FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from...............to...............
Commission File No. 1 - 9102
AMERON, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 77-0100596
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
245 South Los Robles Avenue
Pasadena, California 91101-2894
(Address of principal executive offices)
Telephone Number (818) 683-4000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes / X / No
The number of shares outstanding of Common Stock, $2.50 par
value, was 3,947,534 on September 30, 1995. No other class of
Common Stock exists.
PAGE 1
AMERON, INC.
INDEX
Page
-------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations 3
Consolidated Balance Sheets 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9-11
PART II. OTHER INFORMATION
Item 2. Changes in Securities 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
PAGE 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Ameron, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except share and per share data)
<TABLE>
Three Months Ended Nine Months Ended
August 31 August 31
--------------------- --------------------
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sales $137,421 $108,376 $353,978 $302,318
Cost of Goods Sold 103,990 82,012 267,379 225,785
--------- --------- --------- ---------
Gross Profit 33,431 26,364 86,599 76,533
Selling, General and
Administrative Expenses 25,664 21,850 71,173 65,934
Other Income 543 4,189 2,615 8,489
--------- --------- --------- ---------
Income before Interest and
Income Taxes 8,310 8,703 18,041 19,088
Interest, net 2,986 2,605 8,913 7,619
--------- --------- --------- ---------
Income before Income Taxes 5,324 6,098 9,128 11,469
Provision for Income Taxes 1,873 2,440 3,195 4,588
--------- --------- --------- ---------
Income of Consolidated Companies 3,451 3,658 5,933 6,881
Equity in Earnings of
Affiliated Companies, net of taxes 1,126 414 2,761 414
--------- --------- --------- ---------
Net Income $ 4,577 $ 4,072 $ 8,694 $ 7,295
========= ========= ========= =========
Net Income per Share $ 1.16 $ 1.04 $ 2.20 $ 1.86
========= ========= ========= =========
Cash Dividends per Share $ 0.32 $ 0.32 $ 0.96 $ 0.96
========= ========= ========= =========
Average Common and Equivalent
Shares Outstanding 3,951,549 3,922,854
========= =========
</TABLE>
See accompanying notes to financial statements.
PAGE 3
Ameron, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands except share and per share data)
<TABLE>
Aug. 31 Nov. 30
1995 1994
<S> --------- ---------
ASSETS
Current Assets <C> <C>
Cash and cash equivalents $ 8,360 $ 9,030
Receivables, net 115,018 97,519
Inventories 85,115 71,644
Deferred income tax benefits 4,590 4,706
Prepaid expenses and Other 4,522 5,192
--------- --------
Total current assets 217,605 188,091
Investments, Advances and Equity in
Undistributed Earnings of Affiliated Companies 37,149 37,315
Property, Plant and Equipment, net 113,450 112,953
Other Assets 14,071 12,497
--------- --------
Total Assets $382,275 $350,856
========= =========
LIABILITIES and STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ 1,682 $ 2,931
Current portion of long-term debt 5,758 9,674
Trade payables 33,259 25,507
Accrued liabilities and Other 43,362 44,161
Income taxes 2,096 4,813
--------- ---------
Total current liabilities 86,157 87,086
Deferred Income Taxes 4,070 5,759
Long-term Debt, less current portion 116,416 92,847
Other Long-term Liabilities 44,736 40,357
--------- ---------
Total liabilities 251,379 226,049
Stockholders' Equity
Common stock, par value $2.50 a share,
Authorized 12,000,000 shares, Outstanding 3,947,534
shares at August 31, 1995 and 3,935,711 shares
at November 30, 1994, net of treasury shares 12,801 12,772
Additional paid-in capital 15,022 14,658
Retained earnings 144,494 139,586
Cumulative foreign currency translation adjustment 1,358 570
Treasury stock (1,172,900 shares), at cost (42,779) (42,779)
--------- ---------
Total stockholders' equity 130,896 124,807
--------- ---------
Total Liabilities and Stockholders' Equity $382,275 $350,856
========= =========
</TABLE>
See accompanying notes to financial statements
PAGE 4
Ameron, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
Nine Months Ended
August 31
1995 1994
<S> --------- ---------
Cash Flow from Operating Activities <C> <C>
Net income $ 8,694 $ 7,295
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation 11,906 11,935
Equity in earnings of affiliated companies (2,761) (414)
Dividends from affiliated companies 4,847 1,973
Other, net 254 (1,927)
Changes in operating assets and liabilities:
Change in receivables (19,207) (9,776)
Change in inventories (12,993) (9,854)
Change in other current assets 769 1,100
Change in trade payables and other current liabilities 3,734 747
Change in other assets and liabilities, net 2,502 -
--------- -------
Net cash provided by operating activities (2,255) 1,079
Cash Flow from Investing Activities
Proceeds from sale of assets 427 2,793
Additions to property, plant and equipment (11,447) (8,695)
Other (1,857) (2,136)
--------- -------
Net cash used in investing activities (12,877) (8,038)
Cash Flow from Financing Activities
Net change in debt with maturities of 3 months or less (1,249) 5,582
Issuance of debt 23,809 -
Repayment of debt (4,603) (673)
Dividends to common stockholders (3,786) (3,757)
Issuance of common stock 9 397
--------- ------
Net cash provided by financing activities 14,180 1,549
Effect of Exchange Rate Changes on Cash and Equivalents 282 346
--------- --------
Net Change in Cash and Equivalents (670) (5,064)
Beginning Cash and Equivalents Balance 9,030 15,738
--------- -------
Ending Cash and Equivalents Balance $ 8,360 $10,674
========= ========
Other Cash Flow Information:
Interest paid $ 9,187 $ 5,527
========= =========
Income taxes paid $ 8,198 $ 5,146
========= =========
</TABLE>
See accompanying notes to financial statements
PAGE 5
Ameron, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
August 31, 1995
Note 1. Basis Of Presentation
The consolidated financial statements for the interim periods
included herein are unaudited, however, they contain all normal
recurring accruals which, in the opinion of management, are
necessary to present fairly the consolidated financial
position of the Company at August 31, 1995 and the consolidated
results of operations for the three- and nine-month periods
ended August 31, 1995 and 1994, and cash flows for the nine-
month periods ended August 31, 1995 and 1994. Accounting
measurements at interim dates inherently involve greater
reliance on estimates than at year end, thus the results of
operations for the period presented, are not necessarily
indicative of the results to be expected for the full year.
Certain prior year balances have been reclassified to conform
with the current year presentation.
The accompanying consolidated financial statements do not
include footnotes and certain financial presentations
normally required under generally accepted accounting
principles and, therefore, should be read in conjunction with
the Annual Report on Form 10-K for the year ended November 30,
1994.
Note 2. Inventories
Inventories are stated at the lower of cost (principally
first-in, first-out) or market. Inventories at August 31,
1995 and November 30, 1994 were comprised of the following
(in thousands):
<TABLE>
Aug. 31 Nov. 30
1995 1994
<S> --------- ---------
<C> <C>
Finished products $ 40,480 $ 34,664
Products in process 26,072 20,175
Materials and supplies 18,563 16,805
--------- ---------
Total Inventories $ 85,115 $ 71,644
========= =========
PAGE 6
Note 3. Affiliated Companies
Summarized operating results of affiliated companies in the
Concrete and Steel Pipe Products segment follow, U.S. dollars
in thousands:
</TABLE>
<TABLE>
Three Months Ended Nine Months Ended
August 31 August 31
-------------------- --------------------
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales $ 10,456 $ 16,846 $ 31,782 $ 58,763
Gross Profit $ 1,919 $ 5,548 $ 6,306 $ 17,368
Net Income $ (1,128) $ 2,298 $ (1,843) $ 4,965
</TABLE>
Equity in earnings of affiliated companies is recorded in the
Company's net income partly on a lag basis, net of taxes and
net of reserves for amounts that management anticipates will
not be distributed to the company. Amounts shown above
represent operating results for Gifford-Hill-American, Inc.
for the three- and nine-month periods ended July 31, 1995 and
1994 and operating results for Ameron Saudi Arabia, Ltd.
for the three- and nine-month periods ended June 30, 1995
and 1994.
Summarized results of operations of Tamco, Bondstrand, Ltd.,
and Oasis Ameron, Ltd. follow, U.S. dollars in thousands:
<TABLE>
Three Months Ended Nine Months Ended
August 31 August 31
-------------------- --------------------
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales $ 40,155 $ 37,419 $ 102,509 $ 96,819
Gross Profit $ 6,402 $ 5,648 $ 16,684 $ 7,789
Net Income $ 2,170 $ 2,126 $ 5,557 $ 1,045
</TABLE>
Amounts shown above include operating results for Tamco for
the three- and nine-month periods stated, and operating results
for Bondstrand, Ltd. and Oasis Ameron, Ltd. for the three- and
nine-month periods ended June 30, 1995 and 1994.
PAGE 7
Note 4. Income Taxes
The deferred tax assets and deferred tax liabilities recorded
on the balance sheet as of August 31, 1995 are as follows,
U.S. Dollars in thousands:
<TABLE>
Non-
Current Current
<S> -------- ---------
Deferred Tax Assets <C> <C>
Self-insurance and contingency reserves $ - $ (7,401)
Employee benefits (1,307) (6,978)
Accounts receivable (1,923) -
Inventory (2,064) -
Capital Loss Carryover - (2,347)
Miscellaneous 704 (171)
Alternative minimum tax credits - (3,612)
-------- ---------
Total Deferred Tax Asset $(4,590) $(20,509)
======== =========
Deferred Tax Liabilities
Investments $ - $ 4,452
Fixed Assets - 20,127
-------- ---------
Total Deferred Tax Liability $ - $ 24,579
======== =========
</TABLE>
PAGE 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Ameron, Inc. and Subsidiaries
August 31, 1995
INTRODUCTION
Management's Discussion and Analysis should be read in
conjunction with the same discussion included in the Company's
1994 Annual Report on Form 10-K. Reference should also be
made to the financial statements included in this Form 10-Q
for comparative consolidated balance sheets and statements of
operations and cash flows.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $8.4 million, a decrease of
$670,000 from the balance at November 30, 1994.
Operating activities used approximately $2.3 million of
cash during the first nine months of fiscal 1995 as higher
working capital requirements exceeded earnings, depreciation
and cash dividends received from affiliated companies. The
increase in working capital was consistent with the higher of
sales and was concentrated mainly in the Concrete and Steel
Pipe segment. Cash used in operating activities also included
payments for interest and income taxes.
Cash used in investing activities consisted primarily of capital
expenditures to support major water transmission contracts being
supplied by the Concrete and Steel Pipe segment, capital
expenditures for normal replacement and upgrades of machinery
and equipment, and the completion of a protective coatings
warehouse in the Netherlands. Additional capital expenditures
are expected in the fourth Quarter of 1995 and are expected
to be funded from existing cash balances and lines of credit
as well as cash generated from operations.
During the third quarter the Company replaced its $35 million
revolving credit agreement with a new $75 million revolving
credit agreement. This new agreement expires in June 1998.
At August 31, 1995, the Company had approximately $85.7
million in unused credit lines available from foreign and
domestic banks.
The Company believes that cash and cash equivalents on hand,
anticipated cash flows from operations and funds available from
existing lines of credit will be sufficient to meet future
operating requirements.
PAGE 9
RESULTS OF OPERATIONS - THIRD QUARTER
The Company earned $1.16 per share on sales of $137.4 million
for the third quarter, which compares favorably to $1.04 per
share on sales of $108.4 million for the same period last year.
Last year's third quarter results included 31 cents per share of
non-recurring income from the sale of a subsidiary in Colombia.
The results reflect strong earnings performance by the Concrete
and Steel Pipe, and Fiberglass Pipe segments. The Construction
and Allied Products segment had moderately higher earnings as
compared to last year, while the Protective Coatings segment
recorded lower income.
Cash dividends were received in the third quarter of fiscal
1995 from affiliate companies. These dividends allowed the
Company to record equity in earnings of affiliated companies
consistent with its conservative approach of recognizing income
only to the extent cash dividends are anticipated.
Concrete and Steel Pipe operations in the western states
reported significantly higher sales and income for the
quarter in comparison to last year, chiefly because of
ongoing deliveries to the Los Vaqueros project in Northern
California, the largest pipe contract in the Company's history.
Work also continued on two other major pipelines in California.
Fiberglass Pipe segment sales and income were up sharply
for the quarter when compared to the same period in 1994.
The improvement resulted primarily from increased shipments
to petroleum projects in Central Africa and the Middle East
from operations in The Netherlands. Also, growing demand from
refinery and marine markets in the Pacific Rim, served by the
Company's Singapore operation, contributed to the upswing.
Domestic sales and earnings were down for the quarter because
of lower demand from petroleum-related markets in the United
States.
Quarterly sales were about even for the worldwide Protective
Coatings segment, but income was down considerably compared
to last year. A major factor in the shortfall was the
continuing affect of higher raw material costs that have
impacted margins throughout the coatings industry. European
sales for the quarter were virtually the same as last year.
However, earnings declined substantially due to escalating
raw material prices and a continuing shift in product mix
caused by greatly reduced shipments to North Africa. Third-
quarter sales of the Company's new PSX line of patented
"engineered siloxane" products were strong, especially in
England, where PSX coatings were chosen for a major gas project.
Sales and income of the construction products business in Hawaii
were moderately higher for the quarter despite the continuing
economic slowdown in the Islands. The domestic pole products
business also posted improved sales and earnings for the quarter.
PAGE 10
RESULTS OF OPERATIONS - YEAR TO DATE
The Company earned $2.20 per share on sales of $354.0 million
for the nine months ended August 31, 1995, which compares
favorably to $1.86 per share on sales of $302.3 million for
the same period last year. Last year's nine-month results
included 46 cents per share of non-recurring income from the
sale of a subsidiary in Colombia. The year-to-date results
reflect strong earnings performance by the Concrete and
Steel Pipe, and Fiberglass Pipe segments, which offset lower
income in the Protective Coatings segment. The Construction
and Allied Products segment had moderately higher earnings
as compared to last year.
The Concrete and Steel Pipe segment reported substantially
higher sales and income for the year-to-date period in
comparison to last year, chiefly because of ongoing deliveries
to major pipeline projects in California.
Fiberglass Pipe segment sales and income for the nine months
were up when compared to the same period in 1994. The
improvement resulted primarily from increased shipments
from operations in The Netherlands and Singapore, which offset
lower sales and earnings from domestic operations.
Year-to-date sales were slightly lower than last year for
the worldwide Protective Coatings segment. Income was down
significantly due to higher raw material costs, competitive
pricing pressures and a continuing shift in product mix caused
by greatly reduced shipments to North Africa.
Sales and earnings of the Construction and Allied Products
segment were slightly higher due to improved sales and income
from pole products and Hawaiian construction products.
PAGE 11
Part II. OTHER INFORMATION
Item 2. Changes in Securities
Terms of lending agreements place restrictions on cash
dividends, borrowings, investments and guarantees and
require maintenance of specified minimum working capital
and certain current ratios. Under the most restrictive
provisions of these agreements, approximately $10.6 million
of consolidated retained earnings was not restricted at August
31, 1995.
Item 5. Other Information
On August 29, 1995 Ameron completed the signing of a $75 million
revolving credit agreement. The revolving credit agreement
replaces an existing $35 million credit agreement.
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended
August 31, 1995.
PAGE 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
AMERON, INC.
Date: October 13, 1995
______________________________
Gary Wagner
Senior Vice President and
Chief Financial Officer,
Treasurer
PAGE 13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> AUG-31-1995
<CASH> 8,360
<SECURITIES> 0
<RECEIVABLES> 119,584
<ALLOWANCES> (4,566)
<INVENTORY> 85,115
<CURRENT-ASSETS> 217,605
<PP&E> 280,572
<DEPRECIATION> (167,122)
<TOTAL-ASSETS> 382,275
<CURRENT-LIABILITIES> 86,157
<BONDS> 116,416
<COMMON> 12,801
0
0
<OTHER-SE> 118,096
<TOTAL-LIABILITY-AND-EQUITY> 382,275
<SALES> 353,978
<TOTAL-REVENUES> 353,978
<CGS> 267,379
<TOTAL-COSTS> 267,379
<OTHER-EXPENSES> 71,173
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,191
<INCOME-PRETAX> 9,128
<INCOME-TAX> 3,195
<INCOME-CONTINUING> 8,694
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,694
<EPS-PRIMARY> 2.20
<EPS-DILUTED> 2.20
</TABLE>
