FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 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
3,945,560 on June 30, 1994. No other class of Common Stock exists.
PAGE 1
AMERON, INC.
INDEX
Page
-------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations 3
Consolidated Balance Sheets 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9-11
PART II. OTHER INFORMATION
Item 2. Changes in Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
PAGE 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Ameron, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except share and per share data)
Three Months Ended Six Months Ended
May 31 May 31
------------------- ------------------
1995 1994 1995 1994
-------- -------- -------- --------
Sales $118,526 $100,612 $216,557 $193,942
Cost of Sales 88,963 73,609 163,389 143,773
-------- -------- -------- --------
Gross Profit 29,563 27,003 53,168 50,169
Selling, General and
Administrative Expenses 22,320 21,356 45,509 44,084
Other Income 1,017 2,374 2,302 4,772
-------- -------- -------- --------
Income before Interest Expense
and Income Taxes 8,260 8,021 9,961 10,857
Interest Expense 3,137 2,799 6,157 5,486
-------- -------- -------- --------
Income before Income Taxes 5,123 5,222 3,804 5,371
Provision for Income Taxes 1,849 2,088 1,322 2,148
-------- -------- -------- --------
Income of Consolidated Companies 3,274 3,134 2,482 3,223
Equity in Earnings of
Affiliated Companies, net of tax 728 - 1,635 -
-------- -------- -------- --------
Net Income $ 4,002 $ 3,134 $ 4,117 $ 3,223
======== ======== ======== ========
Net Income per Share $ 1.01 $ 0.80 $ 1.04 $ 0.82
======== ======== ======== ========
Cash Dividends per Share $ 0.32 $ 0.32 $ 0.64 $ 0.64
======== ======== ======== ========
Average Common and Equivalent
Shares Outstanding 3,946,426 3,921,334 3,946,426 3,921,334
========= ========= ========= =========
See accompanying notes to financial statements.
PAGE 3
Ameron, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands except share and per share data)
May 31 Nov. 30
1995 1994
-------- ---------
ASSETS
Current Assets
Cash and cash equivalents $ 3,358 $ 9,030
Receivables, net 104,409 97,519
Inventories 85,580 71,644
Deferred income tax benefits 4,582 4,706
Prepaid expenses 5,488 5,192
-------- ---------
Total current assets 203,417 188,091
Investments, Advances and Equity in
Undistributed Earnings of Affiliated Companies 37,516 37,315
Property, Plant and Equipment, net 116,163 112,953
Other Assets 17,567 12,497
-------- ---------
Total Assets $374,663 $350,856
======== =========
LIABILITIES and STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ 1,978 $ 2,931
Current portion of long-term debt 9,768 9,674
Trade payables 23,709 25,507
Accrued liabilities 34,580 33,726
Claims and Other 3,404 10,435
Income taxes 1,181 4,813
-------- ---------
Total current liabilities 74,620 87,086
Deferred Income Taxes 7,399 5,759
Long-term Debt, less current portion 120,299 92,847
Other Long-term Liabilities 43,935 40,357
-------- ---------
Total liabilities 246,253 226,049
Stockholders' Equity
Common stock, par value $2.50 a share,
Authorized, 12,000,000 shares,
Outstanding, 3,943,809 shares at
May 31, 1995 and 3,935,711 shares
at November 30, 1994, net of treasury shares 12,792 12,772
Additional paid-in capital 14,899 14,658
Retained earnings 141,180 139,586
Cumulative foreign currency translation adjustment 2,318 570
Treasury stock (1,172,900 shares), at cost (42,779) (42,779)
-------- ---------
Total stockholders' equity 128,410 124,807
-------- ---------
Total Liabilities and Stockholders' Equity $374,663 $350,856
======== =========
See accompanying notes to financial statements
PAGE 4
Ameron, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
Six Months Ended
May 31
1995 1994
-------- --------
Cash Flow from Operating Activities
Net income $ 4,117 $ 3,223
Adjustments to reconcile to net cash
used in operating activities:
Depreciation 7,828 7,861
Equity in earnings of affiliated companies (1,635) -
Dividends from affiliated companies 3,480 961
Other, net (947) (171)
Changes in operating assets and liabilities:
Change in receivables (7,204) (5,040)
Change in inventories (12,642) (6,264)
Change in other current assets (119) 1,146
Change in trade payables and
other current liabilities (12,904) (2,193)
Change in other assets and liabilities, net 829 -
-------- --------
Net cash used in operating activities (19,197) (477)
Cash Flow from Investing Activities
Proceeds from sale of assets 460 1,151
Additions to property, plant and equipment (9,223) (5,666)
Other (1,052) (1,679)
-------- --------
Net cash used in investing activities (9,815) (6,194)
Cash Flow from Financing Activities
Net change in debt with maturities
of three months or less (953) 2,608
Issuance of debt 26,775
Repayment of debt (397) (526)
Dividends to common stockholders (2,523) (2,500)
Issuance of common stock - 397
-------- --------
Net cash provided by (used in) financing activities 22,902 (21)
Effect of Exchange Rate Changes
on Cash and Equivalents 438 64
-------- --------
Net Change in Cash and Equivalents (5,672) (6,628)
Beginning Cash and Equivalents Balance 9,030 15,738
-------- --------
Ending Cash and Equivalents Balance $ 3,358 $ 9,110
======== ========
Other Cash Flow Information:
Interest paid $ 8,168 $ 4,894
======== ========
Income taxes paid $ 4,415 $ 3,347
======== ========
See accompanying notes to financial statements
PAGE 5
Ameron, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
May 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 May 31, 1995 and the consolidated results
of operations for the three- and six-month periods ended May 31, 1995 and
1994, and cash flows for the six-month periods ended May 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 May 31, 1995 and November 30, 1994 were comprised
of the following (in thousands):
May 31 Nov. 30
1995 1994
-------- --------
Finished products $ 41,251 $ 34,664
Products in process 24,655 20,175
Materials and supplies 19,674 16,805
-------- --------
Total Inventories $ 85,580 $ 71,644
======== ========
PAGE 6
Note 3. Affiliated Companies
Equity in earnings of affiliated companies is recognized in the Company's net
income partly on a lag basis, net of taxes only to the extent that cash
dividends are anticipated.
Summarized operating results of affiliated companies in the Concrete and Steel
Pipe Products segment follow, U.S. dollars in thousands:
Three Months Ended Six Months Ended
May 31 May 31
------------------- -------------------
1995 1994 1995 1994
-------- -------- -------- --------
Net Sales $ 10,009 $ 19,905 $ 21,326 $ 41,917
Gross Profit $ 1,957 $ 4,822 $ 4,387 $ 11,820
Net Income (Loss) $ (430) $ 1,074 $ (715) $ 2,667
Amounts shown above represent operating results for Gifford-Hill-American,
Inc. for the three- and six-month periods ended April 30, 1995 and 1994 and
operating results for Ameron Saudi Arabia, Ltd. for the three- and six-month
periods ended March 31, 1995 and 1994.
Summarized results of operations of Tamco, Bondstrand, Ltd., and Oasis Ameron,
Ltd. follow, U.S. dollars in thousands:
Three Months Ended Six Months Ended
May 31 May 31
------------------- -------------------
1995 1994 1995 1994
-------- -------- -------- --------
Net Sales $ 32,260 $ 28,533 $ 62,354 $ 59,400
Gross Profit $ 5,311 $ 1,644 $ 10,282 $ 2,141
Net Income (Loss) $ 1,732 $ (89) $ 3,387 $ (1,081)
Amounts shown above include operating results for Tamco for the three- and
six-month periods stated, and operating results for Bondstrand, Ltd. and
Oasis Ameron, Ltd. for the three- and six-month periods ended March 31, 1995
and 1994.
PAGE 7
Note 4. Income Taxes
The deferred tax assets and deferred tax liabilities recorded on the
balance sheet as of May 31, 1995 are as follows, U.S. Dollars
in thousands:
Non-
Current Current
-------- ---------
Deferred Tax Assets
Self-insurance & contingency reserves $ - $ (8,315)
Employee benefits (1,297) (6,729)
Accounts receivable (1,925) -
Inventory (2,064) -
Alternative minimum tax credits - (3,612)
Miscellaneous - (170)
-------- ---------
Total Deferred Tax Asset $ (5,286) $(18,826)
======== =========
Deferred Tax Liabilities
Investments $ - $ 4,763
Fixed Assets - 21,462
Miscellaneous 704 -
-------- ---------
Total Deferred Tax Liability $ 704 $ 26,225
======== =========
Page 8
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Ameron, Inc. and Subsidiaries
May 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 $3.4 million, a decrease of $5.7 million from
the balance at November 30, 1994.
Operating activities used approximately $19.2 million of cash during the first
half of 1995 as higher working capital requirements exceeded earnings
and cash dividends received from affiliated companies. The increase in
working capital was consistent with the combination of higher sales level
experienced and higher shipments anticipated and was concentrated
principally in Concrete and Steel Pipe. The cash used in operating activities
includes payments for interest and income taxes.
Cash used in investment activities consisted principally of capital
expenditures to support major water transmission contracts being supplied by
the Concrete and Steel Pipe Segment. Other capital expenditures were for
normal replacement and upgrades of machinery and equipment, and completion of
a protective coatings warehouse in The Netherlands. The Company expects that
capital expenditures for the fiscal year ended 1995 will be consistent with
the level of spending experienced in 1994 and 1993, and approximately equal to
depreciation. Capital expenditures are expected to be funded from existing
cash balances and cash generated from operations.
At May 31, 1995, the Company had approximately $45.2 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 the future operating requirements.
Page 9
RESULTS OF OPERATIONS - SECOND QUARTER
Ameron earned $4.0 million or $1.01 per share for the second quarter of 1995,
compared to $3.1 million or $.80 per share during the second quarter of 1994.
Sales for the period totaled $118.5 million, an increase of $17.9 million or
18% for the same period in 1994. Last year's second quarter results
included $.15 per share of non-recurring income from the sale of a steel
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 earnings equal to last year, while
the Protective Coatings Segment experienced lower income.
Cash dividends were received in the second quarter of 1995 from affiliated
companies and was included as equity income consistent with the
Company's conservative approach of recognizing income only to the
extent cash dividends are anticipated.
The Concrete and Steel Pipe Segment achieved higher sales and earnings,
compared to last year, principally as a result of increased deliveries to the
Los Vaqueros project and other major pipe installations throughout
California. The order backlog continues to be strong.
Fiberglass Pipe sales and earnings increased, compared to the second quarter of
1994 due to higher demand worldwide, principally from the petroleum markets.
The Fiberglass Pipe Segment also achieved improved operating efficiencies in
its domestic and international manufacturing operations.
Sales and earnings for the Construction and Allied Products Segment were
essentially equal to the second quarter of 1994 as stronger performance in the
domestic Pole Products business offset lower activity at the Company's
Hawaiian operation.
The Protective Coatings Segment had worldwide sales equal to the second
quarter of 1994; however, earnings were adversely affected by margin pressures
as a result of a product mix shift in Europe and higher raw material prices
worldwide.
RESULTS OF OPERATIONS - YEAR TO DATE
Earnings per share for the first six months of 1995 totaled $1.04, an increase
of 22 cents or 27% from the comparable period of 1994. Sales for the first
half of 1995 were $216.6 million, which represents an increase of $22.7
million, or 12% from the first half of 1994. The increase in sales and
earnings is attributable principally to improved performance in the Concrete
and Steel Pipe and Fiberglass Pipe Segments, which offset the lower sales and
income in the Protective Coatings Segment. The Construction and Allied
Products Segment had marginally higher earnings.
Page 10
First-half sales and earnings for the Concrete and Steel Pipe Segment were up
significantly as a result of increased deliveries to several major pipe
projects in California.
The Fiberglass Pipe Segment had higher sales and earnings for the first six
months of 1995 compared to the same period last year as European and
Asian operations experienced strong growth in all market segments. These
improvements more than offset lower domestic volume attributable to
competitive market conditions in the gasoline fuel-handling and oilfield
markets, and completion of major projects during the first half of 1994.
The Protective Coatings Segment had lower sales and earnings for the first
half of 1995 compared to last year due to competitive pricing pressures in the
United States, higher raw material costs worldwide, and a product mix shift
in Europe.
First-half sales and earnings for the Construction and Allied Products Segment
were about even with the comparable period of 1994. Sales and earnings for
Ameron's construction products operation in Hawaii were down slightly due to
the continuing softness in the Hawaiian economy in general, and specifically
the slowdown and delay in publicly-funded construction projects. The Pole
Products business continued to achieve steady sales growth and improved
earnings, as both were higher for the first half compared to last year.
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 $8.5 million of consolidated
retained earnings was not restricted at May 31, 1995.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on March 27, 1995.
Represented at the meeting, in person or by proxy, were 3,468,704 Shares of
common stock (88.0% of the total shares outstanding). Stockholders voted
on the following matters at this meeting:
Election of Directors:
The four nominees named in the Company's proxy statement, Messrs.
A. Frederick Gerstell, J. Michael Hagan, Lawrence R. Tollenaere and
F. H. Fentener van Vlissingen having received the greatest number of votes
cast, were re-elected to serve for another term with each receiving not
less than 3,414,298 votes.
Other directors whose terms of office continued after the meeting are:
Donald H. Albrecht, Victor K. Atkins, John F. King, James S. Marlen, and
Richard J. Pearson.
Proposal to Ratify the Appointment of Auditors:
3,452,810 (99.5%) of the shares represented at the meeting were voted in
favor of the proposal to ratify the appointment of Arthur Andersen LLP as
independent public accountants of the Company for fiscal year 1995 and 10,059
shares were voted against the proposal. 5,835 shares of the votes cast
abstained from voting on this matter.
Proposal to Approve the Ameron, Inc. 1994 Nonemployee Director Stock Option
Plan:
2,974,816 shares (85.8%) of the shares represented at the meeting were voted
in favor of the proposal to approve the 1994 Nonemployee Director Stock
Option Plan and 256,092 shares were voted against this proposal. 237,796
shares of the votes cast abstained from voting on this matter.
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended May 31, 1995.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERON, INC.
Date: July 12, 1995
/s/ Allen R. Wilkie
_______________________________
Allen R. Wilkie
Vice President, Controller
PAGE 12
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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