<PAGE>
United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended November 30, 1997 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-9102
AMERON INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 77-0100596
(State of Incorporation) (I.R.S. Employer Identification No.)
245 South Los Robles Avenue
Pasadena, CA 91101
(Address and Zip Code of principal executive offices)
Registrant's telephone number, including area code: (626) 683-4000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange
Title of each class on which registered
---------------------------- ----------------------
Common Stock $2.50 par value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
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
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
------
The Registrant estimates that as of February 20, 1998 the aggregate market
value of the shares of its Common Stock, $2.50 par value, held by non-affiliates
of the Registrant (that is, shares beneficially owned by other than executive
officers and directors) was in excess of $222 million.
On February 20, 1998 there were 4,006,362 shares of Common Stock, $2.50 par
value outstanding. This is the only class of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
1. PORTIONS OF AMERON'S 1997 ANNUAL REPORT TO STOCKHOLDERS (PARTS I, II AND
IV).
2. PORTIONS OF AMERON'S PROXY STATEMENT FOR THE 1998 ANNUAL MEETING OF
STOCKHOLDERS (PART III).
<PAGE>
PART I
AMERON INTERNATIONAL CORPORATION
AMERON INTERNATIONAL CORPORATION, a Delaware corporation, and its
consolidated subsidiaries are collectively referred to herein as "Ameron",
the "Company", the "Registrant" or the "Corporation" unless the context
clearly indicates otherwise. The business of the Company has been divided
into business segments in Item 1(c)(1). Substantially all activities relate
to the manufacture of highly engineered products for sale to the industrial,
chemical, energy and construction markets. All references to "the year" or
"the fiscal year" pertain to the twelve months ended November 30, 1997. All
references to the "Annual Report" pertain to the Company's 1997 Annual Report
to Stockholders.
ITEM 1 - BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS.
Although the Company's antecedents date back to 1907, it evolved directly
from the merger of two separate firms in 1929, resulting in the
incorporation of American Concrete Pipe Co. on April 22, 1929. Various
name changes occurred between that time and 1942, at which time the
Company's name became American Pipe and Construction Co. By the late 1960s
the Company was almost exclusively engaged in manufacturing and had
expanded its product lines to include not only concrete and steel pipe but
also high-performance protective coatings, ready-mix concrete, aggregates
and reinforced thermosetting resin pipe and fittings.
At the beginning of 1970, the Company's name was changed to Ameron, Inc.
In the meantime, other manufactured products had been added to its product
lines. These included concrete and steel poles for street and area
lighting, and tapered steel vertical and cantilevered poles for traffic
signals.
In 1996, the Company's name was changed to Ameron International Corporation
in order to better reflect its expanded, global focus. Also in 1996, the
Company acquired assets of Centron, a leading manufacturer of fiberglass
pipe for the worldwide oil field market. In late 1996, the Company
acquired the worldwide Devoe marine coatings business of Imperial Chemical
Industries PLC.
Further details or commentary on the year's operations can be found in the
Annual Report, which is Exhibit 13 to this report on Form 10-K, and which
should be read in conjunction with this report.
(b) FINANCIAL INFORMATION AS TO INDUSTRY SEGMENTS.
The information contained in Notes (1), (6) and (17) of Notes to
Consolidated Financial Statements on pages 52,53,54,58,60 and 61 of the
Annual Report is incorporated herein by reference.
(c) NARRATIVE DESCRIPTION OF BUSINESS.
(1) For geographical and operational convenience, the Company is organized
into divisions. These divisions are combined into the following
groups serving the following-described industry segments. The Company
licenses its patents, trademarks, know-how and technical assistance
to various of its subsidiary and affiliated companies and to various
third-party licensees.
<PAGE>
a) The Protective Coatings Group develops, manufactures and markets
high-performance coatings and surfacer systems on a world-wide
basis. These products are utilized for the preservation of major
structures, such as metallic and concrete facilities and
equipment, to prevent their degradation by corrosion, abrasion,
marine fouling and other forms of chemical and physical attack.
The primary markets served include marine, offshore,
petrochemical, power generation, petroleum, chemical, steel, pulp
and paper, railroad, bridges, mining, metal processing and
original equipment manufacturing. These products are marketed by
direct sales, as well as through manufacturers' representatives,
distributors and licensees. Competition is based upon quality,
price and service. Manufacture of these products is carried out
in the Company's plant in Arkansas, by a wholly-owned subsidiary
in The Netherlands, by jointly-owned operations in Mexico and
Saudi Arabia and by various third party licensees.
b) The Fiberglass Pipe Group develops, manufactures and markets
filament-wound and molded fiberglass pipe and fittings. These
products are used by a wide range of process industries,
including industrial, petroleum, chemical processing and
petrochemical industries, for service station replacement piping
systems, aboard marine vessels and on offshore oil platforms, and
are marketed as an alternative to metallic piping systems which
ultimately fail under corrosive operating conditions. These
products are marketed by direct sales, as well as through
manufacturers' representatives, distributors and licensees.
Competition is based upon quality, price and service.
Manufacture of these products is carried out in the Company's
plant in Texas, by its wholly-owned domestic subsidiary, Centron
International Inc., at its plant in Texas, by wholly-owned
subsidiaries in The Netherlands, Singapore, and Malaysia, by a
jointly-owned affiliate in Saudi Arabia and by a licensee in
Indonesia.
c) The Concrete & Steel Pipe Group supplies products and services
used in the construction of pipeline facilities for various
utilities. Five plants are operated in Arizona and California.
Also included within this group is American Pipe & Construction
International, a wholly-owned subsidiary, with two plants in
Colombia. These plants manufacture concrete cylinder pipe,
prestressed concrete cylinder pipe, steel pipe and reinforced
concrete pipe for water transmission, storm and industrial waste
water and sewage collection. These products are marketed by
direct selling using the Company's own personnel and by
competitive bidding. Customers include local, state and federal
agencies, developers and general contractors. Normally no one
customer or group of customers will account for sales equal to or
greater than 10 percent of the Company's consolidated revenue.
However, occasionally, when more than one unusually large project
is in progress, combined sales to all U.S. government agencies
and/or general contractors for those agencies can reach those
proportions. Besides competing with several other concrete pipe
manufacturers located in the market area, alternative products
such as ductile iron, asbestos cement, and clay pipe compete with
the Company's concrete and steel pipe products, but ordinarily
these other materials do not offer the full diameter range
produced by the Company. Principal methods of competition are
price, delivery schedule and service. The Company's technology
is used in the Middle East by affiliated companies in Saudi
Arabia and by a licensee in Abu Dhabi. This segment also includes
the manufacturing and marketing on a world-wide basis through
direct sales of polyvinyl chloride and polyethylene sheet lining
for the protection of concrete pipe and cast-in-place concrete
structures from the corrosive effects of sewer gases, acids and
industrial chemicals. Competition is based on quality, price
and service. Manufacture of this product is carried out in the
Company's plant in California. This segment also includes
engineered design, fabrication and direct sale of specialized
proprietary equipment which is outside the regular business of
the other segments of the Company's businesses. Competition for
such work is based upon quality, price and service. Manufacture
of such equipment is carried out in the Company's plant in
California.
2
<PAGE>
d) The Construction & Allied Products Group includes the Ameron
Hawaii Division, which supplies ready-mix concrete, crushed and
sized basaltic aggregates, dune sand, concrete pipe and box
culverts, primarily to the construction industry in Hawaii.
These products are marketed through direct sales. Ample raw
materials are available locally in Hawaii and, as to rock
products, the Company has exclusive rights to a quarry containing
many years' reserves. Within the market area there are
competitors for each of the segment's products. No single
competitor offers the full range of products sold by the Company
in Hawaii. The principal methods of competition are in price and
service, since an appreciable portion of the segment's business
is obtained through competitive bidding.
This segment also includes the operations of the Pole Products
Division, which manufactures and markets concrete and steel poles
for highway, street and outdoor area lighting and for traffic
signals. Sales are nationwide, but with a stronger concentration
in the western states. Marketing is handled by the Company's own
sales force and by outside sales agents. Competition for such
products is mainly based on price, but with some consideration
for service and delivery. Manufacture of these products is
carried out in two plants in California, as well as plants in
Washington and Oklahoma.
e) Except as individually shown in the above descriptions of
industry segments, the following comments or situations apply to
all segments:
(i) Because of the number of manufacturing locations and the
variety of raw materials essential to the business, no
critical situations exist with respect to supply of
materials. The Company has multiple sources for raw
materials. The effects of increases in costs of energy are
being mitigated to the extent practical through
conservation and through addition or substitution of
equipment to manage the use and reduce consumption of
energy.
(ii) The Company owns certain patents and trademarks, both U.S.
and foreign, related to its products. It licenses these
proprietary items to some extent in the U.S., and to a
greater degree abroad. These patents, trademarks, and
licenses do not constitute a material portion of the
Company's business. No franchises or concessions exist.
(iii) Many of the Company's products are used in connection
with capital goods, water and sewage transmission and
construction of capital facilities. Favorable or
adverse effects on general sales volume and earnings
can result from weather conditions. Normally, sales
volume and earnings will be lowest in the first fiscal
quarter. Seasonal effects simply accelerate or slow the
business volume and normally do not bring about severe
changes in full-year activity.
(iv) With respect to working capital items, the Company does not
encounter any requirements which are not common to other
companies engaged in the same industries. No unusual
amounts of inventory are required to meet seasonal delivery
requirements. All of the Company's industry segments turn
their inventory between three and eight times annually.
Average days' sales in accounts receivable range between 44
and 93 for all segments.
(v) The value of backlog orders at November 30, 1997 and 1996
by industry segment is shown below. A substantial portion
of the November 30, 1997 backlog is expected to be billed
and recorded as sales during the fiscal year 1998.
3
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<TABLE>
<CAPTION>
Industry Segment 1997 1996
---------------- ------- --------
<S> <C> <C>
(in thousands)
Protective Coatings Group $ 6,580 $ 10,291
Fiberglass Pipe Group 25,440 19,819
Concrete & Steel Pipe Group 71,463 59,718
Construction & Allied Products Group 21,899 14,978
--------- --------
Total $125,382 $104,806
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--------- --------
</TABLE>
(vi) The results of uncontrolled affiliated companies are not
reflected in the amounts reported for each industry segment.
(vii) There was no significant change in competitive conditions or
the competitive position of the Company in the industries and
localities in which it operates. There is no knowledge of any
single competitive situation which would be material to an
understanding of the business.
(viii) Sales contracts in all of the Company's business segments
normally consist of purchase orders, which in some cases are
issued pursuant to master purchase agreements. Longer term
contracts seldom involve commitments of more than one year by
the Company, and exceptions are not deemed material by
management. Payment is normally due from 30 to 60 days after
shipment, with progress payments prior to shipment in some
circumstances. It is the Company's practice to require letters
of credit prior to shipment of foreign orders, subject to
limited exceptions. The Company does not typically extend
long-term credit to purchasers of its products.
(2) a) Approximate expense during each of the last three fiscal years for
Research and Development costs is shown under the caption in Note (1)
of Notes to Consolidated Financial Statements on page 52 of the Annual
Report, which information is incorporated herein by reference.
b) The Company's business is not dependent on any single customer or few
customers, the loss of any one or more of whom would have a material
adverse effect on its business.
c) For many years the Company has been consistently installing or
improving devices to control or eliminate the discharge of pollutants
into the environment. Accordingly, compliance with federal, state,
and locally enacted provisions relating to protection of the
environment is not having, and is not expected to have, a material
effect upon the Company's capital expenditures, earnings, or
competitive position.
d) At year-end the Company and its consolidated subsidiaries employed
approximately 2,761 persons. Of those, approximately 900 were covered
by labor union contracts, and there are four separate bargaining
agreements subject to renegotiation in 1998.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES.
The information contained in Notes (6) and (17) of Notes to Consolidated
Financial Statements on pages 53, 54, 58, 60 and 61 of the Annual Report is
incorporated herein by reference.
4
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Export sales in the aggregate from domestic operations during the last
three fiscal years were:
<TABLE>
<CAPTION>
In thousands
------------
<S> <C>
1997 $38,815
1996 30,980
1995 15,552
</TABLE>
ITEM 2 - DESCRIPTION OF PROPERTY
(a) The location and general character of principal plants and other materially
important physical properties used in the Company's operations is tabulated
below. Property is owned in fee except where otherwise indicated by
footnote. In addition to the property shown, the Company owns vacant land
adjacent to or in the proximity of some of its operating locations and
holds this property available for use when it may be needed to accommodate
expanded or new operations. Property listed does not include any temporary
project sites which are generally leased for the duration of the respective
projects. With the exception of the Kailua, Oahu property, shown under the
Construction & Allied Products industry segment, there are no material
leases with respect to which expiration or inability to renew would have
any material adverse effect on the Company's operations. The lease term on
the Kailua property extends to the year 2012. This is the principal source
of quarried rock and aggregates for the Company's operations on Oahu,
Hawaii and, in management's opinion, reserves are adequate for its
requirements during the term of the lease.
(b) The Company believes that its existing facilities are adequate for current
and presently foreseeable operations. Because of the cyclical nature of
certain of the Company's operations, and the substantial amounts involved
in some individual orders, the level of utilization of particular
facilities may vary significantly from time to time in the normal course of
operations.
<TABLE>
<CAPTION>
INDUSTRY SEGMENT - GROUP
Division - Location Description
------------------- -----------
<S> <C>
PROTECTIVE COATINGS GROUP
Protective Coatings division - USA
Brea, CA Office, Laboratory
Little Rock, AR Office, Plant
Ameron B.V.
Geldermalsen, The Netherlands Office, Plant
FIBERGLASS PIPE GROUP
Fiberglass Pipe division - USA
Houston, TX *Office
Burkburnett, TX Office, Plant
Centron International, Inc.
Mineral Wells, TX Office, Plant
5
<PAGE>
Ameron B.V.
Geldermalsen, The Netherlands Office, Plant
Ameron (Pte) Ltd.
Singapore *Office, Plant
Ameron Malaysia Sdn. Bhd.
Malaysia *Office,Plant
CONCRETE AND STEEL PIPE GROUP
Southern division
Rancho Cucamonga, CA *Office
Etiwanda, CA Plant
Fontana, CA *Office, Plant
Lakeside, CA Plant
Phoenix, AZ Office, Plant
Northern division
Tracy, CA Office, Plant
Protective Linings division
Brea, CA Office, Plant
Fabrication Plant
South Gate, CA Office, Plant
American Pipe & Construction International
Bogota, Colombia Office, Plant
Cali, Colombia Plant
CONSTRUCTION & ALLIED PRODUCTS GROUP
Hawaii division
Honolulu, Oahu, HI *Office, Plant
Kailua, Oahu, HI *Plant, Quarry
Barbers Point, Oahu, HI Plant
Puunene, Maui, HI *Office, Plant, Quarry
Pole Products division
Fillmore, CA Office, Plant
Oakland, CA *Plant
Everett, WA *Office, Plant
Tulsa, OK *Office, Plant
Ventura, CA *Office
6
<PAGE>
CORPORATE
Corporate Headquarters
Pasadena, CA *Office
Corporate Research & Engineering
South Gate, CA Office, Laboratory
*Leased
</TABLE>
ITEM 3 - LEGAL PROCEEDINGS
An action was filed in 1992 in the U.S. District for the District of Arizona by
the Central Arizona Water Conservation District ("CAWCD") seeking damages
against several parties, including the Company and the Company's customer, Peter
Kiewit Sons' Company ("Kiewit"), in connection with six prestressed concrete
pipe siphons furnished and installed in the 1970's as part of the Central
Arizona Project ("CAP"), a federal project to bring water from the Colorado
River to Arizona. The CAWCD also filed separate actions against the U.S. Bureau
of Reclamation ("USBR") in the U.S. Court of Claims and with the Arizona
Projects Office of the USBR in connection with the CAP siphons. The CAWCD
alleged that the six CAP siphons were defective and that the USBR and the
defendants in the U.S. District Court action were liable for the repair or
replacement of those siphons at a claimed estimated cost of $146.7 million. On
September 14, 1994 the U.S. District granted the Company's motion to dismiss the
CAWCD action and entered judgment against the CAWCD and in favor of the Company
and its co-defendants. CAWCD has filed a notice of appeal with the Ninth
Circuit Court of Appeals.
Separately, on September 28, 1995 the Contracting Officer for the USBR issued a
final decision claiming for the USBR approximately $40 million in damages
against Kiewit, based in part on the Contracting Officer's finding that the
siphons supplied by the Company were defective. That claim amount is considered
by the Company to be duplicative of the damages sought by the CAWCD for the
repair or replacement of the siphons in its aforementioned action in the U.S.
District for the District of Arizona. The Contracting Officer's final decision
has been appealed by Kiewit to the U.S. Department of the Interior Board of
Contract Appeals ("IBCA"). The Company is actively cooperating with, and
assisting, Kiewit in the administrative appeal of that final decision before the
IBCA.
The Company internally, as well as through independent third party consultants,
has conducted engineering analyses regarding the allegations that the CAP
siphons were defective and believes that the siphons were manufactured in
accordance with the project specifications and other contract requirements, and
therefore it is not liable for any claims relating to the siphons, whether by
the CAWCD or by the USBR. The Company has recorded provisions deemed adequate
by the Company to permit it to continue to vigorously defend its position in
this matter. The Company believes that it has meritorious defenses to these
actions and that resultant liability, if any, should not have a material adverse
effect on the financial position of the Company or its results of operations.
7
<PAGE>
In addition, certain other claims, suits and complaints, which arise in the
ordinary course of business, have been filed or are pending against the Company.
Management believes that these matters, and the matters discussed above, are
either adequately reserved, covered by insurance, or would not have an adverse
material effect on the financial position of the Company and its results of
operations if disposed of unfavorably.
The Company is also subject to federal, state and local laws and regulations
concerning the environment and is currently participating in administrative
proceedings at several sites under these laws. It is difficult to estimate with
any certainty the total cost of remediation, the timing and extent of remedial
actions required by governmental authorities, and the amount of the Company's
liability, if any, in proportion to that of other potentially responsible
parties. While the Company finds it difficult to estimate with any certainty
the total cost of remediation at the several sites which are subject to
environmental regulatory proceedings, on the basis of currently available
information, the Company does not believe it likely that the outcome of such
environmental regulatory proceedings will have a material adverse effect on the
Company's financial position or its results of operations. This conclusion is
based on the location and type of contamination of each site, potential recovery
from insurance carriers and existing reserves. When it has been possible to
reasonably estimate the Company's liability with respect to these matters,
provisions have been made as appropriate.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(Not Applicable)
ITEM 4A - EXECUTIVE OFFICERS OF THE REGISTRANT
The following sets forth information with respect to individuals who served as
executive officers as of November 30, 1997 and who are not directors of the
Company. All executive officers are appointed by the Board of Directors to
serve at the discretion of the Board of Directors.
<TABLE>
<CAPTION>
Name Age Title and Year Elected as Officer
- ----------------- --- -------------------------------------------
<S> <C> <C>
George J. Fischer 63 Senior Vice President, Human Resources 1992
Raymond E. Foscante 55 Senior Vice President, Technology and
Business Development 1996
Thomas P. Giese 53 Vice President; Group President Concrete
& Steel Pipe Group 1997
James R. McLaughlin 50 Vice President & Treasurer 1997
Dewey H. Norton 53 Vice President, Controller 1997
Gordon G. Robertson 58 Vice President; Group President
Fiberglass Pipe Group 1997
Javier Solis 51 Senior Vice President of Administration,
Secretary & General Counsel 1984
</TABLE>
8
<PAGE>
<TABLE>
<S> <C> <C>
S. Daniel Stracner 51 Vice President, Communications &
Public Affairs 1993
Michael J. Tornberg 50 Vice President; Group President
Protective Coatings Group 1997
Gary Wagner 46 Senior Vice President & Chief Financial
Officer 1990
Robert F. Wilkinson 58 Vice President; President Ameron Hawaii 1997
</TABLE>
All of the executive officers named above have held high level managerial or
executive positions with the Company for more than the past five years except
Messrs. McLaughlin, Norton, Tornberg and Wilkinson.
Mr. McLaughlin joined the Company in 1994 as Director of Financial Planning and
Analysis. In 1997 he was named Vice President and Treasurer. Prior to joining
the Company, he was Director of Operational Analysis for GenCorp Polymer
Products, a division of GenCorp Inc.
Prior to joining the Company in 1997 as Vice President, Controller, Mr. Norton
was Vice President, Finance with Baldwin Filters since 1993.
Mr. Tornberg joined the Company in 1995 as Vice President, Business Development.
In 1996 he was named Group President, Protective Coatings Group. Prior to
coming to the Company, he was with GenCorp Inc. where he served as Director of
Operations for the Coated Fabrics and Wallcovering businesses and Vice President
of the Residential Wallcoverings Division from 1988.
Mr. Wilkinson joined the Company in mid-1996 and was named President of Ameron
Hawaii in December. Prior to that time he served as President and Chief
Executive Officer of Sinclair Paint Company and as President and Chief Operating
Officer of Frazee Paint Company.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Common Stock, $2.50 Par Value, of the Company, its only outstanding class of
common equity, is traded on the New York Stock Exchange, the only exchange on
which it is presently listed. On February 20, 1998, there were 1,617
stockholders of record of such stock.
Dividends have been paid each quarter during the prior two years and for many
years in the past. Information as to the amount of dividends paid during the
reporting period and the high and low prices of the Company's Common Stock
during that period are set out under the caption Per Share Data shown on page 58
of the Annual Report, which information is incorporated herein by reference.
Terms of lending agreements which place restrictions on cash dividends are
discussed in Note (12) of Notes to Consolidated Financial Statements on page 56
of the Annual Report, which is incorporated herein by reference.
9
<PAGE>
ITEM 6 - SELECTED FINANCIAL DATA
The information required by this item is contained in the Selected Consolidated
Financial Information shown on page 42 of the Annual Report, which information
is incorporated herein by reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information required by this item with respect to fiscal years 1997 and 1996
is shown under Ameron 1997 Financial Review on pages 43-46 of the Annual Report,
which information is incorporated herein by reference. The information required
for 1995 is as follows:
Results of Operations: 1995 Compared with 1994
GENERAL. Net income in 1995 was $12.5 million or $3.15 per share on sales of
$481.4 million, compared to net income of $10.8 million or $2.75 per share on
sales of $417.7 million in 1994. Results in 1994 included a gain on the sale of
a non-strategic steel fabrication subsidiary in Colombia, which resulted in a
net after-tax gain of $1.8 million or $.46 per share. After adjusting for the
gain on the sale of this subsidiary, earnings per share for 1994 were $2.29. The
increase in 1995 earnings over equivalent 1994 earnings was 38%.
The sales and earnings improvement over 1994 reflects a significant increase in
concrete and steel pipe deliveries in California, as well as improved
performance by the Fiberglass Pipe business segment. Net income in 1995 also
benefited from improved performance at certain affiliated companies.
SALES. Compared to 1994, sales increased $63.7 million or 15% in 1995, primarily
because of significantly improved deliveries of concrete and steel pipe in
California and increased shipments of fiberglass pipe to Central Africa, the
Middle East, Europe and the Pacific Rim. These sales increases were partially
offset by lower Protective Coatings shipments to North Africa from the Company's
subsidiary in The Netherlands.
Protective Coatings sales were $130.5 million in 1995 compared to $134.2 million
in 1994. Sales of protective coatings and product finishes in the U.S. increased
over 1994 record sales. Ameron's product line based on proprietary
PSX-Registered Trademark- technology continued to grow as an important component
of its high-performance product sales. The primary product in that series, PSX
700, tripled sales in 1995 compared to 1994 and was among the segment's top five
products in sales volume. Modest gains were made in key U.S. market segments,
notably rail, marine and offshore. Sales in Europe, while adversely affected by
the reduction in shipments to North Africa, showed improvements in core
industrial segments in Western and Eastern Europe and in the Middle East.
Fiberglass Pipe sales improved to $82.8 million in 1995, versus $66.2 million in
1994. The increase in sales can be attributed to strong oilfield, industrial,
offshore and marine markets in Europe, Central Africa, the Middle East and the
Pacific Rim. Sales in the U.S. declined during 1995.
Concrete and Steel Pipe sales totaled $153.2 million in 1995, compared to $101.6
million in 1994. The primary reason for the $51.6 million increase was the
commencement of several major water transmission pipelines in California,
including the Coastal Aqueduct, the Eastside pipeline and the Los Vaqueros
pipeline -- the largest concrete pipe contract in Ameron's history.
10
<PAGE>
Construction & Allied Products sales totaled $115.0 million in 1995 compared to
$115.6 million in 1994. The Pole Products business enjoyed significant growth in
traffic signal, highway lighting and street lighting applications due to broader
geographic coverage. The Company's Hawaiian operation, which is the largest
supplier of ready-mix concrete on the Islands continued to experience a downturn
in sales due to reduced construction spending in Hawaii.
GROSS PROFIT. Gross profit of $116.7 million in 1995 was higher than the $104.0
million reported in 1994. The improvement in gross profit in 1995 was due mainly
to the increase in sales volume in 1995, as discussed above. Gross profit as a
percent of sales declined from 24.9% in 1994 to 24.2% in 1995. The decrease in
margin resulted principally from a change in the product mix caused by higher
sales of lower margin concrete and steel pipe, coupled with decreased margins
due to higher raw material costs and competitive pricing in the Protective
Coatings segment. This decline was partially offset by improved gross profit
margins in the Company's other business segments as a result of improved pricing
and increased capacity utilization.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses totaled $95.8 million in 1995 or 19.9% of sales,
compared to $86.8 million or 20.8% of sales in 1994. The $9.0 million increase
was attributable primarily to the substantial increase in business activity over
1994.
GAIN ON THE SALE OF ASSETS. The gain from the sale of assets in 1994 was
realized principally from the divestiture of a wholly-owned non-strategic steel
fabrication subsidiary in Colombia.
OTHER INCOME. Equity in earnings of affiliated companies recorded in 1995
totaled $3.8 million, an increase of $2.2 million from 1994. Two affiliates,
Tamco, which operates a steel mini-mill in Southern California, and
Bondstrand, Ltd., a fiberglass pipe manufacturer in Saudi Arabia, reported
higher sales and earnings in 1995. Sales and earnings of the Company's
concrete pipe producing affiliates, Gifford-Hill-American, Inc. in Texas and
Ameron Saudi Arabia, Ltd. were lower in 1995 than in the previous year.
Royalty and fee income from affiliated companies and licensees declined in
1995 from the prior year as a result of decreased sales reported by
affiliated companies. Foreign currency losses were incurred by the Company's
Colombian and European operations. Miscellaneous income included sublease and
property rental income as well as other income from various sources.
INTEREST. Interest expense totaled $11.7 million in 1995, an increase of $.5
million from 1994 due to higher borrowing levels maintained throughout the year.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements, the report thereon of Arthur Andersen LLP
dated January 19, 1998 and Notes to Consolidated Financial Statements comprising
pages 47 through 59 of the Annual Report, are incorporated herein by reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
(Not applicable)
11
<PAGE>
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to the directors is contained under the section
entitled, "Election of Directors" in the Company's Proxy Statement which was
filed on February 25, 1998 in connection with the Annual Meeting of Stockholders
to be held on March 25, 1998. Such information is incorporated herein by
reference.
Information with respect to the executive officers who are not directors of
the Company is located in Part I, Item 4A of this report.
ITEM 11 - EXECUTIVE COMPENSATION*
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT*
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS*
*The information required by Items 11, 12 and 13 is contained in the Company's
Proxy Statement which was filed on February 2-, 1998 in connection with the 1998
Annual Meeting of Stockholders to be held on March 25, 1998. Such information
is incorporated herein by reference.
12
<PAGE>
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) (1) FINANCIAL STATEMENTS:
The financial statements to be filed hereunder are cross-referenced,
in the index immediately following, to the Annual Report, as to
sections incorporated herein by reference.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Statement Page Reference
--------- to Annual Report
----------------
<S> <C>
Consolidated Statements of Operations for the years
ended November 30, 1997, 1996 and 1995 47
Consolidated Balance Sheets at November 30, 1997
and 1996 48-49
Consolidated Statements of Cash Flows for the years
ended November 30, 1997, 1996 and 1995 50
Consolidated Statements of Stockholders' Equity
for the years ended November 30, 1997, 1996 and 1995 51
Notes to Consolidated Financial Statements 52-58
</TABLE>
(i) Summarized information as to the financial condition and
results of operations for Gifford-Hill-American, Inc.,
Ameron Saudi Arabia, Ltd., Bondstrand, Ltd, Oasis-Ameron,
Ltd. and Tamco are presented in Note (6) of Notes to
Consolidated Financial Statements on pages 53-54 the Annual
Report, which information is incorporated herein by
reference.
13
<PAGE>
(a) (2) FINANCIAL STATEMENT SCHEDULES:
The following additional financial data should be read in conjunction
with the consolidated financial statements in the 1997 Annual Report.
Schedules not included with this additional financial data have been
omitted because they are either not applicable, not required, not
significant, or the required information is provided in the
consolidated financial statements or notes thereto.
<TABLE>
<CAPTION>
Pages of
Schedule Schedules of Ameron International and Subsidiaries This Report
-------- -------------------------------------------------- -----------
<S> <C> <C>
Report of Independent Public Accountants 14
II Valuation and Qualifying Accounts and Reserves 15-17
(a) (3) EXHIBITS
3(i) Certificate of Incorporation [Incorporated by
reference to Annual Report on Form 10-K filed
with the Commission for Registrant's fiscal
year ended November 30, 1996.]
3(ii) Bylaws
4 Instrument Defining the Rights of Security Holders,
Including Indentures
1. Note Agreement dated September 1, 1990 re: Senior
Notes due September 15, 2000, which document is
incorporated by reference to Annual Report on
Form 10-K filed with the Commission for
Registrant's fiscal year ended November 30, 1990.
2. Note Agreement dated November 15, 1991 re: Senior
Notes due November 15, 1998, which document is
incorporated by reference to Annual Report on Form
10-K filed with the Commission for Registrant's
fiscal year ended November 30, 1991.
3. Note Purchase Agreement dated August 28, 1996 re:
Senior Notes due September 1, 2006, which document
is incorporated by reference to Annual Report on
Form 10-K filed with the Commission for Registrant's
fiscal year ended November 30, 1996.
The Company agrees to provide to the Securities and
Exchange Commission, on request, copies of instruments
defining the rights of security holders of long-term
debt of the Company.
10 Material Contracts
13 Annual Report
21 Subsidiaries of the Registrant
23 Consent of Independent Public Accountants
</TABLE>
(b) REPORTS ON FORM 8-K
A report on Form 8-K was filed by the Corporation on September 25, 1997
reporting under Item 5 the financial results for the Company's third
quarter ended August 31, 1997.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Stockholders and the Board of Directors, Ameron International
Corporation:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in Ameron's Annual Report to
Stockholders incorporated by reference in this Form 10-K, and have issued our
report thereon dated January 19, 1998. Our audits were made for the purpose of
forming an opinion on those statements taken as a whole. The schedule listed in
the index above is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Los Angeles, California
January 19, 1998
14
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) 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
By:/s/ Javier Solis
-----------------------------------------------
Javier Solis, Senior Vice President & Secretary
Date: February 26, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Date: 2-26-98 /s/ James S. Marlen Director, Chairman of the Board, President and
--------------------------------- Chief Executive Officer (Principal Executive
James S. Marlen Officer)
Date: 2-24-98 /s/ Gary Wagner Senior Vice President & Chief Financial Officer
--------------------------------- (Principal Financial & Accounting Officer)
Gary Wagner
Date: 2-24-98 /s/ Stephen W. Foss Director
---------------------------------
Stephen W. Foss
Date: Director
---------------------------------
A. Frederick Gerstell
Date: Director
---------------------------------
J. Michael Hagan
Date: 2-24-98 /s/ Terry L. Haines Director
---------------------------------
Terry L. Haines
Date: 2-24-98 /s/ John F. King Director
---------------------------------
John F. King
Date: 2-16-98 /s/ Alan L. Ockene Director
---------------------------------
Alan L. Ockene
Date: 2-24-98 /s/ Richard J. Pearson Director
---------------------------------
Richard J. Pearson
Date: 2-24-98 /s/ David L. Sliney Director
---------------------------------
David L. Sliney
Date: 2-13-98 /s/ F. H. Fentener van Vlissingen Director
---------------------------------
F. H. Fentener van Vlissingen
</TABLE>
18
<PAGE>
AMERON INTERNATIONAL CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEAR ENDED NOVEMBER 30, 1997
(In thousands)
<TABLE>
<CAPTION>
Addi- Deduc-
tions tions,
Balance Charged Pay- Reclas-
at to ments sifica- Balance
Begin- Costs and tions at
ning and Write- and End
Classification of Year Expense offs Others of Year
- --------------------------- ----------- --------- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
Deducted from asset accounts
Allowance for
doubtful accounts $ 5,939 $ 1,798 $ (1,692) $ (643) $ 5,402
Reserve for realization
of investments in
affiliates $ 9,595 $ 1,700 $ - $ - $ 11,295
Reserve for write-down
of assets related to
certain foreign
affiliates $ 3,853 $ - $ - $ - $ 3,853
Included in current liabilities
Reserve for pending
claims and litigation $ 5,188 $ 1,409 $ (3,140) $ (115) $ 3,342
Restructuring reserve $ 346 $ 62 $ (410) $ 2 $ -
Other reserves $ 679 $ 620 $ (938) $ 15 $ 376
Reserve for self-insured
programs $ 6,317 $ 443 $ (4,010) $ (697) $ 2,053
Included in long-term liabilities
Reserve for pending
claims and litigation $ 14,927 $ 1,850 $ (947) $ 57 $ 15,887
Other Reserves $ - $ 125 $ (84) $ - $ 41
Reserve for self-insured
programs $ 6,771 $ - $ - $ 900 $ 7,671
</TABLE>
15
<PAGE>
AMERON INTERNATIONAL CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEAR ENDED NOVEMBER 30, 1996
(In thousands)
<TABLE>
<CAPTION>
Addi- Deduc-
tions tions,
Balance Charged Pay- Reclas-
at to ments sifica- Balance
Begin- Costs and tions at
ning and Write- and End
Classification of Year Expense offs Others of Year
- --------------------------- ----------- --------- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
Deducted from asset accounts
Allowance for
doubtful accounts $ 4,800 $ 2,583 $ (1,325) $ (119) $ 5,939
Reserve for realization
of investments in
affiliates $ 9,359 $ 1,408 $ (1,172) $ - $ 9,595
Reserve for write-down
of assets related to
certain foreign
affiliates $ 3,219 $ 694 $ (60) $ - $ 3,853
Included in current liabilities
Reserve for pending
claims and litigation $ 3,086 $ 3,864 $ (1,718) $ (44) $ 5,188
Restructuring reserve $ 539 $ (94) $ (99) $ - $ 346
Other reserves $ 764 $ 616 $ (761) $ 60 $ 679
Reserve for self-insured
programs $ 5,874 $ 6,564 $ (6,121) $ - $ 6,317
Included in long-term liabilities
Reserve for pending
claims and litigation $ 13,788 $ 2,174 $ (1,035) $ - $ 14,927
Restructuring reserve $ 1,261 $ (430) $ (831) $ - $ -
Reserve for self-insured
programs $ 6,771 $ - $ - $ - $ 6,771
</TABLE>
16
<PAGE>
AMERON INTERNATIONAL CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEAR ENDED NOVEMBER 30, 1995
(In thousands)
<TABLE>
<CAPTION>
Addi- Deduc-
tions tions,
Balance Charged Pay- Reclas-
at to ments sifica- Balance
Begin- Costs and tions at
ning and Write- and End
Classification of Year Expense offs Others of Year
- --------------------------- ----------- --------- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
Deducted from asset accounts
Allowance for
doubtful accounts $ 4,135 $ 1,710 $ (1,138) $ 93 $ 4,800
Reserve for investments
in affiliates $ 9,748 $ - $ - $ (389) $ 9,359
Reserve for write-down
of assets related to
certain foreign
affiliates $ 3,216 $ 3 $ - $ - $ 3,219
Included in current liabilities
Reserve for pending
claims and litigation $ 6,218 $ 1,109 $ (1,894) $ (2,347) $ 3,086
Restructuring reserve $ 3,646 $ - $ (1,846) $ (1,261) $ 539
Other reserves $ 1,336 $ 62 $ (633) $ (1) $ 764
Reserve for self-insured
programs $ 4,392 $ 5,413 $ (3,931) $ - $ 5,874
Included in long-term liabilities
Reserve for pending
claims and litigation $ 10,429 $ 1,330 $ (387) $ 2,416 $ 13,788
Restructuring reserve $ - $ - $ - $ 1,261 $ 1,261
Reserve for self-insured
programs $ 6,771 $ - $ - $ - $ 6,771
(1) Included as equity in earnings of affiliated companies in Consolidated
Statement of Income
</TABLE>
17
<PAGE>
AMERON INTERNATIONAL CORPORATION
(a Delaware corporation)
BYLAWS
(Restated with amendments
through February 1, 1997 )
ARTICLE I
Offices
SECTION 1.01. Registered Office. The registered office of AMERON
INTERNATIONAL CORPORATION (hereinafter called the Corporation) in the State of
Delaware shall be at 1209 Orange Street, City of Wilmington, County of New
Castle, and the name of the registered agent in charge thereof shall be The
Corporation Trust Company.
SECTION 1.02. Other Offices. The Corporation may also have an office
or offices at such other place or places, either within or without the State of
Delaware, as the Board of Directors (hereinafter called the Board) may from time
to time determine or as the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
SECTION 2.01. Annual Meetings. Annual Meetings of the stockholders
of the Corporation for the purpose of electing directors and for the transaction
of such other proper business as may come before such meetings may be held at
such time, date and place as the Board shall determine by resolution.
SECTION 2.02. Special Meetings. Special meetings of the stockholders
of the Corporation for any purpose may only be called in accordance with the
provisions of the Certificate of Incorporation.
SECTION 2.03. Place of Meetings. All meetings of the stockholders
shall be held at such places, within or without the State of Delaware, as may be
designated by the Board.
<PAGE>
SECTION 2.04. Notice of Meetings. Except as otherwise required by
law, notice of each meeting of the stockholders, whether annual or special,
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder of record entitled to vote at such
meeting by delivering a typewritten or printed notice thereof to him personally,
or by depositing such notice in the United States mail, in a postage prepaid
envelope, directed to him at his post office address furnished by him to the
Secretary of the Corporation for such purpose or, if he shall not have furnished
to the Secretary his address for such purpose, then at his post office address
last known to the Secretary, or by transmitting a notice thereof to him at such
address by telegraph, cable, or wireless. Except as otherwise expressly
required by law, no publication of any notice of a meeting of the stockholders
shall be required. Every notice of a meeting of the stockholders shall state
the place, date and hour of the meeting, and, in the case of a special meeting,
shall also state the purpose or purposes for which the meeting is called.
Notice of any meeting of stockholders shall not be required to be given to any
stockholder to whom notice may be omitted pursuant to applicable Delaware law or
who shall have waived such notice and such notice shall be deemed waived by any
stockholder who shall attend such meeting in person or by proxy, except as a
stockholder who shall attend such meeting for the express purpose of objecting,
at the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. Except as otherwise expressly
required by law, notice of any adjourned meeting of the stockholders need not be
given if the time and place thereof are announced at the meeting at which the
adjournment is taken.
SECTION 2.05. Quorum. Except as otherwise required by law, the
holders of record of a majority in voting interest of the shares of stock of the
Corporation entitled to be voted thereat, present in person or by proxy, shall
constitute a quorum for the transaction of business at any meeting of the
stockholders of the Corporation or any adjournment thereof. In the absence of a
quorum at any meeting or any adjournment thereof, a majority in voting interest
of the stockholders present in person or by proxy and entitled to vote thereat
or, in the absence therefrom of all the stockholders, any officer entitled to
preside at, or to act as secretary of, such meeting may adjourn such meeting
from time to time. At any such adjourned meeting at which a quorum is present
any business may be transacted which might have been transacted at the meeting
as originally called.
SECTION 2.06. Voting.
(a) Each stockholder shall, at each meeting of the stockholders, be
entitled to vote in person or by proxy each share or fractional share of the
stock of the Corporation having voting rights on the matter in question and
which shall have been held by him and registered in his name on the books of the
Corporation:
-2-
<PAGE>
(i) on the date fixed pursuant to Section 6.05 of these Bylaws
as the record date for the determination of stockholders entitled to
notice of and to vote at such meeting, or
(ii) if no such record date shall have been so fixed, then (a)
at the close of business on the day next preceding the day on which
notice of the meeting shall be given or (b) if notice of the meeting
shall be waived, at the close of business on the day next preceding
the day on which the meeting shall be held.
(b) Shares of its own stock belonging to the Corporation or to
another corporation, if a majority of the shares entitled to vote in the
election of directors in such other corporation is held, directly or indirectly,
by the Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Persons holding stock of the Corporation in a fiduciary capacity
shall be entitled to vote such stock. Persons whose stock is pledged shall be
entitled to vote, unless in the transfer by the pledgor on the books of the
Corporation he shall have expressly empowered the pledges to vote thereon, in
which case only the pledges, or his proxy, may represent such stock and vote
thereon. Stock having voting power standing of record in the names of two or
more persons, whether fiduciaries, members of a partnership, joint tenants in
common, tenants by entirety or otherwise, or with respect to which two or more
persons have the same fiduciary relationship, shall be voted in accordance with
the provisions of the General Corporation Law of the State of Delaware.
(c) Any such voting rights may be exercised by the stockholder
entitled thereto in person or by his proxy appointed by an instrument in
writing, subscribed by such stockholder or by his attorney thereunto authorized
and delivered to the secretary of the meeting; provided, however, that no proxy
shall be voted or acted upon after three years from its date unless said proxy
shall provide for a longer period. The attendance at any meeting of a
stockholder who may theretofore have given a proxy shall not have the effect of
revoking the same unless he shall in writing so notify the secretary of the
meeting prior to the voting of the proxy. At any meeting of the stockholders
all matters, except as otherwise provided in the Certificate of Incorporation,
in these Bylaws or by law, shall be decided by the vote of a majority in voting
interest of the stockholders present in person or by proxy and entitled to vote
thereat and thereon, a quorum being present. The vote at any meeting of the
stockholders on any question need not be by ballot, unless so directed by the
chairman of the meeting. On a vote by ballot each ballot shall be signed by the
stockholder voting, or by his proxy, if there be such proxy, and it shall state
the number of shares voted.
SECTION 2.07. List of Stockholders. The Secretary of the Corporation
shall prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the
-3-
<PAGE>
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
SECTION 2.08. Judges. If at any meeting of the stockholders a vote
by written ballot shall be taken on any question, the chairman of such meeting
may appoint a judge or judges to act with respect to such vote. Each judge so
appointed shall first subscribe an oath faithfully to execute the duties of a
judge at such meeting with strict impartiality and according to the best of his
ability. Such judges shall decide upon the qualifications of the voters and
shall report the number of shares represented at the meeting and entitled to
vote on such question, shall conduct and accept the votes, and, when the voting
is completed, shall ascertain and report the number of shares voted respectively
for and against the question. Reports of judges shall be in writing and
subscribed and delivered by them to the Secretary of the Corporation. The
judges need not be stockholders of the Corporation, and any officer of the
Corporation may be a judge on any question other than a vote for or against a
proposal in which he shall have a material interest.
SECTION 2.09. Action Without Meeting. No action shall be taken by
the stockholders except at an annual or special meeting of stockholders. No
action shall be taken by stockholders by written consent.
SECTION 2.10 Notice of Stockholder Business. At any annual
stockholders' meeting, only such business shall be conducted as shall have been
properly brought before the meeting. To be properly brought before an annual
stockholders' meeting, business must be (i) specified in the notice of meeting
(or any supplement thereto) given by or at the direction of the Board of
Directors; (ii) otherwise properly brought before the meeting by or at the
direction of the Board of Directors; or (iii) otherwise properly brought before
the meeting by a stockholder. For business to be properly brought before an
annual meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be received at the principal office of the Corporation
not less than sixty (60) days nor more than one hundred and twenty (120) days
prior to the meeting; provided, however, that in the event that the first public
disclosure (whether by mailing of a notice to shareholders, press release or
otherwise) of the date of the meeting is made less than sixty-five (65) days
prior to the date of the meeting, notice by the stockholder will be timely if
received not later than the close of business on the tenth day following the day
on which such first public
-4-
<PAGE>
disclosure was made. A stockholder's notice to the Secretary shall set forth,
as to each matter the stockholder proposes to bring before the annual meeting,
(i) the reasons for conducting such business at the annual meeting; (ii) the
name and address as they appear on the Corporation's stock register, of the
stockholder proposing such business; (iii) the number of shares of capital stock
of the Corporation which are beneficially owned by the stockholder; and (iv) any
material interest of the stockholder in such business. Notwithstanding any
other provision of these Bylaws, no business shall be conducted at an annual
stockholders' meeting except in accordance with the procedures set forth in this
Section 2.10. If the presiding officer of an annual stockholders' meeting
determines and declares that business was not properly brought before the
meeting in accordance with this Section 2.10, any such business shall not be
transacted.
ARTICLE III
Board of Directors
SECTION 3.01. General Powers. The property, business and affairs of
the Corporation shall be managed by the Board.
SECTION 3.02. Number and Term of Office. The number of directors
shall not be less than six (6) nor more than eleven (10), the exact number of
which shall be fixed by Bylaw duly adopted by the Board. The number of
directors of the Corporation shall be ten (10). The Board shall be divided into
three classes, Class I, Class II and Class III. Such classes shall be as nearly
equal in number of directors as possible. Each director shall serve for a term
ending on the third annual meeting following the annual meeting at which such
director was elected; provided, however, that the directors first elected to
Class I shall serve for a term ending at the annual meeting to be held in 1987,
the directors first elected to Class II shall serve for a term ending at the
annual meeting to be held in 1988 and the directors first elected to Class III
shall serve for a term ending at the annual meeting to be held in 1989.
Directors need not be stockholders. Each of the directors of the Corporation
shall hold office until his successor shall have been duly elected and shall
qualify or until he shall resign or shall have been removed in the manner
hereinafter provided.
SECTION 3.03. Election of Directors. In any election of directors of
the Corporation, a holder of any class or series of stock then entitled to vote
in such election shall be entitled to as many votes as shall equal (i) the
number of votes which (except for this Section as to cumulative voting) he would
be entitled to cast for the election of directors with respect to his shares of
stock multiplied by (ii) the number of directors to be elected in the election
in which his class or series
-5-
<PAGE>
of shares is entitled to vote, and each stockholder may cast all of such votes
for a single director or for any two or more of them as he may see fit.
SECTION 3.04. Resignations. Any director of the Corporation may
resign at any time by giving written notice to the Board or to the Secretary of
the Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, it shall take effect immediately upon
its receipt; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 3.05. Vacancies. Except as otherwise provided in the
Certificate of Incorporation, any vacancy in the Board, whether because of
death, resignation, disqualification, an increase in the number of directors, or
any other cause, may be filled by vote of the majority of the remaining
directors, although less than a quorum. Each director so chosen to fill a
vacancy shall hold office for the unexpired term of his predecessor or until his
successor shall have been elected and shall qualify or until he shall resign or
shall have been removed in the manner hereinafter provided.
SECTION 3.06. Place of Meeting, Etc. The Board may hold any of its
meetings at such place or places within or without the State of Delaware as the
Board may from time to time by resolution designate or as shall be designated by
the person or persons calling the meeting or in the notice or a waiver of notice
of any such meeting. Directors may participate in any regular or special
meeting of the Board by means of conference telephone or similar communications
equipment pursuant to which all persons participating in the meeting of the
Board can hear each other, and such participation shall constitute presence in
person at such meeting.
SECTION 3.07. First Meeting. The Board shall meet as soon as
practicable after each annual election of directors and notice of such first
meeting shall not be required.
SECTION 3.08. Regular Meetings. Regular meetings of the Board may be
held at such times as the Board shall from time to time by resolution determine.
If any day fixed for a regular meeting shall be a legal holiday at the place
where the meeting is to be held, then the meeting shall be held at the same hour
and place on the next succeeding business day not a legal holiday. Except as
provided by law, notice of regular meetings need not be given.
SECTION 3.09. Special Meetings. Special meetings of the Board shall
be held whenever called by the Chairman of the Board, the President or a
majority of the authorized number of directors. Except as otherwise provided by
law or by these Bylaws, notice of
-6-
<PAGE>
the time and place of each such special meeting shall be mailed to each
director, addressed to him at his residence or usual place of business, at least
five (5) days before the day on which the meeting is to be held, or shall be
sent to him at such place by telegraph or cable or be delivered personally not
less than twenty-four (24) hours before the time at which the meeting is to be
held. Except where otherwise required by law or by these Bylaws, notice of the
purpose of a special meeting need not be given. Notice of any meeting of the
Board shall not be required to be given to any director who is present at such
meeting, except a director who shall attend such meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
SECTION 3.10. Quorum and Manner of Acting. Except as otherwise
provided in these Bylaws or by law, the presence of a majority of the number of
directors then currently specified as the size of the Board pursuant to Section
3.02 of these Bylaws shall be required to constitute a quorum for the
transaction of business at any meeting of the Board, and all matters shall be
decided at any such meeting, a quorum being present, by the affirmative votes of
a majority of the directors present. In the absence of a quorum, a majority of
directors present at any meeting may adjourn the same from time to time until a
quorum shall be present. Notice of any adjourned meeting need not be given.
The directors shall act only as a Board, and the individual directors shall have
no power as such.
SECTION 3.11. Action by Consent. Any action required or permitted to
be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
Board or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board or committee.
SECTION 3.12. Removal of Directors. Subject to the provisions of the
Certificate of Incorporation, a director may be removed at any time, for cause
only.
SECTION 3.13. Compensation. The directors shall receive only such
compensation for their services as directors as may be allowed by resolution of
the Board. The Board may also provide that the Corporation shall reimburse each
such director for any expense incurred by him on account of his attendance at
any meetings of the Board or Committees of the Board. Neither the payment of
such compensation nor the reimbursement of such expenses shall be construed to
preclude any director from serving the Corporation or its subsidiaries in any
other capacity and receiving compensation therefor.
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SECTION 3.14. Committees. The Board may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the Corporation. Any such committee,
to the extent provided in the resolution of the Board and except as otherwise
limited by law, shall have and may exercise all the powers and authority of the
Board in the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it. Any such committee shall keep written minutes of its meetings and
report the same to the Board at the next regular meeting of the Board. In the
absence or disqualification of a member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of such
absent or disqualified member.
SECTION 3.15. Notice of Director Nominations. Only persons who are
nominated in accordance with the procedures set forth in this Section 3.15 shall
be eligible for election as Director at annual meeting of the stockholders.
Nominations of candidates for election to the Board of Directors of the
Corporation at any annual meeting may be made only by or at the direction of the
Board of Directors or by a stockholder entitled to vote at such annual meeting.
All such nominations, except those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation of the stockholder's intention to make such nomination. To
be timely, any such notice must be received at the principal office of the
Corporation not less than sixty (60) no more than one hundred twenty (120) days
prior to the date of such annual meeting; provided, however, that in the event
that the first public disclosure (whether by mailing of a notice to
stockholders, press release or otherwise) of the date of such annual meeting is
made less than sixty-five (65) days prior to the date of such annual meeting,
notice by the stockholder will be timely if received not later than the close of
business on the tenth day following the day on which such first public
disclosure was made. Such stockholder's notice with respect to a proposed
nomination shall set forth (i) the name, age, business and residence address and
principal occupation or employment of each nominee proposed in such notice;
(ii) the name and address of the stockholder giving the notice as the same
appears in the Corporation's stock register; (iii) the number of shares of
capital stock of the Corporation which are beneficially owned by each such
nominee and by such stockholder; and (iv) such other information concerning each
such nominee as would be required, under the rules of the Securities and
Exchange Commission, in a proxy statement soliciting proxies for the election of
such nominee. Such notice must also include a signed consent of each such
nominee to serve as a director of the Corporation, if elected.
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In the event that a person is validly designated as a nominee in
accordance with the procedures specified above and shall thereafter become
unable or unwilling to stand for election to the Board of Directors, the Board
of Directors or the stockholder who proposed such nominee, as the case may be,
may designate a substitute nominee; provided, however, that in the case of
persons not nominated by the Board of Directors, such a substitution may only be
made if notice as provided above in this Section 3.15 is received at the
principal office of the Corporation not later than the later of (i) thirty (30)
days prior to the date of the annual meeting or (ii) five (5) days after the
stockholder proposing the original nominee first learned that such original
nominee has become unable or unwilling to stand for election.
ARTICLE IV
Officers
SECTION 4.01. Officers, Election and Removal. The officers of the
Corporation shall be a President, a Vice President, a Secretary, and a
Treasurer. The Corporation may also have at the discretion of the Board of
Directors an Executive Vice President, one or more additional Vice Presidents,
one or more Assistant Secretaries, one or more Assistant Treasurers, and such
other officers as may be elected by the Board of Directors. Any two or more
offices may be held by the same person except that the office of President and
the office of Secretary may not be held by the same person.
The officers of the Corporation shall be elected annually by the Board
of Directors at their first meeting after the annual meeting of the stockholders
and, unless they shall sooner resign, be removed or become disqualified, shall
hold office until their respective successors shall be elected and qualify.
The Chairman of the Board and the President shall be elected from
among the Directors but the other officers need not be Directors.
Any officer may be removed either with or without cause by a majority
of the Directors at the time in office at any regular or special meeting of the
Board of Directors.
SECTION 4.02. Chairman of the Board. The Chairman of the Board, if
there shall be one, shall preside at all meetings of the stockholders and of the
Board of Directors. He shall, ex officio, be a member of all committees
appointed or constituted by the Board of Directors, including the Executive
Committee.
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SECTION 4.03. President, Executive Vice President and Vice President.
The President shall be responsible to the Board of Directors for all actions and
activities of the Corporation.
The Executive Vice President, if there shall be one, shall act for the
President in the President's absence. He shall have such other powers and be
required to perform such other duties as the President and the Board of
Directors shall prescribe.
The Vice President, or if there shall be more than one such officer
elected, shall have such powers and perform such duties as may be delegated to
him or them by the President or the Board of Directors.
SECTION 4.04. Secretary. The Secretary shall issue notices for all
meetings, shall keep their minutes, shall have charge of the seal and the
Corporate books, and shall make such reports and perform such other duties as
are incident to his office, or are properly required of him by the Board of
Directors. He shall also keep at the principal office of the corporation or
cause to be kept at the office of the Corporation's transfer agent, a stock
transfer book, and he shall keep or cause to be kept by the Corporation's
registrar, a share registry book. The Secretary may be required to perform such
duties of the Treasurer as may be assigned to him from time to time.
SECTION 4.05. Treasurer. The Treasurer shall have the custody of all
moneys and securities of the Corporation and shall keep regular books of
account. He shall disburse the funds of the Corporation in payment of the just
demands against the Corporation or as may be ordered by the Board of Directors,
taking proper vouchers for such disbursements, and shall render to the President
and to the Board of Directors from time to time as may be required of him, an
account of all his transactions as Treasurer and of the financial condition of
the Corporation. He shall perform all other duties incident to his office or
that are properly required of him by the Board. He shall give the Corporation a
bond, if required by the Board of Directors, in a sum, and with one or more
sureties, satisfactory to the Board of Directors, for the faithful performance
of the duties of his office, and for the restoration to the Corporation, in case
of his death, resignation, retirement, or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in his possession or
under his control belonging to the Corporation.
SECTION 4.06. Incapacity. In case of the absence or inability of any
officer of the Corporation to act and of any person herein authorized to act in
his place, the Board of Directors may from time to time delegate the powers or
duties of such officer to any other officer or any Director or other person whom
they may select.
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SECTION 4.07. Vacancies. Vacancies in any office arising from any
cause may be filled by the Directors at any regular or special meeting.
SECTION 4.08. Other officers. The Board of Directors may appoint
such other officers and agents as it shall deem necessary or expedient, who
shall hold their offices for such terms and shall exercise such powers and
perform such duties as shall be determined from time to time by the Board of
Directors.
SECTION 4.09. Salaries. The salaries of all officers and agents of
the Corporation shall be fixed by the Board of Directors. Nothing contained
herein shall preclude any officer from serving the Corporation, or any
subsidiary corporation, in any other capacity and receiving proper compensation
therefor.
ARTICLE V
Contracts, Checks, Drafts, Bank Accounts, Etc.
SECTION 5.01. Execution of Contracts. The Board, except as in these
Bylaws otherwise provided, may authorize any officer or officers, agent or
agents, to enter into any contract or execute any instrument in the name of and
on behalf of the Corporation, and such authority may be general or confined to
specific instances; and unless so authorized by the Board or by these Bylaws, no
officer, agent or employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or in any amount.
SECTION 5.02. Checks, Drafts, Etc. All checks, drafts or other
orders for payment of money, notes or other evidence of indebtedness, issued in
the name of or payable to the Corporation, shall be signed or endorsed by such
person or persons and in such manner as, from time to time, shall be determined
by resolution of the Board. Each such officer, assistant, agent or attorney
shall give such bond, if any, as the Board may require.
SECTION 5.03. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board may select, or
as may be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board and shall be drawn out only by check signed by
persons designated, from time to time, by resolution of the Board of Directors.
<PAGE>
SECTION 5.04. General and Special Bank Accounts. The Board may from
time to time authorize the opening and keeping of general and special bank
accounts with such banks, trust companies or other depositories as the Board may
select or as may be selected by any officer or officers, assistant or
assistants, agent or agents, or attorney or attorneys of the Corporation to whom
such power shall have been delegated by the Board. The Board may make such
special rules and regulations with respect to such bank accounts, not
inconsistent with the provisions of these Bylaws, as it may deem expedient.
ARTICLE VI
Shares and Their Transfer
SECTION 6.01. Certificates for Stock. Every owner of stock of the
Corporation shall be entitled to have a certificate or certificates, to be in
such form as the Board shall prescribe, certifying the number and class of
shares of the stock of the Corporation owned by him. The certificates
representing shares of such stock shall be numbered in the order in which they
shall be issued and shall be signed in the name of the Corporation by the
President or a Vice President, and by the Secretary or an Assistant Secretary or
by the Treasurer or an Assistant Treasurer. Any of or all of the signatures on
the certificates may be a facsimile. In case any officer, transfer agent or
registrar who has signed, or whose facsimile signature has been placed upon, any
such certificate, shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, such certificate may nevertheless
be issued by the Corporation with the same effect as though the person who
signed such certificate, or whose facsimile signature shall have been placed
thereupon, were such officer, transfer agent or registrar at the date of issue.
A record shall be kept of the respective names of the persons, firms or
corporations owning the stock represented by such certificates, the number and
class of shares represented by such certificates, respectively, and the
respective dates thereof, and in case of cancellation, the respective dates of
cancellation. Every certificate surrendered to the Corporation for exchange or
transfer shall be cancelled, and no new certificate or certificates shall be
issued in exchange for any existing certificate until such existing certificate
shall have been so cancelled, except in cases provided for in Section 6.04.
SECTION 6.02. Transfers of Stock. Transfers of shares of stock of
the Corporation shall be made only on the books of the Corporation by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary, or with a transfer clerk or
a transfer agent appointed as provided in Section 6.03, and upon surrender of
the certificate or certificates for such shares properly endorsed and the
payment of all taxes thereon. The person in whose name shares of stock stand on
the books of the Corporation shall
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be deemed the owner thereof for all purposes as regards the Corporation.
Whenever any transfer of shares shall be made for collateral security, and not
absolutely, such fact shall be so expressed in the entry of transfer if, when
the certificate or certificates shall be presented to the Corporation for
transfer, both the transferor and the transferee request the Corporation to do
so.
SECTION 6.03. Regulations. The Board may make such rules and
regulations as it may deem expedient, not inconsistent with these Bylaws,
concerning the issue, transfer and registration of certificates for shares of
the stock of the Corporation. It may appoint, or authorize any officer or
officers to appoint, one or more transfer clerks or one or more transfer agents
and one or more registrars, and may require all certificates for stock to bear
the signature or signatures of any of them.
SECTION 6.04. Lost, Stolen, Destroyed, and Mutilated Certificates.
In any case of loss, theft, destruction, or mutilation of any certificate of
stock, another may be issued in its place upon proof of such loss, theft,
destruction, or mutilation and upon the giving of a bond of indemnity to the
Corporation in such form and in such sum as the Board may direct; provided,
however, that a new certificate may be issued without requiring any bond when,
in the judgment of the Board, it is proper so to do.
SECTION 6.05. Fixing Date for Determination of Stockholders of
Record. In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
other change, conversion or exchange of stock or for the purpose of any other
lawful action, the Board may fix, in advance, a record date, which shall not be
more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action. If in any
case involving the determination of stockholders for any purpose other than
notice of or voting at a meeting of stockholders, the Board shall not fix such a
record date, the record date for determining stockholders for such purpose shall
be the close of business on the day on which the Board shall adopt the
resolution relating thereto. A determination of stockholders entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of
such meeting; provided, however, that the Board may fix a new record date for
the adjourned meeting.
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ARTICLE VII
Indemnification
SECTION 7.01. (DELETED MARCH 30, 1987)
ARTICLE VIII
Executive Committee
SECTION 8.01. Members and Powers. The Board, by resolution adopted
by majority of its total number, may annually elect three or more of its number
to constitute an Executive Committee of the Board to have authority to exercise
to the extent permitted by law, in the intervals between meetings of the Board,
all powers of the Board, except to amend or repeal these Bylaws, or to fill
vacancies in its own membership or in the Board, or to declare dividends. The
actions of the Executive Committee shall be ratified at the next succeeding
meeting of the Board.
SECTION 8.02. Meetings. The Executive Committee may adopt rules
governing the method of the notice of the time and place of its meetings and the
conduct of the proceedings thereat; but, in the absence of such rules, meetings
of the Executive Committee may be called by any member of the Committee. Notice
to each member, regarding the time and place of holding the proposed meeting,
shall be given to each member verbally or by mail at least twenty-four (24)
hours before the time of the meeting. No notice of a meeting will be required
if all members of the Committee are in attendance, or if notice is waived. The
Executive Committee shall keep a record of its acts and proceedings.
SECTION 8.03. Quorum. To constitute a quorum of the Executive
Committee for the transaction of business at any meeting, a majority shall be
present and the act of a majority of the whole Committee shall be necessary to
constitute the act of the Committee.
SECTION 8.04. Removal of Members. Any member of the Executive
Committee may be removed with or without cause by resolution of the Board,
adopted by a majority of its total number then in office.
SECTION 8.05. Vacancies. Vacancies in the Executive Committee shall
be filled in the same manner as for the original appointment to membership.
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ARTICLE IX
Miscellaneous
SECTION 9.01. Seal. The Corporate seal of the Corporation shall
consist of two concentric circles, between which is the name of the Corporation,
and in the center shall be inscribed the year of its incorporation and the
words, "Corporate Seal, Delaware."
SECTION 9.02. Waiver of Notices. Whenever notice is required to be
given by these Bylaws or the Certificate of Incorporation or by law, the person
entitled to said notice may waive such notice in writing, either before or after
the time stated therein, and such waiver shall be deemed equivalent to notice.
SECTION 9.03. Amendments. Except as otherwise provided herein or in
the Certificate of Incorporation, these Bylaws or any of them, may be altered,
amended, repealed or rescinded and new Bylaws may be adopted, (i) by the Board,
or (ii) by the stockholders, at any annual meeting of stockholders, or at any
special meeting of stockholders, provided that notice of such proposed
alteration, amendment, repeal, rescission or adoption is given in the notice of
meeting.
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EXH. 10
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This amended and restated employment agreement ("Agreement") is made
effective as of June 11, 1996, by and between Ameron International Corporation,
a Delaware corporation (the "Company"), and James S. Marlen ("Employee"). It
supersedes and replaces the Employment Agreement previously entered into between
the Company and Employee which was effective as of June 11, 1996.
In consideration of the mutual promises and agreements set forth herein,
the Company and Employee agree as follows:
1. TERM.
1.1 The term of this Agreement shall commence on June 11, 1996, and
shall be automatically extended from day to day so that it always
has a remaining term of three years and six months or until
Employee attains age 67-1/2, if sooner (the "Term"), subject to
earlier termination in accordance with the provisions of section
10 hereinbelow. In no event shall the Term of this Agreement
extend beyond the date when Employee attains age 67-1/2, unless
the Company and Employee hereafter expressly agree in writing to
extend the Term of this Agreement beyond such date.
2. POSITION AND TITLE.
2.1 The Company hereby employs Employee as its Chairman of the Board,
President and Chief Executive Officer, and Employee hereby
accepts such employment.
2.2 Employee shall devote substantially all of his efforts on a full
time basis to the business and affairs of the Company and to its
subsidiaries and affiliates. Employee shall not engage in any
business or perform any services in any capacity whatsoever
adverse to the interests of the Company.
2.3 Employee shall at all times faithfully, industriously, and to the
best of his ability, experience and talents, perform all of the
duties of the office of Chairman of the Board, President and
Chief Executive Officer of the Company.
2.4 As President and Chief Executive Officer, Employee shall be
responsible to the Board of Directors for all actions and
activities of the Company.
<PAGE>
3. (Deleted)
4. BASE SALARY.
4.1 As of June 11, 1996, Employee's base salary is $515,000 per year.
Employee's base salary and performance shall be reviewed annually
during the Term, by the Board of Directors of the Company and may
be increased from time to time at the discretion of, and by, such
Board based on merit or such other considerations as such Board
shall deem appropriate.
5. SHORT-TERM INCENTIVE BONUS.
5.1 The Company has adopted a management incentive bonus plan for its
executives, which plan is currently known as the "Management
Incentive Compensation Plan" (herein the "MIC Plan"), and a Key
Executive Long-Term Cash Incentive Plan (herein the "LTIP").
5.2 Employee shall be deemed to be a participant under the MIC Plan
and the LTIP, as well as any successor management incentive bonus
plans adopted by the Company for its executives. Individual
goals and guidelines for bonus payable to Employee under the MIC
Plan and the LTIP, and any successor plans, shall be subject to
review and approval by the Board of Directors of the Company.
5.3 Employee's participation in the MIC Plan and the LTIP shall be in
accordance with the terms and conditions of those plans and other
compensation arrangements as agreed to herein. In the event of
Employee's termination of employment other than for cause (as
defined in paragraph 10.1 hereinbelow) Employee shall be entitled
to a pro-rata portion of the award he would have been entitled to
receive under the MIC Plan in respect of the fiscal year in which
Employee's termination date occurs had he continued in employment
until the end of such fiscal year.
5.4 The Company shall consider in good faith any recommendations of
Employee with respect to any management incentive bonus plans
subsequent to the MIC Plan and the LTIP.
6. STOCK GRANTS & OPTIONS.
6.1 (Deleted)
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6.2 As promptly as possible, with due consideration to the
limitations on shares of the Company's stock available for award
under the Company's 1992 Incentive Stock Compensation Plan, the
Company shall cause Employee to be granted stock options of
100,000 shares of the Company's common stock in the form of
non-qualified stock options with terms of 10 years from the dates
of actual grant, with vesting in four installments, each of which
shall equal twenty-five percent of the shares subject to the
option during each of the succeeding four annual periods. The
option price for such 100,000 shares shall be $39.50, that being
the New York Stock Exchange closing market price of the Company's
common stock (par value $2.50) as of June 24, 1996, as agreed to
by the Company's Board of Directors at its meeting held on June
24, 1996.
6.3 Except as noted in paragraph 6.2 hereinabove, Employee hereby
waives any rights to claim any additional stock option grants
during calendar years 1996, 1997, and 1998. Notwithstanding the
foregoing additional stock grants may be granted from time to
time at the sole discretion of, an by, the Board of Directors of
the Company. The Board of Directors of the Company shall
consider in good faith any recommendations of Employee with
respect to any alternative formulas or plans for stock options.
7. (Deleted)
8. PENSION.
8.1 During the Term, the Company shall provide pensions benefits to
Employee in accordance with the terms and conditions of Company's
Pension Plan for Salaried Employees and its Supplemental
Executive Retirement Plan as in effect as of June 11, 1993.
8.2 In addition to the pension benefits described in paragraph 8.1
hereinabove, the Company shall provide the following additional
pension benefits to Employee. Those additional benefits shall be
calculated by crediting two years of service for each actual year
of service during the first 9-1/2 years of his employment by the
Company under the Supplemental Executive Retirement Plan
described in paragraph 8.1 hereinabove, provided however that in
no event shall Employee's vested pension benefits from the
Company at age 65 be less than $114,302 in the event of
Employee's voluntary or involuntary termination before age 65.
8.3 Vesting of the pension benefits described in paragraphs 8.1 and
8.2 hereinabove began as of June 11, 1993.
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8.4 In the event that Employee's employment is terminated by the
Company without cause (as defined in paragraph 10.2 hereinbelow)
and/or due to or following a Change of Control (as defined in
paragraph 10.5 hereinbelow) during the Term, Employee shall be
entitled to continue to accrue the pension benefits described in
paragraphs 8.1, 8.2 and 8.3 hereinabove for the additional period
starting from the date of such termination of employment with the
Company and continuing until the effective date of his obtaining
of new employment, if any; provided however that such additional
period for the accrual of those pension benefits shall not exceed
three (3) years from the date of termination of employment with
the Company.
9. ADDITIONAL EMPLOYEE BENEFITS.
9.1 The Company shall provide Employee the right to participate in
its Executive Life Insurance plan, together with all other fringe
benefit programs in which executive officers of the Company
generally participate so long as such programs are continued by
the Company, and all other fringe benefit programs which may
hereafter be adopted by the Company for its executive officers.
9.2 The Company shall provide Employee the right to participate in
its medical and dental insurance plans.
9.3 In the event that Employee should voluntarily resign or is
terminated without cause (as defined in paragraph 10.2
hereinbelow) by the Company during the Term, the Company shall
provide Employee with substantially the same level of health and
medical benefits in effect for Employee as of the date of such
resignation or termination, with Employee remaining obligated to
continuing to pay employee contributions towards such coverage at
the same level as in effect as of such date, until the earlier of
(1) the second anniversary of such date of resignation or
termination, or (2) the date Employee becomes employed by another
party.
9.4 The Company shall provide Employee the right to participate in
its long-term disability insurance plan, which as of this date
generally provides that in the event of total disability, the
plan will provide a benefit equal to 60% of base monthly salary
less any income received by Employee from other sources, such as
by way of example and not limitation, Social Security and
worker's compensation.
9.5 The Company shall provide Employee the right to participate in
its 401(k) Savings Plan.
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9.6 The Company shall reimburse Employee for dues and assessments for
membership at the Annandale Country Club and the California Club.
9.7 The Company shall provide Employee with the use of a company car
substantially equivalent to a Cadillac STS, together with normal
maintenance, insurance and operating expenses.
9.8 Employee shall be entitled to vacation in accordance with the
customary practice of the company with regard to its executives,
which is currently four (4) weeks annually.
9.9 Employee shall be reimbursed for financial/tax consulting
services actually incurred, not to exceed $5,000 annually.
9.10 The Company shall reimburse Employee for fees actually paid by
Employee to his legal counsel in connection with legal review of
this employment agreement, provided that such reimbursement shall
not exceed $5,000.00.
9.11 The Company agrees that in the event of an audit of Employee's
tax returns by the Internal Revenue Service with respect to
issues arising under this Agreement (including, but not limited
to, Section 10.5 hereof), Employee will have the right to select
his own professional advisors to represent Employee in the audit
proceedings, and the reasonable expenses thereof shall be borne
by the Company.
10. TERMINATION; EXTENSION.
10.1 During the Term of this Agreement, the Company's Board of
Directors may terminate Employee's employment herein at any time
for cause as contemplated by Section 2924 of the California Labor
Code (copy of which in effect as of the date hereof is attached
hereto as Exhibit "E" and made a part hereof), or as a result of
a material breach by Employee of his obligations under this
Agreement, provided however that Company shall provide Employee
with not less than sixty (60) days prior written notice
describing the behavior or conduct which is alleged by the
Company to constitute cause for termination and Employee shall be
provided with reasonable opportunity to correct such behavior or
conduct within that notice period.
10.2 In the event that the Company terminates Employee's employment
for any cause other than the causes set forth in paragraph 10.1
hereinabove, such shall be considered to be termination "without
cause." Removal from Employee of the title of "President, Chief
Executive Officer and
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Chairman of the Board" during the Term, without Employee's
consent, shall be deemed to be termination without cause.
10.3 In the event that the Company terminates Employee's employment
without cause at any time during the Term of this Agreement,
except for termination without cause due to or following a Change
of Control (as that term is defined in paragraph 10.5
hereinbelow), then:
(1) the Company shall pay Employee a lump-sum severance amount
within thirty (30) days following termination equal to 3.5
(or the number of years and fractional years remaining in
the Term, if the remaining Term of this Agreement is less
than three years and six months as of the date of the
termination) times the sum of (i) Employee's annual base
salary in effect as of the date of termination, and (ii) the
highest management incentive bonus paid to Employee during
the three and one-half years preceding termination (but not
less than sixty percent (60%) times Employee's annual base
salary determined as of the date of termination);
(2) all unvested restricted stock grants and stock options
granted to Employee shall automatically vest in full; and
(3) Employee shall be entitled to the benefits described in
paragraphs 8.3, 8.4 and 9.3 hereinabove.
Employee shall not be obligated to seek other employment or take
any other action by way of mitigation of the amounts payable to
Employee under any of the provisions of this Agreement.
10.4 The Term of this Agreement shall be automatically extended from
day to day so that it always has a remaining term of three years
and six months (or until Employee attains age 67-1/2, if sooner)
until the Company or Employee shall give written notice to the
other that the Term shall not be further extended. In such event
the Term shall end three years and six months after delivery of
such written notice in the manner provided in paragraph 12.3
hereinbelow (or when Employee attains age 67-1/2, if sooner). If
the Company notifies Employee that the Term shall not be further
extended, then Employee may elect within 90 days after receipt of
such notice to terminate employment and consider his employment
to have been terminated by the Company without cause, in which
case Employee shall be entitled to those termination benefits
described in paragraph 10.3 hereinabove.
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10.5 In the event of a Change of Control at any time during the Term
of this Agreement:
(1) All unvested restricted stock grants and stock options
granted to Employee shall automatically vest in full upon a
Change of Control.
(2) In the event that the Company terminates Employee's
employment without cause at any time during the Term of this
Agreement within the period of twelve (12) months following
the date of a Change of Control, then Employee shall be
entitled to the termination benefits described in paragraph
10.3 hereinabove; provided that the lump-sum severance
amount paid to Employee under this paragraph 10.5(2) which
is calculated based on paragraph 10.3(1) hereinabove (i)
shall be reduced to equal the present value, determined in
accordance with IRC 280G(d)(4), of the lump-sum severance
amount which would otherwise be payable under paragraph
10.3(1), and (ii) shall be reduced to offset compensation
and other earned income earned by Employee in the manner
provided in paragraphs 10.5(3) and (4) below.
(3) The amount of the lump-sum severance amount payable to
Employee under paragraph 10.5(2) which is calculated based
on paragraph 10.3(1) shall be reduced by one hundred percent
(100%) of any compensation and other earned income (within
the meaning of Section 911(d)(2)(A) of the Internal Revenue
Code ("IRC")) which is earned by Employee for services
rendered to persons or entities other than the Company or
its affiliates during the remaining Term of this Agreement
as of the date of termination. Health and medical benefits
shall be offset as provided in paragraph 9.3.
(4) Not less frequently than annually (by December 31 of each
year), Employee shall account to the Company with respect to
all compensation and other earned income earned by Employee
which is required hereunder to be offset against the
lump-sum severance amount received by Employee from the
Company under paragraph 10.5(2) which is calculated based on
paragraph 10.3(1). If the Company has paid a lump-sum
severance amount in excess of the amount to which Employee
is entitled (after giving effect to the offsets provided
above), Employee shall reimburse the Company for such excess
by December 31 of such year. The requirements imposed under
this paragraph shall terminate on December 31 of the last
calendar
7
<PAGE>
year which begins during the remaining term of this
Agreement as of the date of termination.
Notwithstanding any other provisions in this Agreement or any
other agreement, plan or arrangement (except as provided in
paragraph I of Exhibit "T" herein, the provisions of which
Exhibit are hereby fully incorporated by reference), if any
payment or benefit received or to be received by Employee,
whether under the terms of this Agreement, or any other
agreement, plan or arrangement with the Company, or any other
plan, arrangement or agreement with any person whose actions
result in a Change of Control or any person affiliated with the
Company (all such payments and benefits being hereinafter
referred to as "Total Payments") would be subject, in whole or in
part, to taxes imposed by IRC Section 4999, then the portion of
the Total Payments payable under this Agreement shall be reduced
as provided in accordance with the provisions of Exhibit "T."
As used herein, the term "Change of Control" means either:
(1) the dissolution or liquidation of the Company; (ii) a
reorganization, merger or consolidation of the Company with one
or more corporations as a result of which the Company is not the
surviving corporation; (iii) approval by the stockholders of the
Company of any sale, lease, exchange or other transfer (in one or
a series of transactions) of all or substantially all of the
assets of the Company; (iv) approval by the stockholders of the
Company of any merger or consolidation of the Company in which
the holders of voting stock of the Company immediately before the
merger or consolidation will not own fifty percent (50%) or more
of the outstanding voting shares of the continuing or surviving
corporation immediately after such merger or consolidation; or
(v) a change of 25% (rounded to the next whole person) in the
membership of the Board of Directors of the Company within a
12-month period, unless the election or nomination for election
by stockholders of each new director within such period was
approved by the vote of 85% (rounded to the next whole person) of
the directors then still in office who were in office at the
beginning of the 12-month period.
10.6 In the event that Employee should voluntarily resign or is
terminated for cause by the Company during the Term, Employee
shall not be entitled to any of the termination benefits
described in this section 10, other than any payment which may be
due pursuant to paragraph 9.3 or 10.5 hereinabove.
10.7 In the event that Employee should die or become disabled or
incapacitated for an uninterrupted period in excess of six (6)
months
8
<PAGE>
during the Term, then (1) all unvested restricted stock grants
and stock options granted to Employee shall automatically vest
in full, and (2) Employee shall remain eligible (or entitled as
the case may be) for a prorated management incentive or bonus
award for the period prior to Employer's death or disability.
11. COVENANTS.
11.1 Employee agrees that any and all confidential knowledge or
information, including but not limited to customer lists, books,
records, data, formulae, specifications, inventions, processes
and methods, developments and improvements, which has or have
been or may be obtained or learned by him in the course of his
employment with the Company, will be held confidential by him and
that he will not disclose the same to any person outside of the
Company either during his employment or after his employment by
the Company has terminated.
11.2 Employee agrees that upon termination of his employment with the
Company he will immediately surrender and turn over to the
Company all books, records, forms specifications, formulae, data
and all papers and writings relating to the business of the
Company and all other property belonging to the Company, it being
understood and agreed that the same are the sole property of the
Company and that Employee will not make or retain any copies
thereof.
11.3 Employee agrees that all inventions, development or improvements
which he may make, conceive, invent, discover or otherwise
acquire during his employment by the Company in the scope of his
responsibilities or otherwise shall become the sole property of
the Company.
12. MISCELLANEOUS.
12.1 All terms and conditions of this Agreement are set forth herein,
and there are no warranties, agreements or understandings,
express or implied, except those expressly set forth herein.
12.2 Any modification of this Agreement shall be binding only if
evidenced in writing signed by both parties hereto.
12.3 Any notice or other communication required or permitted to be
given hereunder shall be deemed properly given if personally
delivered or deposited in the United States mail, registered or
certified and postage prepaid, address to the Company at 245 S.
Los Robles Ave., Pasadena, CA 91101, or to Employee at 437 South
Orange Grove Boulevard #5,
9
<PAGE>
Pasadena, CA 91105, or at such other
addresses as may from time to time be designated by the
respective parties in writing.
12.4 The laws of the State of California shall govern the validity of
this Agreement, the construction of its terms and the
interpretation of the rights and duties of the parties.
12.5 In the event that any one or more of the provisions contained in
this Agreement shall for any reason be held to be invalid,
illegal or unenforceable, the same shall not affect any other
provisions of this Agreement, but this Agreement shall be
construed as if such invalid, illegal or unenforceable provisions
had never been contained herein.
12.6 This Agreement shall be binding upon, and inure to the benefit
of, the successors and assigns of the Company and the personal
representatives, heirs and legatees of Employee.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the
date first above written.
AMERON INTERNATIONAL CORPORATION
By:
------------------------------
A. Frederick Gerstell
Chairman, Compensation & Stock Option Committee
Board of Directors
EMPLOYEE
- ---------------------------------
James S. Marlen
10
<PAGE>
EXHIBIT E
<PAGE>
DEERING'S CALIFORNIA CODES
LABOR CODE
ANNOTATED
OF THE STATE OF CALIFORNIA
ADOPTED APRIL 24, 1937
with amendments through the
First Extraordinary Session of the 1989-1990 Legislature
Section 2924. Employment for specified term; Grounds for
termination by employer
An employment for a specified term may be terminated at any
time by the employer in case of any willful breach of duty
by the employee in the course of his employment, or in case
of his habitual neglect of his duty or continued incapacity
to perform it.
Enacted 1937. Amended Stats 1969, ch 1529 Section 3; Stats
1971, ch 1580 Section 2, ch 1607 Section 3.
<PAGE>
EXHIBIT T
<PAGE>
Exhibit "T"
(Page of 2)
I. The Total Payments payable under this Agreement shall be reduced to the
extent necessary so that no portion of the Total Payments shall be subject
to the parachute excise tax (the "Excise Tax") imposed by IRC Section 4999
(after taking into account any reduction in the Total Payments provided by
reason of IRC Section 280G in any other plan, arrangement or agreement) but
only if the amount determined under the following subparagraph I.(1) is
greater than the amount determined under the following subparagraph I.(2).
(1) The amount determined hereunder shall be the net amount of such Total
Payments, as so reduced (and after deduction of the net amount of
Federal, state and local income taxes on such reduced Total Payments
computed at Employee's highest marginal tax rate).
(2) The amount determined hereunder shall be the excess of:
(i) the net amount of such Total Payments, without reduction (but
after deduction of the net amount of Federal, state and local
income taxes on such Total Payments computed at Employee's
highest marginal tax rate), over
(ii) the amount of Excise Tax to which Employee would be subject in
respect of such Total Payments.
Any reduction of the Total Payments shall be made under one of the two
alternative methods described in the following section II. For purposes of
this Exhibit "T" and the calculations hereunder, Total Payments shall not
include any amounts which are not considered a "parachute payment" under
IRC Section 280G in the opinion of Arthur Andersen LLP (or suitable experts
selected by the Company's Board of Directors).
II. If the Total Payments all become payable at approximately the same time:
(1) the payments under section 10.3(1)(ii) of the Agreement shall first be
reduced (if necessary, to zero);
(2) the payments under section 10.3(1)(i) of the Agreement shall next be
reduced (if necessary, to zero);
(3) the other portions of the Total Payments shall next be reduced (if
necessary, to zero); and
<PAGE>
(4) the acceleration of vesting of awards under stock options shall be
reduced as necessary.
If the Total Payments do not become due and payable at approximately the
same time, the respective Total Payments shall be paid in full in the order
in which they become payable until any portion thereof would not be
deductible, and such portion (and any subsequent portions) of the Total
Payments shall be reduced to zero. In such case, the Company shall make
every reasonable effort to make such payments in the order that results in
the most favorable tax treatment and financial results for Employee.
III. For purposes of determining whether and the extent to which the Total
Payments would be subject to the Excise Tax:
(1) no portion of the Total Payments the receipt or enjoyment of which
Employee shall have effectively waived in writing prior to the date of
termination shall be taken into account;
(2) no portion of the Total Payments shall be taken into account which in
the opinion of Arthur Andersen LLP (or suitable experts selected by
the Company's Board of Directors) does not constitute a "parachute
payment" within the meaning of IRC Section 280G(b)(2), including by
reason of IRC Section 280G(b)(4)(A);
(3) in calculating the Excise Tax, the payments shall be reduced only to
the extent necessary so that the Total Payments in their entirety
constitute reasonable compensation for services actually rendered
within the meaning of IRC Section 280G(b)(4) or are otherwise not
subject to disallowance as deductions because of IRC Section 280G, in
the opinion of Arthur Andersen LLP (or suitable experts selected by
the Company's Board of Directors); and
(4) the value of any noncash benefit or any deferred payment or benefit
included in the Total Payments shall be determined by Arthur Andersen
LLP (or suitable experts selected by the Company's Board of Directors)
in accordance with the principles of IRC Section 280G(d)(3) and (4).
The Company shall provide Employee with the calculation of the foregoing
amounts and any supporting materials as are reasonably necessary for
Employee to evaluate the calculations. All calculations hereunder shall be
performed by Arthur Andersen LLP (or suitable experts selected by the
Company's Board of Directors).
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Year ended November 30
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER COMMON SHARE DATA
Net income (loss) $ 4.73 $ 3.87 $ 3.15 $ 2.75 (1) $ (6.28) (2)
Net income excluding restructuring and
related charges, and unusual items 4.73 3.87 3.15 2.29 1.87
Dividends 1.28 1.28 1.28 1.28 1.28
Average shares (3) 4,094,885 3,982,006 3,954,544 3,924,456 3,861,872
Stock price-high 70 50 37 7/8 43 1/8 38 3/4
Stock price-low 46 3/8 34 1/8 29 31 7/8 31
Price/earnings ratio (range) 15-10 13-9 12-9 16-12 NA
- -------------------------------------------------------------------------------------------------------------------------------
OPERATING RESULTS
Sales $ 533,506 $ 496,940 $ 481,405 $ 417,682 $ 453,357
Gross profit 135,683 129,263 116,731 103,975 119,869
Interest expense 12,433 11,134 11,715 11,191 12,689
Provision (benefit) for income taxes 11,874 8,297 5,190 7,297 (7,674)
Net income (loss) 19,372 15,410 12,452 10,790 (1) (24,255) (2)
Net income/sales 3.6% 3.1% 2.6% 2.6% (5.4)%
Return on equity 13.0% 11.0% 9.6% 9.0% (18.6)%
- -------------------------------------------------------------------------------------------------------------------------------
FINANCIAL CONDITION AT YEAR END
Working capital $ 154,027 $ 121,858 $ 114,458 $ 103,904 $ 85,990
Property, plant and equipment, net 127,678 125,687 114,116 112,953 113,199
Investments, advances and equity
in affiliated companies 33,777 33,722 36,197 37,315 39,984
Total assets 433,225 411,666 371,381 350,856 337,842
Long-term debt, less current portion 140,917 112,598 91,565 92,847 89,590
- -------------------------------------------------------------------------------------------------------------------------------
CASH FLOW
Expenditures for property, plant
and equipment $ 24,860 $ 25,227 $ 16,154 $ 14,934 $ 14,697
Depreciation 15,729 16,078 16,065 15,855 16,444
</TABLE>
(1) INCLUDES $1.8 MILLION GAIN, NET OF INCOME TAXES, OR $.46 PER SHARE, ON THE
SALE OF A COLOMBIAN SUBSIDIARY.
(2) INCLUDES $31.5 MILLION, NET OF INCOME TAXES, OR $8.15 PER SHARE, FOR
RESTRUCTURING AND OTHER RELATED CHARGES.
(3) INCLUDES COMMON STOCK EQUIVALENTS IN THE PERIODS IN WHICH THEY HAVE A
DILUTIVE EFFECT.
<PAGE>
AMERON 1997 FINANCIAL OVERVIEW
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
OPERATIONS
LIQUIDITY & CAPITAL RESOURCES
During 1997, the Company used $8.1 million of cash for operations, compared to
$44.6 million that was generated in 1996. Net borrowings for the year were $29.7
million. These funds were used for capital expenditures of $24.9 million.
Additionally, the Company paid common dividends of $5.1 million. Cash and cash
equivalents at November 30, 1997, totaled $9.8 million, a decrease of $8.5
million from the prior year.
Cash used in operating activities increased over the previous year due to an
increase in working capital requirements that was due primarily to increased
inventories and receivables associated with an expanded coatings business.
Cash used in investing activities consisted principally of capital expenditures
of $24.9 million, which included investment in a new fiberglass pipe plant in
Malaysia. Remaining expenditures were primarily for the replacement and
refurbishment of machinery and equipment at existing facilities. During the
fiscal year ending November 30, 1998, the Company anticipates spending
approximately $15 million to $30 million for capital expenditures for current
operations, which will be funded from existing cash balances and lines of
credit, as well as funds generated from operations.
The Company maintains various credit facilities with lines of credit totaling
$129 million. At November 30, 1997, the Company had $69 million in unused credit
available to fund worldwide operating and investing activities. Management
believes that cash flows from operations and current cash balances, together
with currently available lines of credit, will be sufficient to meet future
operating requirements.
RESULTS OF OPERATIONS: 1997 COMPARED WITH 1996
GENERAL
Earnings per share for the fiscal year ended November 30, 1997, were $4.73 on
sales of $533.5 million, compared to $3.87 per share on sales of $496.9 million
in 1996. Earnings per share in 1997 improved 22% over the prior year, while
sales in 1997 were the highest in the Company's history. Return on average
stockholder's equity increased to 13% in 1997 from 11% in the prior year.
The significant increase in earnings over the prior year mainly reflects higher
sales and earnings from the Company's worldwide protective coatings business.
SALES
Sales increased by $36.6 million to $533.5 million in 1997, primarily due to
an increase in sales of the Protective Coatings Group. Partially offsetting
the protective coatings increase were lower sales of construction products
because of the continued economic slowdown in Hawaii. Deliveries of
fiberglass, concrete and steel pipe were also down slightly from the prior
year.
Protective Coatings Group sales improved to $190.7 million in 1997, versus
$142.6 million in the prior year. Sales in domestic and European markets were up
over last year, due principally to the acquisition of the worldwide Devoe marine
business from Imperial Chemical Industries PLC (ICI) late in fiscal 1996. During
the second quarter of 1997, the Company exchanged its product finishes business
for a slightly larger maintenance coatings business of The Valspar Corporation.
The Company anticipates continued growth in the coming year, although not at the
same level achieved through the Devoe acquisition.
Fiberglass Pipe Group sales decreased to $102.5 million in 1997 from $104.1
million in 1996. The decrease was attributable to increased competition and
lower sales from European operations into the Middle East. Asian operations
posted slightly lower sales versus the prior year. Centron, acquired by the
Company in 1996, posted higher sales because of exports to worldwide oilfield
markets. The Company expects Centron's growth to continue and overall
fiberglass pipe sales to increase in 1998.
<PAGE>
Concrete & Steel Pipe Group sales were $145.6 million in 1997, down slightly
from the $148.5 million posted in 1996. The decrease was due primarily to
weather-related and customer-requested delays that affected the timing of
deliveries. Total order backlog for this segment at November 30, 1997, was
$71.5 million, compared to $59.7-million backlog at the end of fiscal 1996.
The Company anticipates that backlog will increase in the first half of
fiscal 1998 and that sales will improve slightly for the coming year.
Construction & Allied Products Group sales totaled $94.8 million in 1997,
versus $101.8 million in the prior year. The Company's construction products
business in Hawaii reported substantially lower sales in 1997 compared to
1996. Construction spending in 1997 for large public and private building
projects continued to decline in the Islands; spending for residential
construction also declined. Hawaii is not expected to boost construction
activity in 1998. Sales for the Company's Pole Products Division improved
slightly compared to last year. The Company continues to expect moderate
sales growth from this operation.
GROSS PROFIT
Gross profit in 1997 was $135.7 million or 25.4% of sales, compared to gross
profit of $129.3 million or 26.0% of sales in 1996. The increase in gross profit
dollars can be attributed mainly to the higher sales of the Protective Coatings
Group and improved productivity from the Fiberglass Pipe Group. The decline in
gross profit margin resulted from higher integration costs associated with the
Devoe acquisition and competitive pressures.
SELLING, GENERAL & ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses totaled $103.1 million in 1997 or
19.3% of sales, compared to $103.3 million or 20.8% of sales in 1996. The
percent of sales decrease was due partly to lower workers' compensation costs in
1997 and higher expenses related to the Centron acquisition and increased
provisions for doubtful accounts and pending claims in 1996.
Selling, general and administrative expenses include charges for environmental
and legal claims. For a discussion on pending environmental and legal claims,
see Note 15: "Contingencies and Commitments." Given recorded reserves, the
Company does not expect these matters to have a material effect on the Company's
present and future financial position or its results of operations.
In the early 1970s, the Company disposed of certain quantities of waste at the
Stringfellow Hazardous Waste Site in Riverside County, California, which is one
of several priority sites on the Superfund list established by the U.S.
Environmental Protection Agency. Ameron waste accounted for less than 1% of the
total waste deposited at the site. In 1993, the State of California was found to
be 75% to 85% liable for the remediation costs of this Superfund site. However,
the State of California has appealed this finding. Ameron maintains reserves
that it believes to be adequate to cover expected future costs associated with
this matter.
The Company is subject to federal, state and local laws and regulations
concerning the environment and, in addition to the Stringfellow site, is
currently participating in administrative proceedings at several sites under
these laws. While the Company finds it difficult to estimate with any certainty
the total cost of remediation at the several sites, on the basis of currently
available information and reserves provided, the Company believes it unlikely
that the outcome of such environmental regulatory proceedings will have a
material effect on the Company's financial position or its results of
operations.
OTHER INCOME
Other income includes equity in earnings of affiliated companies (see Note 2:
"Other Income"). Equity in earnings of affiliated companies totaled $4
million, increasing by $1.7 million from the previous year. Tamco,
Gifford-Hill-American, Inc., Bondstrand, Ltd. and Oasis-Ameron, Ltd. all
reported improved earnings over the prior year. Ameron Saudi Arabia, Ltd.
reported its third consecutive year of losses.
Other income also includes royalties and fees from affiliated companies and
licensees, currency gains and losses and other miscellaneous income. Royalty and
fee income rose $1.5 million in 1997 over 1996 due to new protective coatings
licensing agreements and improved results from fiberglass pipe and protective
coatings licensees. Foreign currency losses of $.5 million were incurred by the
Company's international operations in 1997.
INTEREST
Interest expense was $12.4 million in 1997 compared to $11.1 million in 1996.
The increase was the result of higher borrowing levels throughout 1997.
NEW ACCOUNTING POLICIES
In 1997, the Company adopted Statement of Financial Accounting Standards No.
123 (SFAS 123), "Accounting for Stock-Based Compensation." As permitted under
this standard, the Company has elected to follow Accounting Principles Board
Opinion No. 25,
<PAGE>
"Accounting For Stock Issued to Employees," in accounting for its stock
options and other stock-based employee awards. Pro forma information
regarding net income and earnings per share, as calculated under the
provisions of SFAS 123, is disclosed in Note 14.
In 1997, the Company adopted Statement of Financial Accounting Standards No.
121 (SFAS 121), "Accounting for the Impairment of Long-Lives Assets and
Long-Lived Assets to be Disposed of" which requires impairment losses to be
recorded on long-lived assets used in operations when indications of
impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amount. The
adoption of SFAS 121 did not have a material effect on the Company's
financial position or results of operations.
In 1997, Statement of Financial Accounting Standards No. 128 (SFAS 128),
"Earnings per Share," was issued. The Company is required to adopt SFAS 128 for
annual and interim periods ending after December 15, 1997. The Company will be
required to restate earnings per share for all prior periods reported.
YEAR 2000
The Company has conducted a review of its computer and other operating systems
to identify those systems that could be affected by the "Year 2000" issue and is
developing an implementation plan to resolve any issues. Anticipated spending
for this plan is not expected to have a significant impact on the Company's
ongoing results of operations.
RESULTS OF OPERATIONS: 1996 COMPARED WITH 1995
GENERAL
Earnings per share for the fiscal year ended November 30, 1996 were $3.87 on
sales of $496.9 million, compared to $3.15 per share on sales of $481.4 million
in 1995. Earnings per share in 1996 improved 23% over the prior year. Return on
stockholders' equity increased to 11.0% in 1996 from 9.6% in the prior year.
The significant increase in earnings over the prior year reflects mainly the
improved profitability of Ameron's concrete and steel pipe operations in the
western United States and higher sales and earnings from the Company's worldwide
protective coatings and fiberglass pipe businesses.
SALES
Sales increased by $15.5 million to $496.9 million in 1996, due partly to
increased shipments of fiberglass pipe to oilfield and offshore platform markets
in the United States and Latin America. Sales of protective coatings worldwide
also improved over the prior year. Partially offsetting these increases were
lower sales of construction products in Hawaii due to the continued slowdown in
construction spending in the Islands. Sales of concrete and steel pipe were down
slightly from the record level in 1995.
Protective Coatings sales improved to $142.6 million in 1996 versus $130.5
million in the prior year. Sales in domestic markets were up as deliveries of
protective coatings improved over last year. European operations benefited from
the introduction of Ameron's unique PSX polysiloxane-based coatings. Sales in
Asian markets also improved over the previous year. In October 1996, the Company
completed the acquisition of the worldwide Devoe marine coatings business from
ICI. The acquisition made Ameron the largest supplier of high-performance marine
and offshore coatings in the United States and greatly expanded the Company's
sales and service network and global presence in these markets. The Devoe
business acquired by Ameron generated sales of approximately $50 million in 1995
when part of ICI. The acquisition had a minor impact on Ameron's sales in 1996.
Fiberglass Pipe sales increased to $104.1 million in 1996, compared to $82.8
million in 1995. The increase was attributed to higher sales of oilfield and
offshore platform products in the United States and Latin America. European
sales were down because of sluggish markets and major order delays. Asian
operations reported higher sales than the prior year. In January 1996, the
Company acquired the assets of Centron Corporation, a privately-held,
Texas-based manufacturer of fiberglass pipe for oilfield applications.
Concrete & Steel Pipe sales were $148.5 million in 1996, down slightly from the
$153.2 million posted in 1995. During 1996, the Company completed work on
several major water transmission pipelines in California, including the Coastal
Aqueduct, the Eastside pipeline and the Los Vaqueros pipeline. Ameron continued
to benefit from the strong demand for water-transmission piping throughout the
western United States as water agencies expanded water storage and distribution
systems.
<PAGE>
Construction & Allied Products sales totaled $101.8 million in 1996 versus
$115.0 million in the prior year. The Company's construction products business
in Hawaii reported substantially lower sales in 1996 compared to 1995.
Construction spending in 1996 for large public and private building projects
continued to decline in the Islands. Spending for residential construction
declined as well. Sales from the Company's Pole Products Division improved
slightly over last year. The division further penetrated new markets in the
Midwest and South with its prestressed concrete lighting and traffic poles.
GROSS PROFIT
Gross profit in 1996 was $129.3 million or 26.0% of sales, an improvement over
1995 performance of $116.7 million or 24.2% of sales. The improved gross profit
dollars and margin can be attributed mainly to the Company's Concrete & Steel
Pipe operations. Strong demand for water transmission piping, coupled with
manufacturing cost reductions and improved productivity, resulted in higher
margins in this segment. In addition, margins in Protective Coatings increased
as a result of lower raw material costs, improved manufacturing productivity and
a favorable product mix.
SELLING, GENERAL & ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses totaled $103.3 million in 1996 or
20.8% of sales, compared to $95.8 million or 19.9% of sales in 1995. The $7.5
million increase was attributable partly to the acquisition of Centron early in
1996 and partly to increased provisions for doubtful accounts and pending
claims. Selling, general and administrative expenses as a percent of sales
increased because, despite slightly lower sales from the concrete and steel pipe
segment, expenses rose somewhat to maintain marketing and engineering support
for expected future business activity.
OTHER INCOME
Equity in earnings of affiliated companies totaled $2.3 million, declining
$1.5 million from the previous year. Tamco's sales improved in 1996, but net
income was down slightly. Gifford-Hill-American, Inc., Bondstrand, Ltd. and
Oasis-Ameron, Ltd. all reported improved earnings over the prior year. Ameron
Saudi Arabia, Ltd. reported its second consecutive year of losses.
Other income also includes royalties and fees from affiliated companies and
licensees, currency gains and losses, and other miscellaneous income. Royalty
and fee income rose $1.3 million in 1996 over 1995 due to new protective
coatings licensing agreements and improved results from existing fiberglass pipe
and protective coatings licensees. Foreign currency losses of $.9 million were
incurred by the Company's Colombian and European operations in 1995 as compared
to gains of $.6 million realized in 1996. Miscellaneous income includes sublease
and property rental income, which was lower than last year.
INTEREST
Interest expense was $11.1 million in 1996 compared to $11.7 million in 1995.
The decrease was the result of lower borrowing levels during the second and
third fiscal quarters of 1996.
CAUTIONARY STATEMENT FOR PURPOSES
OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Any of the above statements that refer to the Company's estimated or
anticipated future results are forward looking and reflect the Company's
current analysis of existing trends and information. Actual results may
differ from current expectations based on a number of factors affecting
Ameron's businesses, including competitive conditions and changing market
conditions. In addition, matters affecting the economy generally, including
the state of economies worldwide, can affect the Company's results. These
forward looking statements represent the Company's judgment only as of the
date of this Annual Report. Actual results could differ materially, and, as a
result, the reader is cautioned not to rely on these forward looking
statements. The Company disclaims, however, any intent or obligation to
update these forward looking statements.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year ended November 30
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) 1997 1996 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $533,506 $496,940 $481,405
Cost of sales 397,823 367,677 364,674
-----------------------------------------------
Gross profit 135,683 129,263 116,731
Selling, general and administrative expenses 103,075 103,320 95,786
Other income 10,493 8,516 8,068
-----------------------------------------------
Income before interest and income taxes 43,101 34,459 29,013
Interest income 578 382 344
Interest expense 12,433 11,134 11,715
-----------------------------------------------
Income before income taxes 31,246 23,707 17,642
Provision for income taxes 11,874 8,297 5,190
-----------------------------------------------
Net income $ 19,372 $ 15,410 $ 12,452
-----------------------------------------------
-----------------------------------------------
Net income per share $ 4.73 $ 3.87 $ 3.15
-----------------------------------------------
-----------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of November 30
(DOLLARS IN THOUSANDS) 1997 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 9,848 $ 18,381
Receivables, less allowance of $5,402 in
1997 and $5,939 in 1996 122,352 105,534
Inventories 95,752 84,971
Deferred income tax benefits 9,083 9,741
Prepaid expenses and other 4,257 4,996
------------------------
Total current assets 241,292 223,623
Investments, advances and equity in undistributed
earnings of affiliated companies 33,777 33,722
Property, plant and equipment
Land 34,911 33,780
Buildings 49,792 50,450
Machinery and equipment 216,958 211,652
Construction in progress 12,255 7,958
------------------------
Total property, plant and equipment at cost 313,916 303,840
Less accumulated depreciation (186,238) (178,153)
------------------------
Total property, plant and equipment, net 127,678 125,687
Intangible assets, net of accumulated amortization
of $4,149 in 1997 and 3,269 in 1996 11,282 12,061
Other assets 19,196 16,573
------------------------
Total assets $ 433,225 $ 411,666
------------------------
------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
As of November 30
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) 1997 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings $ 715 $ 1,242
Current portion of long-term debt 17,654 17,753
Trade payables 31,988 36,715
Accrued liabilities 32,561 41,102
Income taxes 4,347 4,953
-------------------------------
Total current liabilities 87,265 101,765
Deferred income taxes 2,907 2,727
Long-term debt, less current portion 140,917 112,598
Other long-term liabilities 49,154 49,778
-------------------------------
Total liabilities 280,243 266,868
Commitments and contingencies
Stockholders' equity
Common stock, par value $2.50 a share,
authorized 12,000,000 shares,
outstanding 4,005,487 shares in 1997 and
3,985,112 shares in 1996, net of treasury shares 12,946 12,895
Additional paid-in capital 16,969 16,212
Retained earnings 171,569 157,321
Cumulative foreign currency translation adjustments (5,723) 1,149
Less treasury stock (1,172,900 shares in
1997 and 1996), at cost (42,779) (42,779)
-------------------------------
Total stockholders' equity 152,982 144,798
-------------------------------
Total liabilities and stockholders' equity $433,225 $411,666
-------------------------------
-------------------------------
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended November 30
(DOLLARS IN THOUSANDS) 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 19,372 $ 15,410 $ 12,452
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 15,729 16,078 16,065
Amortization 947 367 161
Provision (benefit) for deferred income taxes 809 (4,414) (822)
Equity in earnings of affiliated companies (3,990) (2,298) (3,844)
Dividends from affiliated companies 5,056 4,152 6,186
(Gain) loss from sale of assets 64 (576) (730)
Other, net 1,789 884 144
Other changes in operating assets and liabilities,
excluding business acquisitions:
(Increase) decrease in receivables (22,801) 2,405 (8,483)
Increase in inventories (13,825) (667) (4,182)
(Increase) decrease in other current assets 1,151 (2,211) (3,274)
Increase in long-term assets (191) (536) (440)
Increase (decrease) in trade payables, accrued
liabilities and income taxes (11,264) 10,415 (2,511)
Increase (decrease) in long-term liabilities (965) 5,570 9,445
-----------------------------------
Net cash (used in) provided by operating activities (8,119) 44,579 20,167
-----------------------------------
INVESTING ACTIVITIES
Proceeds from sale of assets 2,287 1,371 1,126
Additions to property, plant and equipment (24,860) (25,227) (16,154)
Business acquisitions -- (29,032) --
Investment in life insurance policies (2,645) (2,995) (1,452)
-----------------------------------
Net cash used in investing activities (25,218) (55,883) (16,480)
-----------------------------------
FINANCING ACTIVITIES
Net change in debt with maturities of three months or less (525) (471) (1,061)
Issuance of debt 47,201 65,022 15,897
Repayment of debt (17,000) (43,277) (9,849)
Dividends on common stock (5,124) (5,076) (5,051)
Issuance of common stock 808 776 34
-----------------------------------
Net cash provided by (used in) financing activities 25,360 16,974 (30)
-----------------------------------
Effect of exchange rate changes on cash and cash equivalents (556) (212) 236
-----------------------------------
Net change in cash and cash equivalents (8,533) 5,458 3,893
Cash and cash equivalents at beginning of year 18,381 12,923 9,030
-----------------------------------
Cash and cash equivalents at end of year $ 9,848 $ 18,381 $ 12,923
-----------------------------------
-----------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
-------------------------
Shares Additional Retained
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) Outstanding Amount Paid-in Capital Earnings Other
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, November 30, 1994 3,935,711 $ 12,772 $ 14,658 $ 139,586 $ 570
Net income -- 1995 12,452
Exercise of stock options and issuance of stock
to employee savings plan 20,786 51 664
Dividends on common stock of $1.28 a share (5,051)
Foreign currency translation adjustments 1,649
--------------------------------------------------------------------
Balance, November 30, 1995 3,956,497 12,823 15,322 146,987 2,219
Net income -- 1996 15,410
Exercise of stock options and issuance of stock
to employee savings plan 28,615 72 890
Dividends on common stock of $1.28 a share (5,076)
Foreign currency translation adjustments (1,070)
--------------------------------------------------------------------
Balance, November 30, 1996 3,985,112 12,895 16,212 157,321 1,149
Net income -- 1997 19,372
Exercise of stock options 20,375 51 757
Dividends on common stock of $1.28 a share (5,124)
Foreign currency translation adjustments (6,872)
--------------------------------------------------------------------
BALANCE, NOVEMBER 30, 1997 4,005,487 $ 12,946 $ 16,969 $ 171,569 $ (5,723)
--------------------------------------------------------------------
--------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE ONE: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Ameron
International Corporation and all wholly-owned subsidiaries (the Company). All
material intercompany accounts and transactions have been eliminated.
RECLASSIFICATIONS
Certain prior year balances have been reclassified to conform with the current
year presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
REVENUE RECOGNITION
Revenue from sales of protective coatings, fiberglass pipe, construction
products and certain other products is recorded at the time the goods are
shipped or when title passes. Revenue from sales of concrete and steel pipe is
recorded at the time the pipe is inspected and accepted by the customer.
RESEARCH & DEVELOPMENT COSTS
Research and development costs are expensed as incurred. Such costs were
approximately $5,534,000 in 1997, $4,400,000 in 1996 and $4,300,000 in 1995.
ENVIRONMENTAL CLEAN-UP COSTS
The Company expenses environmental clean-up costs related to existing conditions
resulting from past or current operations and from which no current or future
benefit is discernible. Expenditures that extend the life of the related
property or mitigate or prevent future environmental contamination are
capitalized. The Company determines its liability on a site by site basis and
records a liability at the time when it is probable and can be reasonably
estimated. The estimated liability of the Company is not discounted or reduced
for possible recoveries from insurance carriers.
INCOME TAXES
The Company follows Statement of Financial Accounting Standards No. 109 (SFAS
109), "Accounting for Income Taxes." Under the asset and liability method of
SFAS 109, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases.
NET INCOME PER SHARE
Net income per share is computed on the basis of the weighted average number of
common shares outstanding each year, plus common stock equivalents related to
dilutive stock options. The number of shares used in the computation of per
share data was 4,094,885 in 1997, 3,982,006 in 1996 and 3,954,544 in 1995.
CASH & CASH EQUIVALENTS
Cash equivalents include time deposits with maturities of three months or less
when purchased.
INVENTORY VALUATION
Inventories are valued at the lower of cost or market. Cost is principally
determined by either the first-in, first-out or average cost methods. Such cost
includes raw materials, direct labor and manufacturing overhead. Certain steel
inventories are valued using the last-in, first-out cost method.
EQUITY METHOD OF ACCOUNTING
Investments in significant 30- to 50-percent-owned affiliates are accounted
for by the equity method of accounting, whereby the investment is carried at
cost of acquisition, plus the Company's equity in undistributed earnings or
losses since acquisition. Reserves are provided where management determines
that the investment or equity in earnings is not realizable.
PROPERTY, PLANT & EQUIPMENT
Items capitalized as property, plant and equipment, including improvements to
existing facilities, are recorded at cost. The book value of obsolete assets is
charged to depreciation expense when they are scrapped. Upon sale or retirement,
the cost and related accumulated depreciation are removed from the respective
accounts, and any gain or loss is included in income. Maintenance and repair
costs are expensed as incurred. Interest costs applicable to the construction of
major plant and expansion projects were immaterial for the periods presented.
DEPRECIATION METHOD
Depreciation is computed principally using the straight-line method based on
estimated useful lives of the assets. Annual rates of depreciation are as
follows:
<TABLE>
<CAPTION>
Percentage of Cost
- -----------------------------------------------------------------
<S> <C>
Buildings 2.50-10.00
Machinery and equipment
Autos, trucks and trailers 6.67-50.00
Cranes and tractors 10.00-15.00
Manufacturing equipment 6.67-33.33
Other 5.00-66.67
</TABLE>
Depreciation expense was $15,729,000 in 1997, $16,078,000 in 1996 and
$16,065,000 in 1995.
AMORTIZATION OF INTANGIBLES
Goodwill and other intangible assets are amortized on a straight-line basis over
periods ranging up to 40 years.
SELF INSURANCE
The Company utilizes third-party insurance subject to varying retention levels
or self insurance. Such self insurance relates to losses and liabilities
primarily associated with workers' compensation claims and general, product and
vehicle liability. Losses are accrued based upon the Company's estimates of the
aggregate liability for claims incurred using certain actuarial assumptions
followed in the insurance industry and based on Company experience.
FOREIGN CURRENCY TRANSLATION
The functional currency for the majority of the Company's foreign operations is
the applicable local currency. The translation from the applicable foreign
currencies to U.S. dollars is performed for balance sheet accounts using current
exchange rates in effect at the balance sheet date and for revenue and expense
accounts using a weighted average exchange rate during the period. The resulting
translation adjustments are recorded as a component of shareholders' equity.
Gains or losses resulting from foreign currency transactions are included in
other income.
DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company operates internationally, giving rise to exposure to market risks
from changes in foreign exchange rates. Derivative financial instruments are
used by the Company to reduce those risks. The Company does not hold or issue
financial or derivative financial instruments for trading or speculative
purposes. The magnitude and volume of such transactions were not material for
the periods presented.
STOCK OPTIONS
In 1997, the Company adopted Statement of Financial Accounting Standards No.
123 (SFAS 123), "Accounting for Stock-Based Compensation." As permitted under
this standard, the Company has elected to follow Accounting Principles Board
Opinion No. 25, "Accounting For Stock Issued to Employees" in accounting for
its stock options and other stock-based employee awards. Pro forma
information regarding net income and earnings per share, as calculated under
the provisions of SFAS 123, are disclosed in Note 14.
<PAGE>
LONG-LIVED ASSETS
In 1997, the Company adopted Statement of Financial Accounting Standards No. 121
(SFAS 121), "Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed of," which requires impairment losses to be recorded on
long-lived assets used in operations when indications of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. As of November 30, 1997, the carrying
value of the Company's assets held for sale, in aggregate, was $3,400,000. The
fair market value of these assets total $7,300,000. The adoption of SFAS 121 did
not have a material effect on the Company's financial position or results of
operations.
PENDING ACCOUNTING CHANGES
In 1997, Statement of Financial Accounting Standards No. 128 (SFAS 128),
"Earnings per Share," was issued. The Company is required to adopt SFAS 128 for
annual and interim periods ending after December 15, 1997. The Company will be
required to restate earnings per share for all prior periods reported.
In 1997, Statement of Financial Accounting Standards No. 130 (SFAS 130),
"Reporting Comprehensive Income," was issued. The statement must be adopted by
the Company no later than the fiscal year ending November 30, 1998.
<TABLE>
<CAPTION>
CASH FLOW INFORMATION
(IN THOUSANDS) 1997 1996 1995
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Interest paid $12,428 $ 9,545 $ 9,849
Income taxes paid, net $16,919 $ 9,010 $ 2,448
</TABLE>
NOTE TWO: OTHER INCOME
Other income for the years ended November 30 included the following:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1997 1996 1995
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Royalties and fees from affiliated
companies and licensees $ 6,051 $ 4,557 $ 3,297
Equity in earnings of affiliated
companies 3,990 2,298 3,844
Foreign currency gain (loss) (481) 558 (928)
Gain (loss) from sale of assets (64) 576 730
Miscellaneous 997 527 1,125
-----------------------------------
$10,493 $ 8,516 $ 8,068
-----------------------------------
-----------------------------------
</TABLE>
The Company provides technical services and receives fees, royalties and other
income from several of its affiliates and licensees, which are included above.
NOTE THREE: CASH & CASH EQUIVALENTS
At November 30, 1997, the Company had approximately $270,000 invested in time
deposits. The Company had $3,978,000 in cash equivalents at November 30, 1996.
The carrying value of cash and cash equivalents approximates their fair value.
NOTE FOUR: RECEIVABLES
Receivables at November 30 were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1997 1996
- ------------------------------------------------------------------------
<S> <C> <C>
Trade $115,740 $102,683
Affiliated companies 2,574 2,205
Dividends from affiliated companies -- 1,138
Other 9,440 5,447
Reserve (5,402) (5,939)
--------------------------
$122,352 $105,534
--------------------------
--------------------------
</TABLE>
The Company's provision for bad debt was $1,798,000 in 1997, $2,583,000 in 1996
and $1,710, 000 in 1995.
NOTE FIVE: INVENTORIES
Inventories at November 30 were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1997 1996
- ------------------------------------------------------------------------
<S> <C> <C>
Finished products $56,989 $44,577
Products in process 18,791 17,467
Materials and supplies 19,972 22,927
---------------------------
$95,752 $84,971
---------------------------
---------------------------
</TABLE>
Certain steel inventories are valued using the last-in, first-out cost method.
These items comprised 2.5% and 10.1% of consolidated inventories at November 30,
1997 and 1996, respectively. If such inventories had been valued using the
first-in, first-out cost method, total inventories would have increased by
$1,776,000 and $1,597,000 at November 30, 1997 and 1996, respectively.
NOTE SIX: AFFILIATED COMPANIES
The Company's principal investments, which have been accounted for by the equity
method, are summarized as follows:
<TABLE>
<CAPTION>
Ownership
Products Affiliate Interest
- -------------------------------------------------------------------
<S> <C> <C>
Concrete pipe products Gifford-Hill-American, Inc. 50%
Ameron Saudi Arabia, Ltd. 30%
Steel products Tamco 50%
Other Bondstrand, Ltd. 40%
Oasis-Ameron, Ltd. 40%
</TABLE>
Investments in affiliated companies and the amount of undistributed retained
earnings included in the Company's consolidated retained earnings at November 30
were as follows:
<TABLE>
<CAPTION>
Concrete
pipe Steel
(IN THOUSANDS) products products Other Total
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT, NOVEMBER 30, 1997
COST $ 6,194 $ 8,482 $ 3,706 $ 18,382
ACCUMULATED EQUITY IN
UNDISTRIBUTED EARNINGS 13,292 11,034 2,364 26,690
RESERVES (7,981) (2,741) (573) (11,295)
------------------------------------------------
$ 11,505 $ 16,775 $ 5,497 $ 33,777
------------------------------------------------
------------------------------------------------
DIVIDENDS RECEIVED IN FISCAL 1997 $ 1,062 $ 3,025 $ 969 $ 5,056
------------------------------------------------
------------------------------------------------
Investment, November 30, 1996
Cost $ 6,194 $ 8,482 $ 3,706 $ 18,382
Accumulated equity in undistributed earnings 13,175 9,918 1,842 24,935
Reserves (7,145) (2,450) -- (9,595)
------------------------------------------------
$ 12,224 $ 15,950 $ 5,548 $ 33,722
------------------------------------------------
------------------------------------------------
Dividends Received in Fiscal 1996 $ 750 $ 1,925 $ 1,477 $ 4,152
------------------------------------------------
------------------------------------------------
</TABLE>
The Company has provided income taxes on the undistributed earnings of its
affiliated companies.
The Company's investment in Gifford-Hill-American, Inc., which manufactures
concrete pressure pipe, was recorded based on audited financial statements as of
November 30, 1996, and unaudited financial statements as of October 31, 1997.
The Company's investments in Ameron Saudi Arabia, Ltd., Bondstrand, Ltd. and
Oasis-Ameron, Ltd. were recorded based on audited financial statements as of
December 31, 1996, and unaudited financial statements as of September 30,
1997. The investment in Tamco was based on audited financial statements as of
November 30, 1997.
<PAGE>
Summarized and combined financial information for affiliates in the concrete
pipe products business follows:
<TABLE>
<CAPTION>
Financial Condition
(IN THOUSANDS) 1997 1996
- ----------------------------------------------------------------
<S> <C> <C>
Current assets $ 70,719 $ 61,483
Noncurrent assets 35,076 37,178
------------------------
$105,795 $ 98,661
------------------------
------------------------
Current liabilities $ 36,088 $ 38,993
Noncurrent liabilities 14,798 3,191
Stockholders' equity 54,909 56,477
------------------------
$105,795 $ 98,661
------------------------
------------------------
</TABLE>
<TABLE>
<CAPTION>
Results of Operations
(IN THOUSANDS) 1997 1996 1995
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 56,295 $ 38,753 $ 41,861
---------------------------------------
---------------------------------------
Gross profit $ 12,151 $ 8,987 $ 8,087
---------------------------------------
---------------------------------------
Net income (loss) $ 207 $ (2,397) $ (1,924)
---------------------------------------
---------------------------------------
</TABLE>
Summarized and combined financial information for Tamco, Bondstrand, Ltd. and
Oasis-Ameron, Ltd. follows:
<TABLE>
<CAPTION>
Financial Condition
(IN THOUSANDS) 1997 1996
- -----------------------------------------------------------------
<S> <C> <C>
Current assets $58,504 $65,877
Noncurrent assets 30,538 30,525
--------------------
$89,042 $96,402
--------------------
--------------------
Current liabilities $26,442 $38,700
Noncurrent liabilities 5,024 3,607
Stockholders' equity 57,576 54,095
--------------------
$89,042 $96,402
--------------------
--------------------
</TABLE>
<TABLE>
<CAPTION>
Results of Operations
(IN THOUSANDS) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $173,041 $150,116 $140,568
------------------------------------------
------------------------------------------
Gross profit $ 29,949 $ 26,711 $ 26,387
------------------------------------------
------------------------------------------
Net income $ 10,017 $ 8,432 $ 7,870
------------------------------------------
------------------------------------------
</TABLE>
The amount of investments and accumulated equity in the undistributed earnings
in the Middle Eastern affiliates was approximately $16,000,000 and $17,000,000
at November 30, 1997 and 1996, respectively.
Sales and technical services provided by the Company to affiliates in the Middle
East totaled approximately $2,300,000 in 1997, $1,200,000 in 1996 and $1,700,000
in 1995, and related receivables aggregated approximately $2,300,000 at November
30, 1997, and $900,000 at November 30, 1996.
NOTE SEVEN: BUSINESS ACQUISITIONS
In the first quarter of fiscal 1996, the Company acquired for cash substantially
all the assets of Centron Corporation (Centron). Centron, located in Mineral
Wells, Texas is a manufacturer of fiberglass pipe for the worldwide oilfield
market. The acquisition was accounted for as a purchase and Centron's results of
operations have been included in the Company's consolidated financial statements
since January 1996.
During the fourth quarter of fiscal 1996, the Company acquired for cash the
worldwide Devoe marine coatings business of Imperial Chemical Industries PLC,
(ICI). The acquisition was accounted for as a purchase and its results of
operations were included in the Company's consolidated financial statements
beginning in the fourth quarter of fiscal 1996.
During the first quarter of fiscal 1997, the Company acquired the maintenance
coatings business of The Valspar Corporation for cash and the assets of the
Company's product finishes business. The transaction was accounted for as a
purchase, and its results of operations were included in consolidated financial
statements beginning in the second quarter of fiscal 1997.
The above acquisitions were completed for a total of $31,419,000. The excess of
the purchase price over the fair value of the assets acquired was $11,329,000.
The Company recorded $8,096,000 as goodwill and $3,233,000 as other intangibles.
Goodwill is being amortized on a straight-line basis over a period not to exceed
40 years. Other intangible assets are being amortized on a straight-line basis
over periods ranging from 3 to 10 years.
NOTE EIGHT: ACCRUED LIABILITIES
Accrued liabilities at November 30 were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1997 1996
- -------------------------------------------------------------------
<S> <C> <C>
Reserves for pending claims and litigation $ 3,342 $ 5,188
Compensation and benefits 12,879 12,653
Self-insurance reserves 2,053 6,317
Interest 4,330 3,753
Commissions and royalties 1,314 2,927
Taxes (other than income taxes) 3,181 2,816
Other 5,462 7,448
--------------------
$32,561 $41,102
--------------------
--------------------
</TABLE>
NOTE NINE: OTHER LONG-TERM LIABILITIES
Other long-term liabilities at November 30 were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1997 1996
- -------------------------------------------------------------------
<S> <C> <C>
Reserves for pending claims and litigation $15,887 $14,927
Compensation and benefits 13,955 14,693
Interest and self-insurance reserves 11,114 10,289
Other 8,198 9,869
--------------------
$49,154 $49,778
--------------------
--------------------
</TABLE>
NOTE TEN: EMPLOYEE BENEFIT PLANS
The Company has a qualified, defined benefit, noncontributory pension plan
for employees not covered by union pension plans, which is accounted for in
accordance with SFAS No. 87. Benefits paid to retirees are based upon age at
retirement, years of credited service and average compensation or negotiated
benefit rates. The Company's funding policy is to make contributions to the
plan sufficient to meet the minimum funding requirements of applicable laws
and regulations, plus such additional amounts, if any, as the Company deems
appropriate based on actuarial consultants' recommendations.
Assets of the defined benefit plan are invested in a directed trust. Assets in
the trust are invested in equity securities of corporations (including
$8,197,000 of the Company's common stock at November 30, 1997), U.S. government
obligations, derivative securities, corporate bonds and money market funds.
The Company has a supplemental non-qualified, non-funded retirement plan, for
which the Company has purchased cost recovery life insurance on the lives of
the participants. The Company is the sole owner and beneficiary of such
policies. The amount of the coverage is designed to provide sufficient
revenues to cover all costs of the plan if assumptions made as to mortality
experience, policy earnings and other factors are realized. As of November
30, 1997 and 1996, the cash surrender value of these policies was $5,899,000
and $4,871,000, respectively.
Net periodic pension cost for the years ended November 30 consists of the
following:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1997 1996 1995
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Service cost:
Defined benefit plan $ 1,912 $ 1,953 $ 1,822
Supplemental plan 246 217 26
Interest cost:
Defined benefit plan 8,707 8,292 8,333
Supplemental plan 300 250 213
Return on plan assets (35,281) (14,996) (17,466)
Net deferral:
Defined benefit plan 23,670 4,560 7,860
Supplemental plan 339 346 273
----------------------------------
Net periodic pension (benefit)cost $ (107) $ 622 $ 1,061
----------------------------------
----------------------------------
</TABLE>
<PAGE>
The following table sets forth the funding status of the qualified, defined
benefit plan and the amount recognized in the Company's balance sheet at
November 30:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1997 1996
- -------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation $112,632 $103,724
Non-vested benefits 452 522
-----------------------
Accumulated benefit obligation 113,084 104,246
Effect of salary increases 8,121 7,722
-----------------------
Actuarial present value of projected
benefit obligation 121,205 111,968
Less plan assets at market value 150,454 122,571
-----------------------
-----------------------
Plan assets in excess of projected
benefit obligation (29,249) (10,603)
Unrecognized asset 33,130 15,477
-----------------------
Accrued pension cost in consolidated
balance sheets $ 3,881 $ 4,874
-----------------------
-----------------------
</TABLE>
The following table sets forth the status of the supplemental plan as of
November 30:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1997 1996
- -------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation $3,581 $3,007
Non-vested benefits 7 3
----------------------
Accumulated benefit obligation 3,588 3,010
Effect of salary increases 751 548
----------------------
Actuarial present value of projected
benefit obligation 4,339 3,558
Unrecognized obligation (503) (841)
Unrecognized net loss (552) (73)
----------------------
Accrued pension cost in consolidated
balance sheets $3,284 $2,644
----------------------
----------------------
</TABLE>
The 1997 actuarial computations for both the qualified, defined benefit plan
and the supplemental plan assumed a discount rate of 7.5% and annual salary
increases of 5.0%. The qualified, defined benefit plan assumed an expected
long-term rate of return of 9.75%.
Approximately 17% of the Company's employees are covered by union-sponsored,
collectively bargained, multi-employer pension plans. The Company contributed
and charged to expense $2,700,000, $2,600,000 and $2,700,000 in 1997, 1996 and
1995, respectively. These contributions are determined in accordance with the
provisions of negotiated labor contracts and generally are based on the number
of hours worked. Information from the plans' administrators is not available to
permit the Company to determine its share of unfunded vested benefits, if any.
The Company has no intention of withdrawing from any of these plans, nor is
there any intention to terminate such plans.
The Company has a deferred compensation plan providing key executives with the
opportunity to participate in an unfunded, deferred compensation program. Under
the program, participants may defer base compensation and bonuses and earn
interest on their deferred amounts. The program is not qualified under Section
401 of the Internal Revenue Code. The total of participant deferrals, which is
reflected in long-term liabilities, was $6,297,000 at November 30, 1997, and
$4,668,000 at November 30, 1996. The participant deferrals earn interest at a
rate based on U.S. Government Treasury rates. The interest expense related to
this plan was $550,000 in 1997, $392,000 in 1996 and $340,000 in 1995.
The Company has a life insurance plan wherein eligible executives are provided
with life insurance protection based upon three times base salary. Upon
retirement, the executive is provided with life insurance protection based upon
final base salary. Benefits may be paid as a lump sum or as an annual income to
the identified survivor over ten years. The expense related to this plan was
$361,000 in 1997, $350,000 in 1996 and, $355,000 in 1995.
In connection with the above two plans, whole life insurance contracts were
purchased on the related participants. At November 30, 1997 and 1996, the cash
surrender value of these policies was $9,197,000 and $7,581,000, respectively,
net of loans of $2,043,000.
The Company provides to certain employees a savings plan under Section 401(k) of
the Internal Revenue Code. The savings plan allows for deferral of income up to
a certain percentage through contributions to the plan and, within certain
restrictions, Company matching contributions are in the form of cash. In 1996,
contributions were in the form of the Company's common stock and cash. In 1995 ,
matching contributions were solely in the form of the Company's common stock. In
1997, 1996 and 1995, the Company recorded expenses for matching contributions of
$286,000, $433,000 and $681,000, respectively, while 4,840 and 19,761 shares of
common stock were issued by the Company to the savings plan in 1996 and 1995,
respectively.
NOTE ELEVEN: INCOME TAXES
The provision for income taxes for the years ended November 30 included the
following:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1997 1996 1995
- -----------------------------------------------------------
<S> <C> <C> <C>
Current
Federal $9,875 $9,320 $2,833
Foreign (82) 1,730 2,516
State 1,272 1,661 663
-----------------------------------
11,065 12,711 6,012
Deferred
Federal 676 (3,755) (993)
Foreign (63) (46) 396
State 196 (613) (225)
-----------------------------------
809 (4,414) (822)
-----------------------------------
$1,874 $8,297 $5,190
-----------------------------------
-----------------------------------
</TABLE>
The principal types of temporary differences and the tax effect of each, which
give rise to the deferred tax provision (benefit), for the years ended November
30 follow:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1997 1996 1995
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Accelerated depreciation $ (306) $ (6) $ (377)
Change in nondeductible reserves 1,601 (3,801) (2,310)
Write down of fixed assets -- (410) --
Federal alternative minimum tax and State
loss carryforwards -- 32 1,379
Equity in earnings of affiliated companies (482) (343) 250
Other, net (4) 114 236
------------------------------
$ 809 $(4,414) $ (822)
------------------------------
------------------------------
</TABLE>
Deferred tax assets (liabilities) are comprised of the following as of
November 30:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1997 1996
- --------------------------------------------------------------------------
<S> <C> <C>
Non-current deferred taxes
Self insurance/claims reserves $ 7,979 $ 7,993
Investments (2,696) (2,234)
Employee benefits 9,394 9,352
Fixed assets (19,571) (20,437)
Federal and State tax credit and loss
carryforwards 2,347 2,347
Other (360) 252
---------------------
Net non-current deferred liability (2,907) (2,727)
Current deferred taxes
Self-insurance/claims reserves 1,435 1,442
Employee benefits 2,732 2,497
Accounts receivable 1,401 2,937
Inventory 3,273 2,935
Other 242 (70)
---------------------
Net current deferred asset 9,083 9,741
---------------------
Net deferred taxes $ 6,176 $ 7,014
---------------------
---------------------
</TABLE>
<PAGE>
The tax provision represents effective tax rates of 38.0%, 35% and 29.4% of
pretax income for the years ended November 30, 1997, 1996 and 1995,
respectively. A reconciliation of income taxes provided at the effective
income tax rate and the amount computed at the federal statutory income tax
rate of 35% for the years ended November 30, 1997, 1996 and 1995 follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1997 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic pretax income $24,746 $17,534 $12,771
Foreign pretax income 6,500 6,173 4,871
--------------------------------
31,246 $23,707 $17,642
--------------------------------
--------------------------------
Taxes at federal statutory rate $10,936 $ 8,297 $ 6,175
State taxes (net of federal tax benefit) 954 681 285
Foreign losses with no federal benefit 87 11 630
Percentage depletion (379) (484) (512)
Foreign branch/withholding taxes 571 (20) 226
Equity in earnings of affiliated companies (1,484) (948) (1,096)
Other, net 1,189 760 (518)
--------------------------------
$11,874 $ 8,297 $ 5,190
--------------------------------
--------------------------------
</TABLE>
In 1996, the Internal Revenue Service completed the examination of the Company's
1990 through 1992 Federal income tax returns, and issued an assessment. The
Company agreed and paid the tax on a portion of the assessment, and filed an
appeal with respect to the portion that is in dispute. The Company also has an
appeal pending with respect to a portion of the Internal Revenue Service audit
assessment relating to the Company's 1987 through 1989 Federal income tax
returns. The resolution of these matters are not expected to have a material
effect on the Company's financial position or its results of operations.
NOTE TWELVE: DEBT
Short-term borrowings consist of loans payable to banks by foreign subsidiaries
totaling $715,000 and $1,242,000 as of November 30, 1997, and 1996,
respectively. The average interest rate on these loans was approximately 9.51%
in 1997 and 9.12% in 1996.
Domestically, the Company has uncommitted, short-term bank credit lines totaling
$24,000,000 with interest at various money market rates.
Long-term debt as of November 30 consisted of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1997 1996
- -------------------------------------------------------------------
<S> <C> <C>
Fixed-rate unsecured notes payable:
8.63%, payable in annual principal
installments of $5,000 $ 5,000 $ 10,000
9.79%, payable in annual principal
installments of $12,000 36,000 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 (3.90% at November 30, 1997) 7,200 7,200
Variable-rate unsecured bank
revolving credit facilities
(approximately 6.12 % at November 30, 1997) 57,429 11,009
Variable-rate unsecured bank loan,
payable by a consolidated subsidiary in
Dutch guilders, with annual principal
installments of approximately $654
(4.01% at November 30, 1997) 2,942 4,142
------------------
158,571 130,351
Less current portion 17,654 17,753
------------------
$140,917 $112,598
------------------
------------------
</TABLE>
The Company maintains a $75,000,000 revolving credit facility with five banks.
The Company may, at its option, borrow at interest rates based on specified
margins over money market rates, at any time until June 2000, when all
borrowings under the facility must be repaid. At November 30, 1997, $40,000,000
was borrowed under this facility.
Additionally, a consolidated subsidiary maintains revolving credit facilities
with three banks. The subsidiary may at its option borrow in various currencies,
at interest rates based on specified margins over money market rates. The
subsidiary is able to borrow up to the equivalent of $7,000,000 at any time
through October 2001 under one facility, and $3,000,000 through August 1998
under a second facility. A third arrangement permits borrowings up to
$6,000,000; this availability declines by $600,000 semi-annually. At November
30, 1997, $4,800,000 was available under this arrangement. At November 30, 1997,
$9,626,000 was borrowed under these bank facilities.
Future payments due on long-term debt total $17,654,000 in 1998, $12,654,000 in
1999, $12,654,000 in 2000, $13,010,000 in 2001, and $8,660,000 in 2002.
The lending agreements contain various restrictive covenants, including the
requirement to maintain specified amounts of working capital and net worth and
restrictions on cash dividends, borrowings, liens, investments and guarantees.
Under the most restrictive provisions of the Company's lending agreements,
approximately $7,650,000 of retained earnings was not restricted at November 30,
1997, as to the declaration of cash dividends and the repurchase of Company
stock. At November 30, 1997, the Company was in compliance with all financial
covenants.
Certain note agreements contain provisions regarding the Company's ability to
grant security interests or liens in association with other debt instruments. If
the Company grants such a security interest or lien, then such notes will be
secured equally and ratably as long as such other debt shall be secured.
The following disclosure of the estimated fair value of the Company's debt is
made in accordance with the requirements of Statement of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instruments." The
estimated fair value amounts have been determined by the Company using available
market information and appropriate valuation methodologies. Considerable
judgment is required to develop the estimates of fair value, thus the estimates
provided herein are not necessarily indicative of the amounts that could be
realized in a current market exchange.
<TABLE>
<CAPTION>
NOVEMBER 30, 1997
-----------------------
Carrying Fair
(IN THOUSANDS) Amount Value
- -------------------------------------------------------------------
<S> <C> <C>
Short-term borrowings $ 715 $ 715
Fixed-rate long-term debt 91,000 95,444
Variable-rate long-term debt 67,571 67,571
</TABLE>
The carrying values of short-term and variable-rate long-term debt are a
reasonable estimate of their fair value. The estimated fair value of the
Company's fixed-rate long-term debt is based on U.S. government notes plus an
estimated spread at November 30, 1997, for similar securities with similar
remaining maturities.
NOTE THIRTEEN: LEASE COMMITMENTS
Rental expense under long-term operating leases of property, vehicles and other
equipment was $6,170,000 in 1997, $7,201,000 in 1996 and $7,225,000 in 1995. At
November 30, 1997, future rental commitments under these leases totaled
$48,904,000. Future rental commitments are payable as follows:
<TABLE>
<CAPTION>
Year ending
(IN THOUSANDS) November 30 Amount
- ---------------------------------------------------------------
<S> <C> <C>
1998 $ 6,036
1999 5,580
2000 4,769
2001 3,468
2002 2,763
2003 - Beyond 26,288
--------
$ 48,904
--------
--------
</TABLE>
Minimum payments for leases have not been reduced by minimum noncancelable
sublease rentals aggregating $4,631,000 for operating leases.
<PAGE>
NOTE FOURTEEN: INCENTIVE STOCK COMPENSATION PLANS
At November 30, 1997, the Company has various stock option plans, which are
described below. The Company applies Accounting Principles Board Opinion No.
25 (APB 25), "Accounting for Stock Issued to Employees," and related
interpretations in accounting for its various stock option plans. In 1997,
the Company adopted Statement of Financial Accounting Standards No. 123 (SFAS
123), "Accounting for Stock-Based Compensation."
On January 27, 1992, the Board of Directors of the Company adopted the Incentive
Stock Compensation Plan ("1992 Incentive Plan"). Under the terms of the 1992
Incentive Plan, 1.5% of the total number of shares of common stock outstanding
on the preceding December 31 are available for grant of awards in the following
calendar year to key employees.
The Company has reserved 292,734 shares of common stock for sale to employees
under the 1992 Incentive Plan at November 30, 1997. The plan provides for the
issuance of additional options to purchase not more than 250,000 shares of
common stock in the form of incentive options under the provisions of Section
422 of the Internal Revenue Code. Options can be incentive options or
non-qualified options and may be granted for up to 10 years. Awards under the
1992 Incentive Plan may include but are not limited to stock bonuses, stock
options, convertible securities and restricted stock grants. Restrictions may
limit the sale, transfer, voting rights and dividends on these shares. At
November 30, 1997, 19,818 were available for future grants.
Also at November 30, 1997, the Company reserved 6,000 shares of common stock for
sale to employees under the 1982 Stock Option Plan. The 1982 Stock Option Plan
expired in January 1992, and no further options will be granted under that plan.
On June 27, 1994, the Board of Directors of the Company adopted the 1994
Nonemployee Director Stock Option Plan (Nonemployee Director Plan). On March 27,
1995, the Nonemployee Director Plan was approved by the stockholders at the
Annual Stockholder's Meeting. Under the terms of the Nonemployee Director Plan,
each Nonemployee Director shall automatically be granted 1,000 options on the
first business day following the date of the annual meeting of the stockholders
of the Company at which the directors of the Company are elected. The aggregate
number of shares issued and issuable shall not exceed 120,000. As of November
30, 1997, the Company had reserved 23,000 shares of common stock for sale under
the Nonemployee Director Plan.
For both the 1992 Incentive Plan and the Nonemployee Director Plan, the exercise
price of each option equals the market price of the Company's stock on the date
of grant, and an option's maximum term is 10 years. Options are granted at
various periods during the fiscal year under both plans and vest over 5 years.
SFAS 123 requires the Company to provide pro forma information regarding net
income and earnings per share as if compensation cost for the Company's stock
option plans had been determined in accordance with the fair value based method
prescribed in SFAS 123. The Company estimates the fair value of stock options at
the grant date by using the Black Scholes option pricing model with the
following weighted average assumptions used for grants in 1996 and 1997,
respectively: dividend yield of .19% for all years; an expected volatility of
20%; risk-free rates of 5.28%, 6.63%, 6.22% and 6.36% for the 1992 plan and
risk-free rates of 6.08%, and 6.66% for the 1994 plan; an expected life of 5
years for the 1992 plan and an expected life of 5 years for the 1994 plan.
Under the accounting provisions of SFAS 123, the Company's net income and
earnings per share would have been reduced by the following pro forma amounts
indicated below:
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT PER SHARE DATA) 1997 1996
- ----------------------------------------------------------------
<S> <C> <C>
Impact
Net Income
As Reported $19,372 $15,410
Pro Forma 19,087 15,234
Earnings Per Share
As Reported $ 4.73 $ 3.87
Proforma 4.66 3.83
</TABLE>
A summary of the Company's two fixed stock option plans as of November 30,
1996 and 1997, and changes during the years ending on those dates is
presented below:
<TABLE>
<CAPTION>
Number of Weighted Average
Shares Exercise Price
- -----------------------------------------------------------------------------
<S> <C> <C>
Outstanding at November 30, 1995 228,334 $37.07
Granted 107,000 39.32
Exercised (23,775) 32.65
Forfeited (19,300) 36.40
-------
Outstanding at November 30, 1996 292,259 37.47
-------
-------
Options Exercisable at Year-end 49,975 36.65
-------
-------
Weighted-Average Fair Value of Options
Granted During the Year $12.63
OUTSTANDING AT NOVEMBER 30, 1996 292,259 $39.22
GRANTED 55,000 48.54
EXERCISED (20,375) 33.86
FORFEITED (5,150) 38.60
-------
OUTSTANDING AT NOVEMBER 30, 1997 321,734 39.57
-------
-------
OPTIONS EXERCISABLE AT YEAR-END 172,359 36.96
-------
-------
WEIGHTED-AVERAGE FAIR VALUE OF OPTIONS
GRANTED DURING THE YEAR $15.27
</TABLE>
The following table summarizes information about stock options outstanding as
of November 30, 1997:
<TABLE>
<CAPTION>
Number Weighted Average Weighted
Range of Exercisable at Remaining Average
Exercised Prices November 30, 1997 Contractual Life Exercise Price
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 0 to $35.00 46,300 6.27 $32.39
35 to 45.00 226,934 7.34 38.35
45 to 55.00 48,500 9.20 49.75
--------
0 to 55.00 321,734 7.47 39.21
--------
--------
</TABLE>
<TABLE>
<CAPTION>
Number Weighted
Range of Outstanding at Average
Exercised Prices November 30, 1997 Exercise Price
- -------------------------------------------------------------------------------------------
<S> <C> <C>
$ 0 to $35.00 39,800 $32.33
35 to 45.00 132,559 38.35
45 to 55.00 -- --
--------
0 to 55.00 172,359 36.96
--------
--------
</TABLE>
<PAGE>
NOTE FIFTEEN: CONTINGENCIES & COMMITMENTS
An action was filed in 1992 in the U.S. District for the District of Arizona by
the Central Arizona Water Conservation District ("CAWCD") seeking damages
against several parties, including the Company and the Company's customer, Peter
Kiewit Sons' Company ("Kiewit"), in connection with six prestressed concrete
pipe siphons furnished and installed in the 1970's as part of the Central
Arizona Project ("CAP"), a federal project to bring water from the Colorado
River to Arizona. The CAWCD also filed separate actions against the U.S. Bureau
of Reclamation ("USBR") in the U.S. Court of Claims and with the Arizona
Projects Office of the USBR in connection with the CAP siphons. The CAWCD
alleged that the six CAP siphons were defective and that the USBR and the
defendants in the U.S. District Court action were liable for the repair or
replacement of those siphons at a claimed estimated cost of $146.7 million. On
September 14, 1994, the U.S. District Court granted the Company's motion to
dismiss the CAWCD action and entered judgment against the CAWCD and in favor of
the Company and its co-defendants. CAWCD has filed a notice of appeal with the
Ninth Circuit Court of Appeals.
Separately, on September 28, 1995, the Contracting Officer for the USBR issued a
final decision claiming for the USBR approximately $40 million in damages
against Kiewit, based in part on the Contracting Officer's finding that the
siphons supplied by the Company were defective. That claim amount is considered
by the Company to be duplicative of the damages sought by the CAWCD for the
repair or replacement of the siphons in its aforementioned action in the U.S.
District for the District of Arizona. The Contracting Officer's final decision
has been appealed by Kiewit to the U.S. Department of the Interior Board of
Contract Appeals ("IBCA"). The Company is actively cooperating with and
assisting Kiewit in the administrative appeal of that final decision before the
IBCA.
The Company internally, as well as through independent third-party consultants,
has conducted engineering analysis regarding the allegations that the CAP
siphons were defective and believes that the siphons were manufactured in
accordance with the project specifications and other contract requirements, and
therefore it is not liable for any claims relating to the siphons, whether by
the CAWCD or by the USBR. The Company has recorded provisions deemed adequate by
the Company to permit it to continue to vigorously defend its position in this
matter. The Company believes that it has meritorious defenses to these actions
and that resultant liability, if any, should not have a material effect on the
financial position of the Company or its results of operations.
In addition, certain other claims, suits and complaints that arise in the
ordinary course of business, have been filed or are pending against the Company.
Management believes that these matters, and the matters discussed above, are
either adequately reserved, covered by insurance, or would not have a material
effect on the financial position of the Company or its results of operations if
disposed of unfavorably. The Company is also subject to federal, state and local
laws and regulations concerning the environment and is currently participating
in administrative proceedings at several sites under these laws. While the
Company finds it difficult to estimate with any certainty the total cost of
remediation at the several sites, on the basis of currently available
information and reserves provided, the Company believes that the outcome of such
environmental regulatory proceedings will not have a material effect on the
Company's financial position or its results of operations.
At November 30, 1997, the Company had reserves of $11,805,000 for potential
environmental liabilities and $7,424,000 associated with product liability and
other legal claims.
NOTE SIXTEEN: CAPITAL STOCK
The certificate of incorporation in Delaware authorizes 12,000,000 shares of
$2.50 par value common stock, 1,000,000 shares of $1.00 par value preferred
stock and 100,000 shares of $1.00 par value series A junior participating
cumulative preferred stock. The preferred stock may be issued in series, with
the rights and preferences of each series to be established by the Board of
Directors. As of November 30, 1997, the Company had no shares of preferred
stock or series A junior participating cumulative preferred stock outstanding.
The Company has a Stockholders' Rights Agreement, which entitles stockholders to
purchase common stock if a party acquires 15% or more of the Company's common
shares or announces a tender offer for at least 15% of its common shares
outstanding.
NOTE SEVENTEEN: BUSINESS SEGMENTS & GEOGRAPHIC AREAS
Financial information for 1997, 1996 and 1995, with respect to the various
business segments of the Company, appears on pages 60 and 61.
QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for the years ended November 30, 1997 and
1996, follow:
<TABLE>
<CAPTION>
1997
-----------------------------------------
(IN THOUSANDS First Second Third Fourth
EXCEPT PER SHARE DATA) Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES $108,261 $131,525 $146,323 $147,397
GROSS PROFIT 27,683 35,208 38,490 34,302
NET INCOME 938 5,270 7,050 6,114
NET INCOME PER SHARE .23 1.30 1.72 1.48
</TABLE>
<TABLE>
<CAPTION>
1996
-----------------------------------------
(IN THOUSANDS First Second Third Fourth
EXCEPT PER SHARE DATA) Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $111,752 $120,632 $133,622 $130,934
Gross Profit 25,363 30,852 36,220 36,828
Net Income 475 4,350 5,972 4,613
Net Income per Share .12 1.09 1.50 1.16
</TABLE>
The Company traditionally experiences lower sales during the first fiscal
quarter because of seasonal patterns associated with weather and contractor
schedules.
PER SHARE DATA
<TABLE>
<CAPTION>
Stock Price Dividends
------------------------------------------------
Quarter Ended 1997 1996 1997 1996
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
February 28 & 29 -High $52 1/2 $39 1/8 $ .32 $ .32
-Low 46 3/8 36
May 31 -High 55 1/2 41 3/4 .32 .32
-Low 47 5/8 37 3/8
August 31 -High 58 5/8 41 5/8 .32 .32
-Low 54 34 1/8
November 30 -High 70 50 .32 .32
-Low 58 1/8 36 1/8
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE STOCKHOLDERS & THE BOARD OF DIRECTORS, AMERON INTERNATIONAL CORPORATION:
We have audited the accompanying consolidated balance sheets of Ameron
International Corporation (a Delaware corporation) and subsidiaries as of
November 30, 1997 and 1996, and the related consolidated statements of income,
cash flows and stockholders' equity for each of the three years in the period
ended November 30, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits, the consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of Ameron International Corporation and subsidiaries as of November
30, 1997 and 1996, and the results of their operations and their cash flows
for each of the three years in the period ended November 30, 1997, in
conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Los Angeles, California
January 19, 1998
REPORT OF MANAGEMENT
We have prepared the accompanying consolidated financial statements and
related financial information of Ameron International Corporation and
subsidiaries in conformity with generally accepted accounting principles
appropriate in the circumstances. Management is primarily responsible for the
integrity of the financial information included in this Annual Report. In
preparing the financial statements, management makes estimates as necessary
based upon currently available information and judgments of current
conditions and circumstances.
Ameron maintains a system of internal accounting controls supported by
documentation to provide reasonable assurance that assets are safeguarded and
the accounting records reflect the authorized transactions of the Company. We
believe the Company's system provides this appropriate balance in accordance
with established policies and procedures as implemented by qualified personnel.
The independent auditors, Arthur Andersen LLP, appointed by the Board of
Directors, are responsible for expressing their opinion as to whether the
consolidated financial statements present fairly in all material respects the
financial position, operating results and cash flows of the Company. In this
process, they evaluate the system of internal accounting controls to establish
the audit procedures. Their opinion appears on this page.
The Audit Committee of the Board of Directors is composed of three directors
who are not officers or employees of the Company. They meet periodically with
management, Arthur Andersen LLP and the internal auditors to review the audit
scope and results, discuss internal control and financial reporting subjects,
and review management actions on these matters. Arthur Andersen LLP and the
internal auditors have full and free access to the members of the Audit
Committee.
/s/ JAMES S. MARLEN /s/ GARY WAGNER
JAMES S. MARLEN GARY WAGNER
Chairman of the Board, Senior Vice President
President & Chief Executive Officer & Chief Financial Officer
<PAGE>
BUSINESS SEGMENTS
Ameron classifies its business operations into four segments. The Protective
Coatings Group manufactures and markets high-performance industrial and
marine coatings. The Fiberglass Pipe Group manufactures and markets
filament-wound and molded composite fiberglass pipe, tubing, fittings and
well screens. The Concrete & Steel Pipe Group manufactures and supplies
concrete and steel pressure pipe, concrete non-pressure pipe, protective
linings for pipe, and fabricated products. The Construction & Allied Products
Group manufactures and sells ready-mix concrete, sand and aggregates,
concrete pipe, and concrete and steel lighting and traffic poles.
Intersegment sales were not significant. Income from reportable segments is
exclusive of certain unallocated income and expense. Identifiable assets by
segment are those assets that are used exclusively by such segment.
Unallocated assets are principally cash, corporate property and equipment,
and investments. Capital expenditures do not include plant and equipment for
business acquisitions. A summary of sales, income (loss), assets,
depreciation and capital expenditures by segment follows:
<TABLE>
<CAPTION>
BUSINESS SEGMENTS
------------------------------------------------------------------------------------------
Protective Fiberglass Concrete & Construction &
(DOLLARS IN THOUSANDS ) Coatings Pipe Steel Pipe Allied Products Unallocated Consolidated
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1997
SALES $190,690 $102,453 $145,599 $ 94,764 $ -- $533,506
INCOME (LOSS) BEFORE INTEREST
AND INCOME TAXES 16,775 12,293 15,172 9,919 (11,058) 43,101
IDENTIFIABLE ASSETS 119,716 78,683 91,088 60,954 82,784 433,225
CAPITAL EXPENDITURES 4,259 8,466 7,383 3,253 1,499 24,860
DEPRECIATION 2,698 3,706 3,935 4,200 1,190 15,729
- -------------------------------------------------------------------------------------------------------------------------------
1996
Sales $142,562 $104,056 $148,528 $ 101,794 $ -- $496,940
Income (loss) before interest
and income taxes 10,073 10,052 17,936 10,680 (14,282) 34,459
Identifiable assets 106,917 76,610 82,811 60,906 84,422 411,666
Capital expenditures 4,475 2,876 2,411 14,490 975 25,227
Depreciation 2,435 3,804 4,072 4,487 1,280 16,078
- -------------------------------------------------------------------------------------------------------------------------------
1995
Sales $130,543 $ 82,752 $153,155 $ 114,955 $ -- $481,405
Income (loss) before interest
and income taxes 3,248 8,777 10,496 15,178 (8,686) 29,013
Identifiable assets 71,432 63,892 107,092 54,228 74,737 371,381
Capital expenditures 3,894 2,534 5,375 2,856 1,495 16,154
Depreciation 2,359 4,027 4,091 4,928 660 16,065
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
GEOGRAPHIC AREAS
The markets served by the Protective Coatings Group and the Fiberglass Pipe
Group are worldwide in scope. The Concrete & Steel Pipe Group serves
primarily the western United States. Ameron Hawaii operates exclusively in
the State of Hawaii, and the Pole Products Division sells mainly in the
continental United States. Ameron Hawaii and the Pole Products Division
together comprise the Construction & Allied Products Group. Sales for export
or to any individual customer did not exceed 10% of consolidated sales.
Information with respect to the Company's geographic areas is as follows:
<TABLE>
<CAPTION>
GEOGRAPHIC AREAS
-----------------------------------------------------------------------
United Investments &
(DOLLARS IN THOUSANDS ) States Europe Other Eliminations Consolidated
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997
SALES TO UNAFFILIATED CUSTOMERS $434,839 $67,328 $31,339 $ -- $533,506
INTERCOMPANY SALES BETWEEN GEOGRAPHIC AREAS 1,829 7,189 2,507 (11,525) --
-----------------------------------------------------------------------
TOTAL SALES $436,668 $74,517 $33,846 $(11,525) $533,506
-----------------------------------------------------------------------
-----------------------------------------------------------------------
INCOME BEFORE INTEREST AND INCOME TAXES $ 29,638 $ 2,838 $ 6,635 $ 3,990 $ 43,101
IDENTIFIABLE ASSETS 315,776 55,839 27,833 33,777 433,225
- ------------------------------------------------------------------------------------------------------------------------------
1996
Sales to unaffiliated customers $396,904 $64,634 $35,402 $ -- $496,940
Intercompany sales between geographic areas 4,705 932 5,637 (11,274) --
-----------------------------------------------------------------------
Total sales $401,609 $65,566 $41,039 $(11,274) $496,940
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Income before interest and income taxes $ 22,556 $ 1,579 $ 8,026 $ 2,298 $ 34,459
Identifiable assets 288,017 61,951 27,976 33,722 411,666
- ------------------------------------------------------------------------------------------------------------------------------
1995
Sales to unaffiliated customers $372,589 $73,528 $35,288 $ -- $481,405
Intercompany sales between geographic areas 4,180 1,411 6,448 (12,039) --
-----------------------------------------------------------------------
Total sales $376,769 $74,939 $41,736 $(12,039) $481,405
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Income before interest and income taxes $ 15,915 $ 1,006 $ 8,248 $ 3,844 $ 29,013
Identifiable assets 253,734 56,315 25,135 36,197 371,381
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
<S> <C> <C>
Parents
- -------
None
Jurisdiction of Percent of
Subsidiaries Consolidated Incorporation Stock Owned
- ------------------------- --------------- -----------
American Pipe & Construction International California 100
Ameron B.V. The Netherlands 100
Ameron FSC Guam 100
Ameron (Hong Kong) Ltd. Hong Kong 100
Amercoat Japan Company, Limited Japan 100
Ameron Malaysia Sdn. Bhd. Malaysia 100
Ameron (Pte) Ltd. Singapore 100
Centron International, Inc. Delaware 100
Subsidiaries Not Consolidated and
Fifty-Percent or Less Owned Companies
- -------------------------------------
Gifford-Hill-American, Inc. Texas 50
Tamco California 50
Bondstrand, Ltd. Saudi Arabia 40
Oasis-Ameron, Ltd. Saudi Arabia 40
Ameron Saudi Arabia, Ltd. Saudi Arabia 30
Names of other subsidiaries not consolidated and fifty-percent or less owned
companies are omitted because when considered in the aggregate as a single
subsidiary they do not constitute a significant subsidiary.
</TABLE>
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports included and incorporated by reference in this Form 10-K, into the
Company's previously filed Registration Statements (File No. 33-3400, 33-57308,
33-59697 and 333-36497).
ARTHUR ANDERSEN LLP
Los Angeles, California
February 26, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<CASH> 9,848
<SECURITIES> 0
<RECEIVABLES> 122,352
<ALLOWANCES> 0
<INVENTORY> 95,752
<CURRENT-ASSETS> 241,292
<PP&E> 127,678
<DEPRECIATION> 0
<TOTAL-ASSETS> 433,225
<CURRENT-LIABILITIES> 87,265
<BONDS> 0
0
0
<COMMON> 12,946
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 433,225
<SALES> 533,506
<TOTAL-REVENUES> 533,506
<CGS> 397,823
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 103,075
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,433
<INCOME-PRETAX> 31,246
<INCOME-TAX> 11,874
<INCOME-CONTINUING> 19,372
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,372
<EPS-PRIMARY> 4.73
<EPS-DILUTED> 0
</TABLE>
