ameron_10q108.htm

	Three Months Ended
	March 2,			February 25,
(Dollars in thousands, except per share data)	2008			2007
Sales	$	149,769		$	120,355
Cost of sales		(116,317	)		(95,035	)
Gross profit		33,452			25,320

Selling, general and administrative expenses		(25,802	)		(21,500	)
Other income, net		2,975			1,018
Income from continuing operations before interest, income taxes and equity in earnings of joint venture		10,625			4,838
Interest income, net		289			366
Income from continuing operations before income taxes and equity in earnings of joint venture		10,914			5,204
Provision for income taxes		(3,929	)		(1,920	)
Income from continuing operations before equity in earnings of joint venture		6,985			3,284
Equity in earnings of joint venture, net of taxes		2,752			5,028
Income from continuing operations		9,737			8,312
Income from discontinued operations, net of taxes		-			156
Net income	$	9,737		$	8,468

Basic earnings per share:
Income from continuing operations	$	1.07		$	.92
Income from discontinued operations, net of taxes		-			.02
Net income	$	1.07		$	.94

Diluted earnings per share:
Income from continuing operations	$	1.07		$	.92
Income from discontinued operations, net of taxes		-			.02
Net income	$	1.07		$	.94

Weighted-average shares (basic)		9,075,086			8,994,075
Weighted-average shares (diluted)		9,102,978			9,050,525

Cash dividends per share	$	.25		$	.20

	March 2,			November 30,
(Dollars in thousands)	2008			2007
ASSETS

Current assets
Cash and cash equivalents	$	159,857		$	155,433
Receivables, less allowances of $6,699 in 2008 and $6,235 in 2007		169,764			185,335
Inventories		98,781			97,717
Deferred income taxes		22,691			22,446
Prepaid expenses and other current assets		12,337			12,100

Total current assets		463,430			473,031

Investments in joint ventures
Equity method		17,172			14,677
Cost method		3,784			3,784

Property, plant and equipment
Land		37,410			35,860
Buildings		77,908			75,245
Machinery and equipment		297,530			292,563
Construction in progress		28,061			24,655

Total property, plant and equipment at cost		440,909			428,323
Accumulated depreciation		(258,759	)		(254,592	)

Total property, plant and equipment, net		182,150			173,731
Deferred income taxes		5,128			4,202
Goodwill and intangible assets, net of accumulated amortization of $1,170 in 2008 and $1,130 in 2007		2,214			2,243
Other assets		38,385			34,144

Total assets	$	712,263		$	705,812

	March 2,			November 30,
(Dollars in thousands, except per share data)	2008			2007
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Current portion of long-term debt	$	17,320		$	17,055
Trade payables		44,327			45,216
Accrued liabilities		69,504			84,436
Income taxes payable		12,854			11,985

Total current liabilities		144,005			158,692

Long-term debt, less current portion		56,284			57,593
Other long-term liabilities		53,632			44,154

Total liabilities		253,921			260,439

Commitments and contingencies

Stockholders' equity

Common stock, par value $2.50 per share, authorized 24,000,000 shares, outstanding 9,167,492 shares in 2008 and 9,138,563 shares in 2007, net of treasury shares		29,767			29,623
Additional paid-in capital		50,000			46,675
Retained earnings		438,377			430,925
Accumulated other comprehensive loss		(5,068	)		(9,870	)
Treasury stock (2,739,300 shares in 2008 and 2,710,479 shares in 2007)		(54,734	)		(51,980	)

Total stockholders' equity		458,342			445,373

Total liabilities and stockholders' equity	$	712,263		$	705,812

	Three Months Ended
	March 2,			February 25,
(Dollars in thousands)	2008			2007
OPERATING ACTIVITIES
Net income	$	9,737		$	8,468
Adjustments to reconcile net income to net cash provided by/(used in) operating activities:
Depreciation		4,773			3,739
Amortization		38			6
Net earnings in excess of distributions from joint ventures		(2,495	)		(5,668	)
Loss/(gain) from sale of property, plant and equipment		58			(19	)
Stock compensation expense		1,856			484
Other		-			2
Changes in operating assets and liabilities:
Receivables, net		17,738			9,816
Inventories		68			(26,515	)
Prepaid expenses and other current assets		(96	)		6,492
Other assets		(4,491	)		(105	)
Trade payables		(1,596	)		7,730
Accrued liabilities and income taxes payable		(20,511	)		(2,538	)
Other long-term liabilities		13,309			(2,422	)
Net cash provided by/(used in) operating activities		18,388			(530	)

INVESTING ACTIVITIES
Proceeds from sale of property, plant and equipment		724			200
Additions to property, plant and equipment		(12,006	)		(9,670	)
Net cash used in investing activities		(11,282	)		(9,470	)

FINANCING ACTIVITIES
Repayment of debt		(2,610	)		(1,417	)
Dividends on common stock		(2,285	)		(1,816	)
Issuance of common stock		760			405
Excess tax benefits related to stock-based compensation		1,251			1,955
Purchase of treasury stock		(2,754	)		(1,142	)
Net cash used in financing activities		(5,638	)		(2,015	)

Effect of exchange rate changes on cash and cash equivalents		2,956			256
Net change in cash and cash equivalents		4,424			(11,759	)
Cash and cash equivalents at beginning of period		155,433			139,479

Cash and cash equivalents at end of period	$	159,857		$	127,720

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 and all subsidiaries (the "Company" or "Ameron" or the "Registrant") as of March 2, 2008, and consolidated results of operations and cash flows for the three months ended March 2, 2008. 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.

For accounting consistency, the quarter typically ends on the Sunday closest to the end of the relevant calendar month. The Company’s fiscal year ends on November 30, regardless of the day of the week. Each quarter consists of approximately 13 weeks, but the number of days per quarter can change from period to period. The quarter ended March 2, 2008 consisted of 93 days, compared to 87 days for the quarter ended February 25, 2007.

The consolidated financial statements do not include certain footnote disclosures and financial information normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America and, therefore, should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended November 30, 2007 ("2007 Annual Report").

In July 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109.” FIN No. 48 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with Statement of Financial Accounting Standard (“SFAS”) No. 109 and prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken or expected to be taken on a tax return. The minimum threshold is defined in FIN No. 48 as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. FIN No. 48 must be applied to all existing tax positions upon initial adoption. The cumulative effect of applying FIN No. 48 at adoption is to be reported as an adjustment to beginning retained earnings for the year of adoption. FIN No. 48 is effective for the current fiscal year and was adopted by the Company as of December 1, 2007. Further information about the application of FIN No. 48 may be found in Note 17, herein.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which formally defines fair value, creates a standardized framework for measuring fair value in generally accepted accounting principles (“GAAP”), and expands fair value measurement disclosures. SFAS No. 157 is effective for the current fiscal year and was adopted by the Company as of December 1, 2007. Further information about the application of SFAS No. 157 may be found in Note 18, herein.

In September 2006, the FASB issued Emerging Issues Task Force (“EITF”) Issue No. 06-4, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements,” effective for fiscal years beginning after December 15, 2007. EITF Issue No. 06-4 requires that, for split-dollar life insurance arrangements providing a benefit to an employee extending to postretirement periods, an employer should recognize a liability for future benefits in accordance with SFAS No. 106. EITF Issue No. 06-4 requires that recognition of the effects of adoption should be either by (a) a change in accounting principle through a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption or (b) a change in accounting principle through retrospective application to all prior periods. The Company is evaluating whether the adoption of EITF Issue No. 06-4 will have a material effect on its consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” SFAS No. 159 allows an entity the irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities on a contract-by-contract basis. SFAS No. 159 also provides companies the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 is effective for the current year and was adopted by the Company as of December 1, 2007. The Company has not elected to exercise the fair value irrevocable option. The adoption of SFAS No. 159 did not have a material effect on the Company’s consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations.” SFAS No. 141(R) amends accounting and reporting standards associated with business combinations and requires the acquiring entity to recognize the assets acquired, liabilities assumed and noncontrolling interests in the acquired entity at the date of acquisition at their fair values. In addition, SFAS No. 141(R) requires that direct costs associated with an acquisition be expensed as incurred and sets forth various other changes in accounting and reporting related to business combinations. SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply SFAS No. 141(R) before that date.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51.” SFAS No. 160 amends the accounting and reporting for noncontrolling interests in a consolidated subsidiary and the deconsolidation of a subsidiary. Included in this statement is the requirement that noncontrolling interests be reported in the equity section of the balance sheet. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited.

On August 1, 2006, the Company completed the sale of its Performance Coatings & Finishes business (the "Coatings Business") to PPG Industries, Inc. ("PPG"). During the first quarter of 2007, the Company recognized $156,000 of research and development tax credits that related to the Coatings Business. The tax credits were attributable to the retroactive application of tax legislation enacted in 2007.

Basic net income per share is computed on the basis of the weighted-average number of common shares outstanding during the periods presented. Diluted net income per share is computed on the basis of the weighted-average number of common shares outstanding plus the effect of outstanding stock options and restricted stock, using the treasury stock method. All outstanding common stock equivalents consisting of restricted shares of 25,570 and 28,550, and options to purchase 43,500 and 98,500 common shares, were dilutive for the three months ended March 2, 2008 and February 25, 2007, respectively. Following is a reconciliation of the weighted-average number of shares used in the computation of basic and diluted net income per share:

	Three Months Ended
	March 2,		February 25,
(In thousands, except per share data)	2008		2007
Numerator:
Income from continuing operations	$	9,737	$	8,312
Income from discontinued operations, net of taxes		-		156
Net income	$	9,737	$	8,468

Denominator for basic income per share:
Weighted-average shares outstanding, basic		9,075,086		8,994,075

Denominator for diluted income per share:
Weighted-average shares outstanding, basic		9,075,086		8,994,075
Dilutive effect of stock options and restricted stock		27,892		56,450
Weighted-average shares outstanding, diluted		9,102,978		9,050,525

Basic net income per share:
Income from continuing operations	$	1.07	$	.92
Income from discontinued operations, net of taxes		-		.02
Net income	$	1.07	$	.94

Diluted net income per share:
Income from continuing operations	$	1.07	$	.92
Income from discontinued operations, net of taxes		-		.02
Net income	$	1.07	$	.94

	March 2,			November 30,
(In thousands)	2008			2007
Fixed-rate notes:
5.36%, payable in annual principal installments of $10,000	$	20,000		$	20,000
4.25%, payable in Singapore dollars, in annual principal installments of $7,320		36,598			35,274
Variable-rate industrial development bonds:
payable in 2016 (2.45% at March 2, 2008)		7,200			7,200
payable in 2021 (2.45% at March 2, 2008)		8,500			8,500
Variable-rate bank revolving credit facility (13.24% at March 2, 2008)		1,306			3,674
Total long-term debt		73,604			74,648
Less current portion		(17,320	)		(17,055	)
Long-term debt, less current portion	$	56,284		$	57,593

lending agreements contain various restrictive covenants, including the requirement to maintain specified amounts of net worth and restrictions on cash dividends, borrowings, liens, investments, guarantees, and financial covenants. The Company was in compliance with all covenants as of March 2, 2008. The Revolver, the 4.25% term notes and the 5.36% term notes are collateralized by substantially all of the Company's assets. The industrial development bonds are supported by standby letters of credit that are issued under the Revolver. The interest rate on the industrial development bonds is based on a weekly index of tax-exempt issues plus a spread of .20%. Certain note agreements contain provisions regarding the Company's ability to grant security interests or liens in association with other debt instruments. If the Company grants such a security interest or lien, then such notes will be collateralized equally and ratably as long as such other debt shall be collateralized.

The Company intends for short-term borrowings under certain bank facilities utilized by the Company and its foreign subsidiaries to be refinanced on a long-term basis via the Revolver. In addition, the amount available under the Revolver exceeds such short-term borrowings at March 2, 2008. Accordingly, amounts due under these bank facilities have been classified as long-term debt and are considered payable when the Revolver is due.

The Company provides certain information about operating segments in accordance with SFAS No. 131, “Disclosure about Segments of an Enterprise and Related Information.” In accordance with SFAS No. 131, the Company has determined that it has four operating and three reportable segments: Fiberglass-Composite Pipe, Water Transmission and Infrastructure Products. Infrastructure Products consists of two operating segments, the Pole Products and Hawaii Divisions, which are aggregated. In the prior periods, the Company included a fourth reportable segment, Performance Coatings & Finishes, which was sold effective August 1, 2006. The results from this segment have been reported as discontinued operations for all reporting periods. Each of the segments has a dedicated management team and is managed separately, primarily because of differences in products. The Company's Chief Operating Decision Maker is the Chief Executive Officer who primarily reviews sales and income before interest, income taxes and equity in earnings of joint venture for each operating segment in making decisions about allocating resources and assessing performance. The Company allocates certain selling, general and administrative expenses to operating segments utilizing assumptions believed to be appropriate in the circumstances. Costs of shared services (e.g., costs of Company-wide insurance programs or benefit plans) are allocated to the operating segments based on revenue, wages or net assets employed. Other items not related to current operations or of an unusual nature, such as adjustments to reflect inventory balances of certain steel inventories under the last-in, first-out ("LIFO") method, certain unusual legal costs and expenses, interest expense and income taxes, are not allocated to the reportable segments.

	Three Months Ended
	March 2,			February 25,
(In thousands)	2008			2007
Sales
Fiberglass-Composite Pipe	$	65,843		$	46,509
Water Transmission		40,984			29,593
Infrastructure Products		43,328			45,287
Eliminations		(386	)		(1,034	)
Total sales	$	149,769		$	120,355

Income from Continuing Operations Before Interest, Income Taxes and Equity in Earnings of Joint Venture
Fiberglass-Composite Pipe	$	16,635		$	8,999
Water Transmission		(3,939	)		(4,131	)
Infrastructure Products		6,294			6,727
Corporate and unallocated		(8,365	)		(6,757	)
Total Income from Continuing Operations Before Interest, Income Taxes and Equity in Earnings of Joint Venture	$	10,625		$	4,838

The Company is one of numerous defendants in various asbestos-related personal injury lawsuits. These cases generally seek unspecified damages for asbestos-related diseases based on alleged exposure to products previously manufactured by the Company and others, and at this time the Company is generally not aware of the extent of injuries allegedly suffered by the individuals or the facts supporting the claim that injuries were caused by the Company's products. Based upon the information available to it at this time, the Company is not in a position to evaluate its potential exposure, if any, as a result of such claims or future similar claims, if any, that may be filed. Hence, no amounts have been accrued for loss contingencies related to these lawsuits in accordance with SFAS No. 5, "Accounting for Contingencies." The Company continues to vigorously defend all such lawsuits. As of March 2, 2008, the Company was a defendant in asbestos-related cases involving 25 claimants, compared to 60 claimants as of November 30, 2007. The Company is not in a position to estimate the number of additional claims that may be filed against it in the future. For the quarter ended March 2, 2008, there were new claims involving three claimants, dismissals and/or settlements involving 38 claimants and no judgments. No net costs or expenses were incurred by the Company for the quarter ended March 2, 2008 in connection with asbestos-related claims.

In May 2003, Dominion Exploration and Production, Inc. and Pioneer Natural Resources USA, Inc. (collectively "Dominion") brought an action against the Company in Civil District Court for the Parish of Orleans, Louisiana as owners of an offshore production facility known as a SPAR. Dominion seeks damages allegedly sustained by it resulting from delays in delivery of the SPAR caused by the removal and replacement of certain coatings containing lead and/or lead chromate for which the manufacturer of the SPAR alleged the Company was responsible. Dominion contends that the Company made certain misrepresentations and warranties to Dominion concerning the lead-free nature of those coatings. Dominion's petition as filed alleged a claim for damages in an unspecified amount; however, Dominion's economic expert has since estimated Dominion's damages at approximately $128,000,000 a figure which the Company contests. This matter is in discovery and no trial date has yet been established. The Company believes that it has meritorious defenses to this action. Based upon the information available to it at this time, the Company is not in a position to evaluate the ultimate outcome of this matter.

In April 2004, Sable Offshore Energy Inc. ("Sable"), as agent for certain owners of the Sable Offshore Energy Project, brought an action against various coatings suppliers and application contractors, including the Company and two of its subsidiaries, Ameron (UK) Limited and Ameron B.V. (collectively "Ameron Subsidiaries") in the Supreme Court of Nova Scotia, Canada. Sable seeks damages allegedly sustained by it resulting from performance problems with several coating systems used on the Sable Offshore Energy Project, including coatings products furnished by the Company and the Ameron Subsidiaries. Sable's originating notice and statement of claim alleged a claim for damages in an unspecified amount; however, Sable has since alleged that its claim for damages against all defendants is approximately 428,000,000 Canadian dollars, a figure which the Company and the Ameron Subsidiaries contest. This matter is in discovery, and no trial date has yet been established. The Company believes that it has meritorious defenses to this action. Based upon the information available to it at this time, the Company is not in a position to evaluate the ultimate outcome of this matter.

The Company is subject to federal, state and local laws and regulations concerning the environment and is currently participating in administrative proceedings at several sites under these laws. While the Company finds it difficult to estimate with any certainty the total cost of remediation at the several sites, on the basis of currently available information and reserves provided, the Company believes that the outcome of such environmental regulatory proceedings will not have a material effect on the Company's financial position, cash flows, or its results of operations.

The Company's product warranty accrual reflects management's estimate of probable liability associated with product warranties. The Company generally provides a standard product warranty covering defects for a period not exceeding one year from date of purchase. Management establishes product warranty accruals based on historical experience and other currently-available information. Changes in the product warranty accrual were as follows:

All of the Company's intangible assets, other than goodwill, are subject to amortization. Amortization expense for the three months ended March 2, 2008 and February 25, 2007 was $38,000 and $6,000, respectively. At March 2, 2008, estimated future amortization expense was as follows: $46,000 for the remaining nine months of 2008, $41,000 for 2009, $33,000 for 2010, $30,000 for 2011, and $28,000 for 2012.

· 1994 Non-Employee Director Stock Option Plan ("1994 Plan") - The 1994 Plan was terminated in 2001, except as to the outstanding options. A total of 240,000 new shares of Common Stock were made available for awards to non-employee directors. Non-employee directors were granted options to purchase the Company's Common Stock at prices not less than 100% of market value on the date of grant. Such options vested in equal annual installments over four years and terminate ten years from the date of grant.

· 2001 Stock Incentive Plan ("2001 Plan") - The 2001 Plan was terminated in 2004, except as to the outstanding stock options and restricted stock grants. A total of 380,000 new shares of Common Stock were made available for awards to key employees and non-employee directors. The 2001 Plan served as the successor to the 1994 Plan and superseded that plan. Non-employee directors were granted options under the 2001 Plan to purchase the Company's Common Stock at prices not less than 100% of market value on the date of grant. Such options vested in equal annual installments over four years. Such options terminate ten years from the date of grant. Key employees were granted restricted stock under the 2001 Plan. Such restricted stock grants vested in equal annual installments over four years.

· 2004 Stock Incentive Plan ("2004 Plan") - The 2004 Plan serves as the successor to the 2001 Plan and supersedes that plan. A total of 525,000 new shares of Common Stock were made available for awards to key employees and non-employee directors and may include, but are not limited to, stock options and restricted stock grants. Non-employee directors were granted options under the 2004 Plan to purchase the Company's Common Stock at prices not less than 100% of market value on the date of grant. Such options vest in equal annual installments over four years and terminate ten years from the date of grant. Key employees were granted restricted stock under the 2004 Plan. Such restricted stock grants typically vest in equal annual installments over three years. During the three months ended March 2, 2008, the Company granted 3,802 stock options to non-employee directors with a fair value on the grant date of $101,000 and 16,000 restricted shares to key employees with fair value on the grant date of $1,639,000.

The Company's income from continuing operations before income taxes and equity in earnings of joint venture for the three months ended March 2, 2008 and February 25, 2007 included compensation expenses of $1,856,000 and $484,000, respectively, related to stock-based compensation arrangements. Tax benefits related to these expenses were $724,000 and $189,000, respectively. There were no capitalized share-based compensation costs for the three months ended March 2, 2008.

						Weighted-
				Weighted-		Average
				Average		Remaining		Aggregate
	Number of			Exercise Price		Contractual		Intrinsic Value
Options	Options			per Share		Term (Years)		(in thousands)
Outstanding at November 30, 2007		67,250		$	28.77
Granted		3,802			101.23
Exercised		(23,750	)		29.34
Outstanding at March 2, 2008		47,302			26.16		4.50	$	3,563

Options exercisable at March 2, 2008		39,000			27.87		4.24	$	3,218

For the three months ended March 2, 2008, 3,802 options were granted and no options were forfeited or expired. For the three months ended February 25, 2007, no options were granted, forfeited or expired. The aggregate intrinsic value in the table above represents the total pretax intrinsic value, which is the difference between the closing price of the Company’s stock on the last trading day of the first quarter of 2008 and the exercise price times the number of shares that would have been received by the option holders if the options were exercised on such trading day. This amount will change based on the fair market value of the Company's stock. The aggregate intrinsic value of stock options exercised during the three months ended March 2, 2008 and February 25, 2007 were $1,702,000 and $1,175,000, respectively. As of March 2, 2008, unrecognized compensation cost related to stock-based compensation arrangements totaled $8,864,000, which is expected to be recognized over a weighted-average period of three years.

For the three months ended March 2, 2008, 16,000 shares of restricted stock were granted. The weighted-average grant-date, fair value of such restricted stock was $102.44 per share. The fair value of restricted stock, which vested during the three months ended March 2, 2008, was $5,488,000. The fair value of restricted stock, which vested during the three months ended February 25, 2007, was $2,308,000.

													U.S. Postretirement
	Pension Benefits												Benefits
	U.S. Plans						Non-U.S. Plans
	Three Months Ended March 2 and February 25,												Three Months Ended March 2 and February 25,
(In thousands)	2008			2007			2008			2007			2008			2007
Service cost	$	757		$	732		$	109		$	132		$	96		$	88
Interest cost		2,871			2,795			638			565			209			202
Expected return on plan assets		(3,900	)		(3,543	)		(429	)		(420	)		(32	)		(35	)
Amortization of unrecognized
prior service cost		28			28			76			70			19			19
Amortization of unrecognized
net transition obligation		-			-			-			-			46			46
Amortization of accumulated loss		233			976			-			38			11			15
Net periodic cost	$	(11	)	$	988		$	394		$	385		$	349		$	335

The Company contributed approximately $1,000,000 to the non-U.S. defined benefit pension plans and made no payment to its U.S. defined benefit pension plan in the first three months of 2008. Based on current actuarial projections, the Company anticipates that the funded status of the U.S. pension plan will be sufficient so that the Company will not be required to make contributions in 2008 under the funding regulations of the Pension Protection Act of 2006 (“PPA”). However, the Company expects to contribute approximately $3,000,000 to its U.S. defined benefit pension plan and an additional $200,000 to the non-U.S. pension plans during the remainder of fiscal year 2008.

Income taxes increased to $3,929,000 in the first quarter of 2008, from $1,920,000 in the same period of 2007. The effective tax rate on income from continuing operations decreased to 36.0% in 2008, from 36.9% in 2007. The effective tax rate for the first quarter of 2008 is based on forecasted full-year earnings and the anticipated mix of domestic and foreign earnings. Income from certain foreign operations and joint ventures is taxed at rates that are lower than the U.S. statutory tax rates. The effective tax rate for the first quarter of 2008 is not necessarily indicative of the tax rate for the full fiscal year.

Prior to December 1, 2007, the Company recorded reserves related to uncertain tax positions as a current liability. Upon adoption of FIN No. 48, the Company reclassified tax reserves related to uncertain tax positions for which a cash payment is not expected within the next 12 months to noncurrent liabilities. The Company’s adoption of FIN No. 48 did not require a cumulative adjustment to the opening balance of its retained earnings.

At December 1, 2007, the total amount of gross unrecognized tax benefits, excluding interest, was $13,102,000. This amount has not been reduced for offsetting benefits in other tax jurisdictions and for the benefit of future tax deductions that would arise as a result of settling such liabilities as recorded. Of this amount, $5,836,000 would reduce the Company’s income tax expense and effective tax rate, after giving effect to offsetting benefits from other tax jurisdictions and resulting future deductions. There have been no material changes to these amounts during the quarter ended March 2, 2008.

The Company anticipates that it is reasonably possible that the total amount of unrecognized tax benefits may significantly change within the succeeding 12 months as a result of the expiration of certain federal and state statutes of limitations for examination and the settlement of certain state audits. The Company estimates that these events could result in a reasonably possible decrease in unrecognized tax benefits of $1,887,000.

The Company’s federal income tax returns remain subject to examination for the 2004 through 2007 tax years. The Company files multiple state income tax returns, including California, Hawaii, Arizona and Texas, with open statutes ranging from 2000 through 2007. The Company also files multiple foreign income tax returns and remains subject to examination in major foreign jurisdictions, including the Netherlands, Singapore and Malaysia, for years ranging from 1996 through 2007.

Effective December 1, 2007, the Company adopted SFAS No. 157, which provides a framework for measuring fair value under GAAP. As defined in SFAS No. 157, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that the Company believes market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable.

SFAS No. 157 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy defined by SFAS No. 157 are as follows:

Level 1

Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, listed equities and U.S. government treasury securities.

Level 2

Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category include non-exchange-traded derivatives such as over the counter forwards, options and repurchase agreements.

Level 3

Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value from the perspective of a market participant. Level 3 instruments include those that may be more structured or otherwise tailored to customers’ needs. At each balance sheet date, the Company performs an analysis of all instruments subject to SFAS No. 157 and includes in Level 3 all of those whose fair value is based on significant unobservable inputs.

The Company conducts business in several countries where transactions are completed in currencies other than the U.S. dollar. The Company’s primary objective with respect to currency risk is to reduce net income volatility that would otherwise occur due to exchange-rate fluctuations. In order to minimize the risk of gain or loss to cash flows due to exchange rates, the Company uses foreign currency derivatives. As of March 2, 2008, the Company held 14 foreign currency forward contracts in the amount of $7,000,000 U.S. dollars, hedging Singapore dollars. As of March 2, 2008, such instruments had a fair value of $107,000 based on quotations from the financial institutions.

Ameron International Corporation ("Ameron" or the "Company") is a multinational manufacturer of highly-engineered products and materials for the chemical, industrial, energy, transportation and infrastructure markets. Ameron is a leading producer of water transmission lines; fiberglass-composite pipe for transporting oil, chemicals and corrosive fluids and specialized materials and products used in infrastructure projects. The Company operates businesses in North America, South America, Europe and Asia. The Company has three reportable segments. The Fiberglass-Composite Pipe Group manufactures and markets filament-wound and molded composite fiberglass pipe, tubing, fittings and well screens. The Water Transmission Group manufactures and supplies concrete and steel pressure pipe, concrete non-pressure pipe, protective linings for pipe and fabricated steel products, such as large-diameter wind towers. The Infrastructure Products Group consists of two operating segments, which are aggregated: the Hawaii Division which manufactures and sells ready-mix concrete, sand and aggregates, concrete pipe and culverts and the Pole Products Division which manufactures and sells concrete and steel lighting and traffic poles. The markets served by the Fiberglass-Composite Pipe Group are worldwide in scope. The Water Transmission Group serves primarily the western U.S. for pipe and sells wind towers primarily west of the Mississippi river. The Infrastructure Products Group's quarry and ready-mix business operates exclusively in Hawaii, and poles are sold throughout the U.S. Ameron also participates in several joint-venture companies, directly in the U.S. and Saudi Arabia, and indirectly in Egypt.

During the third quarter of 2006, the Company sold its Performance Coatings & Finishes business ("Coatings Business"). The results from this segment have been reported as discontinued operations for all the reporting periods. Accordingly, the following discussions generally reflect summary results from continuing operations unless otherwise noted. However, the net income and net income per share discussions include the impact of discontinued operations.

Management's Discussion and Analysis of Liquidity and Capital Resources and Results of Operations are based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires Management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities during the reporting periods. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

The consolidated financial statements include the accounts of Ameron International Corporation and all wholly-owned subsidiaries. All material intercompany accounts and transactions have been eliminated. The functional currencies for the Company's foreign operations are the applicable local currencies. The translation from the applicable foreign currencies to U.S. dollars is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted-average exchange rate during the period. The resulting translation adjustments are recorded in accumulated other comprehensive income/(loss). The Company advances funds to certain foreign subsidiaries that are not expected to be repaid in the foreseeable future. Translation adjustments arising from these advances are also included in accumulated other comprehensive income/(loss). The timing of repayments of intercompany advances could materially impact the Company's consolidated financial statements. Additionally, earnings of foreign subsidiaries are often permanently reinvested outside the U.S. Unforeseen repatriation of such earnings could result in significant unrecognized U.S. tax liability. Gains or losses resulting from foreign currency transactions are included in other income, net.

Revenue for the Fiberglass-Composite Pipe and Infrastructure Products segments is recognized when risk of ownership and title pass, primarily at the time goods are shipped, provided that an agreement exists between the customer and the Company, the price is fixed or determinable and collection is reasonably assured. Revenue is recognized for the Water Transmission Group primarily under the percentage-of-completion method, typically based on completed units of production, since products are manufactured under enforceable and binding construction contracts, typically are designed for specific applications, are not interchangeable between projects, and are not manufactured for stock. Revenue for the period is determined by multiplying total estimated contract revenue by the percentage-of-completion of the contract and then subtracting the amount of previously recognized revenue. Cost of earned revenue is computed by multiplying estimated contract completion cost by the percentage-of-completion of the contract and then subtracting the amount of previously recognized cost. In some cases, if products are manufactured for stock or are not related to specific construction contracts, revenue is recognized under the same criteria used by the other two segments. Revenue under the percentage-of-completion method is subject to a greater level of estimation, which affects the timing of revenue recognition, costs and profits. Estimates are reviewed on a consistent basis and are adjusted periodically to reflect current expectations. Costs attributable to unpriced change orders are treated as costs of contract performance in the period, and contract revenue is recognized if recovery is probable. Disputed or unapproved change orders are treated as claims. Recognition of amounts of additional contract revenue relating to claims occurs when amounts have been received or awarded with recognition based on the percentage-of-completion methodology.

The Company expenses environmental clean-up costs related to existing conditions resulting from past or current operations on a site-by-site basis. Liabilities and costs associated with these matters, as well as other pending litigation and asserted claims arising in the ordinary course of business, require estimates of future costs and judgments based on the knowledge and experience of management and its legal counsel. When the Company's exposures can be reasonably estimated and are probable, liabilities and expenses are recorded. The ultimate resolution of any such exposure to the Company may differ due to subsequent developments.

Inventories are stated at the lower of cost or market with cost determined principally on the first-in, first-out ("FIFO") method. Certain steel inventories used by the Water Transmission Group are valued using the last-in, first-out ("LIFO") method. Significant changes in steel levels or costs could materially impact the Company's financial statements. Reserves are established for excess, obsolete and rework inventories based on estimates of salability and forecasted future demand. Management records an allowance for doubtful accounts receivable based on historical experience and expected trends. A significant reduction in demand or a significant worsening of customer credit quality could materially impact the Company’s consolidated financial statements.

Investments in unconsolidated joint ventures or affiliates ("joint ventures") over which the Company has significant influence are accounted for under the equity method of accounting, whereby the investment is carried at the cost of acquisition, plus the Company's equity in undistributed earnings or losses since acquisition. Investments in joint ventures over which the Company does not have the ability to exert significant influence over the investees' operating and financing activities are accounted for under the cost method of accounting. The Company's investment in TAMCO, a steel mini-mill in California, is accounted for under the equity method. Investments in Ameron Saudi Arabia, Ltd. and Bondstrand, Ltd. are accounted for under the cost method due to management's current assessment of the Company's influence over these joint ventures.

Property, plant and equipment is stated on the basis of cost and depreciated principally using a straight-line method based on the estimated useful lives of the related assets, generally three to 40 years. The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. If the estimated future, undiscounted cash flows from the use of an asset are less than its carrying value, a write-down is recorded to reduce the related asset to estimated fair value. Actual cash flows may differ significantly from estimated cash flows. Additionally, current estimates of future cash flows may differ from subsequent estimates of future cash flows. Changes in estimated or actual cash flows could materially impact the Company's consolidated financial statements.

The Company is self-insured for a portion of the losses and liabilities primarily associated with workers' compensation claims and general, product and vehicle liability. Losses are accrued based upon the Company's estimates of the aggregate liability for claims incurred using historical experience and certain actuarial assumptions followed in the insurance industry. The estimate of self-insurance liability includes an estimate of incurred but not reported claims, based on data compiled from historical experience. Actual experience could differ significantly from these estimates and could materially impact the Company's consolidated financial statements. The Company purchases varying levels of insurance to cover losses in excess of the self-insured limits. Currently, the Company's primary self-insurance limits are $1.0 million per workers' compensation claim, $.1 million per general, property or product liability claim, and $.25 million per vehicle liability claim.

The Company follows the guidance of Statement of Financial Accounting Standards ("SFAS") No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,” SFAS No. 87, “Employers' Accounting for Pensions”, and SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions,” when accounting for pension and other postretirement benefits. Under these accounting standards, assumptions are made regarding the valuation of benefit obligations and the performance of plan assets that are controlled and invested by third-party fiduciaries. Delayed recognition of differences between actual results and expected or estimated results is a guiding principle of these standards. Such delayed recognition provides a gradual recognition of benefit obligations and investment performance over the working lives of the employees who benefit under the plans, based on various assumptions. Assumed discount rates are used to calculate the present values of benefit payments which are projected to be made in the future, including projections of increases in employees' annual compensation and health care costs. Management also projects the future returns on invested assets based principally on prior performance. These projected returns reduce the net benefit costs the Company records in the current period. Actual results could vary significantly from projected results, and such deviations could materially impact the Company's consolidated financial statements. Management consults with the Company’s actuaries when determining these assumptions. Program changes, including termination, freezing of benefits or acceleration of benefits, could result in an immediate recognition of unrecognized benefit obligations and such recognition could materially impact the Company's consolidated financial statements.

The Company adopted SFAS No. 157, “Fair Value Measurements,” which provides a framework for measuring fair value under GAAP. As defined in SFAS No. 157, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that the Company believes market participants would use in pricing assets or liabilities, including assumptions about risk and the risks inherent in the inputs to valuation technique. These inputs can be readily observable, market corroborated or generally unobservable. The Company primarily applies the market approach for recurring fair value measurements and endeavors to utilize the best available information. Accordingly, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The Company classifies fair value balances based on the observability of those inputs.

Deferred income tax assets and liabilities are computed for differences between the financial statement and income tax bases of assets and liabilities. Such deferred income tax asset and liability computations are based on enacted tax laws and rates applicable to periods in which the differences are expected to reverse. Valuation allowances are established, when necessary, to reduce deferred income tax assets to the amounts expected to be realized. Quarterly income taxes are estimated based on the mix of income by jurisdiction forecasted for the full fiscal year. The Company believes that it has adequately provided for tax-related matters.

The amount of income taxes the Company pays is subject to ongoing audits by federal, state and foreign tax authorities. The Company’s estimate of the potential outcome of any uncertain tax issue is subject to management’s assessment of relevant risks, facts, and circumstances existing at that time, pursuant to the Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109.” FIN No. 48 requires a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. We record a liability for the difference between the benefit recognized and measured pursuant to FIN No. 48 and tax position taken or expected to be taken on our tax return. To the extent that the Company’s assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. The Company reports tax-related interest and penalties as a component of income tax expense.

As of March 2, 2008, the Company's working capital, including cash and cash equivalents, totaled $319.4 million, an increase of $5.1 million from working capital of $314.3 million as of November 30, 2007. Higher working capital resulted primarily from a decrease in accrued wages, employee benefits, and other current liabilities and an increase in cash, offset by a decrease in receivables. Cash and cash equivalents totaled $159.9 million as of March 2, 2008, compared to $155.4 million as of November 30, 2007.

For the three months ended March 2, 2008, net cash of $18.4 million was generated from operating activities, compared to $.5 million used in the similar period in 2007. The higher operating cash flow in 2008 was primarily due to higher earnings, excluding non-cash items and asset sales, and a net decrease in operating assets and liabilities. In the three months ended March 2, 2008, the Company's cash provided by operating activities included net income of $9.7 million, plus non-cash adjustments (depreciation, amortization, equity income from joint ventures in excess of dividends and stock compensation expense) of $4.2 million, plus changes in operating assets and liabilities of $4.4 million. In the three months ended February 25, 2007, the Company’s cash from operating activities included net income of $8.5 million, less similar non-cash adjustments of $1.5 million, and less changes in operating assets and liabilities of $7.5 million. The non-cash adjustments in 2008 were higher due primarily to higher stock compensation expense and lower equity in earnings of TAMCO. The positive change in operating assets and liabilities in 2008 was due to a decrease of receivables in 2008 and an increase of inventories in 2007.

Net cash used in investing activities totaled $11.3 million in three months ended March 2, 2008, compared to $9.5 million used in the three months ended February 25, 2007. Net cash used in investing activities during the first quarter of 2008 consisted of capital expenditures of $12.0 million, compared to $9.7 million in the same period of 2007. Capital expenditures were primarily for normal replacement and upgrades of machinery and equipment in both 2008 and 2007. Capital expenditures for both years also included the expansion of the Company’s steel fabrication plant in California to manufacture large-diameter wind towers. During the year ending November 30, 2008, the Company anticipates spending between $30 and $80 million on capital expenditures. Capital expenditures are expected to be funded by existing cash balances, cash generated from operations or additional borrowings.

Net cash used in financing activities totaled $5.6 million during the three months ended March 2, 2008, compared to $2.0 million used in the three months ended February 25, 2007. Net cash used in 2008 consisted of net repayment of debt of $2.6 million, payment of Common Stock dividends of $2.3 million and treasury stock purchases of $2.8 million, related to the payment of taxes associated with the vesting of restricted shares. Also in 2008, the Company received $.8 million from the issuance of Common Stock related to exercised stock options and recognized tax benefits related to stock-based compensation of $1.3 million. Net cash used in 2007 consisted of net repayment of debt of $1.4 million, payment of Common Stock dividends of $1.8 million and treasury stock purchases of $1.1 million. In 2007, the Company received $.4 million from the issuance of Common Stock related to exercised stock options and recognized tax benefits related to stock-based compensation of $2.0 million.

The Company utilizes a $100.0 million revolving credit facility with six banks (the "Revolver"). Under the Revolver, the Company may, at its option, borrow at floating interest rates (LIBOR plus a spread ranging from .75% to 1.625%, determined based on the Company’s financial condition and performance), at any time until September 2010, when all borrowings under the Revolver must be repaid.

The Company's lending agreements contain various restrictive covenants, including the requirement to maintain specified amounts of net worth and restrictions on cash dividends, borrowings, liens, investments, guarantees, and financial covenants. The Company is required to maintain consolidated net worth of $181.4 million plus 50% of net income and 75% of proceeds from any equity issued after January 24, 2003. The Company's consolidated net worth exceeded the covenant amount by $166.1 million as of March 2, 2008. The Company is required to maintain a consolidated leverage ratio of consolidated funded indebtedness to earnings before interest, taxes, depreciation and amortization ("EBITDA") of no more than 2.5 times. At March 2, 2008, the Company maintained a consolidated leverage ratio of .73 times EBITDA. Lending agreements require that the Company maintain qualified consolidated tangible assets at least equal to the outstanding secured funded indebtedness. At March 2, 2008, qualifying tangible assets equaled 2.72 times funded indebtedness. Under the most restrictive fixed charge coverage ratio, the sum of EBITDA and rental expense less cash taxes must be at least 1.5 times the sum of interest expense, rental expense, dividends and scheduled funded debt payments. At March 2, 2008, the Company maintained such a fixed charge coverage ratio of 3.69 times. Under the most restrictive provisions of the Company's lending agreements, approximately $38.1 million of retained earnings was not restricted, at March 2, 2008, as to the declaration of cash dividends or the repurchase of Company stock. At March 2, 2008, the Company was in compliance with all covenants.

Cash and cash equivalents at March 2, 2008 totaled $159.9 million, an increase of $4.4 million from November 30, 2007. At March 2, 2008, the Company had total debt outstanding of $73.6 million, compared to $74.6 million at November 30, 2007, and approximately $114.4 million in unused committed and uncommitted credit lines available from foreign and domestic banks. The Company's highest borrowing and the average borrowing levels during 2008 were $74.5 million and $73.9 million, respectively.

Management believes that cash flow from operations and current cash balances, together with currently available lines of credit, will be sufficient to meet operating requirements in 2008. Cash available from operations could be affected by any general economic downturn or any decline or adverse changes in the Company's business, such as a loss of customers or significant raw material price increases. Management does not currently believe it likely that business or economic conditions will worsen or that costs will increase sufficiently to impact short-term liquidity.

	Payments Due by Period
			Less than						After 5
Contractual Obligations	Total		1 year		1-3 years		3-5 years		years
Long-term debt (a)	$	73,604	$	17,320	$	25,946	$	7,320	$	23,018

Interest payments on debt (b)		10,634		2,578		4,017		1,701		2,338

Operating leases		39,017		4,513		8,623		4,206		21,675

Purchase obligations (c)		975		975		-		-		-

Uncertain tax positions		702		702		-		-		-

Total contractual obligations (d)	$	117,940	$	25,584	$	38,105	$	20,563	$	33,688

Income from continuing operations totaled $9.7 million, or $1.07 per diluted share, on sales of $149.8 million in the quarter ended March 2, 2008, compared to $8.3 million, or $.92 per diluted share, on sales of $120.4 million in the same period in 2007. Sales and income from continuing operations increased due to higher business activity and the longer period in 2008. The Fiberglass-Composite Pipe Group had higher sales and profits due to continued strength in all markets. The Infrastructure Products Group had lower sales and slightly lower profits due to the slow down in pole sales associated with residential construction. The Water Transmission Group had higher sales and continuing loses. Income from continuing operations was higher due primarily to the strong results of the Fiberglass-Composite Pipe Group and the Hawaiian division of the Infrastructure Products Group. Offsetting the increase in operating income was a $2.3 million reduction in equity in earnings of TAMCO, Ameron's 50%-owned steel mini-mill in California, in the first quarter of 2008, compared to the same period in 2007.

Fiberglass-Composite Pipe's sales increased $19.3 million, or 41.6%, in the first quarter of 2008, compared to the similar period in 2007. Sales from operations in the U.S. increased $3.6 million in the first quarter of 2008 primarily due to increased demand for onshore oilfield and industrial piping. Sales from the Asian subsidiaries increased $6.9 million in the first quarter of 2008, driven by activity in the industrial, marine and offshore segments and the impact of foreign exchange. Sales from European operations increased $4.0 million in the first quarter of 2008 due to growth in industrial, oilfield and marine markets and the impact of foreign exchange. The Brazilian business acquired in October 2007 contributed sales of $4.8 million. The strong demand for oilfield, industrial and marine piping continues to be driven by high oil prices and the high cost of steel piping, the principal substitute for fiberglass pipe. The outlook for the Fiberglass Composite Pipe Group remains favorable.

Water Transmission’s sales increased $11.4 million, or 38.5%, in the first quarter of 2008, compared to the similar period in 2007. The sales increase was driven by the Company’s entry into the market for large-diameter wind towers and operations in South America which benefited from increased demand for water pipe in Colombia. Sales of water pipe in the U.S. declined due to wet weather and soft market conditions. The demand for large-diameter water pipe in the western U.S. remained soft due to a cyclical lull in the water infrastructure market. The market for wind towers is expected to remain strong, while the water infrastructure market in the western U.S. region is expected to remain slow.

Infrastructure Products' sales decreased $2.0 million, or 4.3%, in the first quarter of 2008, compared to the similar period in 2007. The Company’s Hawaiian division had higher sales due to improved pricing and the continued strength of the governmental, commercial and resort/timeshare construction markets on Oahu and Maui. Pole Products was impacted by the decline in U.S. residential construction markets which resulted in a reduction in demand for concrete lighting poles. Sales of steel poles for highway and traffic applications also decreased due to weather and project timing. Although the housing market has softened, primarily impacting the demand for concrete poles, the outlook for the Infrastructure Products Group’s other construction markets remains firm.

Fiberglass-Composite Pipe Group's gross profit increased $9.8 million in the first quarter of 2008, compared to the similar period in 2007. Profit margins improved to 36.4% in 2008, compared to 30.5% in 2007. Higher margins resulted from improvements in product and market mix, prices and plant utilization. Increased sales volume and prices generated additional gross profit of $5.9 million, while favorable product mix and operating efficiencies generated additional gross profit of $3.9 million in 2008.

Water Transmission Group's gross profit decreased $2.0 million in the first quarter of 2008, compared to the similar period in 2007. The profit margin was negative 1.9% in 2008, compared to a profit margin of 4.0% in 2007. Higher sales volume increased profit by $.5 million in 2008. Lower margins negatively impacted gross profit by $2.5 million due to an unfavorable mix of projects, start-up costs associated with the introduction of wind towers and lower efficiencies due to lower pipe sales.

Selling, general and administrative ("SG&A") expenses totaled $25.8 million, or 17.2% of sales, in the first quarter of 2008, compared to $21.5 million, or 17.9% of sales, in the similar period of 2007. The $4.3 million increase included higher stock compensation expense of $1.4 million, $.9 million associated with the newly-acquired Brazilian operations and commissions and administrative expense of $2.0 million associated with higher sales. The reduction in SG&A as a percent of sales was due to spending controls and the leverage achieved from higher sales.

Other income was $3.0 million in the first quarter of 2008, compared to $1.0 million in the similar period of 2007. The increase in other income in 2008 was due primarily to dividend income received from the Company’s concrete pipe joint venture, Ameron Saudi Arabia, Ltd., of $1.5 million. Other income also included royalties and fees from licensees, foreign currency transaction losses and other miscellaneous income.

Income taxes increased to $3.9 million in the first quarter of 2008, from $1.9 million in the same period of 2007. The effective tax rate on income from continuing operations decreased to 36.0% in 2008, from 36.9% in 2007. The effective tax rate for the first quarter of 2008 is based on forecasted full-year earnings and the anticipated mix of domestic and foreign earnings. Income from certain foreign operations and joint ventures is taxed at rates that are lower than the U.S. statutory tax rates. The effective tax rate for the first quarter of 2008 is not necessarily indicative of the tax rate for the full year.

Equity in earnings of joint venture, which consists of the Company’s share of the net income of TAMCO, decreased to $2.8 million in the first quarter of 2008, compared to $5.0 million in the similar period of 2007. Equity income is shown net of income taxes. Dividends from TAMCO were taxed at an effective rate of 9.6% and 11.3%, respectively for the first quarter of 2008 and 2007, reflecting the dividend exclusion provided to the Company under current tax laws. The reduction in TAMCO’s earnings was due to higher production costs and increased raw material costs.

Evaluation of Disclosure Controls and Procedure – Management has established disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms and that such information relating to the Company, including its consolidated subsidiaries, is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Based on their evaluation as of March 2, 2008, the principal executive officer and principal financial officer of the Company have concluded that the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Any of the statements contained in this report that refer to the Company's forecasted, 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 the Company’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. 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.

The Company is one of numerous defendants in various asbestos-related personal injury lawsuits. These cases generally seek unspecified damages for asbestos-related diseases based on alleged exposure to products previously manufactured by the Company and others, and at this time the Company is generally not aware of the extent of injuries allegedly suffered by the individuals or the facts supporting the claim that injuries were caused by the Company's products. Based upon the information available to it at this time, the Company is not in a position to evaluate its potential exposure, if any, as a result of such claims. Hence, no amounts have been accrued for loss contingencies related to these lawsuits in accordance with SFAS No. 5, "Accounting for Contingencies." The Company continues to vigorously defend all such lawsuits. As of March 2, 2008, the Company was a defendant in asbestos-related cases involving 25 claimants, compared to 60 claimants as of November 30, 2007. The Company is not in a position to estimate the number of additional claims that may be filed against it in the future. For the quarter ended March 2, 2008, there were new claims involving three claimants, dismissals and/or settlements involving 38 claimants and no judgments. No net costs or expenses were incurred by the Company for the quarter ended March 2, 2008 in connection with asbestos-related claims.

(c)

(d)

Number of Shares

Maximum Number (or

(a)

(b)

(or Units) Purchased

Approximate Dollar Value)

Total Number of

Average Price

As Part of Publicly

Of Shares (or Units) that May

Shares (or Units)

Paid per

Announced Plans or

Yet Be Purchased Under

Period

Purchased

Share (or Unit)

Programs

The Plans or Programs**

12/1/07 thru 12/30/07

57,050

12/31/07 thru 2/3/08

19,628

97.17

39,741

2/4/08 thru 3/2/08

3,724

99.71

35,896

Delaware	77-0100596
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Large accelerated filer _		Accelerated filer X
Non-accelerated filer _		Smaller reporting company _

PART I – FINANCIAL INFORMATION
ITEM 1 – FINANCIAL STATEMENTS		3
ITEM 2 – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		18
ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		25
ITEM 4 – CONTROLS AND PROCEDURES		25
PART II – OTHER INFORMATION
ITEM 1 – LEGAL PROCEEDINGS		26
ITEM 1A – RISK FACTORS		26
ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		26
ITEM 4 – SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS		26
ITEM 5 – OTHER INFORMATION		27
ITEM 6 – EXHIBITS		27

	March 2,			November 30,
(In thousands)	2008			2007
Trade	$	145,947		$	156,562
Joint ventures		3,207			2,714
Other		27,309			32,294
Allowances		(6,699	)		(6,235	)
	$	169,764		$	185,335

	March 2,		November 30,
(In thousands)	2008		2007
Finished products	$	40,981	$	41,580
Materials and supplies		27,274		28,246
Products in process		30,526		27,891
	$	98,781	$	97,717

			Foreign
			Currency
	November 30,		Translation		March 2,
(In thousands)	2007		Adjustments		2008
Fiberglass-Composite Pipe	$	1,440	$	-	$	1,440
Water Transmission		392		3		395
Infrastructure Products		201		-		201
	$	2,033	$	3	$	2,036

	March 2, 2008					November 30, 2007
	Gross Intangible		Accumulated			Gross Intangible		Accumulated
(In thousands)	Assets		Amortization			Assets		Amortization
Trademarks	$	113	$	(103	)	$	113	$	(101	)
Non-compete agreements		299		(170	)		299		(163	)
Patents		212		(212	)		212		(212	)
Other		90		(51	)		79		(17	)
	$	714	$	(536	)	$	703	$	(493	)


	Fair Value Measurements Using						Assets/Liabilities
(In thousands)	Level 1		Level 2		Level 3		At Fair Value
Assets
Derivative assets	$	-	$	107	$	-	$	107
Total assets	$	-	$	107	$	-	$	107

	Commitments Expiring Per Period
			Less than						After
Contractual Commitments	Total		1 year		1-3 years		3-5 years		5 years
Standby letters of credit (e)	$	2,100	$	2,100	$	-	$	-	$	-

Total commercial commitments (d)	$	2,100	$	2,100	$	-	$	-	$	-

EXHIBIT	EXHIBITS OF AMERON
31.1	Section 302 Certification of Chief Executive Officer
31.2	Section 302 Certification of Chief Financial Officer
32	Section 906 Certification of Chief Executive Officer and Chief Financial Officer*

By:	/s/ James R. McLaughlin
	James R. McLaughlin, Senior Vice President, Chief Financial Officer & Treasurer