FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from...............to..................
Commission File No. 1 - 9102
AMERON INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 77-0100596
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
245 South Los Robles Avenue
Pasadena, California 91101-2820
(Address of principal executive offices)
Telephone Number (626) 683-4000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes / X / No
The number of shares outstanding of Common Stock, $2.50 par value, was
4,007,112 on March 31, 1998. No other class of Common Stock exists.
Page 1
AMERON INTERNATIONAL CORPORATION
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Income 3
Consolidated Statements of Comprehensive Income 4
Consolidated Balance Sheets 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 11
PART II. OTHER INFORMATION
Item 2. Changes in Securities 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURE PAGE 14
Page 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Ameron International Corporation and Subsidiaries
Consolidated Statements of Income
(In thousands, except share and per share data)
Three Months Ended
February 28,
-------------------
1998 1997
-------- --------
Net Sales $102,526 $108,261
Cost of Sales 78,324 80,578
-------- --------
Gross Profit 24,202 27,683
Selling, General and
Administrative Expenses 25,046 26,283
-------- --------
Operating Profit/(Loss) (844) 1,400
Royalty, Equity and Other Income 1,771 2,619
-------- --------
Income before Interest
and Income Taxes 927 4,019
Interest Income 154 85
Interest Expense 2,647 2,541
-------- --------
Income/(Loss) Before Income Taxes (1,566) 1,563
Provision/(Benefit) for Income Taxes (626) 625
-------- --------
Net Income/(Loss) $ (940) $ 938
======== ========
Basic Net Income/(Loss) per Share $ (.23) $ .23
======== ========
Diluted Net Income/(Loss) per Share $ (.23) $ .23
======== ========
Weighted Average Common Shares Outstanding 4,005,956 4,000,443
========= =========
Diluted Common Shares Outstanding 4,005,956 4,067,138
========= =========
Cash Dividends per Share $ .32 $ .32
======== ========
See accompanying notes to financial statements.
Page 3
Ameron International Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income
(In thousands)
Three Months Ended
February 28,
-------------------
1998 1997
-------- --------
Net Income/(Loss) $ (940) $ 938
Other Comprehensive Income/(Loss):
Foreign Currency Translation Adjustment (2,837) (3,644)
-------- --------
Other Comprehensive Income/(Loss) before Tax (2,837) (3,644)
Income Tax (Expense)/Benefit Related to Other
Comprehensive Income 1,135 1,458
-------- --------
Other Comprehensive Income/(Loss), Net of Tax (1,702) (2,186)
-------- --------
Comprehensive Income/(Loss) (2,642) (1,248)
======== ========
Page 4
Ameron International Corporation and Subsidiaries
Consolidated Balance Sheets
(In thousands except share and per share data)
Feb. 28, Nov. 30,
1998 1997
-------- --------
ASSETS
Current Assets
Cash and cash equivalents $ 6,973 $ 9,848
Receivables, net 105,169 122,352
Inventories 107,958 95,752
Deferred income tax benefits 8,246 9,083
Prepaid expenses and other 5,360 4,257
-------- --------
Total current assets 233,706 241,292
Investments, Advances and Equity in
Undistributed Earnings of Affiliated Companies 33,541 33,777
Property, Plant and Equipment, net 128,149 127,678
Other Assets 28,494 30,478
-------- --------
Total Assets $423,890 $433,225
======== ========
LIABILITIES and STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ 585 $ 715
Current portion of long-term debt 17,635 17,654
Trade payables 35,868 31,988
Accrued liabilities 28,846 32,561
Income taxes 4,437 4,347
-------- --------
Total current liabilities 87,371 87,265
Deferred Income Taxes 1,320 2,907
Long-term Debt, less current portion 142,733 140,917
Other Long-term Liabilities 44,512 49,154
-------- --------
Total liabilities 275,936 280,243
Stockholders' Equity
Common stock, par value $2.50 a share,
Authorized, 12,000,000 shares,
Outstanding, 4,006,362 shares at
February 28, 1998 and 4,005,487 shares
at November 30, 1997, net of treasury shares 12,948 12,946
Additional paid-in capital 16,998 16,969
Retained earnings 169,347 171,569
Accumulated other comprehensive income/(loss) (8,560) (5,723)
Treasury stock (1,172,900 shares), at cost (42,779) (42,779)
-------- --------
Total stockholders' equity 147,954 152,982
-------- --------
Total Liabilities and Stockholders' Equity $423,890 $433,225
======== ========
See accompanying notes to financial statements
Page 5
Ameron International Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
Three Month Ended
February 28,
-------------------
1998 1997
-------- --------
Cash Flow from Operating Activities
Net Income/(Loss) $ (940) $ 938
Adjustments to reconcile to net cash
provided by (used in) operating activities:
Depreciation 3,916 3,927
Amortization 308 156
Equity in earnings of affiliated companies (372) (531)
Dividends from affiliated companies 611 1,137
Other, net 277 216
Changes in operating assets and liabilities:
Change in receivables 16,310 755
Change in inventories (12,711) (11,802)
Change in other current assets (281) (794)
Change in trade payables and
other current liabilities 707 (7,871)
Change in other assets and liabilities, net (4,292) 996
-------- --------
Net cash provided by (used in)
operating activities 3,533 (12,873)
Cash Flow from Investing Activities
Proceeds from sale of assets 58 41
Additions to property, plant and equipment (6,832) (5,290)
Other (333) (253)
-------- --------
Net cash used in investing activities (7,107) (5,502)
Cash Flow from Financing Activities
Net change in debt with maturities
of three months or less (130) (32)
Issuance of debt 2,312 15,452
Repayment of debt (160) (2,960)
Dividends to common stockholders (1,282) (1,280)
Issuance of common stock 31 566
-------- --------
Net cash provided by financing activities 771 11,746
Effect of Exchange Rate Changes
on Cash and Equivalents (72) (315)
-------- --------
Net Change in Cash and Equivalents (2,875) (6,944)
Beginning Cash and Equivalents Balance 9,848 18,381
-------- --------
Ending Cash and Equivalents Balance $ 6,973 $ 11,437
======== ========
See accompanying notes to financial statements
Page 6
Ameron International Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands except share and per share data)
February 28, 1998
Note 1. Basis Of Presentation
The consolidated financial statements for the interim periods included herein
are unaudited; however, they contain all normal recurring accruals which, in the
opinion of management, are necessary to present fairly the consolidated
financial position of the Company at February 28, 1998 and the consolidated
statements of income for the three-month periods ended February 28, 1998 and
1997, and cash flows for the three-month periods ended February 28, 1998 and
1997. Accounting measurements at interim dates inherently involve greater
reliance on estimates than at year end, thus the results of operations for the
periods presented are not necessarily indicative of the results to be expected
for the full year.
The accompanying consolidated financial statements do not include footnotes
and certain financial presentations normally required under generally accepted
accounting principles and, therefore, should be read in conjunction with the
Annual Report on Form 10-K for the year ended November 30, 1997.
The Company adopts Statement of Financial Accounting Standards No. 128 (SFAS
128), "Earnings per Share" and No. 130 (SFAS 130), "Reporting Comprehensive
Income" in its fiscal year 1998. As a result, the Company's reported earnings
per share for 1997 were restated. The effect of this accounting change makes no
difference on previously reported earnings per share. The full disclosure are
in Note 6 and 7 below.
Note 2. Inventories
Inventories are stated at the lower of cost (principally first-in, first-out)or
market. Inventories at February 28, 1998 and November 30, 1997 were comprised
of the following:
Feb. 28, Nov. 30,
1998 1997
-------- --------
Finished products $ 61,197 $ 56,989
Products in process 27,453 18,791
Materials and supplies 19,308 19,972
-------- --------
Total Inventories $107,958 $ 95,752
======== ========
Page 7
Note 3. Other Cash Flow Information:
Three Months Ended
February 28,
-------------------
1998 1997
-------- --------
Interest paid $ 1,073 $ 412
======== ========
Income taxes paid $ 333 $ 2,559
======== ========
Note 4. Affiliated Companies
Summarized operating results of affiliated companies in the Concrete and Steel
Pipe Products segment follow:
Three Months Ended
February 28,
-------------------
1998 1997
-------- --------
Net Sales $ 19,302 $ 6,476
Gross Profit $ 5,279 $ 621
Net Income (Loss) $ 1,607 $ (1,404)
Amounts shown above represent operating results for Gifford-Hill-American,
Inc. for the three-month periods ended February 28, 1998 and January 31, 1997
and operating results for Ameron Saudi Arabia, Ltd. for the three-month
periods ended December 31, 1997 and 1996.
Summarized results of operations of Tamco, Bondstrand, Ltd., and Oasis-Ameron,
Ltd. follow:
Three Months Ended
February 28,
-------------------
1998 1997
-------- --------
Net Sales $ 36,445 $ 33,912
Gross Profit $ 8,447 $ 6,169
Net Income $ 2,936 $ 1,874
Amounts shown above include operating results for Tamco for the three-month
periods stated, and operating results for Bondstrand, Ltd. and Oasis-Ameron,
Ltd. for the three-month periods ended December 31, 1997 and 1996.
Page 8
Note 5. Income Taxes
The deferred tax assets and deferred tax liabilities recorded on the balance
sheet as of February 28, 1998 are as follows:
Non-
Current Current
-------- --------
Deferred Tax Assets
Self-insurance & contingency reserves $ 1,240 $ 7,840
Employee benefits 1,978 11,075
Accounts receivable 1,499 -
Inventory 3,383 -
Federal and State tax credits and
loss carry forwards - 2,347
Miscellaneous 146 (307)
-------- --------
Total Deferred Tax Asset 8,246 20,955
Deferred Tax Liabilities
Investments - (2,704)
Fixed Assets - (19,571)
-------- --------
Total Deferred Tax Liability - (22,275)
-------- --------
Net Deferred Tax Asset (Liability) $ 8,246 $ (1,320)
======== ========
Note 6. Comprehensive Income
The Company adopts Statement of Financial Accounting Standards No. 130 (SFAS
130), "Reporting Comprehensive Income" in its fiscal year 1998. Accumulated
other comprehensive income or loss is calculated as follow:
Accumulated Other Comprehensive Income/(Loss)
Foreign Currency Translation Adjustment:
Balance at November 30, 1997 & 1996 (5,723) 1,149
Change during 1st Quarter (2,837) (3,644)
-------- --------
Balance at February 28, 1998 & 1997 (8,560) (2,495)
======== ========
Page 9
Note 7. Earning Per Share
The Company adopts Statement of Financial Accounting Standards No. 128 (SFAS
128), "Earnings per Share" in its fiscal year 1998. As a result, the Company's
reported earnings per share for 1997 were restated. The effect of this
accounting change makes no difference on previously reported earnings per
share. Earning per share is calculated as follow:
Per-Share
Income Shares Amount
-------- ---------- ----------
For Period Ended February 28, 1997
Basic Earnings per Share
Income available to common stockholders $938,000 4,000,443 $ .23
Options issued to employees & directors 66,695
Diluted Earnings per Share $938,000 4,067,138 $ .23
For Period Ended February 28, 1998
Basic Earnings per Share
Net (Loss) to common stockholders ($940,000) 4,005,956 ($ .23)
Options issued to employees & directors* 0
Diluted Earnings per Share ($940,000) 4,005,956 ($ .23)
*Potentially dilutive securities that were not included in the computation of
diluted EPS because to do so would have been antidilutive.
At February 28, 1998 and November 30, 1997, the Company's long-term debt
consisted of the following:
Feb. 28, Nov. 30,
1998 1997
-------- --------
Fixed-rate unsecured notes payable:
8.63%, payable in annual principal
installments of $5,000 $ 5,000 $ 5,000
9.79%, payable in annual principal
installments of $12,000 36,000 36,000
7.92%, payable in annual principal
installments of $8,333, commencing
in 2001 50,000 50,000
Variable-rate industrial development bonds,
payable in 2016 (3.45% at February 28, 1998) 7,200 7,200
Variable-rate unsecured bank revolving
credit facilities (5.90% at February 28, 1998) 59,469 57,429
Variable-rate unsecured bank loan, payable by a
consolidated subsidiary in Dutch guilders,
with annual principal installments of
approximately $635(4.01% at February 28, 1998) 2,699 2,942
-------- --------
160,368 158,571
Less current portion 17,635 17,654
-------- --------
$142,733 $140,917
======== ========
Page 10
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Ameron International Corporation and Subsidiaries
February 28, 1998
INTRODUCTION
Management's Discussion and Analysis should be read in conjunction with the
same discussion included in the Company's 1997 Annual Report on Form 10-K.
Reference should also be made to the financial statements included in this
Form 10-Q for comparative consolidated balance sheets and statements of
income and cash flows.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of fiscal 1998 the Company generated $3.5 million of
cash from operating activities, principally as a result of lower receivables
that was partially offset by an increase in inventory. Cash and cash
equivalents at February 28,1998 totaled almost $7 million, a decrease of $2.9
million from November 30,1997.
Cash used in investing activities consisted of capital expenditures for normal
replacement and upgrades of machinery and equipment. Management estimates that
capital spending by the Company during this fiscal year will be between $15.0
million and $30.0 million, which will be funded from existing cash balances,
cash generated from operations and existing lines of credit.
At February 28, 1998, the Company had approximately $67 million in unused credit
lines available from foreign and domestic banks.
The Company believes that cash and cash equivalents on hand, anticipated cash
flows from operations and funds from existing lines of credit will be sufficient
to meet future operating requirements.
Page 11<PAGE>
RESULTS OF OPERATIONS - First Quarter
The Company reported a loss of 23 cents per share on sales of $102.5 million for
the first quarter of fiscal 1998. For the similar period in 1997, the company
reported earnings of 23 cents per share on sales of $108.2 million. The loss
was attributed primarily to project delays caused by severe weather in major
domestic markets.
The Protective Coatings and Concrete and Steel Pipe businesses reported
lower sales and earnings from last year because of the severe El Nino-related
weather. The military buildup in the Arabian Gulf, which delayed scheduled
drydockings and maintenance for U.S. Navy ships, contributed to a shortfall in
the Company's marine coatings business. A strike at the Company's main steel
fabrication plant in Southern California also delayed shipments of welded
steel pipe at the end of the quarter. The strike ended on March 25, 1998.
The Fiberglass Pipe business reported higher sales and earnings for the quarter
compared to the same period in 1997, because of an improvement in the
European operation and continued growth of the Centron operation.
Results from Ameron Hawaii, the Company's construction product business,
reported higher sales and earnings for the quarter compared to the same period
in 1997, because of the timing of projects and higher efficiency as a result
of a reorganization that was implemented during the second half of 1997. The
outlook for the construction sector in Hawaii remains sluggish. The
domestic Pole Products business reported lower sales and earnings than last
year due to a softness in the Southern California market.
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 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 12
Part II. OTHER INFORMATION
Item 2. Changes in Securities
Terms of lending agreements place restrictions on cash
dividends,borrowings, investments and guarantees, and require
maintenance of specified minimum working capital and certain current
ratios. Under the most restrictive provisions of these agreements,
approximately $3.4 million of consolidated retained earnings was not
restricted at February 28, 1998.
Item 6. Exhibits and Reports on Form 8-K
A report on Form 8-K was filed on February 2, 1998, related
to a news release disclosing the Company's financial results for the
year, which ended November 30, 1997.
Page 13
SIGNATURE PAGE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Ameron International Corporation
Date: April 8, 1998
/s/ Gary Wagner
_______________________________
Gary Wagner
Senior Vice President,
Chief Financial Officer and
Treasurer
Page 14
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<ARTICLE> 5
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<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> NOV-30-1998 NOV-30-1997
<PERIOD-END> FEB-28-1998 FEB-28-1997
<CASH> 6,973 11,437
<SECURITIES> 0 0
<RECEIVABLES> 105,169 101,174
<ALLOWANCES> 0 0
<INVENTORY> 107,958 95,177
<CURRENT-ASSETS> 233,706 223,145
<PP&E> 128,149 124,220
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 423,890 410,202
<CURRENT-LIABILITIES> 87,371 92,628
<BONDS> 0 0
0 0
0 0
<COMMON> 12,948 12,937
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 423,890 410,202
<SALES> 102,526 108,261
<TOTAL-REVENUES> 102,526 108,261
<CGS> 78,324 80,578
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<OTHER-EXPENSES> 25,046 26,283
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,647 2,541
<INCOME-PRETAX> (1,566) 1,563
<INCOME-TAX> (626) 625
<INCOME-CONTINUING> (940) 938
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
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