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, 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 (626) 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
4,003,862 on June 30, 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 4. Submission of Matters to a Vote of Security Holders 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,
------------------ ------------------
1997 1996 1997 1996
-------- -------- -------- --------
Net Sales $131,525 $120,632 $239,786 $232,384
Cost of Sales 96,317 89,780 176,895 176,169
-------- -------- -------- --------
Gross Profit 35,208 30,852 62,891 56,215
Selling, General and
Administrative Expenses 26,449 23,626 52,732 47,449
-------- -------- -------- --------
Operating Profit 8,759 7,226 10,159 8,766
Royalty, Equity and Other Income 2,326 2,132 4,945 4,104
-------- -------- -------- --------
Income before Interest
and Income Taxes 11,085 9,358 15,104 12,870
Interest Income 70 48 155 101
Interest Expense 3,168 2,714 5,709 5,548
-------- -------- -------- --------
Income before Income Taxes 7,987 6,692 9,550 7,423
Provision for Income Taxes 2,717 2,342 3,342 2,598
-------- -------- -------- --------
Net Income $ 5,270 $ 4,350 $ 6,208 $ 4,825
======== ======== ======== ========
Net Income per Share $ 1.30 $ 1.09 $ 1.53 $ 1.21
======== ======== ======== ========
Cash Dividends per Share $ .32 $ .32 $ .64 $ .64
======== ======== ======== ========
Average Common and Equivalent
Shares Outstanding 4,069,733 3,978,323 4,069,733 3,978,323
========= ========= ========= =========
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,
1997 1996
-------- --------
ASSETS
Current Assets
Cash and cash equivalents $ 13,901 $ 18,381
Receivables, net 106,743 105,534
Inventories 107,553 84,971
Deferred income tax benefits 10,185 9,741
Prepaid expenses and other 5,124 4,996
-------- --------
Total current assets 243,506 223,623
Investments, Advances and Equity in
Undistributed Earnings of Affiliated Companies 33,949 33,722
Property, Plant and Equipment, net 125,853 125,687
Other Assets 29,659 28,634
-------- --------
Total Assets $432,967 $411,666
======== ========
LIABILITIES and STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ 815 $ 1,242
Current portion of long-term debt 17,677 17,753
Trade payables 35,677 36,715
Accrued liabilities 35,306 41,102
Income taxes 1,015 4,953
-------- --------
Total current liabilities 90,490 101,765
Deferred Income Taxes 4,346 2,727
Long-term Debt, less current portion 142,863 112,598
Other Long-term Liabilities 50,000 49,778
-------- --------
Total liabilities 287,699 266,868
Stockholders' Equity
Common stock, par value $2.50 a share,
Authorized, 12,000,000 shares,
Outstanding, 4,003,787 shares at
May 31, 1997 and 3,985,112 shares
at November 30, 1996, net of treasury shares 12,941 12,895
Additional paid-in capital 16,794 16,212
Retained earnings 160,968 157,321
Cumulative foreign currency translation adjustment (2,656) 1,149
Treasury stock (1,172,900 shares), at cost (42,779) (42,779)
-------- --------
Total stockholders' equity 145,268 144,798
-------- --------
Total Liabilities and Stockholders' Equity $432,967 $411,666
======== ========
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,
-------------------
1997 1996
-------- --------
Cash Flow from Operating Activities
Net income $ 6,208 $ 4,825
Adjustments to reconcile to net cash
(used in) provided by operating activities:
Depreciation 7,847 8,167
Equity in earnings of affiliated companies (1,319) (1,207)
Dividends from affiliated companies 2,237 1,807
Other, net 637 306
Changes in operating assets and liabilities:
Change in receivables (5,033) 4,637
Change in inventories (24,266) 2,245
Change in other current assets (732) (185)
Change in trade payables and
other current liabilities (9,454) (10,451)
Change in other assets and liabilities, net 3,066 1,488
-------- --------
Net cash (used in) provided by
operating activities (20,809) 11,632
Cash Flow from Investing Activities
Proceeds from sale of assets 355 486
Additions to property, plant and equipment, and
acquisitions (11,496) (16,207)
Other (1,518) (1,090)
-------- --------
Net cash used in investing activities (12,659) (16,811)
Cash Flow from Financing Activities
Net change in debt with maturities
of three months or less (423) 32
Issuance of debt 37,208 7,605
Repayment of debt (5,510) (392)
Dividends to common stockholders (2,561) (2,534)
Issuance of common stock 628 83
-------- --------
Net cash provided by financing activities 29,342 4,794
Effect of Exchange Rate Changes
on Cash and Equivalents (354) (260)
-------- --------
Net Change in Cash and Equivalents (4,480) (645)
Beginning Cash and Equivalents Balance 18,381 12,923
-------- --------
Ending Cash and Equivalents Balance $ 13,901 $ 12,278
======== ========
See accompanying notes to financial statements
Page 5
Ameron International Corporation and Subsidiaries
Notes to Consolidated Financial Statements
May 31, 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 May 31, 1997, and the consolidated
statements of income for the three- and six-month periods ended May 31, 1997 and
1996, and cash flows for the six-month periods ended May 31, 1997 and 1996.
Accounting measurements at interim dates inherently involve greater reliance on
estimates than at year end, thus the results of operations for the periods
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 May 31, 1997 and November 30, 1996 were comprised of the
following (U.S. dollars in thousands):
May 31, Nov. 30,
1997 1996
-------- --------
Finished products $ 56,669 $ 44,577
Products in process 26,719 17,467
Materials and supplies 24,165 22,927
-------- --------
Total Inventories $107,553 $ 84,971
======== ========
Note 3. Other Cash Flow Information (U.S. dollars in thousands):
Six Months Ended
May 31,
-------------------
1997 1996
-------- --------
Interest paid $ 5,687 $ 4,922
======== ========
Income taxes paid $ 7,768 $ 3,949
======== ========
Page 6
Note 4. Unconsolidated 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 Six Months Ended
May 31, May 31,
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
Net Sales $ 11,507 $ 10,781 $ 17,983 $ 22,429
Gross Profit $ 2,208 $ 3,123 $ 2,829 $ 6,159
Net Loss $ (245) $ (133) $ (1,649) $ (45)
Amounts shown above represent operating results for Gifford-Hill-American,
Inc. for the three- and six-month periods ended May 31, 1997 and April 30, 1996
and operating results for Ameron Saudi Arabia, Ltd. for the three- and six-month
periods ended March 31, 1997 and 1996.
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,
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
Net Sales $ 44,166 $ 38,136 $ 78,078 $ 71,598
Gross Profit $ 7,727 $ 3,993 $ 13,896 $ 9,826
Net Income $ 2,672 $ 443 $ 4,546 $ 2,187
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, 1997 and 1996.
Page 7
Note 5. Income Taxes
The deferred tax assets and deferred tax liabilities recorded on the balance
sheet as of May 31, 1997 are as follows (U.S. dollars in thousands):
Non-
Current Current
-------- --------
Deferred Tax Assets
Self-insurance & contingency reserves $ 1,442 $ 8,158
Employee benefits 2,497 7,847
Accounts receivable 2,797 -
Inventory 2,963 -
Federal and State tax credits and
loss carryovers - 2,347
Miscellaneous 486 198
-------- --------
Total Deferred Tax Asset 10,185 18,550
Deferred Tax Liabilities
Investments - (2,398)
Fixed Assets - (20,498)
-------- --------
Total Deferred Tax Liability - (22,896)
-------- --------
Net Deferred Tax Asset (Liability) $ 10,185 $ (4,346)
======== ========
Note 6. Debt
At May 31, 1997 and November 30, 1996, the Company's long-term debt consisted of
the following (U.S. dollars in thousands):
May 31, 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 (4.00% at May 31, 1997) 7,200 7,200
Variable-rate unsecured bank revolving credit
facilities (approximately 6.85% at May 31, 1997) 41,954 11,009
Variable-rate unsecured bank loan, payable by a
consolidated subsidiary in Dutch guilders, with
annual principal installments of approximately
$677 (4.01% at May 31, 1997) 3,386 4,142
-------- --------
160,540 130,351
Less - Current portion 17,677 17,753
-------- --------
$142,863 $112,598
======== ========
Page 8
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations
Ameron International Corporation and Subsidiaries
May 31, 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 six-month period ended May 31, 1997, the Company used $20.8 million
of cash for operating activities (compared to generating $11.6 million during
the six-month period ended May 31, 1996), principally as a result of higher
working capital requirements. The change in working capital reflects higher
inventory levels caused by increased sales volume in the Protective Coatings
business and the seasonal demands of the Concrete and Steel Pipe business.
Additional net borrowings of $31.3 million plus $0.6 million from the issuance
of common stock were used for capital expenditures, increased working capital
requirements and payment of common dividends of $2.6 million. Cash and cash
equivalents at May 31,1997 totaled $13.9 million, a decrease of $4.5 million
from November 30,1996.
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 May 31, 1997, the Company had approximately $84.9 million in unused
committed and uncommitted 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 $1.30 per share on sales of $131.5 million for the second
quarter of fiscal 1997, which compares favorably to earnings of $1.09 per share
on sales of $120.6 million for the same period last year.
The quarterly earnings 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 and Valspar
maintenance coatings business in March 1997. Increased profitability from the
fiberglass pipe business resulted from improved operational efficiencies.
The Concrete and Steel Pipe business reported lower sales and income from last
year because of timing of project deliveries. Order backlog for this business
increased by $45 million during the first half, and sales for the second half of
the fiscal year are expected to be stronger.
Results from Ameron Hawaii, the Company's construction products business,
continued to be substantially less than last year due to the ongoing economic
slowdown in Hawaii. The domestic Pole Products business reported higher sales
and earnings than last year.
RESULTS OF OPERATIONS - YEAR TO DATE
The Company earned $1.53 per share on sales of $239.8 million during the first
half of fiscal 1997, which compares favorably to earnings of $1.21 on sales of
$232.4 million during the prior-year period.
The improvements for the first six months of 1997 were based on substantial
increases in sales and profits by Protective Coatings and improved efficiencies
by Fiberglass Pipe.
Protective Coatings sales increased in the first half because of the Devoe
acquisition, the Valspar acquisition and an increase in sales of traditional
Ameron coatings. The higher sales produced substantially higher earnings.
The Fiberglass Pipe business reported sales about even compared to last year,
but was able to achieve higher earnings through operational improvements.
Concrete and Steel Pipe reported sales significantly below last year due to the
timing of project deliveries and impact of weather. Profits were negatively
impacted by the reduced sales volume.
The construction products business in Hawaii posted a decline in sales and
earnings due to the depressed Hawaiian construction market. Sales for domestic
Pole Products were about even with last year; however, profits were down due to
unfavorable plant utilization in the first quarter of 1997.
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. Under the most restrictive
provisions of these agreements, approximately $6.3 million of
consolidated retained earnings was not restricted at May 31, 1997.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on March 26,
1997. Represented at the meeting, in person or by proxy, were
3,636,666 shares of common stock (91.0% of the total shares
outstanding). Stockholders voted on the following matters at this
meeting:
1. Election of Directors
The five nominees for directors named in the Company's proxy
statement, Messrs. A. Frederick Gerstell, Terry L. Haines, John F.
King, Richard J. Pearson and David L. Sliney, received the greatest
number of votes cast and were elected; each receiving not less than
3,607,802 votes.
Other directors whose terms of office continued after the meeting are:
Stephen W. Foss, J. Michael Hagan, James S. Marlen, Alan L. Ockene
and F. H. Fentener van Vlissingen.
2. Proposal to Ratify the Appointment of Auditors
3,622,377 shares (99.6% of the shares represented at the meeting or
90.5% of the shares outstanding) voted in favor of the proposal to
ratify the appointment of Arthur Andersen LLP as independent public
accountants of the Company for fiscal year 1997. Of the shares
represented at the meeting, 6,248 shares (0.2%) voted against the
proposal.
Item 6. Exhibits and Reports on Form 8-K
No report on Form 8-K was filed for the Company in the second 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: July 14, 1997
/s/ Gary Wagner
_________________________________
Gary Wagner
Senior Vice President,
Chief Financial Officer
Page 12
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