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 29, 2000
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
3,991,912 on March 31, 2000. No other class of Common Stock exists.
Page 1
AMERON INTERNATIONAL CORPORATION
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Statements of Income 3
Consolidated Balance Sheets 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 10
Item 3. Quantitative & Qualitative Market Risk Disclosure 12
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)
(Unaudited)
Three Months Ended
February 29 and 28,
------------------
2000 1999
-------- --------
Sales $121,365 $122,899
Cost of Sales (93,312) (92,018)
-------- --------
Gross Profit 28,053 30,881
Selling, General and
Administrative Expenses (27,142) (29,760)
Other Income, net 3,633 3,824
-------- --------
Income before Interest
and Income Taxes 4,544 4,945
Interest Income 30 56
Interest Expense (3,306) (3,525)
-------- --------
Income before Income Taxes 1,268 1,476
Provision for Income Taxes (317) (472)
-------- --------
Net Income $ 951 $ 1,004
======== ========
Net Income per Share (Basic) $ .24 $ .25
======== ========
Net Income per Share (Diluted) $ .24 $ .25
======== ========
Weighted Average Shares(Basic) 3,991,912 4,016,712
========= =========
Weighted Average Shares (Diluted) 4,002,853 4,026,602
========= =========
Cash Dividends per Share $ .32 $ .32
======== ========
See accompanying notes to consolidated financial statements.
Page 3
Ameron International Corporation and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share and per share data)
Feb. 29, Nov. 30,
2000 1999
(Unaudited)
-------- --------
ASSETS
Current Assets
Cash and Cash Equivalents $ 7,959 $ 10,521
Receivables, less allowances of $7,125
in 2000 and $6,937 in 1999 116,629 118,900
Inventories 96,079 95,488
Deferred Income Taxes 11,025 11,054
Prepaid Expenses and Other Current Assets 8,759 6,691
-------- --------
Total Current Assets 240,451 242,654
Investments, Advances and Equity in
Undistributed Earnings of Affiliated Companies 20,628 23,046
Property, Plant and Equipment, Net 148,329 149,597
Other Assets 44,338 43,670
-------- --------
Total Assets $453,746 $458,967
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-Term Borrowings $ 3,244 $ 3,479
Current Portion of Long-Term Debt 12,570 12,595
Trade Payables 36,150 36,667
Accrued Liabilities 40,649 43,552
Income Taxes Payable 16,319 18,848
-------- --------
Total Current Liabilities 108,932 115,141
Long-Term Debt, Less Current Portion 140,373 135,237
Other Long-Term Liabilities 29,457 30,469
-------- --------
Total Liabilities 278,762 280,847
-------- --------
Stockholders' Equity
Common Stock, Par Value $2.50 a Share,
Authorized 12,000,000 Shares, Outstanding
3,991,912 Shares for 2000 and 1999,
Net of Treasury Shares 13,007 13,007
Additional Paid-In Capital 17,857 17,857
Retained Earnings 204,010 204,336
Accumulated Other Comprehensive Loss (15,696) (12,886)
Less Treasury Stock (1,211,100 shares
for 2000 and 1999) (44,194) (44,194)
-------- --------
Total Stockholders' Equity 174,984 178,120
-------- --------
Total Liabilities and Stockholders' Equity $453,746 $458,967
======== ========
See accompanying notes to consolidated financial statements.
Page 4
Ameron International Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended
February 29 and 28,
-------------------
2000 1999
-------- --------
Cash Flows from Operating Activities
Net Income $ 951 $ 1,004
Adjustments to Reconcile Net Income to Net Cash
Used in Operating Activities:
Depreciation 4,046 4,449
Amortization 421 542
Provision for Deferred Income Taxes 156 -
Equity in Earnings of Affiliated Companies (1,765) (2,200)
Dividends from Affiliated Companies 3,957 2,200
Gain from Sale of Assets (17) (218)
Other, Net - 2,411
Changes in Operating Assets and Liabilities:
Receivables 739 6,341
Inventories (1,607) (5,173)
Prepaid Expenses and Other Current Assets (2,165) (1,708)
Trade Payables, Accrued Liabilities and
Income Taxes Payable (5,062) (10,031)
Other Long-Term Assets and Liabilities (2,375) (488)
-------- --------
Net Cash Used in Operating Activities (2,721) (2,871)
-------- --------
Cash Flows from Investing Activities
Proceeds from Sale of Property, Plant and Equipment 75 1,069
Additions to Property, Plant and Equipment (4,126) (3,787)
Other - (2,513)
-------- --------
Net Cash Used in Investing Activities (4,051) (5,231)
-------- --------
Cash Flows from Financing Activities
Net Decrease of Debt with Maturities of Three
Months of Less (217) (324)
Issuance of Debt 6,700 9,055
Repayment of Debt (1,142) (1,449)
Dividends on Common Stock (1,277) (1,279)
Purchase of Treasury Stock - (1,235)
-------- --------
Net Cash Provided by Financing Activities 4,064 4,768
-------- --------
Effect of Exchange Rate Changes
on Cash and Cash Equivalents 146 (193)
-------- --------
Net Change in Cash and Cash Equivalents (2,562) (3,527)
Cash and Cash Equivalents at Beginning of Period 10,521 16,376
-------- --------
Cash and Cash Equivalents at End of Period $ 7,959 $ 12,849
======== ========
See accompanying notes to consolidated financial statements.
Page 5
Ameron International Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(In Thousands)
(Unaudited)
Note 1. Basis Of Presentation
The consolidated financial statements for the interim periods included herein
are unaudited; however, they contain all adjustments, including normal
recurring accruals, which in the opinion of management, are necessary to
present fairly the consolidated financial position of Ameron International
Corporation ("Company" or "Ameron") at February 29, 2000, and its consolidated
results of operations and its consolidated cash flows for the three months
ended February 29, 2000 and February 28, 1999. Accounting measurements at
interim dates inherently involve greater reliance on estimates than at year-
end. The results of operations for the periods presented are not necessarily
indicative of the results to be expected for the full year.
The consolidated financial statements do not include certain footnote
disclosures and financial information normally included in consolidated
financial statements prepared in accordance with generally accepted accounting
principles and, therefore, should be read in conjunction with the consolidated
financial statements and notes included in Ameron's Annual Report on Form 10-K
for the year ended November 30, 1999.
Note 2. New Accounting Pronouncement
In 1998, Statement of Financial Accounting Standards No. 133 ("SFAS 133"),
"Accounting for Derivative Instruments and Hedging Activities," was issued.
Ameron is required to adopt SFAS 133 beginning December 1, 2000. The Company
is currently evaluating the impact of adopting SFAS 133.
Note 3. Inventories
Inventories are stated at the lower of cost (principally first-in, first-out)or
market. Inventories were comprised of the following:
Feb. 29, Nov. 30,
2000 1999
-------- --------
Finished Products $ 61,091 $ 56,122
Products in Process 14,066 17,382
Materials and Supplies 20,922 21,984
-------- --------
Total Inventories $ 96,079 $ 95,488
======== ========
Note 4. Supplemental Disclosure of Cash Flow Information
Three Months Ended
Feb. 29 and 28,
-------------------
2000 1999
-------- --------
Interest Paid $ 1,795 $ 508
Income Taxes Paid $ 2,351 $ 7,188
Page 6
Note 5. Unconsolidated Affiliated Companies
Operating results of affiliated companies, which were accounted for by the
equity method, were as follows:
Three Months Ended
Feb. 29 and 28,
-------------------
2000 1999
-------- --------
Net Sales $ 55,404 $ 48,212
Gross Profit $ 17,985 $ 15,109
Net Income $ 7,905 $ 8,363
Amounts shown above represent the operating results of Ameron Saudi Arabia,
Ltd., Bondstrand, Ltd. and Oasis-Ameron, Ltd. for the three months ended
December 31, 1999 and 1998 and TAMCO for the three months ended February 29,
2000 and February 28, 1999. Ameron's equity in earnings of affiliated
companies is included in other income.
Note 6. Earnings Per Share ("EPS")
The net income per basic share is computed on the basis of the weighted average
number of common shares outstanding each period. The net income per diluted
share is computed on the basis of the weighted average total of common shares
outstanding each period plus the effect of outstanding stock options, excluding
those that would be anti-dilutive, using the treasury stock method.
The following table is a reconciliation of the weighted average number of
shares used in the computation of basic and diluted EPS:
Three Months Ended
Feb. 29 and 28,
-------------------
2000 1999
--------- ---------
Basic Average Common Shares Outstanding 3,991,912 4,016,712
Dilutive Effect of Stock Options 10,941 9,890
--------- ---------
Diluted Average Common Shares Outstanding 4,002,853 4,026,602
========= =========
Page 7
Note 7. Other Comprehensive Income
Comprehensive loss was computed as follows:
Three Months Ended
Feb. 29 and 28,
-------------------
2000 1999
-------- --------
Net Income $ 951 $ 1,004
Foreign Currency Translation Adjustment, Net of Tax (2,810) (2,729)
-------- --------
Comprehensive Loss $ (1,859) $ (1,725)
======== ========
Note 8. Debt
The Company's long-term debt consisted of the following:
Feb. 29, Nov. 30,
2000 1999
-------- --------
Fixed-rate unsecured notes payable:
9.79%, payable in annual principal
installments of $12,000 $ 12,000 $ 12,000
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 February 29, 2000) 7,200 7,200
Variable-rate unsecured bank revolving credit
facilities (approximately 6.22% at February 29, 2000) 82,462 77,144
Variable-rate unsecured bank loan, payable by a
consolidated subsidiary in Dutch guilders, with
annual principal installments of approximately
$569 (4.14% at February 29, 2000) 1,281 1,488
-------- --------
Total Long-Term Debt 152,943 147,832
Less Current portion ( 12,570) ( 12,595)
-------- --------
Long-Term Debt, Less Current Portion $140,373 $135,237
======== ========
Page 8
Note 9. Segment Information
The Company provides certain information about operating segments in accordance
with Statement of Financial Accounting Standards No. 131 ("SFAS 131"),
"Disclosure about Segments of an Enterprise and Related Information." In
accordance with SFAS 131, the Company has determined that is has four operating
segments: The Coating Group, the Fiberglass-Composite Pipe Group, the Concrete
& Steel Pipe Group, and the Construction & Allied Products Group. Each of
these segments has a dedicated management team and is managed separately,
primarily because of differences in products. In accordance with SFAS 131, the
following table presents information related to each operating segment included
in, and in a manner consistent with, internal management reports:
Three Months Ended
February 29 and 28,
-------------------
2000 1999
-------- --------
Sales
Coatings $ 41,700 $ 44,875
Fiberglass-Composite Pipe 21,577 23,021
Concrete & Steel Pipe 33,391 30,840
Construction & Allied Products 24,731 24,357
Eliminations ( 34) ( 194)
-------- --------
Total Sales $121,365 $122,899
======== ========
Income (Loss) Before Interest and Income Taxes
Coatings $ (428) $ 33
Fiberglass-Composite Pipe 1,369 3,335
Concrete & Steel Pipe 4,507 2,739
Construction & Allied Products 2,495 2,816
Corporate & Unallocated (3,399) (3,978)
-------- --------
Total Income Before Interest and Income Taxes $ 4,544 $ 4,945
======== ========
Assets
Coatings $140,611 $171,122
Fiberglass-Composite Pipe 121,614 113,333
Concrete & Steel Pipe 102,392 119,016
Construction & Allied Products 58,436 55,716
Corporate & Unallocated 158,013 161,698
Eliminations (127,320) (131,423)
-------- --------
Total Assets $453,746 $489,462
======== ========
Investments
Coatings $ 2,145 $ 2,135
Fiberglass-Composite Pipe 3,784 3,784
Concrete & Steel Pipe - -
Construction & Allied Products - -
Corporate & Unallocated 14,699 16,797
-------- --------
Total Investments $ 20,628 $ 22,716
======== ========
Page 9
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Ameron International Corporation and Subsidiaries
February 29, 2000
INTRODUCTION
Management's Discussion and Analysis should be read in conjunction with the
same discussion included in the Company's 1999 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 2000 the Company used $2.7 million of cash
for operating activities, principally for the payment of accrued liabilities
and income taxes.
Cash used in investing activities consisted of capital expenditures for normal
replacement and upgrades of machinery and equipment. Management estimates that
capital expenditures during fiscal 2000 will be between $15.0 million and $25.0
million. Capital expenditures will be funded from existing cash balances, cash
generated from operations and existing lines of credit.
Additional net borrowings of $5.3 million were used to finance operations,
capital expenditures, and payment of common stock dividends of $1.3 million.
Cash and cash equivalents at February 29, 2000 totaled approximately $8.0
million, a decrease of $2.6 million from November 30, 1999.
At February 29, 2000 the Company had approximately $110.0 million in unused
committed and uncommitted credit lines available from foreign and domestic
banks.
The Company believes that cash and cash equivalents on hand, anticipated cash
flows from operations and funds from existing lines of credit will be
sufficient to meet future operating requirements.
Page 10
RESULTS OF OPERATIONS - FIRST QUARTER
The Company earned 24 cents per diluted share on sales of $121.4 million for
the first quarter of fiscal 2000, compared to earnings of 25 cents per diluted
share on sales of $122.9 million for the same period in 1999. The slight
decrease was attributed primarily to lower sales and profitability of the
Coatings and Fiberglass-Composite Pipe businesses, offset by the higher sales
and profitability of the Concrete & Steel Pipe business and the continued
strength from Ameron's joint venture, TAMCO.
Sales of Concrete & Steel Pipe increased $2.6 million in the first quarter of
2000, compared to the same period of 1999. Sales increased because of
favorable weather conditions and continued demand for pipe products.
Profitability increased $1.8 million in the first quarter of 2000, compared
to the first quarter of 1999, as a result of higher sales and improved product
mix and plant utilization. Concrete & Steel Pipe entered 2000 with a lower
backlog, and the business is expected to moderate in 2000.
Sales of the Company's worldwide Fiberglass-Composite Pipe business declined
$1.4 million in the first quarter of 2000, compared to the first quarter of
1999, primarily because of the lingering impact of oil and commodity prices.
Oil and commodity prices declined in 1998 and early 1999, reducing the general
level of spending for maintenance and capital projects in a number of the
Company's markets. Additionally, in the first quarter of 1999, the Fiberglass-
Composite Pipe business benefited from higher sales of fuel-handling piping
associated with government-mandated conversions of gas stations. Profits
declined in the first quarter of 2000, primarily because of lower sales of
higher-margin, fuel-handling piping. Overall, the outlook for Fiberglass-
Composite Pipe is expected to improve in the second half of 2000.
Coatings' sales declined $3.2 million in the first quarter of 2000, compared to
the first quarter of 1999. The market factors which affected Fiberglass-
Composite Pipe similarly affected Coatings. Coatings' profits declined
primarily due to lower sales. An improvement in Coatings is also expected in
the second half of 2000.
Construction & Allied Products had flat sales, but profits declined primarily
due to a strike at one of Ameron's operations in Hawaii. Ameron's pole business
made up much of the shortfall in Hawaii, benefiting from strong construction
spending for new housing and roadways.
Selling, General and Administrative expenses were lower in the first quarter of
2000, compared to the first quarter of 1999, primarily due to the higher
insurance costs in 1999.
The effective tax rate was 25% in the first quarter of 2000, compared to 32%
for the same period in 1999. The effective tax rates give effect to the
anticipated income taxes on income from domestic operations, as well as foreign
operations and joint ventures, which are taxed at rates lower than the U.S.
marginal tax rate.
Page 11
YEAR 2000
The Company's efforts to address Year 2000 ("Y2K") issues began in 1997. In
addressing the issues, the Company has employed a five-step process
consisting of 1) conducting a company-wide inventory, 2) assessing Y2K
compliance, 3) remediating non-compliant hardware and software, 4) testing
remediated hardware and software and 5) certifying Y2K compliance. Personnel
from operations and from functional disciplines, as well as information
technology professionals, are involved in the process. Outside consultants have
also been retained to participate in the inventory and assessment process,
provide support resources on a company-wide basis and minimize duplication of
efforts. Inventory and assessment activities are completed. The data are
continuously updated as new information becomes available, and we expect this
to continue. Remediation efforts are estimated to be complete. Communication
with customers and suppliers to determine the extent of their Y2K efforts is an
integral part of the program.
Costs for Y2K efforts are not being accumulated separately. The costs are
being expensed or capitalized as part of normal operations. Overall, such
costs have not had and are not expected to have a significant effect on the
Company's financial position or results of operations. In the event of the
failure to correct all compliance issues related to manufacturing control
systems, the Company's plants have the ability, in most instances, to continue
operations mechanically, rather than electronically.
Following the arrival of the Year 2000, the Company has not experienced any
problems, with devices and raw materials manufactured and/or supplied by third
parties. There was no interruption in the Company's ability to manufacture and
deliver its products and transact business with its suppliers and customers.
The Company has received no notification from customers regarding Year 2000
issues related to products it has sold. The Company continues to monitor its
systems, suppliers and products for any unanticipated issues that may arise.
Although the Company believes it has taken the appropriate steps to address
Y2K readiness, there is no guarantee that the Company's efforts will prevent a
material adverse impact on the results of operations and financial condition.
Item 3. Quantitative and Qualitative Market Risk Disclosure
No material changes have occurred in the quantitative and qualitative market
risk disclosure of the Company as presented in Ameron's Annual Report on Form
10-K for the year ended November 30, 1999.
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. 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. Since actual
results could differ materially, the reader is cautioned not to rely on these
forward-looking statements. Moreover, the Company disclaims 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,
stock repurchases, borrowings, investments and guarantees and require
maintenance of specified minimum working capital. Under the most
restrictive provisions of these agreements, approximately $10.0
million of consolidated retained earnings were not restricted at
February 29, 2000.
Item 6. Exhibits and Reports on Form 8-K
A Form 8-K was filed on February 25, 2000 to report the Company's
financial results for the year ended November 30, 1999, as reported
in press releases dated January 31, 2000 and February 17, 2000.
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 14, 2000
/s/ Gary Wagner
_________________________________
Gary Wagner
Senior Vice President,
Chief Financial Officer
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<FISCAL-YEAR-END> NOV-30-2000 NOV-30-1999
<PERIOD-END> FEB-29-2000 FEB-28-1999
<CASH> 7,959 12,849
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0 0
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