-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FCwG7eyAX28wIvdDCWyqk8tvF0slah+e179SkWMia0TJloNxz7uVXaGLFyuPCo9N BOVwJ/2YD6TDpQL2pp0G4Q== 0000790730-98-000022.txt : 19981015 0000790730-98-000022.hdr.sgml : 19981015 ACCESSION NUMBER: 0000790730-98-000022 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980831 FILED AS OF DATE: 19981014 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERON INTERNATIONAL CORP CENTRAL INDEX KEY: 0000790730 STANDARD INDUSTRIAL CLASSIFICATION: CONCRETE GYPSUM PLASTER PRODUCTS [3270] IRS NUMBER: 770100596 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09102 FILM NUMBER: 98725353 BUSINESS ADDRESS: STREET 1: 245 S LOS ROBLES AVE CITY: PASADENA STATE: CA ZIP: 91101 BUSINESS PHONE: 6266834000 MAIL ADDRESS: STREET 1: 245 S LOS ROBLES AVE CITY: PASADENA STATE: CA ZIP: 91101 FORMER COMPANY: FORMER CONFORMED NAME: AMERON INC/DE DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 / X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended August 31, 1998 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from...............to.................. Commission File No. 1 - 9102 AMERON INTERNATIONAL CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 77-0100596 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 245 South Los Robles Avenue Pasadena, California 91101-2820 (Address of principal executive offices) Telephone Number (626) 683-4000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes / X / No The number of shares outstanding of Common Stock, $2.50 par value, was 4,030,112 on September 30, 1998. No other class of Common Stock exists. Page 1 AMERON INTERNATIONAL CORPORATION INDEX Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Statements of Income 3 Consolidated Balance Sheets 4 Consolidated Statements of Cash Flows 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 PART II. OTHER INFORMATION Item 2. Changes in Securities 13 Item 6. Exhibits and Reports on Form 8-K 13 SIGNATURE PAGE 14 Page 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements Ameron International Corporation and Subsidiaries Consolidated Statements of Income (In thousands, except share and per share data) Three Months Ended Nine Months Ended August 31, August 31, ------------------ ------------------ 1998 1997 1998 1997 -------- -------- -------- -------- Net Sales $155,707 $146,323 $395,207 $386,109 Cost of Sales 117,565 107,833 296,537 284,728 -------- -------- -------- -------- Gross Profit 38,142 38,490 98,670 101,381 Selling, General and Administrative Expenses 26,276 27,375 80,920 80,107 -------- -------- -------- -------- Operating Profit 11,866 11,115 17,750 21,274 Royalty, Equity and Other Income 2,899 3,128 8,362 8,073 -------- -------- -------- -------- Income before Interest and Income Taxes 14,765 14,243 26,112 29,347 Interest Income 149 36 321 191 Interest Expense 5,409 3,432 11,467 9,141 -------- -------- -------- -------- Income before Income Taxes 9,505 10,847 14,966 20,397 Provision for Income Taxes 3,327 3,797 5,238 7,139 -------- -------- -------- -------- Net Income $ 6,178 $ 7,050 $ 9,728 $ 13,258 ======== ======== ======== ======== Basic Net Income per Share $ 1.54 $ 1.76 $ 2.42 $ 3.31 ======== ======== ======== ======== Diluted Net Income per Share $ 1.51 $ 1.72 $ 2.37 $ 3.25 ======== ======== ======== ======== Weighted Average Common Shares Outstanding 4,012,875 4,002,830 4,012,875 4,002,830 ========= ========= ========= ========= Diluted Common Shares Outstanding 4,098,610 4,082,831 4,098,610 4,082,831 ========= ========= ========= ========= Cash Dividends per Share $ .32 $ .32 $ .96 $ .96 ======== ======== ======== ======== See accompanying notes to financial statements. Page 3 Ameron International Corporation and Subsidiaries Consolidated Balance Sheets (In thousands except share and per share data) Aug. 31, Nov. 30, 1998 1997 -------- -------- ASSETS Current Assets Cash and Cash Equivalents $ 10,149 $ 9,848 Receivables, Net 138,079 122,352 Inventories 124,166 95,752 Deferred Income Tax Benefits 7,568 9,083 Prepaid Expenses and Other 4,309 4,257 -------- -------- Total Current Assets 284,271 241,292 Investments, Advances and Equity in Undistributed Earnings of Affiliated Companies 33,689 33,777 Property, Plant and Equipment, Net 160,773 127,678 Other Assets 28,715 30,478 -------- -------- Total Assets $507,448 $433,225 ======== ======== LIABILITIES and STOCKHOLDERS' EQUITY Current Liabilities Short-Term Borrowings $ 3,949 $ 715 Current Portion of Long-Term Debt 17,654 17,654 Trade Payables 36,983 31,988 Accrued Liabilities 39,554 32,561 Income Taxes 9,308 4,347 -------- -------- Total Current Liabilities 107,448 87,265 Deferred Income Taxes 2,868 2,907 Long-Term Debt, Less Current Portion 205,373 140,917 Other Long-Term Liabilities 37,577 49,154 -------- -------- Total Liabilities 353,266 280,243 Stockholders' Equity Common Stock, Par Value $2.50 a Share, Authorized, 12,000,000 Shares, Outstanding, 4,030,112 Shares at August 31, 1998 and 4,005,487 Shares at November 30, 1997, Net of Treasury Shares 13,007 12,946 Additional Paid-In Capital 17,828 16,969 Retained Earnings 177,446 171,569 Accumulated Other Comprehensive Loss (11,320) (5,723) Treasury Stock (1,172,900 shares), at Cost (42,779) (42,779) -------- -------- Total Stockholders' Equity 154,182 152,982 -------- -------- Total Liabilities and Stockholders' Equity $507,448 $433,225 ======== ======== See accompanying notes to financial statements Page 4 Ameron International Corporation and Subsidiaries Consolidated Statements of Cash Flows (In thousands) Nine Months Ended Aug. 31, ------------------- 1998 1997 -------- -------- Cash Flow from Operating Activities Net Income $ 9,728 $ 13,258 Adjustments to Reconcile to Net Cash Provided by (Used in) Operating Activities: Depreciation 12,931 11,884 Amortization 883 199 Equity in Earnings of Affiliated Companies (4,367) (2,749) Dividends from Affiliated Companies 4,453 2,787 Other, Net (103) 1,493 Changes in Operating Assets and Liabilities: Change in Receivables (15,205) (12,497) Change in Inventories (13,626) (24,545) Change in Other Current Assets 2,055 (391) Change in Trade Payables and Other Current Liabilities 16,180 (5,200) Change in Other Assets and Liabilities, Net (9,597) (872) -------- -------- Net Cash Provided by (Used in) Operating Activities 3,332 (16,633) Cash Flow from Investing Activities Proceeds from Sale of Assets 732 532 Additions to Property, Plant and Equipment, and Acquisitions (64,797) (17,607) Other (1,065) (2,277) -------- -------- Net Cash Used in Investing Activities (65,130) (19,352) Cash Flow from Financing Activities Net Change in Debt with Maturities of Three Months or Less 3,176 128 Issuance of Debt 64,116 51,653 Repayment of Debt (1,892) (7,705) Dividends to Common Stockholders (3,851) (3,843) Issuance of Common Stock 920 667 -------- -------- Net Cash Provided by Financing Activities 62,469 40,900 Effect of Exchange Rate Changes on Cash and Cash Equivalents (370) (794) -------- -------- Net Change in Cash and Cash Equivalents 301 4,121 Beginning Cash and Cash Equivalents Balance 9,848 18,381 -------- -------- Ending Cash and Cash Equivalents Balance $ 10,149 $ 22,502 ======== ======== See accompanying notes to financial statements Page 5 Ameron International Corporation and Subsidiaries Notes to Consolidated Financial Statements (In thousands except share and per share data) August 31, 1998 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 August 31, 1998, and the consolidated statements of income for the three- and nine-month periods ended August 31, 1998 and 1997, and cash flows for the nine-month periods ended August 31, 1998 and 1997. Accounting measurements at interim dates inherently involve greater reliance on estimates than at year end, thus the results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. 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, 1997. Note 2. Inventories Inventories are stated at the lower of cost (principally first-in, first-out)or market. Inventories at August 31, 1998 and November 30, 1997 were comprised of the following: Aug. 31, Nov. 30, 1998 1997 -------- -------- Finished Products $ 75,732 $ 56,989 Products in Process 25,869 18,791 Materials and Supplies 22,565 19,972 -------- -------- Total Inventories $124,166 $ 95,752 ======== ======== Note 3. Other Cash Flow Information: Nine Months Ended Aug. 31, ------------------- 1998 1997 -------- -------- Interest Paid $ 8,836 $ 6,703 Income Taxes Paid $ 2,893 $ 10,694 Page 6 Note 4. Unconsolidated Affiliated Companies Summarized operating results of affiliated companies in the Concrete and Steel Pipe Products segment follow: Three Months Ended Nine Months Ended Aug. 31, Aug. 31, ------------------- ------------------- 1998 1997 1998 1997 -------- -------- -------- -------- Net Sales $ 8,857 $ 18,104 $ 47,855 $ 36,087 Gross Profit $ 934 $ 3,679 $ 10,562 $ 6,508 Net Income/(Loss) $ (1,115) $ 428 $ 1,211 $ (1,221) Amounts shown above represent operating results for Gifford-Hill-American, Inc. for the three- and nine-month periods ended August 31, 1998 and 1997 and operating results for Ameron Saudi Arabia, Ltd. for the three- and nine-month periods ended June 30, 1998 and 1997. Summarized results of operations of Tamco, Bondstrand, Ltd., and Oasis Ameron, Ltd. follow: Three Months Ended Nine Months Ended Aug. 31, Aug. 31, ------------------- ------------------- 1998 1997 1998 1997 -------- -------- -------- -------- Net Sales $ 47,691 $ 49,509 $127,560 $127,587 Gross Profit $ 11,187 $ 8,568 $ 29,098 $ 22,464 Net Income $ 4,702 $ 3,286 $ 11,424 $ 7,832 Amounts shown above include operating results for Tamco for the three- and nine- month periods ended August 31, 1998 and 1997 and operating results for Bondstrand, Ltd. and Oasis Ameron, Ltd. for the three- and nine-month periods ended June 30, 1998 and 1997. Page 7 Note 5. Comprehensive Income The Company adopted Statement of Financial Accounting Standards No. 130 (SFAS 130), "Reporting Comprehensive Income" in the first quarter of fiscal year 1998. The Company recognized unrealized foreign currency translation losses of $2,650 and $2,845 for the three months ended August 31, 1998 and 1997, and losses of $5,597 and $6,650 for the nine months ended August 31, 1998 and 1997, respectively. Note 6. Earnings Per Share The Company adopted Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings per Share" in the first quarter of fiscal year 1998. As a result, the Company's reported earnings per share for 1997 were restated. Earnings per share are calculated as follow: Three Months Ended Nine Months Ended Aug. 31, Aug. 31, ------------------ ------------------ 1998 1997 1998 1997 -------- -------- -------- -------- Income Available to Common Stockholders $ 6,178 $ 7,050 $ 9,728 $ 13,258 -------- -------- -------- -------- Weighted Average Common Shares Outstanding 4,012,875 4,002,830 4,012,875 4,002,830 Options Issued to Employees & Directors Outstanding 85,735 80,001 85,735 80,001 Diluted Common Shares Outstanding 4,098,610 4,082,831 4,098,610 4,082,831 Basic Net Income per Share $ 1.54 $ 1.76 $ 2.42 $ 3.31 ======== ======== ======== ======== Diluted Net Income per Share $ 1.51 $ 1.72 $ 2.37 $ 3.25 ======== ======== ======== ======== Page 8 Note 7. Debt At August 31, 1998 and November 30, 1997, the Company's long-term debt consists of the following: Aug. 31, Nov. 30, 1998 1997 -------- -------- Fixed-rate unsecured notes payable: 8.63% payable in annual principal installments of $5,000 $ 5,000 $ 5,000 9.79% payable in annual principal installments of $12,000 36,000 36,000 7.92% payable in annual principal installments of $8,333, commencing in 2001 50,000 50,000 Variable-rate Industrial Development Bonds, Payable in 2016 (3.35% at August 31, 1998) 7,200 7,200 Variable-rate unsecured bank revolving credit facilities (approximately 6.33% at August 31, 1998) 122,374 57,429 Variable-rate unsecured bank loan, payable by a consolidated subsidiary in Dutch guilders, with annual principal installments of approximately $654 (4.39% at August 31, 1998) 2,453 2,942 -------- -------- Total Long-Term Debt 223,027 158,571 Current portion 17,654 17,654 -------- -------- Long-Term Debt, Less Current Portion $205,373 $140,917 ======== ======== Note 8. Acquisition On April 9, the Company acquired for cash totaling approximately $45,000 the worldwide industrial coatings business of United Kingdom-based Croda International Plc ("Croda Coatings"). The acquisition was accounted for as a purchase and its results of operations were included in the Company's consolidated financial statements from the date of acquisition in the second quarter of fiscal 1998. The Croda Coatings' impact on earnings was immaterial for the third quarter of fiscal 1998. On April 20, the Company acquired for cash the fiberglass pipe and fittings business of Hope Composites 2000, Inc. ("Hope"), a privately-owned company based in Atlanta, Georgia. The acquisition was accounted for as a purchase and its results of operations were included in the Company's consolidated financial statements from the date of acquisition in the second quarter of fiscal 1998. The Hope's impact on earnings was immaterial for the third quarter of fiscal 1998. Page 9 PART I. FINANCIAL INFORMATION Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations Ameron International Corporation and Subsidiaries August 31, 1998 INTRODUCTION Management's Discussion and Analysis should be read in conjunction with the same discussion included in the Company's 1997 Annual Report on Form 10-K. Reference should also be made to the financial statements included in this Form 10-Q for comparative consolidated balance sheets and statements of income and cash flows. LIQUIDITY AND CAPITAL RESOURCES During the nine-month period ended August 31, 1998, the Company generated $3.3 million of cash from operating activities compared to $16.6 million of cash used during the nine-month period ended August 31, 1997. Working capital increased during 1998 because of higher inventory levels and receivables caused by the Croda Coatings acquisition and the seasonal demands of the Concrete and Steel Pipe and Protective Coatings businesses. Cash used in investing activities consisted of business acquisitions and capital expenditures for normal replacement and upgrades of machinery and equipment. Management estimates that capital expenditures during this fiscal year will be between $30.0 million and $35.0 million. Capital expenditures will be funded from existing cash balances, cash generated from operations and existing lines of credit. Additional net borrowings of $65.4 million plus $0.9 million from the issuance of common stock were used for the business acquisitions, capital expenditures, increased working capital requirements and payment of common dividends of $3.9 million. Cash and cash equivalents at August 31, 1998 totaled $10.1 million, an increase of $0.3 million from November 30, 1997. At August 31, 1998, the Company had approximately $86.1 million in unused committed and uncommitted credit lines available from foreign and domestic banks. The Company believes that cash and cash equivalents on hand, anticipated cash flows from operations and funds from existing lines of credit will be sufficient to meet future operating requirements. Page 10 RESULTS OF OPERATIONS - THIRD QUARTER The Company earned $1.51 per diluted share and $1.54 per basic share on sales of $155.7 million for the third quarter of fiscal 1998, compared to $1.72 per diluted share and $1.76 per basic share on sales of $146.3 million for the same period last year. The reduction in third quarter earnings was caused by a decline in the Protective Coatings business. The market for the Company's traditional protective coatings continued to soften, reducing sales and increasing competitive pressures on margins. Worldwide sales of protective coatings increased because of the Croda Coatings acquisition in 1998. The Fiberglass Pipe business reported slightly higher sales and earnings for the quarter compared to the same period in 1997, because of improvement in European operations and strong demand for fuel-handling products used in service station applications throughout the United States. Sales of concrete and steel pipe were lower than in the same period of 1997, because of the timing of production start-up on several major orders. Earnings were higher due to a favorable product mix and improved manufacturing efficiencies. The Company's construction products business in Hawaii reported lower sales and higher earnings compared to the same period in 1997, due to cost reduction programs implemented in the later part of 1997. The domestic Pole Products business reported higher sales but lower earnings due to competitive pricing pressures. Selling, General and Administrative (SG&A) expenses were lower for the quarter compared to the same period in 1997, primarily because of lower pension expenses. Royalty, Equity and Other Income was lower because of lower royalty income from foreign licensees. RESULTS OF OPERATIONS - YEAR TO DATE The Company earned $2.37 per diluted share and $2.42 per basic share on sales of $395.2 million during the nine-month period of fiscal 1998, compared to earnings of $3.25 per diluted share and $3.31 per basic share on sales of $386.1 million during the prior-year period. The decline in earnings for the nine-month period of 1998 was due primarily to lower sales of the Company's traditional protective coatings, and a slow first half in the Concrete and Steel Pipe business that was impacted by severe weather and a six-week strike at the Company's major steel pipe manufacturing facility in Fontana, California. Protective Coatings sales increased because of the Croda Coatings acquisition. However, earnings declined in 1998 due to a slowdown in domestic markets, increased competitive pressures and the impact on customers of lower oil prices. Page 11 The Fiberglass Pipe business reported higher sales and earnings due to higher demand for fuel-handling pipe systems, including the Company's new rigid coaxial products. The decline in oil prices curtailed demand for high-pressure fiberglass pipe supplied to worldwide oilfield markets by Centron, a wholly- owned subsidiary. Concrete and Steel Pipe reported sales significantly below last year due to the timing of project deliveries, the impact of weather and the strike. Profits were negatively impacted by the reduced sales volume. The construction products business in Hawaii posted higher sales and earnings because of the timing of projects and increased demand from the private sector. Earnings improved also because of higher efficiency as a result of a reorganization that was implemented during the second half of 1997. The domestic Pole Products business reported lower sales and earnings than last year due to competitive pressures on pricing. The Company's efforts to address Year 2000 (Y2K) issues began in 1997. In addressing the issues, the Company has employed a five-step process consisting of 1) conducting a company-wide inventory, 2) assessing Y2K compliance, 3) remediating non-compliant hardware and software, 4) testing remediated hardware and software and 5) certifying Y2K compliance. Personnel from operations and from functional disciplines, as well as information technology professionals, are involved in the process. Outside consultants have also been retained to participate in the inventory and assessment process, provide support resources on a company-wide basis and minimize duplication of efforts. Inventory and assessment activities are estimated at approximately 95 percent complete. This data is continuously updated as new information becomes available and we expect this to continue. Overall remediation efforts are estimated at approximately 65 percent complete. Communication with customers and suppliers to determine the extent of their Y2K efforts is an integral part of the program. Costs for Y2K efforts are not being accumulated separately. Much of the cost is being accounted for as part of normal operating budgets. Overall, the costs are not expected to have a significant effect on the Company's financial position or results of operations. The Company believes it will not have significant exposure to Y2K issues and that the risk to its operations and financial condition is remote. CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Any of the above statements that refer to the Company's estimated or anticipated future results are forward-looking and reflect the Company's current analysis of existing trends and information. Actual results may differ from current expectations based on a number of factors affecting Ameron's businesses, including competitive conditions and changing market conditions. Matters affecting the economy generally, including the state of economies worldwide, can affect the Company's results. These forward-looking statements represent the Company's judgment only as of the date of this report. Since actual results could differ materially, the reader is cautioned not to rely on these forward- looking statements. Moreover, the Company disclaims any intent or obligation to update these forward looking statements. Page 12 Part II. OTHER INFORMATION Item 2. Changes in Securities Terms of lending agreements place restrictions on cash dividends, borrowings, investments and guarantees and require maintenance of specified minimum working capital. Under the most restrictive provisions of these agreements, approximately $11 million of consolidated retained earnings were not restricted at August 31, 1998. Item 6. Exhibits and Reports on Form 8-K A Form 8-K was filed on June 24, 1998 to report the Company's second quarter 1998 sales and earnings. Page 13 Signature Page Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Ameron International Corporation Date: October 14, 1998 /s/ Gary Wagner _________________________________ Gary Wagner Senior Vice President, Chief Financial Officer Page 14 EX-27 2
5 9-MOS 9-MOS NOV-30-1998 NOV-30-1997 AUG-31-1998 AUG-31-1997 10,149 22,502 0 0 138,079 112,336 0 0 145,166 106,683 284,271 256,401 160,773 126,430 0 0 507,448 447,019 107,448 94,240 0 0 0 0 0 0 13,007 12,944 0 0 507,448 447,019 395,207 386,109 395,207 386,109 296,537 284,728 0 0 80,920 80,107 0 0 11,467 9,141 14,966 20,397 5,238 7,139 9,728 13,258 0 0 0 0 0 0 9,728 13,258 2.42 3.31 2.37 3.25
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