SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): 1-31-00
AMERON INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-9102 77-0100596
(State or other jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
245 South Los Robles Ave., Pasadena, California 91101
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(626) 683-4000
Item 5.Other Events
The attached announcements were released to the news media on January 31,
and February 17, 2000, respectively.
SIGNATURES
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: February 17, 2000 By: ----------------------------
Javier Solis
Senior Vice President and Secretary
N E W S R E L E A S E
January 31, 2000
Contacts:
James S. Marlen, Chairman, President and Chief Executive Officer
Gary Wagner, Senior Vice President, Chief Financial Officer
Telephone: 626-683-4000
AMERON INTERNATIONAL REPORTS RECORD EARNINGS FOR 1999
PASADENA, Calif. Ameron International Corporation (NYSE: AMN) today
reported record earnings per diluted share for the fiscal year ended
November 30, 1999 of $5.54 on sales of $545.1 million, compared to earnings
of $5.08 per share and sales of $552.1 million in 1998. Fiscal 1999
earnings, excluding gains from sales of assets, totaled $5.33 per share,
compared to $4.25 per share from operations in 1998, an improvement of
over 25%.
James Marlen, Ameron's Chairman, President and Chief Executive
Officer, stated, "1999 was the best year in the Company's history. With
the strong operating performance of 1999, Ameron has achieved an earnings
growth rate of 20% per year over the past seven years."
Fourth-quarter earnings totaled $1.62 per share in 1999 and $1.58 per
share in 1998, excluding asset sales and other nonrecurring charges.
Reported earnings in the fourth quarter of 1999 totaled $1.80 per share on
sales of $133.9 million, compared to $2.71 per share and sales of $156.9 in
the fourth quarter of 1998. Ameron recognized an after-tax gain on the
sale of idle property of $.18 per share during the fourth quarter of 1999.
During the fourth quarter of 1998, $1.13 per share, net of taxes, was
recognized relating to nonrecurring charges and gains from sales of assets.
The full-year results reflected the higher demand experienced by the
Concrete & Steel Pipe business, improved sales and efficiencies in the
Construction & Allied Products segment, and continued strong performances
by the Company's joint-venture companies. The Fiberglass-Composite Pipe
segment had lower sales and profitability as a result of the lower oil, gas
and commodity prices that caused the worldwide markets served by Ameron to
curtail capital investment and maintenance programs. Coatings was also
affected by these difficult market conditions.
James Marlen stated, "Despite softness in some key market segments, we
were able to achieve record earnings for 1999. We are optimistic about
Ameron's long-term growth potential and expect an overall improvement from
operations in 2000. However, this improvement is not expected until the
second half of 2000; and the first half of 2000 is expected to be slower
than in 1999. The recent strong performance of the Concrete & Steel Pipe
segment should moderate based on the timing of new orders; however,
Construction & Allied Products should continue to experience steady growth.
We expect the Coatings and Fiberglass-Composite Pipe segments to benefit
from the recovery of their major markets as customers react to higher oil
prices and increase capital and maintenance spending. Conditions remain
favorable for our joint-venture companies, including TAMCO."
Ameron International Corporation is a multinational manufacturer of
highly-engineered products and materials for the industrial, chemical, oil
and construction markets. Traded on the New York Stock Exchange (AMN),
Ameron is a leading producer of high-performance coatings; fiberglass-
composite piping; concrete & steel pipe systems and specialized
construction products. The Company operates businesses in North America,
South America, Europe, Australasia and Asia. It also participates in
several joint-venture companies in the U.S., Saudi Arabia and Mexico.
Cautionary statement for purposes of the "Safe Harbor" provisions of
The Private Securities Litigation Reform Act of 1995: Any statements in
this report that refer to Ameron'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 situations. Matters
affecting the economy generally, including the state of economics
worldwide, can affect Ameron's results. Forward-looking statements
represent the Company's judgment only as of the date of this report. Since
actual results could differ materially, the reader is cautioned not to rely
on these forward-looking statements. Moreover, Ameron disclaims any intent
or obligation to update these forward-looking statements.
N E W S R E L E A S E
February 17, 2000
Contacts:
James S. Marlen, Chairman, President and Chief Executive Officer
Gary Wagner, Senior Vice President, Chief Financial Officer
Telephone: 626-683-4000
Ameron International Provides Details of 1999 Results
and Questions and Answers by James S. Marlen, Ameron's Chairman
PASADENA, Calif. Ameron International Corporation (NYSE: AMN) today
provided the attached financial details for fiscal year ended November 30,
1999.
Ameron had previously reported record 1999 results of $5.54 per
diluted share on sales of $545.1 million, compared to earnings of $5.08 per
share and sales of $552.1 million in 1998. Fiscal 1999 earnings, excluding
gains from sales of assets, totaled $5.33 per share, compared to $4.25 per
share from operations in 1998, an improvement of over 25%. Fourth-quarter
earnings totaled $1.62 per share in 1999 and $1.58 per share in 1998,
excluding asset sales and other nonrecurring charges.
Also attached are questions and answers provided by James Marlen,
Ameron's Chairman, President and Chief Executive Officer. The questions
and answers provide insight to Ameron's outlook and strategies. The
questions and answers can also be viewed on Ameron's web page at
www.ameron.com.
Ameron International Corporation is a multinational manufacturer of
highly-engineered products and materials for the industrial, chemical, oil
and construction markets. Traded on the New York Stock Exchange (AMN),
Ameron is a leading producer of high-performance coatings; fiberglass-
composite piping; concrete & steel pipe systems and specialized
construction products. The Company operates businesses in North America,
South America, Europe, Australasia and Asia. It also participates in
several joint-venture companies in the U.S., Saudi Arabia and Mexico.
Cautionary statement for purposes of the "Safe Harbor" provisions of
The Private Securities Litigation Reform Act of 1995: Any statements in
this report that refer to Ameron'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 situations. Matters
affecting the economy generally, including the state of economics
worldwide, can affect Ameron's results. Forward-looking statements
represent the Company's judgment only as of the date of this report. Since
actual results could differ materially, the reader is cautioned not to rely
on these forward-looking statements. Moreover, Ameron disclaims any intent
or obligation to update these forward-looking statements.
Ameron International Corporation
Consolidated Statements of Income
Fourth Quarter Ended November 30,
(In thousands except share and per share data)
(Unaudited)
1999 1998
--------- ---------
Sales $ 133,919 $ 156,939
Cost of Sales ( 99,464) (116,397)
--------- ---------
Gross Profit 34,455 40,542
Selling, General and Administrative Expense ( 27,162) ( 30,228)
Asset Write-Downs and Other Charges - ( 19,866)
Other Income, Net 4,860 3,572
Gain from Sale of Property,
Plant and Equipment 1,093 2,862
Gain from Sale of Investment - 24,000
--------- ---------
Income before Interest and Income Taxes 13,246 20,882
Interest, net ( 2,565) ( 3,931)
--------- ---------
Income before Income Taxes 10,681 16,951
Income Taxes ( 3,418) ( 5,933)
--------- ---------
Net Income $ 7,263 $ 11,018
========= =========
Net Income Per Basic Share (Based on
Weighted Average Shares Outstanding
of 3,991,912 Shares in 1999 and
4,016,852 Shares in 1998) $ 1.82 $ 2.74
========= =========
Net Income Per Diluted Share (Based on
Diluted Common Shares Outstanding
of 4,042,537 Shares in 1999 and
4,084,377 Shares in 1998) $ 1.80 $ 2.71
========= =========
Cash Dividends Paid $ .32 $ .32
========= =========
Ameron International Corporation
Consolidated Statements of Income
Twelve Months Ended November 30,
(In thousands except share and per share data)
1999 1998
--------- ---------
Sales $ 545,081 $ 552,146
Cost of Sales (402,099) (412,934)
--------- ---------
Gross Profit 142,982 139,212
Selling, General and Administrative Expenses (113,165) (109,345)
Asset Write-Downs and Other Charges - ( 21,669)
Other Income, Net 14,653 11,943
Gain from Sale of Property,
Plant and Equipment 1,223 2,853
Gain from Sale of Investment - 24,000
--------- ---------
Income before Interest and Taxes 45,693 46,994
Interest, net ( 12,938) ( 15,077)
--------- ---------
Income before Income Taxes 32,755 31,917
Income Taxes ( 10,482) ( 11,171)
--------- ---------
Net Income $ 22,273 $ 20,746
========= =========
Net Income Per Basic Share (Based on
Weighted Average Shares Outstanding
of 3,996,237 Shares in 1999 and
4,016,852 Shares in 1998) $ 5.57 $ 5.17
======== =========
Net Income Per Diluted Share (Based on
Diluted Common Shares Outstanding
of 4,023,248 Shares in 1999 and
4,084,377 Shares in 1998) $ 5.54 $ 5.08
========= =========
Cash Dividends Paid $ 1.28 $ 1.28
========= =========
Ameron International Corporation
Consolidated Statements of Cash Flows
Twelve Months Ended November 30,
(In thousands)
1999 1998
--------- ---------
Operating Activities
Net Income $ 22,273 $ 20,746
Adjustments to Reconcile
Net Income to Net Cash 14,653 2,326
Changes in Operating Assets
and Liabilities 8,140 15,570
--------- ---------
Cash Provided by Operations 45,066 38,642
Investing Activities
Proceeds from Sale of Assets 3,487 31,395
Additions to Property, Plant
and Equipment (19,672) (32,744)
Acquisitions - (46,419)
Other, Net (96) -
--------- ---------
Cash Used by Investing Activities (16,281) (47,768)
Financing Activities
Short and Long-Term Borrowings, Net (27,729) 19,822
Dividends on Common Stock (5,111) (5,141)
Issuance of Common Stock - 920
Purchase of Treasury Stock (1,415) -
--------- ---------
Cash Provided (Used) by Financing Activities (34,255) 15,601
Effect of Exchange Rate Changes on Cash ( 385) 53
--------- ---------
Net Change in Cash $ ( 5,855) $ 6,528
========= =========
Ameron International Corporation
Consolidated Balance Sheets
(In thousands)
As of November 30,
1999 1998
--------- ---------
ASSETS
Current Assets
Cash and Equivalents $ 10,521 $ 16,376
Receivables, Net 118,900 136,380
Inventories 95,488 106,654
Other 17,745 14,280
--------- ---------
Total Current Assets 242,654 273,690
Investments and Advances -
Affiliated Companies 23,046 22,712
Property, Plant and Equipment, Net 149,597 157,918
Other Assets 43,670 45,899
--------- ---------
Total Assets $ 458,967 $ 500,219
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-Term Borrowings $ 3,479 $ 3,024
Current Portion of Long-Term Debt 12,595 12,681
Trade Payables 36,667 37,273
Accrued Liabilities 43,552 50,353
Income Taxes Payable 18,848 23,499
--------- ---------
Total Current Liabilities 115,141 126,830
Long-Term Debt, Less Current Portion 135,237 165,308
Other Long-Term Liabilities 30,469 40,913
--------- ---------
Total Liabilities 280,847 333,051
Stockholders' Equity
Common Stock 13,007 13,007
Additional Paid-In Capital 17,857 17,828
Retained Earnings 204,336 187,174
Accumulated Other Comprehensive Loss (12,886) ( 8,062)
Treasury Stock (44,194) (42,779)
--------- ---------
Total Stockholders' Equity 178,120 167,168
--------- ---------
Total Liabilities and Stockholders' Equity $ 458,967 $ 500,219
========= =========
AMERON INTERNATIONAL CORPORATION
QUESTIONS AND ANSWERS - February 17, 2000
By: James S. Marlen, Chairman, President and Chief Executive Officer
1.Please describe Ameron.
Ameron International Corporation is a multinational manufacturer of
engineered products and specialty materials for the industrial,
chemical, oil and construction markets. Traded on the New York Stock
Exchange (AMN), Ameron is a leading producer of high-performance
coatings; fiberglass-composite piping; concrete & steel pipe systems
and specialized construction products. The Company operates
businesses in North America, South America, Europe, Australasia and
Asia. It also participates in several joint-venture companies in the
U.S., Saudi Arabia and Mexico.
The Company is organized into four operating segments. Ameron
maintains a small, specialized Research & Engineering center, which is
located in California, and several regional product development
groups.
Through the Concrete & Steel Pipe segment, the Company serves the
water transmission business as a world leader in pressure pipe
technology and manufacturing. In addition to being the leading
producer in the western U.S., Ameron also operates the largest
concrete and steel pipe company in Colombia, South America and
participates in joint ventures in Saudi Arabia.
The Coatings segment produces specialty coatings based on epoxies,
urethanes and acrylics designed to protect metal and general
infrastructure against corrosion. Principal markets include marine
vessels, offshore platforms, chemical plants and water treatment
facilities. Ameron is a recognized innovator, utilizing an extensive
worldwide manufacturing presence, distribution and licensing network.
The Coatings segment operates manufacturing facilities in the U.S.,
Holland, U.K., Australia and New Zealand. Ameron also has an interest
in companies in Mexico and Saudi Arabia.
The Fiberglass-Composite Pipe segment produces composite pipe systems
used in the production and transport of highly-corrosive fluids. The
Company is the world's market and technology leader, offering a
variety of highly-engineered pipe systems to meet customers' difficult
requirements. With operations located in the U.S., Europe and Asia,
and an investment in a joint venture with a presence in Saudi Arabia
and Kuwait, the Company has a strong competitive advantage with global
oil companies.
The Construction & Allied Products segment operates an aggregates and
ready-mix concrete business in Hawaii and a pole business throughout
the U.S., as the leading producer of concrete poles. Both operations
are recognized for quality and service.
Principal joint ventures include a 50%-ownership in TAMCO, the largest
steel rebar producer in California, and investments in Bondstrand Ltd.
and Ameron Saudi Arabia Ltd. (ASAL), strategic joint ventures in Saudi
Arabia. Bondstrand is a 40%-owned fiberglass-composite pipe
manufacturer, and ASAL is a 30%-owned concrete pipe manufacturer.
The Company employs approximately 3,100 employees worldwide, and its
stock trades on the New York Stock Exchange under the symbol AMN.
2.Who are Ameron's major competitors?
Our competitors range from large, diversified multinational companies
to smaller regional producers. In Coatings, most are major
international companies like PPG, AKZO, ICI, Sherwin-Williams, and
RPM. In Fiberglass-Composite Pipe, the competitors tend to be smaller
and focused on certain niche markets. A.O. Smith, Star Fiberglass and
Denali are U.S.-based, while FPI is a competitor in Europe and the
Middle East. In Concrete & Steel Pipe, Northwest Pipe is our primary
competitor. Valmont and Union Metal are Pole Products' primary
competitors; and, in Hawaii, Hawaiian Cement is the major competitor.
3.Explain Ameron's management structure and business planning.
We operate with a very lean headquarters staff. We empower the
operating units, but the understanding is clear: prompt communication
on important matters and thorough financial reporting. We follow a
schedule of operating and strategic reviews and financial evaluations.
In terms of planning, operating managers have specific targets as part
of a three-year planning cycle. Key managers have a significant
portion of their total compensation tied to achievement of their own
plan target and, to some extent, to that achieved by the corporation.
Therefore, we rely on an incentivized, pay-for-performance system. As
a matter of philosophy, we ensure sound process management, but we are
intensely focused on results, not only for today, but also in the
future.
4.Ameron is often considered a Construction Products or Building
Materials Company. Is this an accurate description?
I do not believe that Ameron can be accurately defined as a
construction products or building materials company. That may have
been a reasonable description ten years ago, but Ameron has shifted to
specialty chemicals and materials. Fundamentally, Ameron is a
technology-oriented company with a focused growth strategy targeted at
the worldwide specialty coatings and fiberglass-composite materials
markets. Our goal is to create value-added products for these
worldwide growth markets. About 55% of sales relate to what I would
call specialty material and composite products and 45% to highly-
engineered products for the construction and building sectors.
5.What were 1999 results?
Ameron reported record earnings per diluted share for the fiscal year
ended November 30, 1999 of $5.54 on sales of $545.1 million, compared
to earnings of $5.08 per share and sales of $552.1 million in 1998.
Fiscal 1999 earnings, excluding gains from sales of assets, totaled
$5.33 per share, compared to $4.25 per share from operations in 1998,
an improvement of over 25%.
With 1999's strong performance, we achieved an earnings growth rate of
20% per year over the past seven years. In 1998, the Company incurred
the only earnings interruption since 1992, although 1998 was still our
second-best year ever. In the past seven years, the Company has more
than tripled its earnings, from $1.53 to $5.33 per share.
The full-year results reflected the higher demand experienced by the
Concrete & Steel Pipe business, improved sales and efficiencies in the
Construction & Allied Products segment, and continued strong
performances by the Company's joint-venture companies. The
Fiberglass-Composite Pipe segment had lower sales and profitability as
a result of the lower oil, gas and commodity prices that caused the
worldwide markets served by Ameron to curtail capital investment and
maintenance programs. Coatings was also affected by these difficult
market conditions.
6.What was the consensus estimate for 1999?
The final range for 1999 was $5.18 to $5.25 per share. The consensus
at the beginning of the year was $4.60, so you can see the significant
improvement in earnings that was achieved throughout 1999.
7.What was the return on equity and capital for 1999?
Our return on equity has improved significantly over the past years,
increasing from 4% in 1992 to around 13% in 1999.
The return on capital has increased from 5% in 1992 to slightly over
9%. Importantly, current returns exceed our cost of capital and
demonstrate that Ameron is adding shareholder value.
8.What is Ameron's leverage ratio and book capitalization?
Debt to capital was about 46% at the end of 1999. At our peak
borrowing level in 1998, leverage had increased to 60%. So over the
past year, significant progress has been made in improving the
Company's capital structure.
Significant progress has been made in reducing the Company's leverage.
Debt had been used to fund the Croda Coatings acquisition and working
capital increases. We needed to reduce debt and also to focus on
managing working capital more effectively to generate more cash. We
divested Gifford-Hill-American, Inc., a non-strategic concrete pipe
joint venture in Texas, and used the proceeds to lower debt. So,
since the peak in 1998, debt has been reduced by $80 million, and
working capital has been brought more in line with operating
requirements. Working capital is down from its peak by $40 million.
Ameron's book value is $178 million, or over $44 per share. This
compares to the current price of about $35 per share.
9.What was Ameron's cash flow for 1999?
Ameron's cash flow, or EBITDA, has grown steadily over the past years,
going from $32 million in 1992 to almost $65 million in 1999. With
this level of cash flow, Ameron generates sufficient cash to support
capital investment programs, pay dividends, repay debt and grow. As
our businesses continue to grow, we anticipate cash flow to increase
accordingly. Since 1992, EBITDA has grown from about $8.30 per share
to about $16.00 per share in 1999.
10.What is Ameron's dividend payout?
Since 1992, our payout ratio has declined from around 84% to 23%
today an indication of the strong earnings improvement in recent
years. The dividend payout has been constant at $1.28 per share, or
an approximate yield of 3.7%, based on the recent share price of $35.
11.Why did you ultimately decide not to sell TAMCO?
We had decided in mid-year 1998 to divest our 50% ownership interest
in TAMCO to redeploy resources into more strategic businesses.
However, the steel industry became depressed in late 1998 and early
1999, and steel companies pulled back on expansion plans and
acquisitions in order to conserve cash and focus on current
operations. Therefore, the interest level and the valuations of
TAMCO, which was and is still operating at record levels, were not
acceptable to us and our joint venture partners.
We are very happy with TAMCO's continued progress and its long-term
potential. We are continuing to invest to improve productivity and
expand capacity through manufacturing efficiencies and upgrades.
TAMCO has had three consecutive years of record earnings, and we
expect another record in 2000.
What is the status of the stock repurchase program that was authorized
in 1998?
A share repurchase program to buy back up to 10% of Ameron's shares
(around 400,000 shares) was put in place in August 1998. To date, we
have repurchased slightly over 38,000 shares. We must balance our
repurchase program with our need for capital to support operations and
strategic growth initiatives. Additionally, we are constrained by our
lenders and financial covenants.
What are your strategic initiatives?
We have developed a clear, succinct strategic plan. First, we want to
continue repositioning the Company toward high-performance businesses
such as Coatings and Fiberglass-Composite Pipe and related businesses.
Second, we will grow worldwide through alliances and acquisitions and
new product developments, which will result in value-creating
opportunities. Finally, we will protect our leading market positions
and become the low-cost, highest-quality producer in each market we
serve.
14.What is your long-term outlook for Ameron?
Long term, I am optimistic about the potential for each of our
segments. We are the market leader in many of the markets in which we
compete. Demographic projections indicate that the population of the
western U.S. will grow by 30% between 2000 and 2010. These
projections are the driving force for growth of our Concrete & Steel
Pipe and Pole businesses. Additionally, our Coatings and Fiberglass-
Composite Pipe businesses will benefit from a trend toward technical
solutions to complex corrosion problems.
Concrete & Steel Pipe is clearly the leader in water transmission
systems in the western U.S. Our Hawaiian operations play a similar
role with aggregates and ready-mix concrete, as does our Pole business
with concrete poles. Coatings and Fiberglass-Composite Pipe hold
strong positions in selected niches such as marine and offshore, with
a focused position in chemical, industrial and related markets. The
demand in each of these businesses should be strong in the future. In
the short term, we also expect Coatings and Fiberglass-Composite Pipe
to show good improvements if oil prices continue to remain at current
levels.
I should also mention that we have initiated efforts to grow worldwide
revenues and earnings of Coatings and Fiberglass-Composite Pipe
through a more effective distribution network, more efficient
logistics, and streamlining product offerings. At the same time, we
are introducing new, advanced products, upgrading manufacturing
facilities and strengthening the worldwide management organization.
We recently overhauled the Coatings' sales and marketing organization
to serve the market more aggressively with a focused approach that
emphasizes market coverage and customer service.
Again, I have confidence in the long-term potential of each operating
unit. The Company's business mix, geographic reach, strong market
positions, technological strengths, and quality of management
worldwide lead me to conclude that the prospects for overall continued
growth for Ameron are quite positive.
15.How can you sustain growth?
As I mentioned, I am optimistic about Ameron's long-term potential,
especially given our market leadership positions. Our businesses are
cyclical, but we have been able to restructure and manage the Company
such that the overall results have continued to show steady and
significant improvement. Each of our businesses has its own drivers.
In Concrete & Steel Pipe, the market demand for water distribution
will remain high for a number of years, especially as population
shifts and grows in the western U.S. A similar story applies to the
Hawaiian and Pole businesses. In fact, the Hawaiian economy is just
starting to show signs of recovering. In Pole Products, particularly
in concrete poles for residential street lighting, we continue to
penetrate new markets, such as in the Southeast and Southwest.
Coatings and Fiberglass-Composite Pipe are just now picking up, so we
expect good sustainable growth in these worldwide businesses. We also
expect growth from a variety of innovative products, some of which
have been recently introduced and others planned for introduction in
2000.
16.Do you see acquisitions as a way to grow the Company?
Long-term, acquisitions will be important to achieve our strategic
objectives. We actively search for opportunities, but are very
selective. We will not make acquisitions for the sake of making
acquisitions. They must be strategic and provide a favorable return
on investment.
17.Have recent acquisitions met your expectations?
Our most recent acquisition of any size was the Croda Coatings
business in April 1998. Since then, we have fully integrated the
business with Ameron's traditional coatings operation. A lot of
attention was focused on restructuring the business, including
downsizing, consolidating manufacturing and distribution, and
revamping product lines. We have, in effect, overhauled the business,
and we are now more focused and more competitive. The financial
results are slightly behind our original projections, primarily
because of poor regional market and economic conditions. Coatings
markets have declined worldwide. Long term, we remain optimistic
about the potential of the businesses in the U.K., Australia and New
Zealand.
Going in, we realized the need to reorganize and restructure this
business, and that is why we did not pay a significant premium for it.
If you look at other acquisitions in this field, buyers have paid much
higher multiples of earnings. With the Croda Coatings acquisition we
strategically expanded our coatings business geographically and
broadened the markets we serve. In addition, we acquired valuable
manufacturing technology, particularly in the area of computerized
color mixing and control. Croda Coatings brought us several new
market segments agriculture and construction equipment, wood coatings,
fire-resistant coatings, and even coil and powder coatings in
Australia and New Zealand.
18.Can you discuss any recent new product developments?
Ameron's principal focus is in technology for Coatings and Fiberglass-
Composite Pipe. We hold a leading position and reputation in both
businesses. Ameron invented and patented a novel class of polymers,
which are hybrids of inorganic siloxanes with traditional organic
polymers such as epoxies and acrylics. This is our PSX technology.
This PSX polysiloxane technology has been expanded with the
introduction of a single-pack acrylic PSX topcoat system that
outperforms traditional polyurethanes. In Europe, we introduced a
line of fire-retardant coatings and new plastic coatings for the
automotive market. We also developed a breakthrough internal barrier
coating for plastic drums. In Australasia, we completely overhauled
the wood finishes product offering with the introduction of an
advanced, pigmented wood finishes line. In Fiberglass, we used PSX
to develop a line of adhesives for bonding phenolic-fiberglass, fire-
resistant piping.
Ameron's most significant technical advancement and market opportunity
is the development and introduction of a high-pressure, fiberglass
steel-strip-laminate pipe called SSL , which combines the strength of
steel with the corrosion resistance of fiberglass. This new
technology has been enthusiastically received and has the potential to
make significant inroads into the sizable, worldwide high-performance
pipe market. We are now in prototype production and expect to begin
commercialization in 2000.
In Concrete & Steel Pipe, our emphasis is on the use of advanced
technology to improve productivity and manufacturing capabilities.
Projects include implementation of automated laser weld-seam tracking
and use of unique drive systems to enhance productivity of mortar-
lining equipment. In Hawaii, we have introduced under the Islecrete
brand a unique lightweight concrete for housing structures, which is
being specified for residential, commercial and military construction.
Our Pole Products business is using technology and innovation to
develop fiberglass lighting and distribution poles, both new market
opportunities.
Ameron's future success depends on how well we use technology to
develop new products and improve manufacturing efficiencies and
capabilities.
19.How much does Ameron invest in technology?
Ameron spent nearly $4.3 million in 1999 on R&D. Our R&D budgets
differ significantly by business, but most of our R&D efforts are
focused in Coatings and Fiberglass-Composite Pipe.
20.What are your expectations for capital investments for the next couple
of years?
To support and grow the businesses, we plan to invest $15 to $25
million per year on capital projects. The last couple of years we
purchased two strategic properties (in Hawaii and California);
therefore, our capital expenditures were higher. The property
investments eliminated an element of risk to operations and reduced
costs.
21.What is your forecast for 2000?
We are optimistic about Ameron's long-term growth potential and expect
an overall improvement from operations in 2000. However, this
improvement is not expected until the second half of 2000; and the
first half of 2000 is expected to be slower than in 1999. The recent
strong performance of the Concrete & Steel Pipe segment should
moderate based on the timing of new orders; however, Construction &
Allied Products should continue to experience steady growth. We
expect the Coatings and Fiberglass-Composite Pipe segments to benefit
from the recovery of their major markets as customers react to higher
oil prices and increase capital and maintenance spending. Conditions
remain favorable for our joint-venture companies, including TAMCO.
22.What are analysts' expectations for 2000?
Analysts expect earnings in the range of $5.55 to $5.65 per share,
excluding unusual items. Again, earnings totaled $5.33 per share in
1999, excluding nonrecurring gains.
23.What risks to the business do you see in the next few years?
The principal short-term risk is the recovery of oil-related
industries. By recovery, I mean the oil and chemical companies begin
to fund expansion and maintenance programs. Our Fiberglass-Composite
Pipe and Coatings businesses declined in 1999 because of the lingering
impact of the fall of oil prices in 1998. The strength of our
Concrete & Steel Pipe and Construction & Allied Pipe businesses more
than offset the decline. Going forward, Concrete & Steel Pipe is
expected to slow. Therefore, to maintain the consolidated earnings
level of 1999, both Fiberglass-Composite Pipe and Coatings must
improve.
The current level of oil prices has historically benefited both
Fiberglass-Composite Pipe and Coatings, and we expect to see an
improvement later in 2000. However, if our customers who are tied to
oil prices do not increase spending because of industry consolidations
or because of a perception that the current oil-price level is not
sustainable, spending on maintenance and capital projects could remain
lower than we anticipate.
Why is Ameron not followed by more investment analysts?
Few analysts are interested in companies of our size or in our
industries. Ameron is a micro-cap company, and micro-cap companies
have not benefited in the stock market, as have large-cap companies.
Also, value stocks and stocks in the manufacturing sector in general
have not been rewarded by Wall Street. There is definitely an
investor bias toward high-technology companies, and funds have shifted
from traditional value companies to the technology and growth stocks.
We are hurt by the lack of visibility and lack of analyst coverage.
As earnings continue to grow, we expect the investor community to
become more interested.
25.Do you think Ameron is fairly valued today?
Ameron is, by any measure, undervalued. We are convinced that, as
superior performance continues, investors will be rewarded. Our
trailing P/E ratio stands at only 6.6. Currently, the market only
seems to reward technology and Internet stocks. As the market
corrects its bias against small stocks and against basic industries,
Ameron's value should increase. Long term,I believe that our
consistently improving earnings performance will be recognized in a
P/E multiple much higher than at present.
James S. Marlen
Cautionary statement for purposes of the "Safe Harbor" provisions of The
Private Securities Litigation Reform Act of 1995: Any statements in this
report that refer to Ameron'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 situations. Matters
affecting the economy generally, including the state of economics
worldwide, can affect Ameron's results. Forward-looking statements
represent the Company's judgment only as of the date of this report. Since
actual results could differ materially, the reader is cautioned not to rely
on these forward-looking statements. Moreover, Ameron disclaims any intent
or obligation to update these forward-looking statements.
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