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, 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 INTERNATIONAL CORPORATION
(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
3,964,037 on June 30, 1996. No other class of Common Stock exists.
Page 1
AMERON INTERNATIONAL CORPORATION
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 6. Exhibits and Reports on Form 8-K 11
SIGNATURE PAGE 12
Page 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Ameron International Corporation and Subsidiaries
Consolidated Statements of Income
(In thousands, except share and per share data)
Three Months Ended Six Months Ended
May 31, May 31,
------------------ ------------------
1996 1995 1996 1995
-------- -------- -------- --------
Net Sales $120,632 $118,526 $232,384 $216,557
Cost of Sales 89,780 88,963 176,169 163,389
-------- -------- -------- --------
Gross Profit 30,852 29,563 56,215 53,168
Selling, General and
Administrative Expenses 23,626 22,320 47,449 45,509
-------- -------- -------- --------
Operating Profit 7,226 7,243 8,766 7,659
Royalty, Equity and Other Income 2,132 1,589 4,104 3,767
-------- -------- -------- --------
Income before Interest
and Income Taxes 9,358 8,832 12,870 11,426
Interest Income 48 145 101 230
Interest Expense 2,714 3,137 5,548 6,157
-------- -------- -------- --------
Income before Income Taxes 6,692 5,840 7,423 5,499
Provision for Income Taxes 2,342 1,838 2,598 1,382
-------- -------- -------- --------
Net Income $ 4,350 $ 4,002 $ 4,825 $ 4,117
======== ======== ======== ========
Net Income per Share $ 1.09 $ 1.01 $ 1.21 $ 1.04
======== ======== ======== ========
Cash Dividends per Share $ .32 $ .32 $ .64 $ .64
======== ======== ======== ========
Average Common and Equivalent
Shares Outstanding 3,978,323 3,946,426 3,978,323 3,946,426
========= ========= ========= =========
See accompanying notes to financial statements.
Page 3
Ameron International Corporation and Subsidiaries
Consolidated Balance Sheets
(In thousands except share and per share data)
May 31, Nov. 30,
1996 1995
-------- --------
ASSETS
Current Assets
Cash and cash equivalents $ 12,278 $ 12,923
Receivables, net 100,222 105,019
Inventories 76,352 76,426
Deferred income tax benefits 7,315 7,315
Prepaid expenses and other 5,363 5,155
-------- --------
Total current assets 201,530 206,838
Investments, Advances and Equity in
Undistributed Earnings of Affiliated Companies 35,391 36,197
Property, Plant and Equipment, net 111,074 114,116
Other Assets 21,545 14,230
-------- --------
Total Assets $369,540 $371,381
======== ========
LIABILITIES and STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ 1,715 $ 1,718
Current portion of long-term debt 17,763 17,803
Trade payables 25,496 32,219
Accrued liabilities 34,330 37,427
Income taxes 2,202 3,213
-------- --------
Total current liabilities 81,506 92,380
Deferred Income Taxes 3,685 4,040
Long-term Debt, less current portion 98,327 91,565
Other Long-term Liabilities 49,966 48,824
-------- --------
Total liabilities 233,484 236,809
Stockholders' Equity
Common stock, par value $2.50 a share,
Authorized, 12,000,000 shares,
Outstanding, 3,963,837 shares at
May 31, 1996 and 3,956,497 shares
at November 30, 1995, net of treasury shares 12,842 12,823
Additional paid-in capital 15,574 15,322
Retained earnings 149,278 146,987
Cumulative foreign currency translation adjustment 1,141 2,219
Treasury stock (1,172,900 shares), at cost (42,779) (42,779)
-------- --------
Total stockholders' equity 136,056 134,572
-------- --------
Total Liabilities and Stockholders' Equity $369,540 $371,381
======== ========
See accompanying notes to financial statements
Page 4
Ameron International Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
Six Months Ended
May 31,
-------------------
1996 1995
-------- --------
Cash Flow from Operating Activities
Net income $ 4,825 $ 4,117
Adjustments to reconcile to net cash
provided by (used in) operating activities:
Depreciation 8,167 7,828
Equity in earnings of affiliated companies (1,207) (1,695)
Dividends from affiliated companies 1,807 3,480
Other, net 306 (887)
Changes in operating assets and liabilities:
Change in receivables 4,637 (7,204)
Change in inventories 2,245 (12,642)
Change in other current assets (185) (119)
Change in trade payables and
other current liabilities (10,451) (12,904)
Change in other assets and liabilities, net 1,488 829
-------- --------
Net cash provided by (used in)
operating activities 11,632 (19,197)
Cash Flow from Investing Activities
Proceeds from sale of assets 486 460
Additions to property, plant and equipment, and
acquisition of Centron (16,207) (9,223)
Other (1,090) (1,052)
-------- --------
Net cash used in investing activities (16,811) (9,815)
Cash Flow from Financing Activities
Net change in debt with maturities
of three months or less 32 (953)
Issuance of debt 7,605 26,775
Repayment of debt (392) (397)
Dividends to common stockholders (2,534) (2,523)
Issuance of common stock 83 -
-------- --------
Net cash provided by financing activities 4,794 22,902
Effect of Exchange Rate Changes
on Cash and Equivalents (260) 438
-------- --------
Net Change in Cash and Equivalents (645) (5,672)
Beginning Cash and Equivalents Balance 12,923 9,030
-------- --------
Ending Cash and Equivalents Balance $ 12,278 $ 3,358
======== ========
See accompanying notes to financial statements
Page 5
Ameron International Corporation and Subsidiaries
Notes to Consolidated Financial Statements
May 31, 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 May 31, 1996 and the consolidated results
of operations for the three- and six-month periods ended May 31, 1996 and 1995,
and cash flows for the six-month periods ended May 31, 1996 and 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 May 31, 1996 and November 30, 1995 were comprised of the
following (in thousands):
May 31, Nov. 30,
1996 1995
-------- --------
Finished products $ 37,069 $ 32,210
Products in process 20,305 26,128
Materials and supplies 18,978 18,088
-------- --------
Total Inventories $ 76,352 $ 76,426
======== ========
Note 3. Other Cash Flow Information:
Six Months Ended
May 31,
-------------------
1996 1995
-------- --------
Interest paid $ 4,922 $ 4,894
======== ========
Income taxes paid $ 3,949 $ 3,347
======== ========
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 Six Months Ended
May 31, May 31,
------------------- -------------------
1996 1995 1996 1995
-------- -------- -------- --------
Net Sales $ 10,781 $ 10,009 $ 22,429 $ 21,326
Gross Profit $ 3,123 $ 1,957 $ 6,159 $ 4,387
Net Income (Loss) $ (133) $ (430) $ (45) $ (715)
Amounts shown above represent operating results for Gifford-Hill-American,
Inc. for the three- and six-month periods ended April 30, 1996 and 1995 and
operating results for Ameron Saudi Arabia, Ltd. for the three- and six-month
periods ended March 31, 1996 and 1995.
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,
------------------- -------------------
1996 1995 1996 1995
-------- -------- -------- --------
Net Sales $ 38,136 $ 32,260 $ 71,598 $ 62,354
Gross Profit $ 3,993 $ 5,311 $ 9,826 $ 10,282
Net Income $ 443 $ 1,732 $ 2,187 $ 3,387
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, 1996 and 1995.
Page 7
Note 5. Income Taxes
The deferred tax assets and deferred tax liabilities recorded on the balance
sheet as of May 31, 1996 are as follows, U.S. Dollars in thousands:
Non-
Current Current
-------- --------
Deferred Tax Assets
Self-insurance & contingency reserves $ (1,309) $ (8,290)
Employee benefits (1,683) (8,644)
Accounts receivable (1,445) -
Inventory (2,728) -
Federal and State tax credits and
loss carryovers - (2,347)
Miscellaneous (150) (699)
-------- --------
Total Deferred Tax Asset $ (7,315) $(19,980)
======== ========
Deferred Tax Liabilities
Investments $ - $ 3,000
Fixed Assets - 20,665
-------- --------
Total Deferred Tax Liability $ - $ 23,665
======== ========
Page 8
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Ameron International Corporation and Subsidiaries
May 31, 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
income and cash flows.
LIQUIDITY AND CAPITAL RESOURCES
During the six month period ended May 31, 1996, the Company generated $11.6
million of cash from operations. These funds, along with additional net
borrowings of $7.2 million, were used for capital expenditures and the
acquisition of Centron of $16.2 million and payment of common dividends of $2.5
million. Cash and cash equivalents at May 31, 1996 totaled $12.3 million, a
decrease of $645,000 from November 30, 1995.
The Company generated cash from operating activities during the first half of
fiscal 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 was about even with the
balance at November 30, 1995 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 expenditures by the Company during this fiscal
year will be between $15.0 and $25.0 million. Capital expenditures and
acquisitions will be funded from existing cash balances, cash generated from
operations and existing lines of credit.
At May 31, 1996 the Company had approximately $83.1 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
RESULTS OF OPERATIONS - SECOND QUARTER
The Company earned $1.09 per share on sales of $120.6 million during the second
quarter of fiscal 1996, which compares favorably to earnings of $1.01 per share
on sales of $118.5 million during the prior year period.
The quarterly improvement resulted partly from significantly higher sales and
earnings by the Company's concrete and steel pipe operations in the western
United States. Demand remains strong as water agencies undertake long-term
aqueduct expansion.
The Company's worldwide protective coatings business reported about even sales,
but higher earnings for the quarter. Results from European operations continued
to improve.
Sales were up for the Company's worldwide fiberglass pipe business and earnings
improved slightly versus the prior year quarter. Positive contributions came
from operations in Singapore and the United States - including Centron
International, a Texas-based oilfield pipe manufacturer acquired by the Company
in January. Delayed orders continued to hamper European operations.
Results from Ameron Hawaii, the Company's construction products business,
continue to be substantially lower than last year because of unfavorable
economic conditions in the Islands. Work was recently postponed on several
residential subdivisions due to the weak economy.
The Company's lighting and traffic pole business posted quarterly results near
last year's levels.
RESULTS OF OPERATIONS - YEAR TO DATE
The Company earned $1.21 per share on sales of $232.4 million during the first
half of fiscal 1996, which compares favorably to earnings of $1.04 per share on
sales of $216.6 million during the prior year period.
The improved results can be attributed primarily to continuing deliveries of
concrete and steel pipe to jobsites in the western states. The concrete and
steel pipe business continued the strong pace begun in 1995.
Earnings increased for the Company's global protective coatings business, which
is recovering 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. Sales
of Ameron's new PSX line of patented "engineered siloxane" products also
continued to grow worldwide.
The Company's worldwide fiberglass pipe business, including Centron
International reported improved sales, but project delays and market
sluggishness negatively impacted European operations.
Results from the construction products business in Hawaii continued
to be substantially lower than in 1995 because of unfavorable economic
conditions in the Islands. Sales and earnings from the domestic pole products
business improved slightly for the year-to-date period.
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
$13.0 million of consolidated retained earnings was not restricted at
May 31, 1996.
Item 6. Exhibits and Reports on Form 8-K
A report on Form 8-K was filed on April 16, 1996 related to a news
release disclosing the Company's change of name from Ameron, Inc. to
Ameron International Corporation.
Page 11
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 International Corporation
Date: July 3, 1996
/s/ Gary Wagner
_________________________________
Gary Wagner
Senior Vice President,
Chief Financial Officer and
Treasurer
Page
12<PAGE>
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 International Corporation
Date:
_________________________________
Gary Wagner
Senior Vice President,
Chief Financial Officer and
Treasurer
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