-----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, SeqzQAe9I5YklTrdJPZcjCK9ouanyjtzh1zTge2hLPY9pX1f9bdNy7Pl4ZywcFOt X81c6U/SCmPswwsJcbPXwQ== 0000790730-99-000009.txt : 19991018 0000790730-99-000009.hdr.sgml : 19991018 ACCESSION NUMBER: 0000790730-99-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990831 FILED AS OF DATE: 19991014 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: 99727891 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, 1999 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 91101-2894 (Address of principal executive offices) Telephone Number (626) 683-4000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes / X / No The number of shares outstanding of Common Stock, $2.50 par value, was 3,991,912 on September 30, 1999. No other class of Common Stock exists. Page 1 AMERON INTERNATIONAL CORPORATION INDEX Page ---- PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements Consolidated Statements of Income 3 Consolidated Balance Sheets 4 Consolidated Statements of Cash Flows 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II. OTHER INFORMATION Item 2. Changes in Securities 12 Item 6. Exhibits and Reports on Form 8-K 12 SIGNATURE PAGE 13 Page 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements Ameron International Corporation and Subsidiaries Consolidated Statements of Income (In thousands, except share and per share data) (Unaudited) Three Months Ended Nine Months Ended August 31, August 31, ------------------ ------------------ 1999 1998 1999 1998 -------- -------- -------- -------- Net Sales $138,795 $155,707 $411,162 $395,207 Cost of Sales (100,708) (117,565) (302,635) (296,537) -------- -------- -------- -------- Gross Profit 38,087 38,142 108,527 98,670 Selling, General and Administrative Expenses (26,700) (24,473) (86,003) (79,117) Royalty, Equity and Other Income 3,804 2,899 9,923 8,362 -------- -------- -------- -------- Operating Profit 15,191 16,568 32,447 27,915 Asset Write-Downs and Other Charges - (1,803) - (1,803) -------- -------- -------- -------- Income before Interest and Income Taxes 15,191 14,765 32,447 26,112 Interest Income 53 149 151 321 Interest Expense (3,499) (5,409) (10,524) (11,467) -------- -------- -------- -------- Income before Income Taxes 11,745 9,505 22,074 14,966 Provision for Income Taxes (3,759) (3,327) (7,064) (5,238) -------- -------- -------- -------- Net Income $ 7,986 $ 6,178 $ 15,010 $ 9,728 ======== ======== ======== ======== Basic Net Income per Share $ 2.00 $ 1.54 $ 3.75 $ 2.42 ======== ======== ======== ======== Diluted Net Income per Share $ 1.98 $ 1.51 $ 3.74 $ 2.37 ======== ======== ======== ======== Weighted Average Common Shares Outstanding 3,991,912 4,012,875 3,997,679 4,012,875 ========= ========= ========= ========= Diluted Common Shares Outstanding 4,024,412 4,098,610 4,016,818 4,098,610 ========= ========= ========= ========= Cash Dividends per Share $ .32 $ .32 $ .96 $ .96 ======== ======== ======== ======== See accompanying notes to consolidated financial statements. Page 3 Ameron International Corporation and Subsidiaries Consolidated Balance Sheets (In thousands, except share and per share data) Aug. 31, Nov. 30, 1999 1998 (Unaudited) -------- -------- ASSETS Current Assets Cash and Cash Equivalents $ 9,675 $ 16,376 Receivables, Net 128,261 136,380 Inventories 98,681 106,654 Deferred Income Tax Benefits 7,723 7,726 Prepaid Expenses and Other 8,492 6,554 -------- -------- Total Current Assets 252,832 273,690 Investments, Advances and Equity in Undistributed Earnings of Affiliated Companies 22,189 22,182 Property, Plant and Equipment, Net 151,900 157,918 Other Assets 45,776 46,429 -------- -------- Total Assets $472,697 $500,219 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Short-Term Borrowings $ 3,615 $ 3,024 Current Portion of Long-Term Debt 12,624 12,681 Trade Payables 39,597 37,273 Accrued Liabilities 48,931 50,353 Income Taxes 13,171 23,499 -------- -------- Total Current Liabilities 117,938 126,830 Long-Term Debt, Less Current Portion 141,973 165,308 Other Long-Term Liabilities 39,741 40,913 -------- -------- Total Liabilities 299,652 333,051 -------- -------- Stockholders' Equity Common Stock, Par Value $2.50 a Share, Authorized 12,000,000 Shares, Outstanding 3,991,912 Shares at August 31, 1999 and 4,030,112 Shares at November 30, 1998, Net of Treasury Shares 13,007 13,007 Additional Paid-In Capital 17,828 17,828 Retained Earnings 198,349 187,174 Accumulated Other Comprehensive Income (11,945) (8,062) Treasury Stock (1,211,100 shares at August 31, 1999 and 1,172,900 shares at November 30, 1998), at Cost (44,194) (42,779) -------- -------- Total Stockholders' Equity 173,045 167,168 -------- -------- Total Liabilities and Stockholders' Equity $472,697 $500,219 ======== ======== See accompanying notes to consolidated financial statements Page 4 Ameron International Corporation and Subsidiaries Consolidated Statements of Cash Flows (In thousands) (Unaudited) Nine Months Ended Aug. 31, ------------------- 1999 1998 -------- -------- Cash Flows from Operating Activities Net Income $ 15,010 $ 9,728 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation 13,506 12,931 Amortization 1,431 883 Equity in Earnings of Affiliated Companies (5,772) (4,367) Dividends from Affiliated Companies 5,731 4,453 Other, Net 1,581 (103) Changes in Operating Assets and Liabilities: Change in Receivables 5,401 (15,205) Change in Inventories 5,576 (13,626) Change in Other Current Assets (2,534) 2,055 Change in Trade Payables and Other Current Liabilities (13,895) 16,180 Change in Other Assets and Liabilities, Net 8,024 (9,597) -------- -------- Net Cash Provided by Operating Activities 34,059 3,332 -------- -------- Cash Flows from Investing Activities Proceeds from Sale of Assets 1,790 732 Additions to Property, Plant and Equipment (11,901) (19,520) Business Acquisitions - (45,277) Other (3,755) (1,065) -------- -------- Net Cash Used by Investing Activities (13,866) (65,130) -------- -------- Cash Flows from Financing Activities Net Change in Short-Term Borrowings 1,268 3,176 Issuance of Debt 1,283 64,116 Repayment of Debt (23,718) (1,892) Dividends to Common Stockholders (3,835) (3,851) Issuance of Common Stock - 920 Purchase of Treasury Stock (1,415) - -------- -------- Net Cash (Used) Provided by Financing Activities (26,417) 62,469 -------- -------- Effect of Exchange Rate Changes on Cash and Cash Equivalents (477) (370) -------- -------- Net Change in Cash and Cash Equivalents (6,701) 301 Beginning Cash and Cash Equivalents Balance 16,376 9,848 -------- -------- Ending Cash and Cash Equivalents Balance $ 9,675 $ 10,149 ======== ======== See accompanying notes to consolidated financial statements Page 5 Ameron International Corporation and Subsidiaries Notes to Consolidated Financial Statements (In thousands) August 31, 1999 Note 1. Basis Of Presentation The consolidated financial statements for the interim periods included herein are unaudited; however, they contain all adjustments, including normal recurring accruals, which in the opinion of management, are necessary to present fairly the consolidated financial position of Ameron International Corporation ("Company" or "Ameron") at August 31, 1999, and the consolidated results of operations for the three- and nine-month periods ended August 31, 1999 and 1998, and consolidated cash flows for the nine-month periods ended August 31, 1999 and 1998. Accounting measurements at interim dates inherently involve greater reliance on estimates than at year end. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. The 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 financial statements and notes included in the Annual Report on Form 10-K for the year ended November 30, 1998. Note 2. Inventories Inventories are stated at the lower of cost (principally first-in, first-out)or market. Inventories were comprised of the following: Aug. 31, Nov. 30, 1999 1998 -------- -------- Finished Products $ 63,397 $ 62,888 Products in Process 15,975 20,988 Materials and Supplies 19,309 22,778 -------- -------- Total Inventories $ 98,681 $106,654 ======== ======== Note 3. Other Cash Flow Information: Nine Months Ended Aug. 31, ------------------- 1999 1998 -------- -------- Interest Paid $ 8,187 $ 8,836 Income Taxes Paid $ 14,344 $ 2,893 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, ------------------- ------------------- 1999 1998 1999 1998 -------- -------- -------- -------- Net Sales $ 9,242 $ 8,857 $ 31,777 $ 47,855 Gross Profit $ 4,743 $ 934 $ 16,682 $ 10,562 Net Income/(Loss) $ 2,859 $ (1,115) $ 10,903 $ 1,211 Amounts shown above represent operating results for Ameron Saudi Arabia, Ltd. for the three- and nine-month periods ended June 30, 1999 and 1998 and Gifford-Hill-American, Inc. for the three- and nine-month periods ended August 31, 1998. The Company sold its 50% ownership of Gifford-Hill-American, Inc. in late 1998. Summarized results of operations of Tamco, Bondstrand, Ltd., and Oasis Ameron, Ltd. follow: Three Months Ended Nine Months Ended Aug. 31, Aug. 31, ------------------- ------------------- 1999 1998 1999 1998 -------- -------- -------- -------- Net Sales $ 43,166 $ 47,691 $120,855 $127,560 Gross Profit $ 13,567 $ 11,187 $ 32,273 $ 29,098 Net Income $ 6,124 $ 4,702 $ 14,608 $ 11,424 Amounts shown above include operating results for Tamco for the three- and nine-month periods ended August 31, 1999 and 1998 and operating results for Bondstrand, Ltd. and Oasis Ameron, Ltd. for the three- and nine-month periods ended June 30, 1999 and 1998. Note 5. Earnings Per Share The basic net income per share is computed on the basis of the weighted average number of common shares outstanding each quarter and year-to-date. The diluted net income per share is computed on the basis of the weighted average total of common shares outstanding each quarter and year-to-date plus common stock equivalents related to dilutive stock options. Page 7 Note 6. Other Comprehensive Income The Company recognized unrealized foreign currency translation losses of $100 and $2,650 for the three months ended August 31, 1999 and 1998, and losses of $3,883 and $5,597 for the nine months ended August 31, 1999 and 1998, respectively. Accumulated other comprehensive income included $502 minimum pension liability as of August 31, 1999 and November 30, 1998. Note 7. Debt The Company's long-term debt consisted of the following: Aug. 31, Nov. 30, 1999 1998 -------- -------- Fixed-rate unsecured notes payable: 9.79% payable in annual principal installments of $12,000 $ 24,000 $ 24,000 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 (3.30% at August 31, 1999) 7,200 7,200 Variable-rate unsecured bank revolving credit facilities (approximately 5.60% at August 31, 1999) 71,682 94,406 Variable-rate unsecured bank loan, payable by a consolidated subsidiary in Dutch guilders, with annual principal installments of approximately $624 (4.17% at August 31, 1999) 1,715 2,383 -------- -------- Total Long-Term Debt 154,597 177,989 Current portion 12,624 12,681 -------- -------- Long-Term Debt, Less Current Portion $141,973 $165,308 ======== ======== Note 8. Business Restructuring For the nine months ended August 31, 1999, $1,131 was charged to the 1998 restructuring reserve. The remaining reserve for business restructuring at August 31, 1999 was $191. Page 8 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, 1999 INTRODUCTION Management's Discussion and Analysis should be read in conjunction with the discussion included in the Company's 1998 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, 1999, the Company generated $34.1 million of cash from operating activities compared to $3.3 million of cash generated during the nine-month period ended August 31, 1998. The improved cash position was a result of improved earnings and better working capital management. Cash used by investing activities included capital expenditures for normal replacement and upgrades of machinery and equipment. Management estimates that capital expenditures during this fiscal year will be between $15.0 million and $20.0 million. Capital expenditures will be funded from existing cash balances, cash generated from operations and existing lines of credit. Cash generated from operating activities was used for capital expenditures, repayment of debts of $21.2 million, payment of common dividends of $3.8 million and repurchase of the Company's shares of $1.4 million. Cash and cash equivalents at August 31, 1999 totaled $9.7 million, a decrease of $6.7 million from November 30, 1998. At August 31, 1999, the Company had approximately $124 million in unused committed and uncommitted credit lines available from foreign and domestic banks. The Company believes that cash and cash equivalents on hand, anticipated cash flows from operations and funds from existing lines of credit will be sufficient to meet future operating requirements. RESULTS OF OPERATIONS - THIRD QUARTER The Company earned $1.98 per diluted share on sales of $138.8 million during the third quarter of fiscal 1999, compared to $1.51 per diluted share on sales of $155.7 million for the same period last year. The improvement was attributed primarily to higher profit margins and lower interest. Sales of the Concrete & Steel Pipe business decreased slightly with higher profitability than in the same quarter of 1998 because of a favorable change in product mix and the benefits of the 1998 cost reduction program. The Company's worldwide Fiberglass-Composite Pipe business had lower sales and profitability than in the same quarter of 1998, as the business continued to suffer because of depressed spending in the oil industry. While oil prices have increased to a level which should stimulate demand for the Company's fiberglass pipe, the recent increases have not yet been reflected in customers' maintenance and capital programs. As anticipated, sales of fuel handling piping declined in the third quarter. Ameron's Asian operations continued to strengthen during the quarter. The Company's worldwide Coatings business had lower sales and profitability than in the third quarter of 1998. The decline reflected the condition of the worldwide, industrial coatings market, which remains soft because of depressed spending in the oil industry and low commodity prices. Ameron's Construction & Allied Products business reported higher sales and profits. The improvement came from Ameron's pole business, which benefitted from the strength of construction in the western U.S. Ameron's Hawaiian operations remained flat. Selling, General and Administrative (SG&A) expenses were higher for the quarter compared to the same period in 1998 because of higher product warranty and employee benefit costs. Royalty, Equity and Other Income was higher because of higher equity income from affiliated companies and higher royalties from licensees. RESULTS OF OPERATIONS - YEAR TO DATE The Company earned $3.74 per diluted share on sales of $411.2 million during the first nine months of fiscal 1999, compared to earnings of $2.37 per diluted share on sales of $395.2 million during the same period in 1998. The improvement in sales for the first nine months of 1999 was due primarily to higher sales of the Concrete & Steel Pipe Group and the acquisition of the Croda Coatings operations in April 1998. The profitability of all businesses improved except for the Fiberglass-Composite Pipe business which suffered from depressed spending in the oil industry, in the first nine months of 1999, compared to the first nine months of 1998. Sales of the Concrete & Steel Pipe business significantly increased because of the healthy backlog at the start of the year and the relatively mild weather during the first nine months of 1999. The Company's first six-months of 1998 were adversely impacted by unusually wet weather and a strike at the Company's major steel pipe facility. Operating profit increased proportionally to the sales increase. The Fiberglass-Composite Pipe business reported lower sales than in the same period of 1998, as the business continued to suffer because of depressed spending in the oil industry. Profits of fiberglass-composite pipe declined slightly in spite of a larger sales decline because of the cost reduction steps taken in 1998. Coatings reported lower sales and relatively flat earnings in the first nine months of 1999, compared to the same period of 1998. The sales decline reflected the condition of the worldwide, industrial coatings market, which remained soft because of depressed spending in the oil industry and low commodity prices. Profits from sales of Coatings remained flat in spite of the sales decline because of the cost reduction steps taken in 1998. Ameron's Construction & Allied Products business reported slightly higher sales and higher profits. The improvement was primarily due to the Company's Page 10 Pole business. Hawaiian operations remained flat because of the economic situation in Hawaii. Selling, General and Administrative expenses were higher compared to the same period in 1998, primarily because of the Croda Coatings acquisition and higher insurance, employee benefit and product warranty costs. YEAR 2000 The Company's efforts to address Year 2000 ("Y2K") issues began in 1997. In addressing the issues, the Company has employed a five-step process consisting of 1) conducting a company-wide inventory, 2) assessing Y2K compliance, 3) remediating non-compliant hardware and software, 4) testing remediated hardware and software and 5) certifying Y2K compliance. Personnel from operations and from functional disciplines, as well as information technology professionals, are involved in the process. Outside consultants have also been retained to participate in the inventory and assessment process, provide support resources on a company-wide basis and minimize duplication of efforts. Inventory and assessment activities are completed. The data are continuously updated as new information becomes available, and we expect this to continue. Overall remediation efforts are estimated at approximately 95 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. The costs are being expensed or capitalized as part of normal operation. Overall, such costs are not expected to have a significant effect on the Company's financial position or results of operations. In the event of the failure to correct all compliance issues related to manufacturing control systems, the Company's plants have the ability, in most instances, to continue operations mechanically, rather than electronically. However, due to the general uncertainty inherent in the Y2K problem, resulting in part from the uncertainty of the Y2K readiness of third- party suppliers and customers, the Company is unable to determine at this time whether the consequences of Y2K failures will have a material impact on the Company's results of operations, liquidity or financial condition. The Company believes its most reasonably likely worst-case scenario is that its operations will experience delays because of failures by third parties, such as suppliers of utilities and raw materials, to correct Y2K problems. The Company is developing contingency plans that are designed to mitigate, in part, the impact on its operations of certain Y2K problems. These plans, however, can not cover all eventualities, such as a power outages. The Company expects these plans to be in place by the fourth quarter of 1999. CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Any of the above statements that refer to the Company's estimated or anticipated future results are forward-looking and reflect the Company's current analysis of existing trends and information. Actual results may differ from current expectations based on a number of factors affecting Ameron's businesses, including competitive conditions and changing market conditions. Matters affecting the economy generally, including the state of economies worldwide, can affect the Company's results. These forward-looking statements represent the Company's judgment only as of the date of this report. Since actual results could differ materially, the reader is cautioned not to rely on these forward-looking statements. Moreover, the Company disclaims any intent or obligation to update these forward looking statements. Page 11 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 $12 million of consolidated retained earnings was not restricted at August 31, 1999. Item 6. Exhibits and Reports on Form 8-K A Form 8-K was filed on June 24, 1999 to report the Company's second quarter 1999 sales and earnings. A Form 8-K was filed on June 30, 1999 to report the change in the Company's independent accountants from Arthur Andersen LLP to Deloitte & Touche LLP. A Form 8-K was filed on July 7, 1999 to report that Mr. Peter K. Barker joined the Company's board of directors. Page 12 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, 1999 /s/ Gary Wagner _________________________________ Gary Wagner Senior Vice President, Chief Financial Officer Page 13 EX-27 2
5 9-MOS 9-MOS NOV-30-1999 NOV-30-1998 AUG-31-1999 AUG-31-1998 9,675 10,149 0 0 128,261 138,079 0 0 98,681 124,166 252,832 284,271 151,900 160,773 0 0 472,697 507,448 117,938 107,448 0 0 0 0 0 0 13,007 13,007 160,038 141,175 472,697 507,448 411,162 395,207 411,162 395,207 302,635 296,537 0 0 86,003 79,117 0 0 10,524 11,467 22,074 14,966 7,064 5,238 15,010 9,728 0 0 0 0 0 0 15,010 9,728 3.75 2.42 3.74 2.37
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