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 August 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
4,004,862 on September 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 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURE PAGE 13
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 Nine Months Ended
August 31, August 31,
------------------ -----------------
1997 1996 1997 1996
-------- -------- -------- -------
Net Sales $146,323 $133,622 $386,109 366,006
Cost of Sales 107,833 97,402 284,728 273,571
-------- -------- -------- -------
Gross Profit 38,490 36,220 101,381 92,435
Selling, General and
Administrative Expenses 27,375 26,274 80,107 73,723
-------- -------- -------- --------
Operating Profit 11,115 9,946 21,274 18,712
Royalty, Equity and Other Income 3,128 1,590 8,073 5,694
-------- -------- -------- --------
Income before Interest
and Income Taxes 14,243 11,536 29,347 24,406
Interest Income 36 69 191 170
Interest Expense 3,432 2,418 9,141 7,966
-------- -------- -------- --------
Income before Income Taxes 10,847 9,187 20,397 16,610
Provision for Income Taxes 3,797 3,215 7,139 5,813
-------- -------- -------- --------
Net Income $ 7,050 $ 5,972 $ 13,258 $10,797
======== ======== ======== ========
Net Income per Share $ 1.72 $ 1.50 $ 3.25 $ 2.71
======== ======== ======== ========
Cash Dividends per Share $ .32 $ .32 $ .96 $ .96
======== ======== ======== ========
Average Common and Equivalent
Shares Outstanding 4,082,831 3,977,481 4,082,831 3,977,481
========= ========= ========= =========
See accompanying notes to financial statements.
Page 3
Ameron International Corporation and Subsidiaries
Consolidated Balance Sheets
(In thousands except share and per share data)
August 31, Nov. 30,
1997 1996
-------- --------
ASSETS
Current Assets
Cash and cash equivalents $ 22,502 $ 18,381
Receivables, net 112,336 105,534
Inventories 106,683 84,971
Deferred income tax benefits 10,977 9,741
Prepaid expenses and other 3,903 4,996
-------- --------
Total current assets 256,401 223,623
Investments, Advances and Equity in
Undistributed Earnings of Affiliated Companies 34,129 33,722
Property, Plant and Equipment, net 126,430 125,687
Other Assets 30,059 28,634
-------- --------
Total Assets $447,019 $411,666
======== ========
LIABILITIES and STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ 1,368 $ 1,242
Current portion of long-term debt 17,639 17,753
Trade payables 31,346 36,715
Accrued liabilities 41,362 41,102
Income taxes 2,525 4,953
-------- --------
Total current liabilities 94,240 101,765
Deferred Income Taxes 717 2,727
Long-term Debt, less current portion 154,407 112,598
Other Long-term Liabilities 49,425 49,778
-------- --------
Total liabilities 298,789 266,868
Stockholders' Equity
Common stock, par value $2.50 a share,
Authorized, 12,000,000 shares,
Outstanding, 4,004,737 shares at
August 31, 1997 and 3,985,112 shares
at November 30, 1996, net of treasury shares 12,944 12,895
Additional paid-in capital 16,830 16,212
Retained earnings 166,736 157,321
Cumulative foreign currency translation adjustment (5,501) 1,149
Treasury stock (1,172,900 shares), at cost (42,779) (42,779)
-------- --------
Total stockholders' equity 148,230 144,798
-------- --------
Total Liabilities and Stockholders' Equity $447,019 $411,666
======== ========
See accompanying notes to financial statements
Page 4
Ameron International Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
Nine Months Ended
August 31,
-------------------
1997 1996
-------- --------
Cash Flow from Operating Activities
Net income $ 13,258 $ 10,797
Adjustments to reconcile to net cash
(used in) provided by operating activities:
Depreciation and amortization 11,884 12,509
Equity in earnings of affiliated companies (2,749) (1,952)
Dividends from affiliated companies 2,787 2,740
Other, net 1,692 (698)
Changes in operating assets and liabilities:
Change in receivables (12,497) (2,888)
Change in inventories (24,545) 6,178
Change in other current assets (391) (52)
Change in trade payables and
other current liabilities (5,200) 606
Change in other assets and liabilities, net (872) 3,733
-------- --------
Net cash (used in) provided by
operating activities (16,633) 30,973
Cash Flow from Investing Activities
Proceeds from sale of assets 532 987
Additions to property, plant and equipment, and
acquisitions (17,607) (19,700)
Other (2,277) (1,959)
-------- --------
Net cash used in investing activities (19,352) (20,672)
Cash Flow from Financing Activities
Net change in debt with maturities
of three months or less 128 (541)
Issuance of debt 51,653 56,706
Repayment of debt (7,705) (26,085)
Dividends to common stockholders (3,843) (3,802)
Issuance of common stock 667 88
-------- --------
Net cash provided by financing activities 40,900 26,366
Effect of Exchange Rate Changes
on Cash and Equivalents (794) (150)
-------- --------
Net Change in Cash and Equivalents 4,121 36,517
Beginning Cash and Equivalents Balance 18,381 12,923
-------- --------
Ending Cash and Equivalents Balance $ 22,502 $ 49,440
======== ========
See accompanying notes to financial statements
Page 5
Ameron International Corporation and Subsidiaries
Notes to Consolidated Financial Statements
August 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 August 31, 1997, and the consolidated
statements of income for the three- and nine-month periods ended August 31,
1997 and 1996, and cash flows for the nine-month periods ended August 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 August 31, 1997 and November 30, 1996
were comprised of the following (U.S. dollars in thousands):
August 31, Nov. 30,
1997 1996
-------- --------
Finished products $ 55,046 $ 44,577
Products in process 28,845 17,467
Materials and supplies 22,792 22,927
-------- --------
Total Inventories $106,683 $ 84,971
======== ========
Note 3. Other Cash Flow Information (U.S. dollars in thousands):
Nine Months Ended
August 31,
-------------------
1997 1996
-------- --------
Interest paid $ 6,703 $ 5,391
======== ========
Income taxes paid $ 10,694 $ 7,438
======== ========
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 Nine Months Ended
August 31, August 31,
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
Net Sales $ 18,104 $ 10,763 $ 36,087 $ 33,192
Gross Profit $ 3,679 $ 2,595 $ 6,508 $ 8,754
Net Income/(Loss) $ 428 $ (491) $ (1,221) $ (536)
Amounts shown above represent operating results for Gifford-Hill-American,
Inc. for the three- and nine-month periods ended August 31, 1997 and July 31,
1996 and operating results for Ameron Saudi Arabia, Ltd. for the three- and
nine-month periods ended June 30, 1997 and 1996.
Summarized results of operations of Tamco, Bondstrand, Ltd., and Oasis
Ameron,Ltd. follow (U.S. dollars in thousands):
Three Months Ended Nine Months Ended
August 31, August 31,
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
Net Sales $ 49,509 $ 43,417 $127,587 $115,015
Gross Profit $ 8,568 $ 8,936 $ 22,464 $ 18,762
Net Income $ 3,286 $ 4,171 $ 7,832 $ 6,358
Amounts shown above include operating results for Tamco for the three- and
nine-month periods stated and operating results for Bondstrand, Ltd. and
Oasis Ameron, Ltd. for the three- and nine-month periods ended June 30, 1997
and 1996.
Page 7
Note 5. Income Taxes
The deferred tax assets and deferred tax liabilities recorded on the balance
sheet as of August 31, 1997 are as follows (U.S. dollars in thousands):
Non-
Current Current
-------- --------
Deferred Tax Assets
Self-insurance & contingency reserves $ 1,435 $ 8,139
Employee benefits 2,497 9,008
Accounts receivable 3,389 -
Inventory 2,959 -
Federal and State tax credits and
loss carryovers - 2,347
Miscellaneous 697 286
-------- --------
Total Deferred Tax Asset 10,977 19,780
Deferred Tax Liabilities
Investments - (60)
Fixed Assets - (20,437)
-------- --------
Total Deferred Tax Liability - (20,497)
-------- --------
Net Deferred Tax Asset (Liability) $ 10,977 $ (717)
======== ========
Note 6. Debt
At August 31, 1997 and November 30, 1996, the Company's long-term debt
consists
of the following (U.S. dollars in thousands):
Aug. 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 (3.45% at August 31, 1997) 7,200 7,200
Variable-rate unsecured bank revolving credit
facilities (approximately 5.85% at August 31, 1997) 53,812 11,009
Variable-rate unsecured bank loan, payable by a
consolidated subsidiary in Dutch guilders, with
annual principal installments of approximately
$639 (4.01% at August 31, 1997) 3,034 4,142
-------- --------
172,046 130,351
Less - Current portion 17,639 17,753
-------- --------
$154,407 $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
August 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 nine-month period ended August 31, 1997, the Company used $16.6
million of cash for operating activities (compared to generating $31 million
during the nine-month period ended August 31, 1996), principally as a result
of
higher working capital requirements. The change in working capital reflects
higher inventory levels and receivables caused by increased sales volume in
the Protective Coatings business due to the Devoe and Valspar acquisitions
and the seasonal demands of the Concrete and Steel Pipe business.
Additional net borrowings of $44.1 million plus $0.7 million from the
issuance of common stock were used for capital expenditures, increased
working capital requirements and payment of common dividends of $3.8 million.
Cash and cash equivalents at August 31, 1997 totaled $22.5 million, an
increase of $4.1 million from November 30,1996.
Cash used in investing activities consisted primarily of capital expenditures
for normal replacement and upgrades of machinery and equipment and a new
fiberglass pipe plant in Malaysia. Management estimates that capital
spending by the Company during this fiscal year will be between $20.0 million
and $30.0 million. Capital expenditures will be funded from existing cash
balances, cash generated from operations and existing lines of credit.
At August 31, 1997, the Company had approximately $72 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 - THIRD QUARTER
The Company earned $1.72 per share on sales of $146.3 million for the third
quarter of fiscal 1997, which compares favorably to earnings of $1.50 per
share on sales of $133.6 million for the same period last year.
The quarterly earnings improvement came primarily from increased
profitability from the worldwide Protective Coatings business. 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.
The Fiberglass Pipe business reported lower sales and earnings for the
quarter compared to the same period in 1996, because of a decline in
international operations. During the quarter, the European operation
completed a reorganization and trimmed staff to reduce future costs.
Additionally, during the quarter, two domestic fiberglass pipe plants were
consolidated into one manufacturing facility. A smaller plant in
Spartanburg, South Carolina, was closed and its equipment relocated to a
larger plant in Burkburnett, Texas.
The Concrete and Steel Pipe business reported slightly higher sales and lower
earnings. The earnings decline resulted from increased repair costs and a
change in sales mix.
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. During the quarter, a major reorganization was completed
in Hawaii, including a 20% reduction in salaried staff, to reduce future
costs. The domestic Pole Products business reported slightly higher sales and
earnings.
RESULTS OF OPERATIONS - YEAR TO DATE
The Company earned $3.25 per share on sales of $386.1 million during the nine
months ended August 31, 1997, which compares favorably to earnings of $2.71
per share on sales of $366 million during the prior year period.
The improvements resulted from substantial increases in sales and profits by
Protective Coatings and improved efficiencies by Fiberglass Pipe.
Protective Coatings year-to-date sales and earnings increased significantly
because of the Devoe acquisition, the Valspar acquisition and an increase in
sales of traditional Ameron coatings.
The Fiberglass Pipe business reported lower sales 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
weather-related and customer-requested delays that affected deliveries.
Profits were negatively impacted by the reduced sales volume.
Page 10
The construction products business in Hawaii posted a decline in sales and
earnings due to the depressed Hawaiian construction market. Sales from the
Pole Products business improved slightly for the year-to-date; however,
earnings declined because of a change in product mix and plant utilization.
Net interest expense for the nine-month period was higher than the same
period last year due primarily to increased borrowings to fund working
capital requirements to support increased sales volume in the Protective
Coatings business and higher Concrete and Steel Pipe inventory.
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. Under the most restrictive
provisions of these agreements, approximately $6.5 million of
consolidated retained earnings was not restricted at August 31,
1997.
Item 6. Exhibits and Reports on Form 8-K
A report on Form 8-K was filed on June 26, 1997, related to a news
release disclosing the Company's financial results for the second
quarter, which ended May 31, 1997.
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 International Corporation
Date: October 10, 1997
/s/ Gary Wagner
_________________________________
Gary Wagner
Senior Vice President,
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-END> AUG-31-1997
<CASH> 22,502
<SECURITIES> 0
<RECEIVABLES> 112,336
<ALLOWANCES> 0
<INVENTORY> 106,683
<CURRENT-ASSETS> 256,401
<PP&E> 126,430
<DEPRECIATION> 0
<TOTAL-ASSETS> 447,019
<CURRENT-LIABILITIES> 94,240
<BONDS> 0
0
0
<COMMON> 12,944
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 447,019
<SALES> 386,109
<TOTAL-REVENUES> 386,109
<CGS> 284,728
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 80,107
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,141
<INCOME-PRETAX> 20,397
<INCOME-TAX> 7,139
<INCOME-CONTINUING> 13,258
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,258
<EPS-PRIMARY> 3.25
<EPS-DILUTED> 0
</TABLE>
