-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, cvk5QrgDteYlKf3k7yt51lEPD8x1dbr55/bgZf4teQLpnKkEUlJAqgZZ9uCxzFg7 M1lPjpAmrJO4EDvsFHhRwA== 0000790730-94-000007.txt : 19940722 0000790730-94-000007.hdr.sgml : 19940722 ACCESSION NUMBER: 0000790730-94-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940531 FILED AS OF DATE: 19940714 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERON INC/DE CENTRAL INDEX KEY: 0000790730 STANDARD INDUSTRIAL CLASSIFICATION: 3272 IRS NUMBER: 770100596 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09102 FILM NUMBER: 94538792 BUSINESS ADDRESS: STREET 1: 245 SOUTH LOS ROBLES AVENUE CITY: PASADENA STATE: CA ZIP: 91101 BUSINESS PHONE: 8186834000 10-Q 1 2ND QTR. REPORT 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 May 31, 1994 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, INC. (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 91101-2894 (Address of principal executive offices) Telephone Number (818) 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 3,925,297 on June 30, 1994. No other class of Common Stock exists. PAGE 1 AMERON, INC. INDEX Page ------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Statements of Operations 3 Consolidated Balance Sheets 4 Consolidated Statements of Cash Flows 5 Notes to Consolidated Financial Statements 6-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-11 PART II. OTHER INFORMATION Item 2. Changes in Securities 12 Item 4. Submission of Matters to a Vote of Security Holders 12 Item 6. Exhibits and Reports on Form 8-K 12 PAGE 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements Ameron, Inc. and Subsidiaries Consolidated Statements of Operations (In thousands, except share and per share data) Three Months Ended Six Months Ended May 31 May 31 ------------------- ------------------ 1994 1993 1994 1993 -------- -------- -------- -------- Sales $100,612 $121,633 $193,942 $218,087 Cost of Goods Sold 73,609 87,156 143,773 156,608 -------- -------- -------- -------- Gross Profit 27,003 34,477 50,169 61,479 Selling, General and Administrative Expenses 21,356 27,759 44,084 54,286 Other Income 2,374 2,064 4,772 3,865 -------- -------- -------- -------- Operating Profit 8,021 8,782 10,857 11,058 Interest Expense 2,799 3,167 5,486 5,932 -------- -------- -------- -------- Income before Income Taxes 5,222 5,615 5,371 5,126 Provision for Income Taxes 2,088 2,078 2,148 1,897 -------- -------- -------- -------- Income of Consolidated Companies 3,134 3,537 3,223 3,229 Equity in Earnings of Affiliated Companies, net of tax - 457 - 1,548 -------- -------- -------- -------- Net Income $ 3,134 $ 3,994 $ 3,223 $ 4,777 ======== ======== ======== ======== Net Income per Share $ 0.80 $ 1.04 $ 0.82 $ 1.24 ======== ======== ======== ======== Cash Dividends per Share $ 0.32 $ 0.32 $ 0.64 $ 0.64 ======== ======== ======== ======== Average Common and Equivalent Shares Outstanding 3,921,334 3,859,962 3,921,334 3,859,962 ========= ========= ========= ========= See accompanying notes to financial statements. PAGE 3 Ameron, Inc. and Subsidiaries Consolidated Balance Sheets (In thousands except share and per share data) May 31 Nov. 30 1994 1993 -------- -------- ASSETS Current Assets Cash and cash equivalents $ 9,110 $ 15,738 Receivables, net 82,590 77,572 Inventories 67,815 61,661 Deferred income tax benefits 13,991 13,586 Prepaid expenses 7,422 8,590 -------- -------- Total current assets 180,928 177,147 Investments, Advances and Equity in Undistributed Earnings of Affiliated Companies 38,511 39,984 Property, Plant and Equipment, net 110,903 113,199 Other Assets 8,343 7,512 -------- -------- Total Assets $338,685 $337,842 ======== ======== LIABILITIES and STOCKHOLDERS' EQUITY Current Liabilities Short-term borrowings $ 3,091 $ 2,021 Current portion of long-term debt 5,811 5,978 Trade payables 26,733 25,309 Accrued liabilities 33,509 38,919 Reserve for contingencies 11,474 13,083 Income taxes 4,519 5,847 -------- -------- Total current liabilities 85,137 91,157 Deferred Income Taxes 10,156 15,605 Long-term Debt, less current portion 90,730 89,590 Other Long-term Liabilities 34,714 25,976 -------- -------- Total liabilities 220,737 222,328 Stockholders' Equity Common stock, par value $2.50 a share, Authorized, 12,000,000 shares, Outstanding, 3,920,786 shares at May 31, 1994 and 3,886,465 shares at November 30, 1993, net of treasury shares 12,734 12,648 Additional paid-in capital 14,156 13,414 Retained earnings 134,535 133,812 Cumulative foreign currency translation adjustment 22 (861) Minimum pension liability adjustment (720) (720) Treasury stock (1,172,900 shares), at cost (42,779) (42,779) -------- -------- Total stockholders' equity 117,948 115,514 -------- -------- Total Liabilities and Stockholders' Equity $338,685 $337,842 ======== ======== See accompanying notes to financial statements PAGE 4 Ameron, Inc. and Subsidiaries Consolidated Statements of Cash Flows (In thousands) Six Months Ended May 31 1994 1993 -------- -------- Cash Flow from Operating Activities Net income $ 3,223 $ 4,777 Adjustments to reconcile to net cash provided by (used in) operating activities: Depreciation 7,861 8,318 Equity in earnings of affiliated companies - (1,548) Dividends from affiliated companies 961 2,518 Other, net (171) 701 Changes in operating assets and liabilities: Change in receivables (5,040) (1,130) Change in inventories (6,264) (11,194) Change in other current assets 1,146 2,217 Change in trade payables and other current liabilities (2,193) (4,203) -------- -------- Net cash provided by (used in) operating activities (477) 456 Cash Flow from Investing Activities Proceeds from sale of assets 1,151 1,093 Additions to property, plant and equipment (5,666) (5,801) Other (1,679) (64) -------- -------- Net cash used in investing activities (6,194) (4,772) Cash Flow from Financing Activities Net change in debt with maturities of three months or less 2,608 1,708 Repayment of debt (526) (5,388) Dividends to common stockholders (2,500) (2,465) Issuance of common stock 397 - -------- -------- Net cash used in financing activities (21) (6,145) Effect of Exchange Rate Changes on Cash and Equivalents 64 (187) -------- -------- Net Change in Cash and Equivalents (6,628) (10,648) Beginning Cash and Equivalents Balance 15,738 26,447 -------- -------- Ending Cash and Equivalents Balance $ 9,110 $ 15,799 ======== ======== Other Cash Flow Information: Interest paid $ 4,894 $ 5,431 ======== ======== Income taxes paid $ 3,347 $ 1,186 ======== ======== See accompanying notes to financial statements PAGE 5 Ameron, Inc. and Subsidiaries Notes to Consolidated Financial Statements May 31, 1994 Note 1. Basis Of Presentation The consolidated financial statements for the interim periods included herein are unaudited, however, they contain all normal recurring accruals which, in the opinion of management, are necessary to present fairly the consolidated financial position of the Company at May 31, 1994 and the consolidated results of operations for the three- and six-month periods ended May 31, 1994 and 1993, and cash flows for the six-month periods ended May 31, 1994 and 1993. Accounting measurements at interim dates inherently involve greater reliance on estimates than at year end, thus the results of operations for the period presented, are not necessarily indicative of the results to be expected for the full year. Certain prior year balances have been reclassified to conform with the current year presentation. The accompanying consolidated financial statements do not include footnotes and certain financial presentations normally required under generally accepted accounting principles and, therefore, should be read in conjunction with the Annual Report on Form 10-K for the year ended November 30, 1993. Note 2. Inventories Inventories are stated at the lower of cost (principally first-in, first-out) or market. Inventories at May 31, 1994 and November 30, 1993 were comprised of the following (in thousands): May 31 Nov. 30 1994 1993 -------- -------- Finished products $ 36,515 $ 34,124 Products in process 13,684 11,689 Materials and supplies 17,616 15,848 -------- -------- Total Inventories $ 67,815 $ 61,661 ======== ======== PAGE 6 Note 3. Affiliated Companies Summarized operating results of affiliated companies in the Concrete and Steel Pipe Products segment follow, U.S. dollars in thousands: Three Months Ended Six Months Ended May 31 May 31 ------------------- ------------------- 1994 1993 1994 1993 -------- -------- -------- -------- Net Sales $ 19,905 $ 21,309 $ 41,917 $ 38,635 Gross Profit $ 4,822 $ 5,391 $ 11,820 $ 10,063 Net Income $ 1,074 $ 2,206 $ 2,667 $ 4,050 Equity in earnings of affiliated companies is recorded in the Company's net income partly on a lag basis, net of taxes and net of reserves for amounts that management anticipates will not be distributed to the company. Amounts shown above represent operating results for Gifford-Hill-American, Inc. for the three- and six-month periods ended April 30, 1994 and 1993 and operating results for Ameron Saudi Arabia, Ltd. for the three- and six-month periods ended March 31, 1994 and 1993. Summarized results of operations of Tamco, Bondstrand, Ltd., and Oasis Ameron, Ltd. follow, U.S. dollars in thousands: Three Months Ended Six Months Ended May 31 May 31 ------------------- ------------------- 1994 1993 1994 1993 -------- -------- -------- -------- Net Sales $ 28,533 $ 27,408 $ 59,400 $ 49,489 Gross Profit $ 1,644 $ 3,163 $ 2,141 $ 7,327 Net Income (Loss) $ (89) $ 1,477 $ (1,081) $ 3,699 Amounts shown above include operating results for Tamco for the three- and six-month periods stated, and operating results for Bondstrand, Ltd. and Oasis Ameron, Ltd. for the three- and six-month periods ended March 31, 1994 and 1993. PAGE 7 Note 4. Income Taxes Effective December 1, 1993, the Company adopted FAS 109 "Accounting for Income Taxes." This standard requires the use of the asset and liability approach for financial accounting and reporting of income taxes. The effect of this accounting change did not have a material effect on the accompanying financial statements. The deferred tax assets and deferred tax liabilities recorded on the balance sheet as of May 31, 1994 are as follows, U.S. dollars in thousands: Non- Current Current -------- -------- Deferred Tax Assets Self-insurance and contingency reserves $ 2,032 $ 6,547 Employee benefits 4,687 3,577 Accounts receivable 3,065 - Investments 831 - Inventory 2,971 - Miscellaneous 405 655 Alternative minimum tax credits - 2,206 Valuation allowance - (633) -------- -------- Total Deferred Tax Asset $ 13,991 $ 12,352 ======== ======== Deferred Tax Liabilities Investments $ - $ 4,256 Fixed Assets - 18,252 -------- -------- Total Deferred Tax Liability $ - $ 22,508 ======== ======== PAGE 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Ameron, Inc. and Subsidiaries May 31, 1994 INTRODUCTION Management's Discussion and Analysis should be read in conjunction with the same discussion included in the Company's 1993 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 operations and cash flows. RESULTS OF OPERATIONS - SECOND QUARTER 1994 Ameron earned 80 cents per share on sales of $100.6 million for the second quarter of 1994. This compares to earnings per share of $1.04 on sales of $121.6 million for the prior year period. It is important to note that 1993 results included equity in earnings of affiliated companies and significant income from large fiberglass pipe projects in North Africa that ended in the fourth quarter of last year. Also, as was disclosed in the company's first quarter report, management is now taking a more conservative approach to recording equity in earnings of affiliated companies than in past years, recognizing income only to the extent that cash dividends are anticipated. Excluding 1993 equity in earnings of affiliates and profits for the completed North African projects, overall base-business results from the Company's four core business segments improved substantially in 1994. This indicates that the restructuring actions taken by management in the fourth quarter of 1993 are continuing to have a positive effect on Ameron's operations. The actions were the primary reason that selling, general and administrative expenses declined to $21.4 million in the second quarter of 1994 from $27.8 million during the prior year period. The Company's worldwide protective coatings business posted improved sales and earnings for the second quarter, mainly as a result of stronger sales in the U.S. due to the improved economy. Sales for the second quarter in Europe were down slightly because of the weaker European economy, but earnings improved due to the Company's restructuring actions. In early May, the Company officially introduced its new PSX line of patented Engineered Siloxane, high-performance coatings at the Offshore Technology Conference in Houston. These products are expected to enhance the Company's global competitive position. Compared to the same period last year, worldwide fiberglass pipe sales and earnings were down significantly this year because a substantial part of last year's results were from the major North African projects described earlier. The soft economy in Europe also continued to inhibit sales growth. Page 9 Unexpected delays of two major pipeline projects in Southern California impacted sales and earnings for concrete and steel pipe operations in the second quarter, and unseasonably inclement weather hampered pipe installations at various job sites. Backlog continued to increase during the quarter with the acquisition of two major contracts totaling over $27 million. Despite labor unrest in the Hawaiian Islands throughout the quarter, as well as extremely heavy rains in March that delayed quarrying and concrete deliveries, the construction products business still achieved improved earnings for the quarter as compared to the prior year period. The improved performance is particularly noteworthy given the ongoing slow down of privately-funded construction in the Islands. Work continues, however, on several large, publicly-funded projects, including an interstate highway and the new Honolulu International Airport. Several more major public projects are scheduled to bid in the near future. The Company's pole products business reported its second straight quarter of improved sales and earnings as compared to 1993 due to higher demand for concrete poles in the western states and increases in steel pole shipments. RESULTS OF OPERATIONS - YEAR TO DATE Earnings per share for the six months ending May 31, 1994 were 82 cents on sales of $193.9 million versus earnings of $1.24 per share on sales of $218.1 million during the same period last year. As was the case in the second quarter, year-to-date results last year included substantial equity in earnings from affiliated companies and significant sales and income from the North African fiberglass pipe projects. Before considering these two items, earnings from Ameron's base-business operations during the first half exceeded that of the same period last year. The improvement in first-half results over 1993 is significant given the fact that the winter of 1993-1994 was the most severe of the century in many of Ameron's markets. The main reason for the change was the positive impact of the restructuring actions taken by management in the fourth quarter of 1993. These actions were the primary reason that selling, general and administrative expenses declined to $44.1 million in the first half of 1994 from $54.3 million during the same period last year. Overall earnings from Ameron's worldwide protective coatings operations improved over the prior year period due to the restructuring and higher domestic sales. However, European sales were lower because of sluggish economic conditions. First-half sales and earnings from the Company's worldwide fiberglass pipe business were down from the same period in 1993. Last year's results included significant shipments to two projects in North Africa. Sales and income from domestic operations rose this year as compared to 1993 due to increased export shipments and improved deliveries of fuel-handling systems. European results unrelated to the North African projects were down slightly compared to last year due to the soft economy. Sales and earnings in Asian markets were also lower as compared to the prior year period. Page 10 Concrete and steel pipe operations reported lower first-half results as compared to 1993 due mainly to lengthy delays on several large projects. Deliveries on these projects are expected to begin later this year. Sales of construction products in Hawaii for the first half of the year were slightly lower than last year, but earnings were improved due to the restructuring and a favorable product mix. The pole products business posted higher sales and earnings during the six-month period as compared to 1993 due to increased deliveries of concrete poles to west coast markets and improved steel pole shipments. Higher earnings were also attributable to the restructuring. LIQUIDITY AND CAPITAL RESOURCES At May 31, 1994, cash and cash equivalents were $9.1 million, $6.6 million lower than the balance at November 30, 1993. Approximately $.5 million of cash was used in operating activities mainly as a result of an increase in working capital partially offset by earnings before depreciation expense, and dividends from affiliated companies. Receivables increased domestically and inventories rose in anticipation of a seasonal increase in sales. Investing activities included capital expenditures for enhancements to a large diameter welded steel pipe facility. Remaining expenditures were primarily for replacement of machinery and equipment and refurbishment of existing facilities. During the fiscal year ending November 30, 1994, the Company anticipates spending between $12 and $15 million for capital expenditures, which will be funded from existing cash balances and cash generated from operations. Proceeds from the sale of assets consists mainly of funds received from the sale of one of the Company's smaller joint ventures in the Middle East. At May 31, 1994, the Company had approximately $70 million in unused credit lines available from foreign and domestic banks. The Company believes that cash and cash equivalents on hand, anticipated cash flows from operations and funds available from existing lines of credit will be sufficient to meet its future operating requirements. Page 11 Part II. OTHER INFORMATION Item 2. Changes in Securities Terms of lending agreements place restrictions on cash dividends, borrowings, investments and guarantees and require maintenance of specified minimum working capital and certain current ratios. Under the most restrictive provisions of these agreements, approximately $6.3 million of consolidated retained earnings was not restricted at May 31, 1994. Item 4. Submission of Matters to a Vote of Security Holders The Company's Annual Meeting of Stockholders was held on March 28, 1994. Represented at the meeting, in person or by proxy, were 3,357,135 shares of common stock (83.0% of the total shares outstanding). Stockholders voted on the following matters at this meeting: Election of Directors: The four nominees named in the Company's proxy statement, Messrs. John F. King, James S. Marlen, William I. McKay and Richard J. Pearson were re-elected to serve for another term, each receiving not less than 3,205,638 votes. Other continuing directors are: Donald H. Albrect, Victor K. Atkins, Lawrence R. Tollenaere, Robert Toxe and F. H. Fentener van Vlissingen. Proposal to Ratify Appointment of Independent Public Accountants: 3,206,133 (99.2%) of the shares represented at the meeting were voted in favor of the approval of the proposal to ratify the appointment of Arthur Andersen & Co. as independent public accountants of the Company for fiscal year 1994 and 6,048 shares were voted against the proposal. 20,440 shares of the votes cast abstained from voting on this matter. Item 6. Exhibits and Reports on Form 8-K No reports on Form 8-K were filed during the three months ended May 31, 1994. 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, INC. Date: July 14, 1994 /s/ Allen R. Wilkie _______________________________ Allen R. Wilkie Vice President, Controller PAGE 12 -----END PRIVACY-ENHANCED MESSAGE-----