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 February 29, 1996
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
3,960,670 on March 29, 1996. No other class of Common Stock exists.
Page 1
AMERON, INC.
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Income 3
Consolidated Balance Sheets 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9
PART II. OTHER INFORMATION
Item 2. Changes in Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURE PAGE 13
Page 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Ameron, Inc. and Subsidiaries
Consolidated Statements of Income
(In thousands, except share and per share data)
Three Months Ended
-------------------
Feb. 29, Feb. 28,
1996 1995
-------- --------
Net Sales $111,752 $ 98,031
Cost of Sales 86,389 74,426
-------- --------
Gross Profit 25,363 23,605
Selling, General and
Administrative Expenses 23,823 23,189
-------- --------
Operating Profit 1,540 416
Royalty, Equity and Other Income 1,972 2,178
-------- --------
Income before Interest
and Income Taxes 3,512 2,594
Interest Income 53 85
Interest Expense 2,834 3,020
-------- --------
Income (loss) before Income Taxes 731 (341)
Provision (Benefit) for Income Taxes 256 (457)
-------- --------
Net Income $ 475 $ 116
======== ========
Net Income per Share $ .12 $ .03
======== ========
Cash Dividends per Share $ .32 $ .32
======== ========
Average Common and Equivalent
Shares Outstanding 3,972,673 3,941,018
========= =========
See accompanying notes to financial statements.
Page 3
Ameron, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands except share and per share data)
Feb. 29, Nov. 30,
1996 1995
-------- --------
ASSETS
Current Assets
Cash and cash equivalents $ 11,680 $ 12,923
Receivables, net 99,709 105,019
Inventories 78,275 76,426
Deferred income tax benefits 7,315 7,315
Prepaid expenses and other 6,780 5,155
-------- --------
Total current assets 203,759 206,838
Investments, Advances and Equity in
Undistributed Earnings of Affiliated Companies 35,967 36,197
Property, Plant and Equipment, net 113,862 114,116
Other Assets 19,496 14,230
-------- --------
Total Assets $373,084 $371,381
======== ========
LIABILITIES and STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ 1,410 $ 1,718
Current portion of long-term debt 17,786 17,803
Trade payables 27,660 32,219
Accrued liabilities 32,649 37,427
Income taxes 2,190 3,213
-------- --------
Total current liabilities 81,695 92,380
Deferred Income Taxes 4,017 4,040
Long-term Debt, less current portion 104,237 91,565
Other Long-term Liabilities 48,639 48,824
-------- --------
Total liabilities 238,588 236,809
Stockholders' Equity
Common stock, par value $2.50 a share,
Authorized, 12,000,000 shares,
Outstanding, 3,959,795 shares at
February 29, 1996 and 3,956,497 shares
at November 30, 1995, net of treasury shares 12,832 12,823
Additional paid-in capital 15,442 15,322
Retained earnings 146,196 146,987
Cumulative foreign currency translation adjustment 2,805 2,219
Treasury stock (1,172,900 shares), at cost (42,779) (42,779)
-------- --------
Total stockholders' equity 134,496 134,572
-------- --------
Total Liabilities and Stockholders' Equity $373,084 $371,381
======== ========
See accompanying notes to financial statements
Page 4
Ameron, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
Three Month Ended
Feb. 29, Feb. 28,
1996 1995
-------- --------
Cash Flow from Operating Activities
Net income $ 475 $ 116
Adjustments to reconcile to net cash
provided by (used in) operating activities:
Depreciation 4,154 3,842
Equity in earnings of affiliated companies (1,124) (978)
Dividends from affiliated companies 1,832 2,680
Other, net 168 (782)
Changes in operating assets and liabilities:
Change in receivables 5,264 3,547
Change in inventories 767 (7,664)
Change in other current assets (1,569) (265)
Change in trade payables and
other current liabilities (10,382) (11,139)
Change in other assets and liabilities, net 1,889 9,082
-------- --------
Net cash provided by (used in)
operating activities 1,474 (1,561)
Cash Flow from Investing Activities
Proceeds from sale of assets 194 176
Additions to property, plant and equipment, and
acquisition of Centron (13,460) (6,280)
Other (654) (353)
-------- --------
Net cash used in investing activities (13,920) (6,457)
Cash Flow from Financing Activities
Net change in debt with maturities
of three months or less (287) -
Issuance of debt 13,053 13,550
Repayment of debt (199) (217)
Dividends to common stockholders (1,266) (1,261)
-------- --------
Net cash provided by financing activities 11,301 12,072
Effect of Exchange Rate Changes
on Cash and Equivalents (98) 482
-------- --------
Net Change in Cash and Equivalents (1,243) 4,536
Beginning Cash and Equivalents Balance 12,923 9,030
-------- --------
Ending Cash and Equivalents Balance $ 11,680 $ 13,566
======== ========
See accompanying notes to financial statements
Page 5
Ameron, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
February 29, 1996
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 February 29, 1996 and the consolidated
results of operations for the three-month periods ended February 29, 1996 and
February 28, 1995, and cash flows for the three-month periods ended February 29,
1996 and February 28, 1995. 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, 1995.
Note 2. Inventories
Inventories are stated at the lower of cost (principally first-in, first-out)or
market. Inventories at February 29, 1996 and November 30, 1995 were comprised
of the following (in thousands):
Feb. 29, Nov. 30,
1996 1995
-------- --------
Finished products $ 36,901 $ 32,210
Products in process 22,192 26,128
Materials and supplies 19,182 18,088
-------- --------
Total Inventories $ 78,275 $ 76,426
======== ========
Note 3. Other Cash Flow Information:
Three Months Ended
Feb. 29, Feb. 28,
1996 1995
-------- --------
Interest paid $ 598 $ 3,427
======== ========
Income taxes paid $ 1,296 $ 4,182
======== ========
Page 6
Note 4. Affiliated Companies
Equity in earnings of affiliated companies is recognized in the Company's net
income partly on a lag basis 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
Feb. 29, Feb. 28,
1996 1995
-------- --------
Net Sales $ 11,648 $ 11,317
Gross Profit $ 3,036 $ 2,430
Net Income (Loss) $ 334 $ (285)
Amounts shown above represent operating results for Gifford-Hill-American,
Inc. for the three-month periods ended January 31, 1996 and 1995 and
operating results for Ameron Saudi Arabia, Ltd. for the three-month
periods ended December 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
Feb. 29, Feb. 28,
1996 1995
-------- --------
Net Sales $ 33,462 $ 30,094
Gross Profit $ 5,833 $ 4,971
Net Income $ 1,744 $ 1,655
Amounts shown above include operating results for Tamco for the three-month
periods stated, and operating results for Bondstrand, Ltd. and Oasis Ameron,
Ltd. for the three-month periods ended December 31, 1995 and 1994.
Page 7
Note 5. Income Taxes
The deferred tax assets and deferred tax liabilities recorded on the balance
sheet as of February 29, 1996 are as follows, U.S. Dollars in thousands:
Non-
Current Current
-------- --------
Deferred Tax Assets
Self-insurance & contingency reserves $ (1,309) $ (8,242)
Employee benefits (1,685) (8,339)
Accounts receivable (1,481) -
Inventory (2,728) -
Federal and State tax credits and
loss carry forwards - (2,347)
Miscellaneous (112) (224)
-------- --------
Total Deferred Tax Asset $ (7,315) $(19,152)
======== ========
Deferred Tax Liabilities
Investments $ - $ 2,592
Fixed Assets - 20,577
-------- --------
Total Deferred Tax Liability $ - $ 23,169
======== ========
Page 8
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Ameron Inc. and Subsidiaries
February 29, 1996
INTRODUCTION
Management's Discussion and Analysis should be read in conjunction with the
same discussion included in the Company's 1995 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
During the first quarter of fiscal 1996, the Company generated $1.5 million of
cash from operations. These funds, along with additional net borrowings of
$12.6 million, were used for capital expenditures and the acquisition of Centron
of $13.5 million and payment of common dividends of $1.3 million. Cash and cash
equivalents at February 29, 1996 totaled $11.7 million, a decrease of $1.2
million from November 30, 1995.
The Company generated cash from operating activities during the first quarter of
1996 versus using cash during the prior year period because of lower receivable
balances and reductions in inventory by ongoing businesses. Total inventory as
shown on the consolidated balance sheets increased from year end due to the
business acquisition.
Cash used in investing activities consisted of capital expenditures for normal
replacement and upgrades of machinery and equipment plus the acquisition of
Centron, a manufacturer of fiberglass pipe for the worldwide oilfield market.
Management estimates that capital spending by the Company during this fiscal
year will be between $15.0 million and $25.0 million. Capital expenditures will
be funded from existing cash balances, cash generated from operations and
existing lines of credit.
At February 29, 1996 the Company had approximately $68.7 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 from existing lines of credit will be sufficient
to meet future operating requirements.
Page 9<PAGE>
RESULTS OF OPERATIONS - First Quarter
The Company earned 12 cents per share on sales of $111.8 million for the first
quarter of fiscal 1996, which compares favorably to earnings of 3 cents per
share on sales of $98.0 million for the same period last year.
The quarterly improvement came primarily from increased deliveries of concrete
and steel pipe to job sites in the western United States. The concrete and
steel pipe business continued the strong pace begun in 1995.
Year-over-year sales and earnings also improved for Ameron's global protective
coatings business, which is beginning to recover from the impact of higher raw
material costs that affected the entire coatings industry in 1995. Higher sales
volume and margins in Europe resulted from further diversification of the
business into new markets in Eastern Europe and the former Soviet Union. Sales
of Ameron's new PSX line of patented "engineered siloxane" products also
continued to grow around the world.
Despite higher sales, overall earnings from Ameron's worldwide fiberglass pipe
business were down somewhat because of continued market sluggishness in both the
United States and Europe. This trend was offset somewhat by Centron
International, the Texas-based oilfield pipe manufacturer acquired by Ameron in
early January.
Results from Ameron Hawaii, the Company's construction products business, were
substantially lower than last year due to the ongoing economic slowdown in the
Islands. The weak economy has caused cancellation or postponement of several
scheduled projects. Continued improvements in sales and earnings from the
domestic pole products business partially offset the decline in Hawaii.
Page 10
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
$10.9 million of consolidated retained earnings was not restricted
at February 29, 1996.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on March 25,
1996. Represented at the meeting, in person or by proxy, were
3,618,513 shares of common stock (91.5% of the total shares
outstanding). Stockholders voted on the following matters at this
meeting:
1. Election of Directors
The three nominees named in the Company's proxy statement, Messrs.
Stephen W. Foss, James S. Marlen and Alan L. Ockene having received
the greatest number of votes cast, were re-elected to serve for
another term with each receiving not less than 3,605,164 votes.
Other directors whose terms of office continued after the meeting
are: A. Frederick Gerstell, J. Michael Hagan, John F. King,
Richard J. Pearson and F. H. Fentener van Vlissingen.
2. Proposal to Ratify the Appointment of Auditors
3,605,164 shares (99.6% of the shares represented at the meeting or
91.1% of the shares outstanding) voted in favor of the proposal to
ratify the appointment of Arthur Andersen & Co. as independent public
accountants of the Company for fiscal year 1996. Of the shares
represented at the meeting, 7,856 shares (0.2%) voted against the
proposal and 5,493 shares (0.2%) abstained from voting on this matter.
3. Proposal to Approve An Amendment to the Certificate of Incorporation
to Change the Company Name to Ameron International Corporation.
3,372,034 shares (93.2% of the shares represented at the meeting or
85.2% of the shares outstanding) voted in favor of the proposal to
approve an amendment to the Certificate of Incorporation to change the
Company name to Ameron International Corporation. Of the shares
represented at the meeting, 185,371 shares (5.1%) voted against this
proposal and 61,108 shares (1.7%) abstained from voting on this
matter.
Page 11
4. Stockholder Proposal Regarding Director Compensation to be Partially
in the Form of Stock
416,061 shares (13.5% of the shares represented and voted at the
meeting on this proposal or 10.5% of the shares outstanding) voted in
favor of the proposal regarding director compensation to be partially
in the form of stock. Of the shares represented and voted on this
proposal, 2,582,824 shares (84.0%) voted against this proposal and
77,471 shares (2.5%) abstained from voting on this matter. 542,157
shares represented at the meeting were broker non-votes and as such
were not included in the vote totals and therefore had no effect on
the vote.
5. Stockholder Proposal Regarding Elimination of Classified Board
1,273,988 shares (43.1% of the shares represented and voted on this
proposal at the meeting or 32.2% of the shares outstanding) voted in
favor of the proposal to eliminate a classified Board. Of the shares
represented and voted on this proposal, 1,477,232 shares (50.0%) voted
against this proposal and 203,467 shares (6.9%) abstained from voting
on this matter. 663,826 shares represented at the meeting were broker
non-votes and as such were not included in the vote totals and
therefore had no effect on the vote.
Item 6. Exhibits and Reports on Form 8-K
A report on Form 8-K was filed on January 8, 1996 related to a news
release disclosing the Company's acquisition of Centron
Corporation.
A report on Form 8-K was filed on January 31, 1996 related to a news
release disclosing the Company's financial results for the fiscal year
ended November 30, 1995.
Page 12
SIGNATURE PAGE
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: April 12, 1996
/s/ Gary Wagner
_______________________________
Gary Wagner
Senior Vice President,
Chief Financial Officer and
Treasurer
Page 13
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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