<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 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 3,885,357
on September 30, 2000. No other class of Common Stock exists.
Page 1
<PAGE>
AMERON INTERNATIONAL CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
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 11
PART II. OTHER INFORMATION
Item 2. Changes in Securities 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURE PAGE 13
</TABLE>
Page 2
<PAGE>
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)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
August 31, August 31,
------------------ ------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales $133,094 $138,795 $394,630 $411,162
Cost of Sales (100,280) (100,708) (296,567) (302,635)
-------- -------- -------- --------
Gross Profit 32,814 38,087 98,063 108,527
Selling, General and
Administrative Expenses (25,774) (26,700) (84,668) (86,003)
Other Income, net 6,515 3,804 15,768 9,923
-------- -------- -------- --------
Income before Interest
and Income Taxes 13,555 15,191 29,163 32,447
Interest Income 422 53 464 151
Interest Expense (3,336) (3,499) (9,466) (10,524)
-------- -------- -------- --------
Income before Income Taxes 10,641 11,745 20,161 22,074
Provision for Income Taxes (2,660) (3,759) (5,040) (7,064)
-------- -------- -------- --------
Net Income $ 7,981 $ 7,986 $ 15,121 $ 15,010
======== ======== ======== ========
Net Income per Share (Basic) $ 2.02 $ 2.00 $ 3.81 $ 3.75
======== ======== ======== ========
Net Income per Share (Diluted) $ 2.02 $ 1.98 $ 3.81 $ 3.74
======== ======== ======== ========
Weighted Average Shares (Basic) 3,929,342 3,991,912 3,968,244 3,997,679
========= ========= ========= =========
Weighted Average Shares (Diluted) 3,935,857 4,024,412 3,975,344 4,016,818
========= ========= ========= =========
Cash Dividends per Share $ .32 $ .32 $ .96 $ .96
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 3
<PAGE>
Ameron International Corporation and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Aug. 31, Nov. 30,
2000 1999
(Unaudited)
-------- --------
<S> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $ 9,542 $ 10,521
Receivables, Less Allowances of $7,897
in 2000 and $6,937 in 1999 134,441 118,900
Inventories 91,881 95,488
Deferred Income Taxes 10,933 11,054
Prepaid Expenses and Other Current Assets 6,897 6,691
-------- --------
Total Current Assets 253,694 242,654
Investments, Advances and Equity in
Undistributed Earnings of Affiliated Companies 21,633 23,046
Property, Plant and Equipment, Net 145,675 149,597
Other Assets 46,645 43,670
-------- --------
Total Assets $467,647 $458,967
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-Term Borrowings $ 4,141 $ 3,479
Current Portion of Long-Term Debt 12,527 12,595
Trade Payables 36,591 36,667
Accrued Liabilities 44,852 43,552
Income Taxes Payable 12,867 18,848
-------- --------
Total Current Liabilities 110,978 115,141
Long-Term Debt, Less Current Portion 147,892 135,237
Other Long-Term Liabilities 30,472 30,469
-------- --------
Total Liabilities 289,342 280,847
-------- --------
Stockholders' Equity
Common Stock, Par Value $2.50 a Share,
Authorized 12,000,000 Shares, Outstanding
3,910,407 Shares at August 31, 2000 and
3,991,912 Shares at November 30, 1999, Net
of Treasury Shares 13,007 13,007
Additional Paid-In Capital 17,857 17,857
Retained Earnings 215,646 204,336
Accumulated Other Comprehensive Loss (21,126) (12,886)
Less Treasury Stock (1,292,605 Shares at
August 31, 2000 and 1,211,100 Shares
at November 30, 1999) (47,079) (44,194)
-------- --------
Total Stockholders' Equity 178,305 178,120
-------- --------
Total Liabilities and Stockholders' Equity $467,647 $458,967
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4
<PAGE>
Ameron International Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
August 31,
-------------------
2000 1999
-------- --------
<S> <C> <C>
Cash Flows from Operating Activities
Net Income $ 15,121 $ 15,010
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 12,583 13,506
Amortization 648 1,431
Deferred Income Taxes 1,726 -
Equity in Earnings of Affiliated Companies (11,071) (5,772)
Dividends from Affiliated Companies 13,651 5,731
Gain from Sale of Assets (12) (130)
Other, Net - 1,711
Changes in Operating Assets and Liabilities:
Receivables (21,107) 5,401
Inventories 1,446 5,576
Prepaid Expenses and Other Current Assets (492) (2,534)
Trade Payables, Accrued Liabilities and
Income Taxes Payable (1,916) (13,895)
Other Long-Term Assets and Liabilities (5,954) 8,024
-------- --------
Net Cash Provided by Operating Activities 4,623 34,059
-------- --------
Cash Flows from Investing Activities
Proceeds from Sale of Property, Plant and Equipment 309 1,790
Additions to Property, Plant and Equipment (13,479) (11,901)
Other - (3,755)
-------- --------
Net Cash Used in Investing Activities (13,170) (13,866)
-------- --------
Cash Flows from Financing Activities
Net Change in Short-Term Borrowings 1,147 1,268
Issuance of Debt 16,100 1,283
Repayment of Debt (2,351) (23,718)
Dividends on Common Stock (3,811) (3,835)
Purchase of Treasury Stock (2,885) (1,415)
-------- --------
Net Cash Provided by (Used in)
Financing Activities 8,200 (26,417)
-------- --------
Effect of Exchange Rate Changes
on Cash and Cash Equivalents (632) (477)
-------- --------
Net Change in Cash and Cash Equivalents (979) (6,701)
Cash and Cash Equivalents at Beginning of Period 10,521 16,376
-------- --------
Cash and Cash Equivalents at End of Period $ 9,542 $ 9,675
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 5
<PAGE>
Ameron International Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(In Thousands)
(Unaudited)
Note 1. Basis Of Presentation
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 (the
"Company" or "Ameron") at August 31, 2000, and its consolidated results of
operations for the three and nine months ended August 31, 2000 and 1999, and
cash flows for the nine months ended August 31, 2000 and 1999. Accounting
measurements at interim dates inherently involve greater reliance on estimates
than at year-end. 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 Pronouncements
In 1998, Statement of Financial Accounting Standards No. 133 ("SFAS 133"),
"Accounting for Derivative Instruments and Hedging Activities," was issued. This
standard was amended by Statement of Financial Accounting Standards No. 137
("SFAS 137"), "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133." SFAS 137 changed the
effective date for SFAS 133 to all fiscal quarters of fiscal years beginning
after June 15, 2000. In June 2000, Statement of Financial Accounting Standards
No. 138 ("SFAS 138"), "Accounting for Certain Derivative Instruments and Certain
Hedging Activities, an amendment of SFAS 133," was issued. Ameron is required to
adopt SFAS 133 and 138 beginning December 1, 2000. The Company is currently
evaluating the impact of adopting SFAS 133 and 138.
In 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"), and
further amended it to defer the effective date. SAB 101 summarized certain of
the SEC Staff's views on applying generally accepted accounting principles to
revenue recognition. The Company is required to adopt the provisions of SAB 101
no later than November 30, 2001. The Company is currently evaluating the impact
of adopting SAB 101.
Page 6
<PAGE>
Note 3. Inventories
Inventories are stated at the lower of cost (principally first-in, first-out)or
market. Inventories were comprised of the following:
<TABLE>
<CAPTION>
Aug. 31, Nov. 30,
2000 1999
-------- --------
<S> <C> <C>
Finished Products $ 56,879 $ 56,122
Products in Process 12,353 17,382
Materials and Supplies 22,649 21,984
-------- --------
Total Inventories $ 91,881 $ 95,488
======== ========
</TABLE>
Note 4. Supplemental Disclosure of Cash Flow Information
<TABLE>
<CAPTION>
Nine Months Ended
August 31,
-------------------
2000 1999
-------- --------
<S> <C> <C>
Interest Paid $ 7,140 $ 8,187
Income Taxes Paid $ 6,008 $ 14,344
</TABLE>
Note 5. Unconsolidated Affiliated Companies
Operating results of affiliated companies, which were accounted for by the
equity method, were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
August 31, August 31,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales $ 68,621 $ 52,408 $181,127 $152,632
Gross Profit $ 19,524 $ 18,310 $ 51,932 $ 48,955
Net Income $ 9,967 $ 8,983 $ 24,386 $ 25,511
</TABLE>
Amounts shown above were the operating results of Ameron Saudi Arabia, Ltd.,
Bondstrand, Ltd. and Oasis-Ameron, Ltd. for the three and nine months ended June
30, 2000 and 1999 and TAMCO for the three and nine months ended August 31, 2000
and 1999. Ameron's equity in earnings of affiliated companies is included in
other income.
Note 6. Earnings Per Share ("EPS")
Net income per basic share is computed on the basis of the weighted average
number of common shares outstanding each period. 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.
Page 7
<PAGE>
Following is a reconciliation of the weighted average number of shares used in
the computation of basic and diluted EPS:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
August 31, August 31,
-------------------- --------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Basic Average Common
Shares Outstanding 3,929,342 3,991,912 3,968,244 3,997,679
Dilutive Effect of
Stock Options 6,515 32,500 7,100 19,139
--------- --------- --------- ---------
Diluted Average Common
Shares Outstanding 3,935,857 4,024,412 3,975,344 4,016,818
========= ========= ========= =========
</TABLE>
Note 7. Other Comprehensive Income
Comprehensive income was computed as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
August 31, August 31,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Income $ 7,981 $ 7,986 $ 15,121 $ 15,010
Foreign Currency Translation
Adjustment, Net of Tax (1,553) (100) (8,240) (3,883)
-------- -------- -------- --------
Comprehensive Income $ 6,428 $ 7,886 $ 6,881 $ 11,127
======== ======== ======== ========
</TABLE>
Note 8. Debt
The Company's long-term debt consisted of the following:
<TABLE>
<CAPTION>
Aug. 31, Nov. 30,
2000 1999
-------- --------
<S> <C> <C>
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 (4.35% at August 31, 2000) 7,200 7,200
Variable-rate unsecured bank revolving credit
facilities (approximately 7.02% at August 31, 2000) 90,297 77,144
Variable-rate unsecured bank loan, payable by a
consolidated subsidiary in Dutch guilders, with
annual principal installments of approximately
$527 (5.43% at August 31, 2000) 922 1,488
-------- --------
Total Long-Term Debt 160,419 147,832
Less Current portion ( 12,527) ( 12,595)
-------- --------
Long-Term Debt, Less Current Portion $147,892 $135,237
======== ========
</TABLE>
Page 8
<PAGE>
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 Performance Coatings & Finishes Group, the Fiberglass-Composite
Pipe Group, the Water Transmission Group, and the Infrastructure Products Group.
Each of these segments has a dedicated management team and is managed
separately, primarily because of differences in products. Following is
information related to each operating segment included in, and in a manner
consistent with, internal management reports:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
August 31, August 31,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales
Performance Coatings & Finishes $ 48,649 $ 52,545 $138,107 $151,094
Fiberglass-Composite Pipe 24,176 21,329 73,256 71,030
Water Transmission 31,866 38,821 102,866 110,811
Infrastructure Products 28,505 26,317 80,637 78,943
Eliminations (102) (217) (236) (716)
-------- -------- -------- --------
Total Sales $133,094 $138,795 $394,630 $411,162
======== ======== ======== ========
Income (Loss) Before Interest
and Income Taxes
Performance Coatings & Finishes $ 933 $ 3,369 $ 2,498 $ 7,038
Fiberglass-Composite Pipe 3,189 3,816 10,478 12,212
Water Transmission 6,047 9,181 13,757 18,438
Infrastructure Products 4,426 3,904 11,624 11,035
Corporate & Unallocated (1,040) (5,079) (9,194) (16,276)
-------- -------- -------- --------
Total Income Before Interest
and Income Taxes $ 13,555 $ 15,191 $ 29,163 $ 32,447
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Aug. 31, Nov. 30,
2000 1999
-------- --------
<S> <C> <C>
Assets
Performance Coatings & Finishes $137,948 $148,436
Fiberglass-Composite Pipe 127,146 117,561
Water Transmission 108,541 100,177
Infrastructure Products 60,545 57,208
Corporate & Unallocated 161,469 159,077
Eliminations (128,002) (123,492)
-------- --------
Total Assets $467,647 $458,967
======== ========
Investments
Performance Coatings & Finishes $ 2,203 $ 2,136
Fiberglass-Composite Pipe 3,784 3,784
Water Transmission - -
Infrastructure Products - -
Corporate & Unallocated 15,646 17,126
-------- --------
Total Investments $ 21,633 $ 23,046
======== ========
</TABLE>
Page 9
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Ameron International Corporation and Subsidiaries
August 31, 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 nine months ended August 31, 2000, the Company generated $4.6 million
of cash from operating activities, compared to $34.1 million generated during
the same period in 1999. Lower cash was generated in 2000 because of higher
working capital requirements. 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.
Cash and additional net borrowings of $14.9 million were used to finance
operations, for capital expenditures, for payment of common stock dividends of
$3.8 million and to purchase treasury stock of $2.9 million. Cash and cash
equivalents at August 31, 2000 totaled approximately $9.5 million, a decrease of
$1.0 million from November 30, 1999.
At August 31, 2000 the Company had approximately $105.0 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.
RESULTS OF OPERATIONS
Net sales for the quarter ended August 31, 2000 were $133.1 million, down from
$138.8 million in the third quarter of 1999. Net sales for the nine months ended
August 31, 2000 were $394.6 million, down from $411.2 million for the same
period in 1999. The decline in sales was principally due to lack of activity in
certain segments within the coatings and water transmission industries. Earnings
per diluted share for the quarter increased to $2.02, compared to $1.98 for the
third quarter of 1999. Earnings per diluted share for the nine months ended
August 31, 2000 totaled $3.81, compared to $3.74 for the same period of 1999.
Higher earnings were due primarily to the strength of Ameron's joint-venture
companies and lower interest expense and taxes.
Sales of the Water Transmission Group decreased about $7.1 million in the third
quarter and $7.9 million in the nine months ended August 31, 2000, compared to
the same periods of 1999. Sales decreased because of a short-term decline in
activity of the water pressure-pipe market in the western United States.
Profitability decreased $3.1 million in the third quarter and $4.7 million in
the nine months ended August 31, 2000, compared to the same periods of 1999, as
a result of lower sales and unfavorable product mix and plant utilization. The
fourth quarter is expected to improve based on current backlog and the scheduled
timing of projects. Bidding activity is increasing, and backlogs are forecasted
to increase early in 2001.
Page 10
<PAGE>
Sales of the Company's worldwide Fiberglass-Composite Pipe business increased
$2.8 million in the third quarter and $2.2 million in the nine months ended
August 31, 2000, compared to the same periods of 1999. Sales increased because
of the strong demand for oil field piping. Profits from consolidated operations
increased $0.6 million in the third quarter, compared to the third quarter of
1999, due to higher sales. Total Fiberglass-Composite Pipe profits, including
equity income, declined in the third quarter of 2000 because of higher equity
income in the third quarter of 1999. Total profits declined $1.7 million in the
first nine months of 2000 primarily because of higher sales of higher-margin,
fuel-handling piping associated with government-mandated conversions of gas
stations in 1999. Additionally, profits in 2000 were impacted by costs of
ramping up production to meet the sharp rise in demand for oil field piping.
Sales of the Performance Coatings & Finishes Group declined $3.8 million in the
third quarter and $13.0 million in the nine months ended August 31, 2000,
compared to the same periods of 1999. The decrease was due primarily to the
prolonged lack of activity in offshore and marine markets and the decline of the
British manufacturing sector. Profits were lower primarily due to lower sales.
Sales of the Infrastructure Products Group increased $2.2 million in the third
quarter and $1.7 million in the nine months ended August 31, 2000, compared to
the same periods of 1999. Sales and profits increased because of an improvement
in Hawaiian operations. Ameron's pole products business declined as construction
slowed due to higher interest rates.
Selling, General and Administrative Expenses were lower in the third quarter and
nine months ended August 31, 2000, compared to the same periods of 1999,
primarily due to higher insurance and employee benefit costs in 1999.
Equity income totaled $5.4 million in the third quarter and $11.1 million in the
nine months ended August 31, 2000, compared to $2.4 million and $5.8 million,
respectively, for the same periods of 1999. The increase reflected the continued
strong performances of the Company's joint ventures.
The effective tax rate was 25% in the third quarter and nine months ended August
31, 2000, compared to 32% for the same periods in 1999. The lower effective tax
rate was based on the mix of income from domestic and foreign operations and
joint ventures. Income from certain foreign and joint-venture operations is
taxed at rates substantially lower than U.S. statutory tax rates.
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 11
<PAGE>
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 $6.9 million of consolidated
retained earnings were not restricted at August 31, 2000.
Item 6. Exhibits and Reports on Form 8-K
A Form 8-K was filed on June 30, 2000 to report the Company's
financial results for the second quarter ended May 31, 2000,
as reported in a press release dated June 21, 2000.
Page 12
<PAGE>
Signature Page
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Ameron International Corporation
Date: October 13, 2000
/s/ Gary Wagner
---------------------------------
Gary Wagner
Senior Vice President,
Chief Financial Officer
Page 13
