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 28, 1997
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
4,003,037 on March 28, 1997. 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 5. Other 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
-------------------
Feb. 28, Feb. 29,
1997 1996
-------- --------
Net Sales $108,261 $111,752
Cost of Sales 80,578 86,389
-------- --------
Gross Profit 27,683 25,363
Selling, General and
Administrative Expenses 26,283 23,823
-------- --------
Operating Profit 1,400 1,540
Royalty, Equity and Other Income 2,619 1,972
-------- --------
Income before Interest
and Income Taxes 4,019 3,512
Interest Income 85 53
Interest Expense 2,541 2,834
-------- --------
Income before Income Taxes 1,563 731
Provision for Income Taxes 625 256
-------- --------
Net Income $ 938 $ 475
======== ========
Net Income per Share $ .23 $ .12
======== ========
Cash Dividends per Share $ .32 $ .32
======== ========
Average Common and Equivalent
Shares Outstanding 4,067,138 3,972,673
========= =========
See accompanying notes to financial statements.
Page 3
Ameron International Corporation and Subsidiaries
Consolidated Balance Sheets
(In thousands except share and per share data)
Feb. 28, Nov. 30,
1997 1996
-------- --------
ASSETS
Current Assets
Cash and cash equivalents $ 11,437 $ 18,381
Receivables, net 101,174 105,534
Inventories 95,177 84,971
Deferred income tax benefits 9,741 9,741
Prepaid expenses and other 5,616 4,996
-------- --------
Total current assets 223,145 223,623
Investments, Advances and Equity in
Undistributed Earnings of Affiliated Companies 34,261 33,722
Property, Plant and Equipment, net 124,220 125,687
Other Assets 28,576 28,634
-------- --------
Total Assets $410,202 $411,666
======== ========
LIABILITIES and STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ 1,208 $ 1,242
Current portion of long-term debt 17,684 17,753
Trade payables 33,276 36,715
Accrued liabilities 36,195 41,102
Income taxes 4,265 4,953
-------- --------
Total current liabilities 92,628 101,765
Deferred Income Taxes 2,682 2,727
Long-term Debt, less current portion 123,773 112,598
Other Long-term Liabilities 49,741 49,778
-------- --------
Total liabilities 268,824 266,868
Stockholders' Equity
Common stock, par value $2.50 a share,
Authorized, 12,000,000 shares,
Outstanding, 4,002,037 shares at
February 28, 1997 and 3,985,112 shares
at November 30, 1996, net of treasury shares 12,937 12,895
Additional paid-in capital 16,736 16,212
Retained earnings 156,979 157,321
Cumulative foreign currency translation adjustment (2,495) 1,149
Treasury stock (1,172,900 shares), at cost (42,779) (42,779)
-------- --------
Total stockholders' equity 141,378 144,798
-------- --------
Total Liabilities and Stockholders' Equity $410,202 $411,666
======== ========
See accompanying notes to financial statements
Page 4
Ameron International Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
Three Month Ended
Feb. 28, Feb. 29,
1997 1996
-------- --------
Cash Flow from Operating Activities
Net income $ 938 $ 475
Adjustments to reconcile to net cash
(used in) provided by operating activities:
Depreciation 3,927 4,154
Equity in earnings of affiliated companies (531) (1,124)
Dividends from affiliated companies 1,137 1,832
Other, net 372 168
Changes in operating assets and liabilities:
Change in receivables 755 5,264
Change in inventories (11,802) 767
Change in other current assets (794) (1,569)
Change in trade payables and
other current liabilities (7,871) (10,382)
Change in other assets and liabilities, net 996 1,889
-------- --------
Net cash (used in) provided by
operating activities (12,873) 1,474
Cash Flow from Investing Activities
Proceeds from sale of assets 41 194
Additions to property, plant and equipment, and
acquisitions (5,290) (13,460)
Other (253) (654)
-------- --------
Net cash used in investing activities (5,502) (13,920)
Cash Flow from Financing Activities
Net change in debt with maturities
of three months or less (32) (287)
Issuance of debt 15,452 13,053
Repayment of debt (2,960) (199)
Dividends to common stockholders (1,280) (1,266)
Issuance of common stock 566 -
-------- --------
Net cash provided by financing activities 11,746 11,301
Effect of Exchange Rate Changes
on Cash and Equivalents (315) (98)
-------- --------
Net Change in Cash and Equivalents (6,944) (1,243)
Beginning Cash and Equivalents Balance 18,381 12,923
-------- --------
Ending Cash and Equivalents Balance $ 11,437 $ 11,680
======== ========
See accompanying notes to financial statements
Page 5
Ameron International Corporation and Subsidiaries
Notes to Consolidated Financial Statements
February 28, 1997
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 28, 1997 and the consolidated
statements of income for the three-month periods ended February 28, 1997 and
February 29, 1996, and cash flows for the three-month periods ended February 28,
1997 and February 29, 1996. 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.
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, 1996.
Note 2. Inventories
Inventories are stated at the lower of cost (principally first-in, first-out)or
market. Inventories at February 28, 1997 and November 30, 1996 were comprised
of the following (U.S. dollars in thousands):
Feb. 28, Nov. 30,
1997 1996
-------- --------
Finished products $ 54,350 $ 44,577
Products in process 18,646 17,467
Materials and supplies 22,181 22,927
-------- --------
Total Inventories $ 95,177 $ 84,971
======== ========
Note 3. Other Cash Flow Information (U.S. dollars in thousands):
Three Months Ended
Feb. 28, Feb. 29,
1997 1996
-------- --------
Interest paid $ 412 $ 598
======== ========
Income taxes paid $ 2,559 $ 1,296
======== ========
Page 6
Note 4. Affiliated Companies
Summarized operating results of affiliated companies in the Concrete and Steel
Pipe Products segment follow (U.S. dollars in thousands):
Three Months Ended
Feb. 28, Feb. 29,
1997 1996
-------- --------
Net Sales $ 6,476 $ 11,648
Gross Profit $ 621 $ 3,036
Net Income (Loss) $ (1,404) $ 334
Amounts shown above represent operating results for Gifford-Hill-American,
Inc. for the three-month periods ended February 28, 1997 and January 31, 1996
and operating results for Ameron Saudi Arabia, Ltd. for the three-month
periods ended December 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
Feb. 28, Feb. 29,
1997 1996
-------- --------
Net Sales $ 33,912 $ 33,462
Gross Profit $ 6,169 $ 5,833
Net Income $ 1,874 $ 1,744
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, 1996 and 1995.
Page 7
Note 5. Income Taxes
The deferred tax assets and deferred tax liabilities recorded on the balance
sheet as of February 28, 1997 are as follows (U.S. Dollars in thousands):
Non-
Current Current
-------- --------
Deferred Tax Assets
Self-insurance & contingency reserves $ 1,442 $ 8,038
Employee benefits 2,497 9,352
Accounts receivable 2,937 -
Inventory 2,935 -
Federal and State tax credits and
loss carry forwards - 2,347
Miscellaneous (70) 252
-------- --------
Total Deferred Tax Asset 9,741 19,989
Deferred Tax Liabilities
Investments - (2,234)
Fixed Assets - (20,437)
-------- --------
Total Deferred Tax Liability - (22,671)
-------- --------
Net Deferred Tax Asset (Liability) $ 9,741 $ (2,682)
======== ========
At February 28, 1997 and November 30, 1996, the Company's long-term debt
consisted of the following (U.S. Dollars in thousands):
Feb. 28, Nov. 30,
1997 1996
-------- --------
Fixed-rate unsecured notes payable:
8.63%, payable in annual principal
installments of $5,000 $ 10,000 $ 10,000
9.79%, payable in annual principal
installments of $12,000 48,000 48,000
7.92%, payable in annual principal
installments of $8,333, commencing
in 2001 50,000 50,000
Variable-rate industrial development bonds,
payable in 2016 (3.40% at February 28, 1997) 7,200 7,200
Variable-rate unsecured bank revolving
credit facilities (5.01% at February 28, 1997) 22,668 11,009
Variable-rate unsecured bank loan, with
annual principal installments of
approximately $684(3.51% at February 28, 1997) 3,589 4,142
-------- --------
141,457 130,351
Less current portion 17,684 17,753
-------- --------
$123,773 $112,598
======== ========
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
February 28, 1997
INTRODUCTION
Management's Discussion and Analysis should be read in conjunction with the
same discussion included in the Company's 1996 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 first quarter of fiscal 1997, the Company used $12.9 million of cash
for operating activities, principally as a result of higher working capital
requirements. The change in working capital reflects the increased sales volume
in the Protective Coatings business.
Additional net borrowings of $12.5 million were used for capital expenditures,
increased working capital requirements and payment of common dividends of $1.3
million. Cash and cash equivalents at February 28,1997 totaled $11.4 million, a
decrease of $6.9 million from November 30,1996.
The company used cash to fund operational activities during the first quarter of
1997 versus generating cash during the prior year period because of higher
inventory balances and reduction of payables. Total inventory as shown on the
consolidated balance sheets increased from year end due to the increased sales
volume in Protective Coatings, principally attributed to the worldwide
Devoe marine coatings business.
Cash used in investing activities consisted of capital expenditures for normal
replacement and upgrades of machinery and equipment. Management estimates that
capital spending by the Company during this fiscal year will be between $15.0
million and $30.0 million. Capital expenditures will be funded from existing
cash balances, cash generated from operations and existing lines of credit.
At February 28, 1997, the Company had approximately $99.2 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 from existing lines of credit will be
sufficient to meet future operating requirements.
Page 9<PAGE>
RESULTS OF OPERATIONS - First Quarter
The Company earned 23 cents per share on sales of $108.3 million for the first
quarter of fiscal 1997, which compares favorably to earnings of 12 cents per
share on sales of $111.8 million for the same period last year.
The quarterly improvement came primarily from increased profitability from the
worldwide Protective Coatings and Fiberglass Pipe businesses. Coatings sales
volume increased substantially, in part because of the acquisition of the
worldwide Devoe marine coatings business in late 1996. Also contributing to the
improved results of the Protective Coatings business was increased royalty
income from licensees. The increase in overall gross margin resulted from a
change in mix of business (higher sales of higher-margin coatings products
partially offset by lower sales of lower-margin concrete pipe products). The
increase in selling, general and administrative expenses was primarily
related to increased support costs for the worldwide Devoe marine coatings
business.
The Concrete and Steel Pipe business reported lower sales and income from last
year. Contract bidding delays in the fourth quarter of fiscal 1996 and
inclement weather in the first quarter of fiscal 1997 significantly reduced both
sales and earnings. Order backlog for this business increased by $55 million
during the first quarter and sales for the last half of the fiscal year are
expected to improve.
Results from Ameron Hawaii, the Company's construction product business, were
less than last year due to the ongoing economic slowdown in the Islands and
inclement weather in the first quarter of fiscal 1997 . The domestic Pole
Products business also reported lower sales and earnings than last year due to a
softness in the Southern California market.
Equity income from affiliate companies was lower than last year.
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
$5.1 million of consolidated retained earnings was not restricted at
February 28, 1997.
Item 5. Other
A third amendment to the Company's Stockholder Rights Agreement became
effective December 16, 1996. This amendment sets the exercise price
of the Rights at $175 and extends the expiration date of the Rights to
the later of December 16, 2006 or the tenth anniversary of the
Distribution Date.
Item 6. Exhibits and Reports on Form 8-K
No report on Form 8-K was filed for the Company in the first quarter
of 1997.
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: April 11, 1997
/s/ Gary Wagner
_______________________________
Gary Wagner
Senior Vice President,
Chief Financial Officer and
Treasurer
Page 12
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