.
</TABLE>
PER SHARE DATA
<TABLE>
<CAPTION>
Stock Price Dividends
-------------------------------------
Quarters Ended 1994 1993 1994 1993
- - - - ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
February 28 --High $43 1/8 $35 $.32 $.32
--Low 35 5/8 32
May 31 --High 42 3/4 33 .32 .32
--Low 35 5/8 31
August 31 --High 38 38 .32 .32
--Low 34 5/8 32 1/4
November 30 --High 37 7/8 38 3/4 .32 .32
--Low 31 7/8 35 3/4
</TABLE>
<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, 1994 and 1993, and the
related consolidated statements of operations, cash flows and stockholders'
equity for each of the three years in the period ended November 30, 1994. 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, 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 percent of consolidated net income
for 1992. 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, 1994 and 1993, and the results of their operations and their cash
flows for each of the three years in the period ended November 30, 1994, in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
LOS ANGELES, CALIFORNIA
JANUARY 19, 1995
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 LLP, 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 LLP 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 LLP and the
internal auditors have full and free access to the members of the Audit
Committee.
/s/ James S. Marlen
James S. Marlen
CHAIRMAN OF THE BOARD, PRESIDENT & CHIEF EXECUTIVE OFFICER
/s/ Gary Wagner
Gary Wagner
SENIOR VICE PRESIDENT & CHIEF FINANCIAL OFFICER, TREASURER
<PAGE>
BUSINESS SEGMENTS & GEOGRAPHIC AREAS
Ameron classifies its business operations into four segments: Protective
Coatings Group--high-performance coatings and product finishes; Fiberglass Pipe
Group--filament-wound fiberglass pipe, tubing and fittings; Concrete & Steel
Pipe Group--concrete and steel pressure pipe, concrete non-pressure pipe,
protective linings for pipe and fabricated products; Construction & Allied
Products Group--ready-mix concrete, sand and aggregates, concrete pipe, and
concrete and steel lighting and traffic poles.
Intersegment sales were not significant. Income (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, and
investments. Capital expenditures do not include plant and equipment from
business acquisitions. A summary of sales, income (loss), assets, depreciation
and capital expenditures by segment follows.
<TABLE>
<CAPTION>
Business Segments
.....................................................................................
Protective Fiberglass Concrete & Construction & Corporate &
(Dollars in thousands) Coatings Pipe Steel Pipe Allied Products Adjustments Consolidated
.............................................................................................................................
<S> <C> <C> <C> <C> <C> <C>
1994
Sales $134,201 $ 66,228 $101,644 $115,609 $ -- $417,682
Income (loss) before interest
expense and income taxes 13,338 2,987 3,271 16,687 (8,690) 27,593
Identifiable assets 64,493 60,731 94,393 56,062 75,177 350,856
Capital expenditures 3,605 2,127 5,161 2,701 1,340 14,934
Depreciation 2,208 3,943 4,159 4,913 632 15,855
- - - - -----------------------------------------------------------------------------------------------------------------------------
1993
Sales $137,776 $ 92,947 $110,261 $112,373 $ -- $453,357
Income (loss) before interest
expense and income taxes 1,494 14,207 (15,067) 6,607 (30,360) (23,119)
Identifiable assets 66,958 58,481 72,838 58,973 80,592 337,842
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
Income (loss) before interest
expense and income taxes 4,807 7,357 6,578 13,745 (16,000) 16,487
Identifiable assets 69,518 67,569 80,830 62,308 99,255 379,480
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
- - - - -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<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 &
(Dollars in thousands) States Europe Other Eliminations Consolidated
.............................................................................................................................
<S> <C> <C> <C> <C> <C>
1994
Sales to unaffiliated customers $334,688 $ 55,286 $ 27,708 $ -- $417,682
Intercompany sales between geographic areas 2,519 1,716 5,507 (9,742) --
--------------------------------------------------------------------
Total sales $337,207 $ 57,002 $ 33,215 $ (9,742) $417,682
--------------------------------------------------------------------
--------------------------------------------------------------------
Income before interest
expense and income taxes $ 19,796 $ 1,489 $ 6,308 $ -- $ 27,593
Identifiable assets 239,652 49,053 24,836 37,315 350,856
- - - - -----------------------------------------------------------------------------------------------------------------------------
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
--------------------------------------------------------------------
--------------------------------------------------------------------
Income (loss) before interest
expense and income taxes $(32,398) $ 11,247 $ (1,968) $ -- $(23,119)
Identifiable assets 225,168 53,479 19,211 39,984 337,842
- - - - -----------------------------------------------------------------------------------------------------------------------------
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
--------------------------------------------------------------------
--------------------------------------------------------------------
Income before interest
expense and income taxes $ 3,956 $ 8,043 $ 4,488 $ -- $ 16,487
Identifiable assets 249,470 63,356 18,772 47,882 379,480
- - - - -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SUBSIDIARIES OF THE REGISTRANT
Parents
- - - - -------
None
Jurisdiction of Percent of
Subsidiaries Consolidated Incorporation Stock Owned
- - - - ------------------------- --------------- -----------
American Pipe & Construction International California 100
Ameron B.V. The Netherlands 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
Names of 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
<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 LLP
Los Angeles, California
February 27, 1995
EXHIBIT 23
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1994
<PERIOD-END> NOV-30-1994
<CASH> 9030
<SECURITIES> 0
<RECEIVABLES> 97519
<ALLOWANCES> 4135
<INVENTORY> 71644
<CURRENT-ASSETS> 188091
<PP&E> 268091
<DEPRECIATION> 155138
<TOTAL-ASSETS> 350856
<CURRENT-LIABILITIES> 87086
<BONDS> 92847
<COMMON> 12772
0
0
<OTHER-SE> 112035
<TOTAL-LIABILITY-AND-EQUITY> 350856
<SALES> 417682
<TOTAL-REVENUES> 0
<CGS> 313707
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 86767
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11191
<INCOME-PRETAX> 16402
<INCOME-TAX> 6971
<INCOME-CONTINUING> 10790
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10790
<EPS-PRIMARY> 2.75
<EPS-DILUTED> 2.75
</TABLE>
