-----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, aT3w74LFRyiEhOBi6RtF5LvgsEVgep7UfzXv62fZyBbypeXfM8abpqPsuN4g3MNZ Ov7QWGwkJHiAW63EStVaRw== 0000912057-94-000693.txt : 19940302 0000912057-94-000693.hdr.sgml : 19940302 ACCESSION NUMBER: 0000912057-94-000693 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19931130 FILED AS OF DATE: 19940228 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-K SEC ACT: 34 SEC FILE NUMBER: 001-09102 FILM NUMBER: 94513261 BUSINESS ADDRESS: STREET 1: 245 SOUTH LOS ROBLES AVENUE CITY: PASADENA STATE: CA ZIP: 91101 BUSINESS PHONE: 8186834000 10-K 1 FORM 10-K United States SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended November 30, 1993 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-9102 AMERON, INC. (Exact name of registrant as specified in its charter) Delaware 77-0100596 (State of Incorporation) (I.R.S. Employer Identification No.) 245 South Los Robles Avenue Pasadena, CA 91101 (Address and Zip Code of principal executive offices) Registrant's telephone number, including area code: (818) 683-4000 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: Name of each exchange Title of each class on which registered ---------------------------- --------------------- Common Stock $2.50 par value New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None 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 --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x --- The Registrant estimates that as of February 9, 1994 the aggregate market value of the shares of its Common Stock, $2.50 par value, held by non-affiliates of the Registrant (that is, shares beneficially owned by other than executive officers and directors) was in excess of $137 million. On February 9, 1994 there were 3,893,748 shares of Common Stock, $2.50 par value outstanding. This is the only class of Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE 1. PORTIONS OF AMERON'S 1993 ANNUAL REPORT TO STOCKHOLDERS (PARTS I, II AND IV). 2. PORTIONS OF AMERON'S PROXY STATEMENT FOR THE 1994 ANNUAL MEETING OF STOCKHOLDERS (PART III). PART 1 AMERON, INC. AMERON, INC., a Delaware corporation, and its consolidated subsidiaries are collectively referred to herein as "Ameron", the "Company", the "Registrant" or the "Corporation" unless the context clearly indicates otherwise. The business of the Company has been divided into business segments in Item 1(c)(1). Substantially all activities relate to the manufacture and supply of goods and services to the industrial, utility, marine and construction markets. All references to "the year" or "the fiscal year" pertain to the twelve months ended November 30, 1993. All references to the "Annual Report" pertain to the Company's 1993 Annual Report to Stockholders. ITEM 1 - BUSINESS (A) GENERAL DEVELOPMENT OF BUSINESS. Although the Company's antecedents date back to 1907, it evolved directly from the merger of two separate firms in 1929, resulting in the incorporation of American Concrete Pipe Co. on April 22, 1929. Various name changes occurred between that time and 1942, at which time the Company's name became American Pipe and Construction Co. By the late 1960s the Company was almost exclusively engaged in manufacturing and had expanded its product lines to include not only concrete and steel pipe but also high-performance protective coatings, ready-mix concrete, aggregates and reinforced thermosetting resin pipe and fittings. At the beginning of 1970, the Company's name was changed to Ameron, Inc. In the meantime, other manufactured products had been added to its product lines. These included concrete and steel poles for street and area lighting, and tapered steel vertical and cantilevered poles for traffic signals. In 1984, the Company acquired a major domestic fiberglass pipe business, including a manufacturing plant in Burkburnett, Texas, and certain trade names and patent rights. In 1988, the Company expanded its ability to serve the water transmission and distribution market through the acquisition of a major steel pipe fabricating facility in Fontana, California. Further details or commentary on the year's operations can be found in the Annual Report, which is Exhibit 13 to this report on Form 10-K, and which should be read in conjunction with this report. (B) FINANCIAL INFORMATION AS TO INDUSTRY SEGMENTS. The information contained in Notes (1), (4) and (14) of Notes to Consolidated Financial Statements on pages 38, 39, 43, 46 and 47 of the Annual Report is incorporated herein by reference. (C) NARRATIVE DESCRIPTION OF BUSINESS. (1) For geographical and operational convenience, the Company is organized into divisions. These divisions are combined into the following groups serving the following-described industry segments. a) The Protective Coatings Systems group develops, manufactures and markets high-performance coatings and surfacer systems on a world-wide basis. These products are utilized for the preservation of major structures, such as metallic and concrete facilities and equipment, to prevent their degradation by corrosion, abrasion, marine fouling and other forms of chemical and physical attack. The primary markets served include marine, offshore, petrochemical, power generation, petroleum, chemical, steel, pulp and paper, railroad, bridges, mining, metal processing and original equipment manufacturing. These products are marketed by direct sales, as well as through manufacturers' representatives, distributors and licensees. Competition is based upon quality, price and service. Manufacture of these products is carried out in the Company's plants in California and Arkansas, by a wholly-owned subsidiary in The Netherlands, by jointly-owned operations in Mexico and Saudi Arabia and by various third party licensees. The Company licenses its patents, trademarks, know-how and technical assistance to various of its subsidiary and affiliated companies and to various third party licensees. b) The Fiberglass Pipe Systems group develops, manufactures and markets filament-wound and molded fiberglass pipe and fittings. These products are used by a wide range of process industries, including industrial, petroleum, chemical processing and petrochemical industries, for service station replacement piping systems, aboard marine vessels and on offshore oil platforms, and are marketed as an alternative to metallic piping systems which ultimately fail under corrosive operating conditions. These products are marketed by direct sales, as well as through manufacturers' representatives, distributors and licensees. Competition is based upon quality, price and service. Manufacture of these products is carried out in the Company's plants in Texas and South Carolina, by wholly-owned subsidiaries in The Netherlands and Singapore, and by a jointly-owned affiliate in Saudi Arabia. c) The Concrete and Steel Pipe Systems group supplies products and services used in the construction of pipeline facilities for various utilities. Eight plants are located in three of the continental western states. These plants manufacture concrete cylinder pipe, prestressed concrete cylinder pipe, steel pipe and reinforced concrete pipe for water transmission, storm and industrial waste water and sewage collection. These products are marketed by direct selling using the Company's own personnel and by competitive bidding. Customers include local, state and federal agencies, developers and general contractors. Normally no one customer or group of customers will account for sales equal to or greater than 10 percent of the Company's consolidated revenue. However, occasionally, when more than one unusually large project is in progress, combined sales to all U.S. government agencies and/or general contractors for those agencies can reach those proportions. Besides competing with several other concrete pipe manufacturers located in the market area, alternative products such as ductile iron, asbestos cement, and clay pipe compete with the Company's concrete and steel pipe products, but ordinarily these other materials do not offer the full diameter range produced by the Company. Principal methods of competition are price, delivery schedule and service. The Company's technology is used in the Middle East through affiliated companies whose activities are not reflected in the amounts reported for this industry segment. This segment also includes the manufacturing and marketing on a world-wide basis through direct sales of polyvinyl chloride sheet lining for the protection of concrete pipe and cast-in- place concrete structures from the corrosive effects of sewer gases, acids and industrial chemicals. Competition is based on quality, price and service. Manufacture of this product is carried out in the Company's plant in California. This segment also includes engineered design, fabrication and direct sale of specialized proprietary equipment which is outside the regular business of the other segments of the Company's businesses. Competition for such work is based upon quality, price and service. Manufacture of such equipment is carried out in the Company's plant in California. d) The Construction & Allied Products group includes the HC&D division, which suppllies ready-mix concrete, crushed and sized basaltic aggregates, dune sand, concrete pipe and box culverts, primarily to the construction industry in Hawaii. These products are marketed through direct sales. Ample raw materials are available locally in Hawaii and, as to rock products, the 2 Company has exclusive rights to a quarry containing many years' reserves. Within the market area there are competitors for each of the segment's products. No single competitor offers the full range of products sold by the Company in Hawaii. The principal methods of competition are in price and service, since an appreciable portion of the segment's business is obtained through competitive bidding. This segment also includes the operations of the Pole Products & Systems division, which manufactures and markets concrete and steel poles for highway, street and outdoor area lighting and for traffic signals. Sales are nationwide, but with a stronger concentration in the western states. Marketing is handled by the Company's own sales force and by outside sales agents. Competition for such products is mainly based on price, but with some consideration for service and delivery. Manufacture of these products is carried out in in two plants in California, as well as plants in Washington and Oklahoma. e) Except as individually shown in the above descriptions of industry segments, the following comments or situations apply to all segments: (i) Because of the number of manufacturing locations and the variety of raw materials essential to the business, no critical situations exist with respect to supply of materials. The Company has multiple sources for raw materials. A program continues in operation to minimize any potential effect which may be anticipated to result from any foreseeable inadequacy of energy supplies. The effects of increases in costs of energy are being mitigated to the extent practical through conservation and through addition or substitution of equipment to manage the use and reduce consumption of energy. (ii) The Company owns certain patents and trademarks, both U.S. and foreign, related to its products. It licenses these proprietary items to some extent in the U.S., and to a greater degree abroad. These patents, trademarks, and licenses do not constitute a material portion of the Company's business. No franchises or concessions exist. (iii) Many of the Company's products are used in connection with capital goods, water and sewage transmission and construction of capital facilities. Favorable or adverse effects on general sales volume and earnings can result from weather conditions. Normally, sales volume and earnings will be lowest in the first fiscal quarter, seasonal effects typically accelerate or slow the business volume and normally do not bring about severe changes in full-year activity. (iv) With respect to working capital items, the Company does not encounter any requirements which are not common to other companies engaged in the same industries. No unusual amounts of inventory are required to meet seasonal delivery requirements. All of the Company's industry segments turn their inventory between four and eleven times annually. Average days' sales in accounts receivable range between 39 and 81 for all segments. 3 (v) The value of backlog orders at November 30, 1993 and 1992 by industry segment is shown below. Substantially all of the November 30, 1993 backlog is expected to be billed and recorded as sales during the year 1994.
Industry Segment 1993 1992 ---------------- --------- --------- (In thousands) Protective Coatings Systems $13,754 $ 9,059 Fiberglass Pipe Systems 14,507 40,243 Concrete and Steel Pipe Systems 40,658 62,685 Construction & Allied Products 11,903 17,896 ------- ------- Total $80,822 $129,883 ------- ------- ------- -------
Backlog at November 30, 1993 declined 37.8% from the prior year's level. The $25.7 million decrease in the Fiberglass Pipe Systems segment reflects the completion of several large crude oil projects overseas. The lower backlog of the Concrete and Steel Pipe Systems segment resulted from a decline in public spending for large water transmission systems and reduced construction activity in the Company's geographic markets. Backlog declined in the Construction and Allied Products segment because of reduced construction activity in Hawaii. The increase in backlog for the Protective Coatings Systems segment reflects an increase in overseas project orders. (vi) There was no significant change in competitive conditions or the competitive position of the Company in the industries and localities in which it operates. There is no knowledge of any single competitive situation which would be material to an understanding of the business. (vii) Sales contracts in all of the Company's business segments normally consists of purchase orders, which in some cases are issued pursuant to master purchase agreements. Longer term contracts seldom involve commitments of more than one year by the Company, and exceptions are not deemed material by management. Payment is normally due from 30 to 60 days after shipment, with progress payments prior to shipment in some circumstances. It is the Company's practice to require letters of credit prior to shipment of foreign orders, subject to limited exceptions. The Company does not voluntarily extend long-term credit to purchasers of its products. (2) a) Approximate expense during each of the last three fiscal years for Research and Development costs is shown under the caption in Note (1) of Notes to Consolidated Financial Statements on page 38 of the Annual Report, which information is incoporated herein by reference. b) The Corporation's business is not dependent on any single customer or few customers, the loss of any one or more of whom would have a material adverse effect on its business. c) For many years the Corporation has been consistently installing or improving devices to control or eliminate the discharge of pollutants into the environment. Accordingly, compliance with federal, state, and locally enacted provisions relating to protection of the environment is not having, and is not expected to have, a material effect upon the Corporation's capital expenditures, earnings, or competitive position. 4 d) At year-end the Corporation and its consolidated subsidiaries employed approximately 2,868 persons. Of those, approximately 1,340 were covered by labor union contracts, and there are six separate bargaining agreements subject to renegotiation in 1994. Management does not presently anticipate a strike or other labor disturbance in connection with renegotiation of these agreements; however, the possibility of such an occurrence exists. (D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES. The information contained in Notes (4) and (14) of Notes to Consolidated Financial Statements on pages 39, 43, 46 and 47 of the Annual Report is incorporated herein by reference. Export sales in the aggregate from domestic operations during the last three fiscal years were:
In thousands ------------ 1993 $12,687 1992 9,663 1991 12,523
ITEM 2 - DESCRIPTION OF PROPERTY (A) The location and general character of principal plants and other materially important physical properties used in the Company's operations is tabulated below. Property is owned in fee except where otherwise indicated by footnote. In addition to the property shown, the Company owns vacant land adjacent to or in the proximity of some of its operating locations and holds this property available for use when it may be needed to accommodate expanded or new operations. Property listed does not include any temporary project sites which are generally leased for the duration of the respective projects. With the exception of the Kailua, Oahu property, shown under the Construction & Allied Products industry segment, there are no material leases with respect to which expiration or inability to renew would have any material adverse effect on the Company's operations. The lease term on the Kailua property extends to the year 2012. This is the principal source of quarried rock and aggregates for the Company's operations on Oahu, Hawaii and, in management's opinion, reserves are adequate for its requirements during the term of the lease. (B) The Company believes that its existing facilities are adequate for current and presently foreseeable operations. Because of the cyclical nature of certain of the Company's operations, and the substantial amounts involved in some individual orders, the level of utilization of particular facilities may vary significantly from time to time in the normal course of operations. INDUSTRY SEGMENT - GROUP Division - Location Description ------------------- ----------- PROTECTIVE COATINGS SYSTEMS Protective Coatings Systems division - USA Brea, CA Office, Plant, Laboratory Little Rock, AR Office, Plant Ameron B.V. Geldermalsen, The Netherlands Office, Plant 5 FIBERGLASS PIPE SYSTEMS Fiberglass Pipe Systems division - USA Burkburnett, TX Office, Plant Spartanburg, SC Plant Ameron B.V. Geldermalsen, The Netherlands Office, Plant Ameron (Pte) Ltd. Singapore *Office, Plant CONCRETE AND STEEL PIPE SYSTEMS Southern Division Rancho Cucamonga, CA *Office Etiwanda, CA Plant Lakeside, CA Plant South Gate, CA Plant Palmdale, CA Plant Phoenix, AZ Office, Plant Northern Division Tracy, CA Office, Plant Portland, OR Office, Plant Steel Fabrication division Fontana, CA *Office, Plant Protective Linings division Brea, CA Office, Plant Fabrication Plant South Gate, CA Office, Plant CONSTRUCTION & ALLIED PRODUCTS HC&D division Honolulu, Oahu, HI *Office, Plant Kailua, Oahu, HI *Plant, Quarry Barbers Point, Oahu, HI *Plant Puunene, Maui, HI *Office, Plant, Quarry Pole Products & Systems division Fillmore, CA Office, Plant Oakland, CA *Plant Everett, WA *Office, Plant Tulsa, OK *Office, Plant 6 CORPORATE Corporate Headquarters Pasadena, CA *Office Corporate Research & Engineering South Gate, CA Office, Laboratory *Leased ITEM 3 - LEGAL PROCEEDINGS On August 22, 1988, Fontana Pipe and Fabrication, Inc. filed a civil lawsuit against the Company in the United States District Court, District of Oregon. The action stemmed from the purchase by the Company in 1988 of the assets of a steel fabrication plant located in Fontana, California which had been owned by Kaiser Steel Corporation. The amounts claimed by the plaintiff were substantial. The case went to trial in October, 1989 and resulted in a judgment in favor of the Company. Following two appeals to the Ninth Circuit Court of Appeals by plaintiff, this lawsuit was settled in September 1993 on terms deemed to be favorable to the Company. On January 24, 1992, the Central Arizona Water Conservation District ("CAWCD") filed an action for damages against several parties, including the Company, in United States District Court, District of Arizona, in connection with six prestressed concrete pipe siphons furnished and installed in the 1970's as part of the Central Arizona Project ("CAP"), a federal project to bring water from the Colorado River to Arizona. The CAWCD also filed separate actions against the U.S. Bureau of Reclamation ("USBR") in the United States Claims Court and with the Arizona Projects Office of the USBR in connection with the CAP siphons. The CAWCD alleges that the six CAP siphons are defective and that the USBR and the defendants in the U.S. District Court action are liable for the repair or replacement of those siphons at a claimed estimated cost of $146.7 million. The Company has internally, as well as through independent third party consultants, conducted engineering analyses regarding this issue and believes that the siphons were manufactured in accordance with the project specifications and other contract requirements, and therefore it is not liable for any claims relating to the siphons. The Company has recorded reserves that it believes are adequate to cover costs associated with the Company's vigorous defense of its position in this matter. The Company and its legal counsel believe that it has meritorious defenses to this action and that resultant liability, if any, should not have a material adverse effect on the financial position of the Company and its results of operations. On July 22, 1992, the Company was served with a complaint in an action brought by the City and County of San Francisco ("CCSF") in Superior Court, County of San Francisco, State of California against the Company and two co-defendants, in connection with a pipeline referred to as San Andreas Pipeline No. 3, a water transmission pipeline that was installed between 1980 and 1982. The Company furnished the pipe used in that pipeline. In its complaint, plaintiff alleges that the pipeline is defective and seeks damages of approximately $44 million to replace the entire pipeline. The Company has recorded reserves that it believes are adequate to cover costs associated with the Company's vigorous defense of its position in this matter. The Company believes that it has meritorious defenses to this action and that resultant liability, if any, should not have a material adverse effect on the financial position of the Company and its results of operations. In addition, certain other claims, suits and complaints, which arise in the ordinary course of business, have been filed or are pending against the Company. Management believes that these matters, and the matters discussed above, are either adequately reserved, covered by insurance, or would not have an adverse 7 material effect on the financial position of the Company and its results of operations if disposed of unfavorably. The Company is also 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. It is difficult to estimate with any certainty the total cost of remediation, the timing and extent of remedial actions required by governmental authorities, and the amount of the Company's liability, if any, in proportion to that of other potentially responsible parties. While the Company finds it difficult to estimate with any certainty the total cost of remediation at the several sites which are subject to environmental regulatory proceedings, on the basis of currently available information, the Company does not believe it likely that the outcome of such environmental regulatory proceedings will have a material adverse effect on the Company's financial position or its results of operations. This conclusion is based on the location and type of contamination of each site, potential recovery from insurance carriers and existing reserves. When it has been possible to reasonably estimate the Company's liability with respect to these matters, provisions have been made as appropriate. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (Not Applicable) ITEM 4A - EXECUTIVE OFFICERS OF THE REGISTRANT The following sets forth information with respect to individuals who served as executive officers as of November 30, 1993 and who are not directors of the Company. All executive officers are appointed by the Board of Directors to serve at the discretion of the Board of Directors.
Name Age Title and Year Elected as Officer - ------------------- --- -------------------------------------------- George J. Fischer 59 Senior Vice President, Human Resources 1992 Gordon G. Robertson 54 Senior Vice President, Technology 1992 James F. Slatic 62 Group Vice President 1989 Javier Solis 47 Senior Vice President of Administration, Secretary & General Counsel 1984 Robert P. Steinkamp 47 Vice President, Manufacturing & Environmental Affairs 1992 S. Daniel Stracner 47 Vice President, Communications & Public Affairs 1993 Gary Wagner 42 Senior Vice President & Chief Financial Officer, Treasurer 1990
8 All of the executive officers named above have held high level managerial or executive positions with the Company for more than the past five years except Mr. Steinkamp, who joined the Company in 1990 as Corporate Director of Manufacturing and in 1992 was named Vice President, Manufacturing. He was previously with Dayton Superior Corporation since 1982 where he was Vice President, Northern Division and in 1987 Vice President, Operations. PART II ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Common Stock, $2.50 Par Value, of the Corporation, its only outstanding class of common equity, is traded on the New York Stock Exchange, the only exchange on which it is presently listed. On February 9, 1994, there were 1,925 stockholders of record of such stock. Dividends have been paid each quarter during the prior two years and for many years in the past. Information as to the amount of dividends paid during the reporting period and the high and low sales prices of the Corporation's Common Stock during that period are set out under the caption Per Share Data shown on page 44 of the Annual Report, which information is incorporated herein by reference. Terms of lending agreements which place restrictions on cash dividends are discussed in Note (9) of Notes to Consolidated Financial Statements on page 42 of the Annual Report, which is incorporated herein by reference. ITEM 6 - SELECTED FINANCIAL DATA The information required by this item is contained in the Selected Consolidated Financial Information shown on page 29 of the Annual Report, which information is incorporated herein by reference. ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this item with respect to fiscal years 1993 and 1992 is shown under Ameron 1993 Financial Review on pages 30-32 of the Annual Report, which information is incorporated herein by reference. The information required for 1991 is as follows: 9 RESULTS OF OPERATIONS-1991 COMPARED WITH 1990 SALES. During 1991, sales rose 4.3 percent to $465 million. The higher revenues were attributable primarily to sales of steel pipe, protective coatings and linings, and fiberglass pipe products. Protective coatings and linings sales were higher than in 1990, due principally to the addition of operations in the United Kingdom and Spain, and increased marine coatings sales to a United States government agency. However, domestic and Canadian sales of industrial protective coatings were flat, reflecting continued recessionary conditions in several markets. The European protective coatings operation was impacted by the delay in the start-up of the next phase of a large North African project, which resumed in 1992. Sales of fiberglass pipe products increased because of continued strong domestic demand for service station rehabilitation piping systems, and increased deliveries to North Africa and the Middle East resulting from petroleum-related and infrastructure development in those regions. Concrete and steel pipe sales were higher than last year, due mainly to welded steel pipe sold to two major water projects in Southern California, and sales of prestressed concrete pipe for a large tunnel liner project. However, the Company's concrete pipe operations were impacted by the economic downturn and competitive pricing pressures, as well as limitations imposed by certain water agencies on the utilization of prestressed concrete cylinder pipe as a result of problems encountered with several pipelines in the United States. In addition, at the beginning of 1992, the Central Arizona Water Conservation District filed an action for damages in connection with six prestressed concrete pipe siphons furnished and installed in the 1970s as part of the Central Arizona Project. The Company's technical staff is working with water agencies and other concrete pipe manufacturers to determine solutions to the pipeline problems. Although near term revenues from this product are expected to be reduced, demand increased in 1991 for welded steel pipe throughout California, thus offsetting much of the effect of the drop-off in sales of prestressed concrete cylinder pipe. Construction product sales declined from 1990, due primarily to a decrease in activity for both concrete and steel pole products as a result of delays in public spending and the sharp drop-off in housing starts and construction. Partially offsetting the reduced pole products sales were moderate gains by the construction products operations in Hawaii, which continued to experience high demand for ready-mix concrete and aggregates in both commercial and public sector markets. GROSS PROFIT. The gross profit margin decreased by .7 percent to 25.5 percent in 1991. Profit margins on sales of protective coatings and linings increased because of improved product pricing achieved by the domestic industrial and marine coatings operations. Higher margins on fiberglass pipe product sales were attributable to manufacturing efficiencies stemming from higher production volumes and better pricing on fiberglass pipe products sold abroad. The decline in construction activity during 1991 furthered price competition and lowered production volumes at several of the concrete pipe operations, causing overall margins on concrete pipe products to decrease. Construction products profit margins declined as a result of significant price competition in steel traffic and lighting pole markets and increased manufacturing costs resulting from lower production volumes, as well as price competition for ready-mix concrete in Hawaii. 10 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses were higher than in 1990, due mainly to the addition of the British and Spanish protective coatings operations, which were not included in the 1990 consolidated results. Other factors affecting selling, general and administrative expenses include increased costs associated with the expansion of marine and protective coatings marketing activities, legal expenses, and additional provisions for insurance, doubtful accounts, and other contingencies. INTEREST EXPENSE. Interest expense increased marginally in 1991, due principally to slightly higher borrowing levels maintained throughout the year. WRITE DOWN OF ASSETS AND RESTRUCTURING COSTS. The Company recorded repositioning costs of approximately $5.6 million and wrote down related fixed assets of approximately $8.9 million after an in-depth evaluation by management of the long-term profitability and rate of return on investment potential for each of the Company's major product lines. Based on this evaluation, management determined that the Company's overall long-term rate of return could be increased if certain facilities were consolidated and if capital and management were redeployed among certain product lines to those with the greatest long-term potential. As a result, management decided to de-emphasize certain product lines and promote and emphasize alternative products that it considered to be more viable and technologically appropriate on a long-term basis. The Company's restructuring activities were also a further response to the lingering effects of the domestic recession and shifting of the Company's productive capabilities to lower cost, more competitive products. GAIN FROM SALE OF ASSETS. During the fourth quarter of 1991, the Company sold, under the threat of condemnation, its headquarters facility for $21 million, resulting in a pre-tax gain of $15 million. OTHER INCOME. Royalties and fees from affiliated companies were higher than last year because of the increased level of sales activity at licensees and foreign affiliated companies. Gains from foreign currency transactions compared favorably to the prior year's losses, reflecting the strength of the U.S. dollar against the Dutch guilder and the Canadian dollar. Other income includes a legal settlement of $770,000 received from resolution of a prior class action lawsuit. EQUITY IN LOSSES OF AFFILIATED COMPANIES. Equity in losses of jointly-owned affiliated companies was primarily the result of economic downturns experienced by several of the affiliates. The losses of Gifford-Hill-American, Inc., a 50- percent-owned concrete pressure pipe manufacturer, reflect ongoing weak demand in the Texas concrete pipe market, coupled with the bankruptcy loss of Gifford- Hill-American's wholly-owned "Lock-Joint" subsidiary. Tamco, a 50-percent- owned steel mini-mill, also reported lower operating results due to the downturn in construction activity in California, while Ameron Saudi Arabia, Ltd., endured the effects of the Gulf War. Partially offsetting these declines were the improved performance of both Oasis-Ameron, Ltd. and Bondstrand, Ltd., which benefitted from increased demand for protective coatings and fiberglass pipe, respectively, in Saudi Arabia. ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA The Consolidated Financial Statements, the report thereon of Arthur Andersen & Co. dated January 13, 1994, Notes to Consolidated Financial Statements and Quarterly Financial Data, comprising pages 33 through 47 of the Annual Report, are incorporated herein by reference. 11 ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE (Not applicable) PART III ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS Information with respect to the directors is contained under the section entitled, "Election of Directors" in the Corporation's Proxy Statement which was filed on February 25, 1994 in connection with the Annual Meeting of Stockholders to be held on March 28, 1994. Such information is incorporated herein by reference. Information with respect to the executive officers of the Corporation is located in Part I, Item 4A of this report. ITEM 11 - EXECUTIVE COMPENSATION* ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT* ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS* *The information required by Items 11, 12 and 13 is contained in the Corporation's Proxy Statement which was filed on February 25, 1994 in connection with the 1994 Annual Meeting of Stockholders to be held on March 28, 1994. Such information is incorporated herein by reference. 12 PART IV ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (A) (1) FINANCIAL STATEMENTS: The financial statements to be filed hereunder are cross-referenced, in the index immediately following, to the Annual Report, as to sections incorporated herein by reference. INDEX TO FINANCIAL STATEMENTS
Page Reference Statement to Annual Report --------- ---------------- Consolidated Balance Sheets at November 30, 1993 and 1992 34-35 Consolidated Statements of Operations for the years ended November 30, 1993, 1992 and 1991 33 Consolidated Statements of Cash Flows for the years ended November 30, 1993, 1992 and 1991 36 Consolidated Statements of Stockholders' Equity for the years ended November 30, 1993, 1992 and 1991 37 Notes to Consolidated Financial Statements 38-43
(i) Summarized information as to the financial condition and results of operations for Gifford-Hill-American, Inc., Ameron Saudi Arabia, Ltd., Bondstrand, Ltd, Oasis-Ameron, Ltd. and Tamco are presented in Note (4) of Notes to Consolidated Financial Statements on page 39 of the Annual Report, which information is incorporated herein by reference. (A) (2) FINANCIAL STATEMENT SCHEDULES: The following additional financial data should be read in conjunction with the consolidated financial statements in the 1993 Annual Report. Schedules not included with this additional financial data have been omitted because they are either not applicable, not required, not significant, or the required information is provided in the consolidated financial statements or notes thereto. 13
Pages of Schedule Schedules of Ameron, Inc. and Subsidiaries This Report -------- ------------------------------------------ ----------- Report of Independent Public Accountants 15 V Property, Plant and Equipment 16 VI Accumulated Depreciation of Property, Plant and Equipment 17 VIII Valuation and Qualifying Accounts and Reserves 18-20 IX Short Term Borrowings 21 X Supplementary Income Statement Information 22 Pages of (A) (3) EXHIBITS This Report ----------- 3(i) Certificate of Incorporation 24 3(ii) Bylaws 25-35 4 Instrument Defining the Rights of Security Holders, Including Indentures 36 10 Material Contracts 37-41 13 Annual Report 42 21 Subsidiaries of the Registrant 43 23 Consent of Independent Public Accountants 44
(B) REPORTS ON FORM 8-K No report on Form 8-K was filed by the Corporation during the last quarter of the fiscal year ended November 30, 1993. 14 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders and the Board of Directors, Ameron, Inc.: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in Ameron, Inc.'s Annual Report to Stockholders incorporated by reference in this Form 10-K, and have issued our report thereon dated January 13, 1994. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed in the index above are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN & CO. Los Angeles, California January 13, 1994 15 AMERON, INC. AND SUBSIDIARIES SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT (In thousands)
Retire- ments, Balance Write- at Addi- Downs Balance Begin- tions and at ning at Cost Sales Other End Classification of Year (a) (b) (c) of Year ================================ =========== =========== =========== =========== =========== Year ended November 30, 1993 Land $ 21,457 $ 125 $ 37 $ (85) $ 21,460 Buildings 44,475 1,484 3,386 (362) 42,211 Machinery and equipment 201,604 14,230 29,531 4,769 191,072 Construction in progress 10,092 (1,142) 994 (592) 7,364 ----------- ----------- ----------- ----------- ----------- $ 277,628 $ 14,697 $ 33,948 $ 3,730 $ 262,107 =========== =========== =========== =========== =========== Year ended November 30, 1992 Land $ 20,177 $ 841 $ 95 $ 534 $ 21,457 Buildings 40,964 3,282 513 742 44,475 Machinery and equipment 184,630 17,933 1,224 265 201,604 Construction in progress 10,567 (1,029) 4 558 10,092 ----------- ----------- ----------- ----------- ----------- $ 256,338 $ 21,027 $ 1,836 $ 2,099 $ 277,628 =========== =========== =========== =========== =========== Year ended November 30, 1991 Land $ 16,736 $ 5,378 $ 1,631 $ (306) $ 20,177 Buildings 47,376 2,405 8,574 (243) 40,964 Machinery and equipment 181,853 15,726 13,852 903 184,630 Construction in progress 8,060 3,018 469 (42) 10,567 ----------- ----------- ----------- ----------- ----------- $ 254,025 $ 26,527 $ 24,526 $ 312 $ 256,338 =========== =========== =========== =========== =========== (a) Additions at cost are net of transfers from construction in progress. (b) Property, plant and equipment write-offs and write-downs of original costs associated with restructuring activities totaled $27,400 in 1993 and $8,891 in 1991. (c) Primarily the effect of the translation from foreign currencies to U.S. dollars and reclassifications.
16 AMERON, INC. AND SUBSIDIARIES SCHEDULE VI - ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT (In thousands)
Addi- Balance tions Retire- at Charged ments Balance Begin- to Costs and at ning and Sales Other End Classification of Year Expense (a) (b) of Year ================================ =========== =========== =========== =========== =========== Year ended November 30, 1993 Buildings $ 23,052 $ 2,402 $ 2,249 $ (105) $ 23,100 Machinery and equipment 126,446 14,042 19,062 4,382 125,808 ----------- ----------- ----------- ----------- ----------- $ 149,498 $ 16,444 $ 21,311 $ 4,277 $ 148,908 =========== =========== =========== =========== =========== Year ended November 30, 1992 Buildings $ 21,900 $ 2,275 $ 224 $ (899) $ 23,052 Machinery and equipment 112,237 13,374 815 1,650 126,446 ----------- ----------- ----------- ----------- ----------- $ 134,137 $ 15,649 $ 1,039 $ 751 $ 149,498 =========== =========== =========== =========== =========== Year ended November 30, 1991 Buildings $ 23,899 $ 2,193 $ 4,089 $ (103) $ 21,900 Machinery and equipment 102,348 14,511 4,368 (254) 112,237 ----------- ----------- ----------- ----------- ----------- $ 126,247 $ 16,704 $ 8,457 $ (357) $ 134,137 =========== =========== =========== =========== =========== (a) Property, plant and equipment write-offs of accumulated depreciation associated with restructuring activities totaled $16,285 in 1993. (b) Primarily the effect of the translation from foreign currencies to U.S. dollars and reclassifications.
17 AMERON, INC. AND SUBSIDIARIES SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED NOVEMBER 30, 1993 (In thousands)
Addi- Deduc- tions tions, Balance Charged Pay- Reclas- at to ments sifica- Balance Begin- Costs and tions at ning and Write- and End Classification of Year Expense offs Others of Year ===================== =========== =========== =========== =========== =========== Deducted from asset accounts Allowance for doubtful accounts $ 5,614 $ 1,458 $ 2,296 $ (461) $ 4,315 Reserve for realization of investments in affiliates - $ 7,323 - - $ 7,323 Reserve for write-down of assets related to certain foreign affiliates $ 8,632 $ 3,392 278 $ 244 $ 11,990 Included in current liabilities Reserve for pending claims and litigation $ 6,060 $ 6,523 $ 5,107 $ (288) $ 7,188 Restructuring reserve - $ 2,572 $ 246 $ 1,772 $ 4,098 Other reserves - $ 1,221 $ 339 $ 915 $ 1,797 Reserve for self-insured programs $ 4,653 $ 11,432 $ 8,659 $ 115 $ 7,541 Included in long term liabilities Reserve for pending claims and litigation $ 2,257 $ 7,790 $ 842 $ 279 $ 9,484 Other reserves - $ 951 - $ 771 $ 1,722 Reserve for self-insured programs $ 4,867 - - - $ 4,867
18 AMERON, INC. AND SUBSIDIARIES SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED NOVEMBER 30, 1992 (In thousands)
Addi- Deduc- tions tions, Balance Charged Pay- Reclas- at to ments sifica- Balance Begin- Costs and tions at ning and Write- and End Classification of Year Expense offs Others of Year ===================== =========== =========== =========== =========== =========== Deducted from asset accounts Allowance for doubtful accounts $ 4,838 $ 1,705 $ 851 $ (78) $ 5,614 Reserve for write-down of assets related to certain foreign affiliates $ 7,003 $ 1,629 - - $ 8,632 Included in current liabilities Reserve for pending claims and litigation $ 3,296 $ 4,149 $ 1,440 $ 55 $ 6,060 Reserve for self-insured programs $ 3,769 $ 11,762 $ 10,278 $ (600) $ 4,653 Included in long term liabilities Reserve for pending claims and litigation $ 2,045 $ 511 $ 239 $ (60) $ 2,257 Reserve for self-insured programs $ 3,962 - - $ 905 $ 4,867
19 AMERON, INC. AND SUBSIDIARIES SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEAR ENDED NOVEMBER 30, 1991 (In thousands)
Addi- Deduc- tions tions, Balance Charged Pay- Reclas- at to ments sifica- Balance Begin- Costs and tions at ning and Write- and End Classification of Year Expense offs Others of Year ===================== =========== =========== =========== =========== =========== Deducted from asset accounts: Allowance for doubtful accounts $ 3,923 $ 1,404 $ 753 $ 264 $ 4,838 Reserve for write-down of assets related to certain foreign affiliates $ 6,200 $ 712 - $ 91 $ 7,003 Included in current liabilities: Reserve for pending claims and litigation $ 2,200 $ 2,859 $ 3,163 $ 1,400 $ 3,296 Reserve for self-insured programs $ 3,263 $ 12,698 $ 12,693 $ 501 $ 3,769 Included in long term liabilities: Reserve for pending claims and litigation $ 1,131 $ 620 $ 23 $ 317 $ 2,045 Reserve for self-insured programs $ 4,266 - - $ (304) $ 3,962
20 AMERON, INC. AND SUBSIDIARIES SCHEDULE IX - SHORT TERM BORROWINGS (In thousands)
Maximum Average Amount Amount Weighted Out- Out- Average stand- stand- Interest Balance Weighted ing ing Rate at Average During During During Category of Aggregate End Interest the the the Short Term Borrowings of Year Rate Year Year Year =============================================== ========== ======= ========== ========== ========= Year ended November 30, 1993 Foreign $ 2,021 24.0% $ 3,179 $ 2,071 22.3% Year ended November 30, 1992 Foreign $ 1,027 11.6% $ 15,884 $ 7,886 11.3% Year ended November 30, 1991 Foreign $ 11,452 10.8% $ 17,157 $ 12,937 11.1%
The increased interest rates in 1993 reflect a higher percentage of short-term borrowings owed by the Company's Colombian subsidiary. 21 AMERON, INC. AND SUBSIDIARIES SCHEDULE X SUPPLEMENTARY INCOME STATEMENT INFORMATION (In thousands)
FOR THE YEARS ENDED NOVEMBER 30, ======================================== Item 1993 1992 1991 ==================================== ============ ============ ============ Maintenance and repairs $ 18,632 $ 19,527 $ 21,912
22 Pursuant to the requirements of Section 13 or 15(d) 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. By: /s/Javier Solis _______________________________________________ Javier Solis, Senior Vice President & Secretary Date: February 25, 1994 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Date: /s/James S. Marlen Chief Executive Officer, President --------------------- and Director (Principal Executive James S. Marlen Officer) Date: /s/Gary Wagner Senior Vice President and Chief --------------------- Financial Officer, Treasurer Gary Wagner (Principal Financial and Accounting Officer) Date: /s/Donald H. Albrecht Director --------------------- Donald H. Albrecht Date: /s/Victor K. Atkins Director --------------------- Victor K. Atkins Date: /s/John F. King Director --------------------- John F. King Date: /s/William I. McKay Director --------------------- William I. McKay Date: /s/Richard J. Pearson Director --------------------- Richard J. Pearson Date: /s/Lawrence R. Tollenaere Director, Chairman of the Board ------------------------- Lawrence R. Tollenaere Date: ________________________________ Director Robert Toxe Date: ________________________________ Director F. H. Fentener van Vlissingen 23 EX-3.(I) 2 EXHIBIT 3(I) CERTIFICATE OF INCORPORATION ---------------------------- Incorporated by reference to Annual Report on Form 10-K filed with the Commission for Registrant's fiscal year ended November 30, 1988. EXHIBIT 3(I) 24 EX-3.(II) 3 EXHIBIT 3(II) BYLAWS AMERON, INC. ------------ (a Delaware corporation) BYLAWS (Restated with amendments through June 14, 1993) ARTICLE I Offices SECTION 1.01. Registered Office. The registered office of AMERON, INC. (hereinafter called the Corporation) in the State of Delaware shall be at 1209 Orange Street, City of Wilmington, County of New Castle, and the name of the registered agent in charge thereof shall be The Corporation Trust Company. SECTION 1.02. Other Offices. The Corporation may also have an office or offices at such other place or places, either within or without the State of Delaware, as the Board of Directors (hereinafter called the Board) may from time to time determine or as the business of the Corporation may require. ARTICLE II Meetings of Stockholders SECTION 2.01. Annual Meetings. Annual Meetings of the stockholders of the Corporation for the purpose of electing directors and for the transaction of such other proper business as may come before such meetings may be held at such time, date and place as the Board shall determine by resolution. SECTION 2.02. Special Meetings. Special meetings of the stockholders of the Corporation for any purpose may only be called in accordance with the provisions of the Certificate of Incorporation. SECTION 2.03. Place of Meetings. All meetings of the stockholders shall be held at such places, within or without the State of Delaware, as may be designated by the Board. 25 SECTION 2.04. Notice of Meetings. Except as otherwise required by law, notice of each meeting of the stockholders, whether annual or special, shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder of record entitled to vote at such meeting by delivering a typewritten or printed notice thereof to him personally, or by depositing such notice in the United States mail, in a postage prepaid envelope, directed to him at his post office address furnished by him to the Secretary of the Corporation for such purpose or, if he shall not have furnished to the Secretary his address for such purpose, then at his post office address last known to the Secretary, or by transmitting a notice thereof to him at such address by telegraph, cable, or wireless. Except as otherwise expressly required by law, no publication of any notice of a meeting of the stockholders shall be required. Every notice of a meeting of the stockholders shall state the place, date and hour of the meeting, and, in the case of a special meeting, shall also state the purpose or purposes for which the meeting is called. Notice of any meeting of stockholders shall not be required to be given to any stockholder to whom notice may be omitted pursuant to applicable Delaware law or who shall have waived such notice and such notice shall be deemed waived by any stockholder who shall attend such meeting in person or by proxy, except as a stockholder who shall attend such meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Except as otherwise expressly required by law, notice of any adjourned meeting of the stockholders need not be given if the time and place thereof are announced at the meeting at which the adjournment is taken. SECTION 2.05. Quorum. Except as otherwise required by law, the holders of record of a majority in voting interest of the shares of stock of the Corporation entitled to be voted thereat, present in person or by proxy, shall constitute a quorum for the transaction of business at any meeting of the stockholders of the Corporation or any adjournment thereof. In the absence of a quorum at any meeting or any adjournment thereof, a majority in voting interest of the stockholders present in person or by proxy and entitled to vote thereat or, in the absence therefrom of all the stockholders, any officer entitled to preside at, or to act as secretary of, such meeting may adjourn such meeting from time to time. At any such adjourned meeting at which a quorum is present any business may be transacted which might have been transacted at the meeting as originally called. SECTION 2.06. Voting. (a) Each stockholder shall, at each meeting of the stockholders, be entitled to vote in person or by proxy each share or fractional share of the stock of the Corporation having voting rights on the matter in question and which shall have been held by him and registered in his name on the books of the Corporation: (i) on the date fixed pursuant to Section 6.05 of these Bylaws as the record date for the determination of stockholders entitled to notice of and to vote at such meeting, or (ii) if no such record date shall have been so fixed, then (a) at the close of business on the day next preceding the day on which notice of the meeting shall be given or (b) if notice of the meeting shall be waived, at the close of business on the day next preceding the day on which the meeting shall be held. (b) Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors in such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes. Persons holding stock of the Corporation in a fiduciary capacity shall be entitled to vote such stock. Persons whose stock is pledged shall be entitled to vote, unless in the transfer by the pledgor on the books of the Corporation he shall have expressly empowered the pledges to vote thereon, in which case only the pledges, or his proxy, may represent 26 such stock and vote thereon. Stock having voting power standing of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants in common, tenants by entirety or otherwise, or with respect to which two or more persons have the same fiduciary relationship, shall be voted in accordance with the provisions of the General Corporation Law of the State of Delaware. (c) Any such voting rights may be exercised by the stockholder entitled thereto in person or by his proxy appointed by an instrument in writing, subscribed by such stockholder or by his attorney thereunto authorized and delivered to the secretary of the meeting; provided, however, that no proxy shall be voted or acted upon after three years from its date unless said proxy shall provide for a longer period. The attendance at any meeting of a stockholder who may theretofore have given a proxy shall not have the effect of revoking the same unless he shall in writing so notify the secretary of the meeting prior to the voting of the proxy. At any meeting of the stockholders all matters, except as otherwise provided in the Certificate of Incorporation, in these Bylaws or by law, shall be decided by the vote of a majority in voting interest of the stockholders present in person or by proxy and entitled to vote thereat and thereon, a quorum being present. The vote at any meeting of the stockholders on any question need not be by ballot, unless so directed by the chairman of the meeting. On a vote by ballot each ballot shall be signed by the stockholder voting, or by his proxy, if there be such proxy, and it shall state the number of shares voted. SECTION 2.07. List of Stockholders. The Secretary of the Corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. SECTION 2.08. Judges. If at any meeting of the stockholders a vote by written ballot shall be taken on any question, the chairman of such meeting may appoint a judge or judges to act with respect to such vote. Each judge so appointed shall first subscribe an oath faithfully to execute the duties of a judge at such meeting with strict impartiality and according to the best of his ability. Such judges shall decide upon the qualifications of the voters and shall report the number of shares represented at the meeting and entitled to vote on such question, shall conduct and accept the votes, and, when the voting is completed, shall ascertain and report the number of shares voted respectively for and against the question. Reports of judges shall be in writing and subscribed and delivered by them to the Secretary of the Corporation. The judges need not be stockholders of the Corporation, and any officer of the Corporation may be a judge on any question other than a vote for or against a proposal in which he shall have a material interest. SECTION 2.09. Action Without Meeting. No action shall be taken by the stockholders except at an annual or special meeting of stockholders. No action shall be taken by stockholders by written consent. 27 SECTION 2.10 Notice of Stockholder Business. At any annual stockholders' meeting, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual stockholders' meeting, business must be (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors; (ii) otherwise properly brought before the meeting by or at the direction of the Board of Directors; or (iii) otherwise properly brought before the meeting by a stockholder. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be received at the principal office of the Corporation not less than sixty (60) days nor more than one hundred and twenty (120) days prior to the meeting; provided, however, that in the event that the first public disclosure (whether by mailing of a notice to shareholders, press release or otherwise) of the date of the meeting is made less than sixty-five (65) days prior to the date of the meeting, notice by the stockholder will be timely if received not later than the close of business on the tenth day following the day on which such first public disclosure was made. A stockholder's notice to the Secretary shall set forth, as to each matter the stockholder proposes to bring before the annual meeting, (i) the reasons for conducting such business at the annual meeting; (ii) the name and address as they appear on the Corporation's stock register, of the stockholder proposing such business; (iii) the number of shares of capital stock of the Corporation which are beneficially owned by the stockholder; and (iv) any material interest of the stockholder in such business. Notwithstanding any other provision of these Bylaws, no business shall be conducted at an annual stockholders' meeting except in accordance with the procedures set forth in this Section 2.10. If the presiding officer of an annual stockholders' meeting determines and declares that business was not properly brought before the meeting in accordance with this Section 2.10, any such business shall not be transacted. ARTICLE III Board of Directors SECTION 3.01. General Powers. The property, business and affairs of the Corporation shall be managed by the Board. SECTION 3.02. Number and Term of Office. The number of directors shall not be less than six (6) nor more than nine (9), the exact number of which shall be fixed by Bylaw duly adopted by the Board. The number of directors of the Corporation shall be nine (9). The Board shall be divided into three classes, Class I, Class II and Class III. Such classes shall be as nearly equal in number of directors as possible. Each director shall serve for a term ending on the third annual meeting following the annual meeting at which such director was elected; provided, however, that the directors first elected to Class I shall serve for a term ending at the annual meeting to be held in 1987, the directors first elected to Class II shall serve for a term ending at the annual meeting to be held in 1988 and the directors first elected to Class III shall serve for a term ending at the annual meeting to be held in 1989. Directors need not be stockholders. Each of the directors of the Corporation shall hold office until his successor shall have been duly elected and shall qualify or until he shall resign or shall have been removed in the manner hereinafter provided. SECTION 3.03. Election of Directors. In any election of directors of the Corporation, a holder of any class or series of stock then entitled to vote in such election shall be entitled to as many votes as shall equal (i) the number of votes which (except for this Section as to cumulative voting) he would be entitled to cast for the election of directors with respect to his shares of stock multiplied by (ii) the number of directors to be elected in the election in which his class or series of shares is entitled to vote, and each stockholder may cast all of such votes for a single director or for any two or more of them as he may see fit. 28 SECTION 3.04. Resignations. Any director of the Corporation may resign at any time by giving written notice to the Board or to the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein, or, if the time be not specified, it shall take effect immediately upon its receipt; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 3.05. Vacancies. Except as otherwise provided in the Certificate of Incorporation, any vacancy in the Board, whether because of death, resignation, disqualification, an increase in the number of directors, or any other cause, may be filled by vote of the majority of the remaining directors, although less than a quorum. Each director so chosen to fill a vacancy shall hold office for the unexpired term of his predecessor or until his successor shall have been elected and shall qualify or until he shall resign or shall have been removed in the manner hereinafter provided. SECTION 3.06. Place of Meeting, Etc. The Board may hold any of its meetings at such place or places within or without the State of Delaware as the Board may from time to time by resolution designate or as shall be designated by the person or persons calling the meeting or in the notice or a waiver of notice of any such meeting. Directors may participate in any regular or special meeting of the Board by means of conference telephone or similar communications equipment pursuant to which all persons participating in the meeting of the Board can hear each other, and such participation shall constitute presence in person at such meeting. SECTION 3.07. First Meeting. The Board shall meet as soon as practicable after each annual election of directors and notice of such first meeting shall not be required. SECTION 3.08. Regular Meetings. Regular meetings of the Board may be held at such times as the Board shall from time to time by resolution determine. If any day fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting shall be held at the same hour and place on the next succeeding business day not a legal holiday. Except as provided by law, notice of regular meetings need not be given. SECTION 3.09. Special Meetings. Special meetings of the Board shall be held whenever called by the Chairman of the Board, the President or a majority of the authorized number of directors. Except as otherwise provided by law or by these Bylaws, notice of the time and place of each such special meeting shall be mailed to each director, addressed to him at his residence or usual place of business, at least five (5) days before the day on which the meeting is to be held, or shall be sent to him at such place by telegraph or cable or be delivered personally not less than twenty-four (24) hours before the time at which the meeting is to be held. Except where otherwise required by law or by these Bylaws, notice of the purpose of a special meeting need not be given. Notice of any meeting of the Board shall not be required to be given to any director who is present at such meeting, except a director who shall attend such meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. SECTION 3.10. Quorum and Manner of Acting. Except as otherwise provided in these Bylaws or by law, the presence of a majority of the number of directors then currently specified as the size of the Board pursuant to Section 3.02 of these Bylaws shall be required to constitute a quorum for the transaction of business at any meeting of the Board, and all matters shall be decided at any such meeting, a quorum being present, by the affirmative votes of a majority of the directors present. In the absence of a quorum, a majority of directors present at any meeting may adjourn the same from time to time until a quorum shall be present. Notice of any adjourned meeting need not be given. The directors shall act only as a Board, and the individual directors shall have no power as such. 29 SECTION 3.11. Action by Consent. Any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if a written consent thereto is signed by all members of the Board or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board or committee. SECTION 3.12. Removal of Directors. Subject to the provisions of the Certificate of Incorporation, a director may be removed at any time, for cause only. SECTION 3.13. Compensation. The directors shall receive only such compensation for their services as directors as may be allowed by resolution of the Board. The Board may also provide that the Corporation shall reimburse each such director for any expense incurred by him on account of his attendance at any meetings of the Board or Committees of the Board. Neither the payment of such compensation nor the reimbursement of such expenses shall be construed to preclude any director from serving the Corporation or its subsidiaries in any other capacity and receiving compensation therefor. SECTION 3.14. Committees. The Board may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. Any such committee, to the extent provided in the resolution of the Board and except as otherwise limited by law, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. Any such committee shall keep written minutes of its meetings and report the same to the Board at the next regular meeting of the Board. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of such absent or disqualified member. SECTION 3.15. Notice of Director Nominations. Only persons who are nominated in accordance with the procedures set forth in this Section 3.15 shall be eligible for election as Director at annual meeting of the stockholders. Nominations of candidates for election to the Board of Directors of the Corporation at any annual meeting may be made only by or at the direction of the Board of Directors or by a stockholder entitled to vote at such annual meeting. All such nominations, except those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the Corporation of the stockholder's intention to make such nomination. To be timely, any such notice must be received at the principal office of the Corporation not less than sixty (60) no more than one hundred twenty (120) days prior to the date of such annual meeting; provided, however, that in the event that the first public disclosure (whether by mailing of a notice to stockholders, press release or otherwise) of the date of such annual meeting is made less than sixty-five (65) days prior to the date of such annual meeting, notice by the stockholder will be timely if received not later than the close of business on the tenth day following the day on which such first public disclosure was made. Such stockholder's notice with respect to a proposed nomination shall set forth (i) the name, age, business and residence address and principal occupation or employment of each nominee proposed in such notice; (ii) the name and address of the stockholder giving the notice as the same appears in the Corporation's stock register; (iii) the number of shares of capital stock of the Corporation which are beneficially owned by each such nominee and by such stockholder; and (iv) such other information concerning each such nominee as would be required, under the rules of the Securities and Exchange Commission, in a proxy statement soliciting proxies for the election of such nominee. Such notice must also include a signed consent of each such nominee to serve as a director of the Corporation, if elected. In the event that a person is validly designated as a nominee in accordance with the procedures specified above and shall thereafter become unable or unwilling to stand for election to the Board of Directors, the Board of Directors or the stockholder who proposed such nominee, as the case may be, may designate a substitute nominee; provided, however, that in the case of persons not nominated by the Board of Directors, 30 such a substitution may only be made if notice as provided above in this Section 3.15 is received at the principal office of the Corporation not later than the later of (i) thirty (30) days prior to the date of the annual meeting or (ii) five (5) days after the stockholder proposing the original nominee first learned that such original nominee has become unable or unwilling to stand for election. ARTICLE IV Officers SECTION 4.01. Officers, Election and Removal. The officers of the Corporation shall be a President, a Vice President, a Secretary, and a Treasurer. The Corporation may also have at the discretion of the Board of Directors an Executive Vice President, one or more additional Vice Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers, and such other officers as may be elected by the Board of Directors. Any two or more offices may be held by the same person except that the office of President and the office of Secretary may not be held by the same person. The officers of the Corporation shall be elected annually by the Board of Directors at their first meeting after the annual meeting of the stockholders and, unless they shall sooner resign, be removed or become disqualified, shall hold office until their respective successors shall be elected and qualify. The Chairman of the Board and the President shall be elected from among the Directors but the other officers need not be Directors. Any officer may be removed either with or without cause by a majority of the Directors at the time in office at any regular or special meeting of the Board of Directors. SECTION 4.02. Chairman of the Board. The Chairman of the Board, if there shall be one, shall preside at all meetings of the stockholders and of the Board of Directors. He shall, ex officio, be a member of all committees appointed or constituted by the Board of Directors, including the Executive Committee. SECTION 4.03. President, Executive Vice President and Vice President. The President shall be responsible to the Board of Directors for all actions and activities of the Corporation. The Executive Vice President, if there shall be one, shall act for the President in the President's absence. He shall have such other powers and be required to perform such other duties as the President and the Board of Directors shall prescribe. The Vice President, or if there shall be more than one such officer elected, shall have such powers and perform such duties as may be delegated to him or them by the President or the Board of Directors. SECTION 4.04. Secretary. The Secretary shall issue notices for all meetings, shall keep their minutes, shall have charge of the seal and the Corporate books, and shall make such reports and perform such other duties as are incident to his office, or are properly required of him by the Board of Directors. He shall also keep at the principal office of the corporation or cause to be kept at the office of the Corporation's transfer agent, a stock transfer book, and he shall keep or cause to be kept by the Corporation's registrar, a share registry book. The Secretary may be required to perform such duties of the Treasurer as may be assigned to him from time to time. 31 SECTION 4.05. Treasurer. The Treasurer shall have the custody of all moneys and securities of the Corporation and shall keep regular books of account. He shall disburse the funds of the Corporation in payment of the just demands against the Corporation or as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and to the Board of Directors from time to time as may be required of him, an account of all his transactions as Treasurer and of the financial condition of the Corporation. He shall perform all other duties incident to his office or that are properly required of him by the Board. He shall give the Corporation a bond, if required by the Board of Directors, in a sum, and with one or more sureties, satisfactory to the Board of Directors, for the faithful performance of the duties of his office, and for the restoration to the Corporation, in case of his death, resignation, retirement, or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. SECTION 4.06. Incapacity. In case of the absence or inability of any officer of the Corporation to act and of any person herein authorized to act in his place, the Board of Directors may from time to time delegate the powers or duties of such officer to any other officer or any Director or other person whom they may select. SECTION 4.07. Vacancies. Vacancies in any office arising from any cause may be filled by the Directors at any regular or special meeting. SECTION 4.08. Other officers. The Board of Directors may appoint such other officers and agents as it shall deem necessary or expedient, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors. SECTION 4.09. Salaries. The salaries of all officers and agents of the Corporation shall be fixed by the Board of Directors. Nothing contained herein shall preclude any officer from serving the Corporation, or any subsidiary corporation, in any other capacity and receiving proper compensation therefor. ARTICLE V Contracts, Checks, Drafts, Bank Accounts, Etc. SECTION 5.01. Execution of Contracts. The Board, except as in these Bylaws otherwise provided, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances; and unless so authorized by the Board or by these Bylaws, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or in any amount. SECTION 5.02. Checks, Drafts, Etc. All checks, drafts or other orders for payment of money, notes or other evidence of indebtedness, issued in the name of or payable to the Corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the Board. Each such officer, assistant, agent or attorney shall give such bond, if any, as the Board may require. SECTION 5.03. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board may select, or as may be selected by any officer or officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation to whom such power shall have been delegated by the Board and shall 32 be drawn out only by check signed by persons designated, from time to time, by resolution of the Board of Directors. SECTION 5.04. General and Special Bank Accounts. The Board may from time to time authorize the opening and keeping of general and special bank accounts with such banks, trust companies or other depositories as the Board may select or as may be selected by any officer or officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation to whom such power shall have been delegated by the Board. The Board may make such special rules and regulations with respect to such bank accounts, not inconsistent with the provisions of these Bylaws, as it may deem expedient. ARTICLE VI Shares and Their Transfer SECTION 6.01. Certificates for Stock. Every owner of stock of the Corporation shall be entitled to have a certificate or certificates, to be in such form as the Board shall prescribe, certifying the number and class of shares of the stock of the Corporation owned by him. The certificates representing shares of such stock shall be numbered in the order in which they shall be issued and shall be signed in the name of the Corporation by the President or a Vice President, and by the Secretary or an Assistant Secretary or by the Treasurer or an Assistant Treasurer. Any of or all of the signatures on the certificates may be a facsimile. In case any officer, transfer agent or registrar who has signed, or whose facsimile signature has been placed upon, any such certificate, shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may nevertheless be issued by the Corporation with the same effect as though the person who signed such certificate, or whose facsimile signature shall have been placed thereupon, were such officer, transfer agent or registrar at the date of issue. A record shall be kept of the respective names of the persons, firms or corporations owning the stock represented by such certificates, the number and class of shares represented by such certificates, respectively, and the respective dates thereof, and in case of cancellation, the respective dates of cancellation. Every certificate surrendered to the Corporation for exchange or transfer shall be cancelled, and no new certificate or certificates shall be issued in exchange for any existing certificate until such existing certificate shall have been so cancelled, except in cases provided for in Section 6.04. SECTION 6.02. Transfers of Stock. Transfers of shares of stock of the Corporation shall be made only on the books of the Corporation by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary, or with a transfer clerk or a transfer agent appointed as provided in Section 6.03, and upon surrender of the certificate or certificates for such shares properly endorsed and the payment of all taxes thereon. The person in whose name shares of stock stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation. Whenever any transfer of shares shall be made for collateral security, and not absolutely, such fact shall be so expressed in the entry of transfer if, when the certificate or certificates shall be presented to the Corporation for transfer, both the transferor and the transferee request the Corporation to do so. SECTION 6.03. Regulations. The Board may make such rules and regulations as it may deem expedient, not inconsistent with these Bylaws, concerning the issue, transfer and registration of certificates for shares of the stock of the Corporation. It may appoint, or authorize any officer or officers to appoint, one or more transfer clerks or one or more transfer agents and one or more registrars, and may require all certificates for stock to bear the signature or signatures of any of them. 33 SECTION 6.04. Lost, Stolen, Destroyed, and Mutilated Certificates. In any case of loss, theft, destruction, or mutilation of any certificate of stock, another may be issued in its place upon proof of such loss, theft, destruction, or mutilation and upon the giving of a bond of indemnity to the Corporation in such form and in such sum as the Board may direct; provided, however, that a new certificate may be issued without requiring any bond when, in the judgment of the Board, it is proper so to do. SECTION 6.05. Fixing Date for Determination of Stockholders of Record. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any other change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. If in any case involving the determination of stockholders for any purpose other than notice of or voting at a meeting of stockholders, the Board shall not fix such a record date, the record date for determining stockholders for such purpose shall be the close of business on the day on which the Board shall adopt the resolution relating thereto. A determination of stockholders entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of such meeting; provided, however, that the Board may fix a new record date for the adjourned meeting. ARTICLE VII Indemnification SECTION 7.01. (DELETED MARCH 30, 1987) ARTICLE VIII Executive Committee SECTION 8.01. Members and Powers. The Board, by resolution adopted by majority of its total number, may annually elect three or more of its number to constitute an Executive Committee of the Board to have authority to exercise to the extent permitted by law, in the intervals between meetings of the Board, all powers of the Board, except to amend or repeal these Bylaws, or to fill vacancies in its own membership or in the Board, or to declare dividends. The actions of the Executive Committee shall be ratified at the next succeeding meeting of the Board. SECTION 8.02. Meetings. The Executive Committee may adopt rules governing the method of the notice of the time and place of its meetings and the conduct of the proceedings thereat; but, in the absence of such rules, meetings of the Executive Committee may be called by any member of the Committee. Notice to each member, regarding the time and place of holding the proposed meeting, shall be given to each member verbally or by mail at least twenty-four (24) hours before the time of the meeting. No notice of a meeting will be required if all members of the Committee are in attendance, or if notice is waived. The Executive Committee shall keep a record of its acts and proceedings. SECTION 8.03. Quorum. To constitute a quorum of the Executive Committee for the transaction of business at any meeting, a majority shall be present and the act of a majority of the whole Committee shall be necessary to constitute the act of the Committee. 34 SECTION 8.04. Removal of Members. Any member of the Executive Committee may be removed with or without cause by resolution of the Board, adopted by a majority of its total number then in office. SECTION 8.05. Vacancies. Vacancies in the Executive Committee shall be filled in the same manner as for the original appointment to membership. ARTICLE IX Miscellaneous SECTION 9.01. Seal. The Corporate seal of the Corporation shall consist of two concentric circles, between which is the name of the Corporation, and in the center shall be inscribed the year of its incorporation and the words, "Corporate Seal, Delaware." SECTION 9.02. Waiver of Notices. Whenever notice is required to be given by these Bylaws or the Certificate of Incorporation or by law, the person entitled to said notice may waive such notice in writing, either before or after the time stated therein, and such waiver shall be deemed equivalent to notice. SECTION 9.03. Amendments. Except as otherwise provided herein or in the Certificate of Incorporation, these Bylaws or any of them, may be altered, amended, repealed or rescinded and new Bylaws may be adopted, (i) by the Board, or (ii) by the stockholders, at any annual meeting of stockholders, or at any special meeting of stockholders, provided that notice of such proposed alteration, amendment, repeal, rescission or adoption is given in the notice of meeting. EXHIBIT 3(II) 35 EX-4 4 EXHIBIT 4 INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES ------------------------------------------------------------------------- Exhibit 4 is: 1. Note Agreement dated September 1, 1990 re: Senior Notes due September 15, 2000, which document is incorporated by reference to Annual Report on Form 10-K filed with the Commission for Registrant's fiscal year ended November 30, 1990. 2. Note Agreement dated November 15, 1991 re: Senior Notes due November 15, 1998, which document is incorporated by reference to Annual Report on Form 10-K filed with the Commission for Registrant's fiscal year ended November 30, 1991. EXHIBIT 4 36 EX-10 5 EXHIBIT 10 MATERIAL CONTRACTS Exhibit 10 is Employment Agreement between James S. Marlen and Registrant April 19, 1993 Mr. James S. Marlen 3773 Maple Leaf Hill Fairlawn, Ohio 44333 Dear Jim, On behalf of Larry Tollenaere and the Board of Directors of Ameron, Inc., I am delighted to extend to you the position of President and Chief Executive Officer. Following our earlier meetings and discussions over the recent weeks, we feel strongly that you are the right person to lead and direct Ameron and are enthusiastic about you joining the company. Terms and conditions of this offer, which you have orally accepted are as follows: 1. POSITION AND TITLE . President and Chief Executive Officer . Member of the Board of Directors . Jim Marlen and Larry Tollenaere to develop specific written responsibilities for new Chairman (non CEO) position. . Larry Tollenaere to serve as Chairman until December 31, 1994. . Jim Marlen and the Board agree that he will become Chairman of the Board on January 1, 1995. . Failure to meet this provision will be deemed to be a termination under the employment contract similar to other major provisions of this agreement. 2. BASE SALARY . $400,000 per year . Opportunity for future merit increases, annual reviews 37 3. BUY-OUT/SIGN-ON BONUS . Ameron to provide a lump sum cash payment of $600,000. This payment represents compensation for stock and bonuses left behind as well as an incentive for Jim Marlen to join the Company. . If Jim Marlen voluntarily resigns from Ameron or is terminated for cause during the first twelve months of employment, he will return the full amount of this payment in cash to the Company. 4. SHORT-TERM INCENTIVE BONUS . Goals and guidelines to be approved by the Board of Directors . Guaranteed bonus of $100,000 for fiscal year l993. Guaranteed minimum bonus at 40% of base compensation for fiscal year l994. . At present, target bonus equal to 50% of base salary is paid for attainment of 100% of goal; threshold bonus equal to 40% of the base for attainment of 80% of goal; and bonus awards for attainment exceeding 100% of goal determined by the Board of Directors at its discretion. 5. STOCK OPTION PLAN . Initial grant of 30,000 shares under Ameron's incentive stock compensation plan. . Stock to be split 50/50 between restricted stock and stock options. . All option grants shall be exercisable over a five year period in four installments each 25% at the completion of years one through four. . Subsequent annual stock options beginning in FY94 will follow the current guideline of one times base compensation. Awards greater than this guideline will be at the discretion of the Board. . The Board is willing to take under advisement formulas or plans for payouts that exceed these guidelines. 38 6. EMPLOYMENT CONTRACT . Initial employment contract for three years. . In the event of termination without cause at any time during this three-year period, severance will be equal to current base compensation plus highest bonus paid during contract period, but not less than guaranteed FY94 bonus, times a factor of three. . Prior to the commencement of the 31st month of this contract, the Board will review terms for the future extension of the contract. . If agreement cannot be reached on those terms, Jim Marlen may exercise the severance provision under the three-year agreement. . In the event of termination for reasons other than cause, including change of control, all shares (both restricted and stock options) would fully vest. . In the event of change of control (as defined under Ameron's SERP plans, evidenced by a filing with the Securities and Exchange Commission of certain actions which, if consummated, would cause a change in control), the severance payment would be 2.5 times combined salary and highest bonus during the contract period, but not less than FY94 bonus. . If Jim Marlen voluntarily resigns or is terminated for cause from Ameron, he will not be entitled to severance provisions under his contract. 7. REAL ESTATE/RELOCATION . Reimbursement of standard escrow and incidental costs on the sale of present home plus moving expenses and other directly related escrow and incidental costs attributable to the purchase of a new residence in Southern California. . Use of Company's temporary condominium in Southern California until permanent housing is located, not to exceed one year. . For items listed above, Company to gross up income so as to result in no tax impact to Jim Marlen. . Housing subsidy of $5,000 per month for three years to help offset the increased cost of Southern California housing. . If current residence not sold following good faith effort by September 1993, company to purchase home at appraised value. Jim Marlen to pick an appraiser, Ameron to pick an appraiser and mutual agreement on a prominent realty company to provide a third appraisal. The average of the three appraisals to be the purchase price of Jim Marlen's home if not sold by September 1993. 39 8. PENSION . Company agrees to provide Jim Marlen with pension benefits that he leaves behind at GenCorp, roughly estimated to be a pension benefit of $109,000 per year beginning at age 65. In addition, Jim Marlen is entitled to separate pension benefits under the Ameron plan. . In order for Company to provide pension benefits not less than Jim Marlen's existing plan, it will add two years of credit for each year of service during the first 9 1/2 years of his employment. . Vesting of pension benefits will begin with commencement of employment. . In the event Jim Marlen is terminated for reasons other than cause and/or a change of control takes place, Jim will be entitled to vested pension benefits plus three years of additional service credit. In the event Jim obtains new employment within three years of leaving Ameron following termination, Jim is entitled only to the vested pension benefits (not additional years of service). 9. OTHER BENEFITS . Under Ameron's executive supplemental life insurance plan, insurance protection equal to three times base salary is provided while employed with Ameron. At normal retirement from Ameron, life insurance protection equal to one times final base salary will be provided. . Ameron offers several optional forms of standard Company medical plans: basic medical, high option medical, and various HMO's. Employee monthly contributions, deductibles and coverages vary. . In the event Jim Marlen is terminated other than for cause or as a result of his resignation or retirement, he will receive health and medical benefits (at whatever cost he is paying at the time of termination) for a period of two years or until he obtains other employment, whichever comes first. . Ameron offers two optional forms of standard Company dental plans: basic dental plan and the Safeguard plan. Employee monthly contributions, deductibles and coverages vary. . Ameron provides long-term disability insurance coverage which provides 60% base salary continuation net of other sources of income such as social security. . Under Ameron's 401(k) Savings Plan, employee contributions of up to 6% of base salary (subject to certain IRS mandated maximums and discrimination testing under IRS regulations) and are matched 50% by Company contributions in the form of Ameron Stock. . Initiation fees, dues and assessments for membership at a local country club and the California Club. 40 . American made company car equal to present car together with normal maintenance, insurance and operating expenses. . Ameron standard executive vacation, which is currently four weeks annually. . Reimbursement of up to $5,000 annually for financial/tax consulting. 10. OTHER . In the event of death or long-term disability while employed, all stock awards (restricted and/or options) become fully vested 11. STARTING DATE . To be established by Jim Marlen, estimated to be June 14, 1993. * * * * Jim, this offer, and the terms and conditions included will be formalized in an employment contract to be completed at the earliest possible date. The parties intend to be contractually bound upon executing this memorandum of agreement, and the subsequent formal employment contract shall not deviate in substantive terms or add any burdensome conditions to the terms signed hereof. We look forward to working with you at Ameron. /s/ Richard J. Pearson Chairman, Nominating Committee Ameron Board of Directors Please acknowledge your acceptance of the terms and conditions of this offer by signing and returning one copy of this letter. By: /s/ James S. Marlen Date: 4-27-94 EXHIBIT 10 41 EX-13 6 EXHIBIT 13 ANNUAL REPORT - ------------- Exhibit 13 is the information which is incorporated by reference into the 10-K Report from the Corporation's 1993 Annual Report. This 10-K Report should be read only in conjunction with that information. In the event you do not already have a copy of the Annual Report, one may be obtained by contacting the Corporate Secretary, Post Office Box 7007, Pasadena, California 91109-7007. The telephone number is (818) 683-4000. EXHIBIT 13 42 SELECTED CONSOLIDATED FINANCIAL INFORMATION
Year ended November 30 -------------------------------------------------------------------- (Dollars in thousands except per share data) 1993 1992 1991 1990 1989 - ------------------------------------------------------------------------------------------------------------------------------- PER COMMON SHARE DATA Net income (loss) $ (6.28)(1) $ 1.53 $ 2.01(2) $ 3.02 $ 3.54 Net income excluding restructuring and related charges and unusual items 1.87 1.53 1.91 3.02 3.54 Dividends 1.28 1.28 1.28 1.28 1.24 Average shares(3) 3,861,872 3,827,540 3,805,781 3,783,881 3,978,212 Market price-high 38 3/4 36 1/2 47 1/8 52 1/2 41 1/2 Market price-low 31 29 31 3/4 34 1/2 30 1/4 Price/earnings ratio (range) NA 24-19 23-16 17-11 12-9 - -------------------------------------------------------------------------------------------------------------------------------- OPERATING RESULTS Sales $ 453,357 $ 446,477 $ 465,136 $445,900 $ 426,464 Gross profit 119,869 118,528 118,399 116,661 107,156 Interest expense 12,689 10,990 14,105 13,644 10,735 Provision (benefit) for income taxes (9,732) 1,649 5,052 6,133 6,180 Equity in earnings (losses) of affiliated companies, net of taxes 1,821 2,011 (976) 566 3,260 Net income (loss) (24,255)(1) 5,859 7,635(2) 11,427 14,101 Net income/sales -5.4% 1.3% 1.6% 2.6% 3.3% Return on average equity -18.6% 4.1% 5.4% 8.4% 10.7% - -------------------------------------------------------------------------------------------------------------------------------- FINANCIAL CONDITION AT YEAR END Working capital $ 85,990 $ 107,086 $ 104,428 $ 103,396 66,322 Property, plant and equipment, net 113,199 128,130 122,201 127,778 110,071 Investments, advances and equity in affiliated companies 39,984 47,882 45,901 48,857 50,201 Total assets 337,842 379,480 384,472 375,373 335,445 Long-term debt, less current portion 89,590 105,874 99,304 110,266 66,006 Market capitalization 142,342 128,214 128,679 143,586 154,658 PROPERTY, PLANT AND EQUIPMENT Expenditures $14,697 $ 21,027 $ 26,527 $33,314 $ 25,868 Depreciation 16,444 15,649 16,704 14,286 12,686 (1) Includes $31.5 million in fourth quarter charges or $8.15 per share, net of income taxes, for restructuring and other related items. (2) Includes $360,000, or $.10 per share, net of income taxes, related to the sale of the Company's corporate headquarters facility, reduced by restructuring charges and asset write-downs. (3) Includes common stock equivalents in periods in which they have a dilutive effect.
29 AMERON 1993 FINANCIAL REVIEW MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES During 1993, the Company generated $25.0 million of cash from operations. These funds, along with a beginning cash balance of $26.4 million, were used to pay down debt of $15.9 million, invest in new plant and equipment of $14.7 million and pay common dividends of $5.0 million. Cash and cash equivalents at November 30, 1993, totaled $15.7 million. The Company incurred a net loss of $24.3 million during 1993 as a result of restructuring and related actions taken in the fourth quarter. These activities related to facility and product line consolidation, severance of approximately 300 salaried employees, revaluation of underperforming assets and elimination of several non-strategic and unprofitable operations. The charges recorded as a result of these actions had very little cash impact in 1993, and management expects that they will have a favorable impact on cash flow from operations in the future. Dividends from affiliated companies increased again in 1993 as several of the Company's Middle Eastern affiliates continued to have favorable earnings. The decrease in receivables resulted mainly from collections on accounts related to fiberglass pipe shipments to North Africa. Inventories rose slightly company- wide in anticipation of increased deliveries. The $10.9 million increase in long-term liabilities is attributable to added reserves for contingencies for litigation and environmental matters and, to a lesser extent, for an increase in the Company's pension liability due to a change in actuarial assumptions. Investing activities included capital expenditures for information processing technology, the expansion of powder coatings production facilities, the consolidation of the domestic Fiberglass Pipe Systems' administrative offices and costs associated with the development of a proposed quarry site in Hawaii. 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 approximately $12 million to $15 million for capital expenditures, which will be funded from existing cash balances and cash generated from operations. During the first fiscal quarter of 1993, the Company's consolidated subsidiary in The Netherlands repaid its 7.68% unsecured bank loan of approximately $5.2 million. During the fourth fiscal quarter of 1993, the Company repaid $6 million of industrial revenue development bonds, which were secured by a concrete pipe manufacturing plant. The Company has also paid down several foreign bank lines of credit during fiscal 1993. Management believes that cash flows from operations and current cash balances, together with currently available lines of credit, will be sufficient to meet future operating requirements. RESULTS OF OPERATIONS--1993 COMPARED WITH 1992 GENERAL Ameron recorded a loss in 1993 of $24.3 million, compared to net income of $5.9 million in 1992. During the fourth quarter, the Company charged to costs and expenses $45.8 million ($31.5 million after tax) for restructuring and related activities. Of the $45.8 million, $33.8 million related directly to restructuring and the write-down of related assets. An additional $9 million provision was recorded for estimated costs related to certain environmental and legal matters. A $3 million charge was also recorded against cost of sales in the fourth quarter for the write-down of selected inventories identified as part of the restructuring efforts. The total effect of these actions resulted in a net loss of $6.28 per share for the year. However, excluding the additional fourth quarter charges, net of their applicable tax benefits, net income per share for the year would have been $1.87, an improvement over the $1.53 per share earned in the prior year. SALES Sales in 1993 increased $6.9 million over the prior year. The primary reasons for the slightly improved sales were increased shipments of fiberglass pipe and protective coatings to projects in North Africa from the Company's subsidiary in Europe. Additionally, domestic sales of fiberglass pipe increased in 1993. However, these improvements were partially offset by reduced sales of concrete and steel pipe and construction products sold in Southern California and Hawaii, respectively. The proportion of European sales to U.S. sales increased again in 1993. However, this trend should reverse in 1994 since the major North African fiberglass pipe projects were completed in the fourth fiscal quarter of 1993. Sales of protective coatings declined $2.2 million from 1992. In the United States, sales of industrial coatings improved over last year while revenues from marine coatings declined due to a reduction in defense spending that impacted government orders. Sales in Europe were lower because of recessionary trends, but shipments to North Africa and the Middle East improved from Ameron B.V., the Company's Dutch subsidiary. The Company anticipates improved industrial sales in the United States as the domestic economy continues to improve; however, the uncertain economic situation in Europe may have an adverse effect on revenues from Ameron's European operations in the near future. Shipments of protective coatings to North Africa should continue into 1994, offsetting the impact of lower sales in Europe. Significant shipments of fiberglass pipe from the Company's European operation to several large crude oil projects in North Africa were the principal reason for the $19.2 million increase in sales over last year from the Fiberglass Pipe business segment. Additionally, sales in the United States improved throughout all market areas, with the biggest increase coming from fuel-handling systems used for service station rehabilitation. Partially offsetting these improvements were lower sales to industrial customers in Europe. The large project shipments to North Africa concluded in the fourth quarter of 1993, and no new projects of this magnitude have been secured for 1994. This fact and the recessionary trends in Europe are expected to lower sales and profits from this business segment in 1994. Prospects are good for additional large project work beyond 1994. Concrete and steel pipe sales declined $3.2 million from the prior year. Improved deliveries of concrete and steel pipe to projects in Northern California and Nevada were offset by reduced sales in Southern California. This business segment was impacted by reduced public spending for large water transmission projects and a low level of construction activity in the Company's geographic markets. The decline in construction activity resulted in increased price competition among producers of non-pressure concrete pipe. Concrete and steel pipe sales are expected to stabilize in 1994. 30 Sales of Construction and Allied Products fell $7.O million from the prior year as privately-funded construction activity continued to decline on the Hawaiian Islands. However, deliveries of ready-mix concrete, sand and aggregates to publicly-funded projects remained strong, while deliveries to residential construction markets improved because of increased housing starts. It is anticipated that overall construction activity in Hawaii will continue to decline in 1994. GROSS PROFIT The gross profit margin remained unchanged from the prior year. Sales of fiberglass pipe and protective coatings to North Africa and improved operating efficiencies favorably impacted the overall gross profit margin. However, price competition in Europe and in certain concrete pipe markets partially offset these gains. As part of the restructuring process, an additional $3 million charge was recorded in the fourth quarter to write down selected fiberglass pipe and protective coatings inventories. This additional $3 million charge had the effect of decreasing the gross profit margin from 27.1 % to 26.4% for the year ended November 30, 1993. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Despite increased insurance costs, added expenses related to the North African sales and the higher expenses of the Company's South American operations, overall selling, general and administrative expenses changed little from last year. This was principally the result of salaried staff reductions at the beginning of the fourth quarter. ENVIRONMENTAL AND LEGAL CLAIMS Environmental and legal claims increased $7.8 million over 1992. As an outgrowth of management's restructuring efforts, an additional $9 million was added to reserves in the fourth quarter (see note 11, "Contingencies and Commitments"). Considering recorded reserves, the Company does not expect these matters to have a material adverse effect on the Company's financial position or its results of operations. In the early 1970s, the Company disposed of certain quantities of waste at the Stringfellow Hazardous Waste Site in Riverside County, California, which is one of several priority sites on the Superfund list established by the EPA. The Company, which accounted for less than one percent of the total waste deposited at the site, was not named as a defendant. In a recent determination, the State of California was found to be 75% to 85% liable for the remediation costs of this Superfund site. However, the courts have yet to accept the determination. Ameron maintains reserves which it believes to be adequate to cover expected future costs associated with 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 it unlikely that the outcome of such environ- mental regulatory proceedings will have a material adverse effect on the Company's financial position or its results of operations. RESTRUCTURING CHARGES AND WRITE-DOWN OF ASSETS During the fourth quarter, the Company charged $33.8 million against pretax earnings for restructuring and the write-down of assets. The restructuring actions included closing two and mothballing two concrete pipe plants in the western United States; consolidating and scaling back protective coatings production and distribution facilities and sales offices in the United States, Canada and Europe; closing a coatings plant in England; and eliminating several product lines within the Fiberglass Pipe & Construction and Allied Products business segments. Also included in the restructuring was the company-wide elimination of approximately 300 salaried staff positions, the planned divesture of a non-strategic steel fabricator in South America and the write-down of the Company's investments in selected affiliated companies, as well as other related assets. GAIN ON THE SALE OF ASSETS The increase over the prior year is attributable to the gain on the sale of a portion of the Company's interest in its affiliated company in Mexico. OTHER INCOME Royalty, fee and other income from affiliated companies and licensees increased over 1992 due largely to a special dividend received from its Mexican affiliate. Interest income declined because last year's amount included interest received from a federal income tax refund and due to lower earnings in 1993 from short- term investments. Miscellaneous income includes higher sublease rental income. INTEREST EXPENSE The $1.7 million increase in interest expense in 1993 can be attributed mainly to accrued interest on income tax obligations related to prior years. PROVISION FOR INCOME TAXES Overall, the effective tax benefit rate in 1993 was 27.2% of the pretax loss. The tax benefit attributable to the restructuring and related charges of $45.8 million was approximately $14.3 million; thus taxes attributable to pretax income, excluding the restructuring and related charges, was $4.5 million, a 45% effective rate. The significant difference in effective rate this year, compared to last year's 30%, can be attributed primarily to losses generated by certain of the Company's foreign subsidiaries for which no tax benefit was generated. The Company will adopt Financial Accounting Standards Board Statement No. 109, "Accounting for Income Taxes," in the first fiscal quarter of 1994. The requirements and impact of this statement are discussed further in note 8 to the financial statements. EQUITY IN EARNINGS OF AFFILIATED COMPANIES Equity in earnings of jointly-owned affiliated companies declined slightly from 1992. Sales and earnings of the Company's Middle Eastern affiliates continued to match or improve on prior year's results. These affiliates include Oasis- Ameron, Ltd.; Bondstrand, Ltd.; and Ameron Saudi Arabia, Ltd. Gifford-Hill- American, Inc., the Company's pressure pipe affiliate in Texas, returned to profitability in 1993, while Tamco, a steel mini-mill, reported a loss due to increased material costs and price competition. As part of the Company's restructuring efforts, which included increased focus on core businesses, the Company recorded a write-down of its investments in its concrete pipe affiliates to their expected net realizable value, based upon anticipated future cash flows. RESULTS OF OPERATIONS--1992 COMPARED WITH 1991 SALES Sales declined $18.7 million in 1992 due principally to lower deliveries of concrete and steel pipe and construction products. Overall, 1992 revenues reflected a higher proportion of sales from foreign operations. Because of the weak U.S. economic situation, sales in 1992 of protective coatings to domestic commercial, utility, petrochemical and offshore markets were near 1991 levels. However, shipments from foreign operations to European and Middle Eastern customers and to a project in North Africa improved significantly over 1991. 31 Sales of fiberglass pipe domestically were lower in 1992 than the previous year, mainly due to the shifting of oil exploration and recovery work from the United States to countries abroad and the impact of the sluggish economy on the capital spending plans of the Company's industrial, chemical and petroleum-related customers. However, declines in U.S. markets were entirely offset by improved sales overseas because of increased industrial development in the Far East and parts of Europe, as well as shipments to several large crude oil projects in North Africa. Concrete and steel pipe sales declined in 1992 from 1991 largely because of nonrecurring projects in 1991. The concrete and steel pipe business segment was impacted by the decline in public spending for water transmission systems and reduced construction activity in the Company's geographic markets. The Southwest and Pacific Northwest were in cyclical downturns, and California's depressed condition resulted in severe price competition. Construction products sales declined in 1992 from 1991, due to an overall decline in commercial construction activity in Hawaii that resulted in lower demand for the Company's quarry and concrete pipe products. Commercial construction spending in Hawaii declined because of the reduction in available investment capital. Sales of concrete and steel poles remained flat due to slow housing starts and continued delays in public spending in the western United States. GROSS PROFIT The gross profit margin increased from the 1991 rate of 25.5% to 26.5% in 1992. Although operations were impacted by continued price competition and low production levels caused by weak domestic markets, increased sales on more profitable contracts abroad and previously implemented manufacturing cost reduction programs pushed the rate above the 1991 level. These improvements were realized mainly by foreign operations due to increased shipments of fiberglass pipe and protective coatings to Africa, the Middle East and the Far East. In addition, improved profit margins were recognized on deliveries of concrete and welded steel pressure pipe. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses were $7.1 million higher in 1992 than in 1991. The increase can be attributed to higher insurance charges, reserves for assets related to certain affiliated companies and rent on the corporate headquarters facility. The Company also increased spending to escalate research and development efforts and to strengthen worldwide marketing and sales networks. ENVIRONMENTAL AND LEGAL CLAIMS Claims expense increased $3.2 million in 1992, above the 1991 level. A large portion of the increase was attributable to legal costs and a $2 million reserve established in connection with a patent infringement lawsuit. OTHER INCOME Royalty and technical fee income increased slightly in 1992 from the prior year as sales activities of the Company's licensees and affiliated companies remained strong. Foreign currency losses were incurred as a result of the devaluation of the British pound and the increased strength of the Dutch guilder. Interest income was higher due to interest earned on short-term investments and a federal income tax refund. In 1991, other income included $770,000 received from a class action legal settlement. INTEREST EXPENSE Interest expense declined because of lower interest rates and a reduction in debt outstanding. PROVISION FOR INCOME TAXES The Company's effective tax rate declined from 37% in 1991 to 30% in 1992. The lower effective rate was attributable to a higher mix of income coming from foreign operations in 1992 as compared to 1991. EQUITY IN EARNINGS OF AFFILIATED COMPANIES Equity earnings of jointly-owned affiliated companies improved $3 million in 1992 over 1991, due largely to strong performances by the Company's protective coatings, fiberglass pipe and concrete pipe affiliates in the Middle East. Ameron Saudi Arabia, Ltd. provided the greatest contribution to the rise in equity income as it benefited from increased spending for infrastructure development within the Kingdom of Saudi Arabia. However, Gifford-Hill-American, Inc. incurred losses as a result of weak demand in its markets. Tamco reported higher net income in 1992 because of slightly increased shipments of reinforcing bar and favorable material costs. Bondstrand, Ltd. and Oasis-Ameron, Ltd. produced improved operating results. 32 CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended November 30 ----------------------------------------------------- 1993 1992 1991 - ----------------------------------------------------------------------------------------------------------------------------- Sales $453,357,000 $446,477,000 $465,136,000 Cost of sales 333,488,000 327,949,000 346,737,000 ---------------------------------------------------- Gross profit 119,869,000 118,528,000 118,399,000 Selling, general and administrative expenses 100,917,000 100,157,000 93,077,000 Environmental and legal claims 14,503,000 6,710,000 3,463,000 Restructuring charges and write-down of assets 33,797,000 -- 14,505,000 Gain from sale of assets 547,000 149,000 15,171,000 Other income 5,682,000 4,677,000 5,243,000 ---------------------------------------------------- Operating profit (loss) (23,119,000) 16,487,000 27,768,000 Interest expense 12,689,000 10,990,000 14,105,000 ---------------------------------------------------- Income (loss) before income taxes (35,808,000) 5,497,000 13,663,000 Provision (benefit) for income taxes (9,732,000) 1,649,000 5,052,000 ---------------------------------------------------- Income (loss) of consolidated companies (26,076,000) 3,848,000 8,611,000 Equity in earnings (losses) of affiliated companies, net of taxes 1,821,000 2,011,000 (976,000) ---------------------------------------------------- Net income (loss) $(24,255,000) $ 5,859,000 $ 7,635,000 ---------------------------------------------------- ---------------------------------------------------- Net income (loss) per share $(6.28) $ 1.53 $ 2.01 ---------------------------------------------------- ----------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements. 33 CONSOLIDATED BALANCE SHEETS
As of November 30 -------------------------------- 1993 1992 - --------------------------------------------------------------------------------------------------------- ASSETS Current assets Cash and cash equivalents $ 15,738,000 $ 26,447,000 Receivables, less allowance of $4,315,000 in 1993 and $5,614,000 in 1992 77,572,000 82,142,000 Inventories 61,661,000 59,914,000 Deferred income tax benefits 13,586,000 11,380,000 Prepaid expenses and other 8,590,000 8,396,000 -------------------------------- Total current assets 177,147,000 188,279,000 Investments, advances and equity in undistributed earnings of affiliated companies 39,984,000 47,882,000 Property, plant and equipment Land 21,460,000 21,457,000 Buildings 42,211,000 44,475,000 Machinery and equipment 191,072,000 201,604,000 Construction in progress 7,364,000 10,092,000 -------------------------------- 262,107,000 277,628,000 Less - accumulated depreciation (148,908,000) (149,498,000) --------------------------------- 113,199,000 128,130,000 Other assets 7,512,000 15,189,000 -------------------------------- $337,842,000 $379,480,000 -------------------------------- --------------------------------
The accompanying notes are an integral part of these consolidated balance sheets. 34
As of November 30 -------------------------------- 1993 1992 - --------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Short-term borrowings $ 2,021,000 $ 1,027,000 Current portion of long-term debt 5,978,000 5,939,000 Trade payables 25,309,000 35,001,000 Accrued liabilities Taxes, interest and other 16,235,000 14,857,000 Compensation and benefits 14,277,000 10,539,000 Insurance 8,407,000 5,186,000 Reserve for contingencies 13,083,000 6,060,000 Income taxes 5,847,000 2,584,000 -------------------------------- Total current liabilities 91,157,000 81,193,000 Deferred income taxes 15,605,000 32,469,000 Long-term debt, less current portion 89,590,000 105,874,000 Other long-term liabilities 25,976,000 15,058,000 Commitments and contingencies Stockholders' equity Common stock, par value $2.50 a share Authorized 12,000,000 shares Outstanding 3,886,465 shares in 1993 and 3,841,630 shares in 1992, net of treasury shares 12,648,000 12,536,000 Additional paid-in capital 13,414,000 12,007,000 Retained earnings 133,812,000 163,017,000 Cumulative foreign currency translation adjustments (861,000) 105,000 Minimum pension liability adjustment (720,000) - Less treasury stock (1,172,900 shares in 1993 and 1992), at cost (42,779,000) (42,779,000) -------------------------------- Total stockholders' equity 115,514,000 144,886,000 -------------------------------- $337,842,000 $379,480,000 -------------------------------- --------------------------------
35 CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended November 30 ---------------------------------------------------- 1993 1992 1991 - ----------------------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net income (loss) $(24,255,000) $ 5,859,000 $ 7,635,000 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 16,444,000 15,649,000 16,704,000 Benefit for deferred income taxes (17,759,000) (958,000) (1,483,000) Equity in (earnings) losses of affiliated companies (1,821,000) (2,011,000) 976,000 Dividends from affiliated companies 3,670,000 1,063,000 542,000 Gain from sale of assets (547,000) (149,000) (15,171,000) Stock contributed to employee benefit plan 958,000 873,000 833,000 Non-cash restructuring and asset write-downs 28,668,000 - 8,891,000 Other, net (189,000) 331,000 384,000 Other changes in operating assets and liabilities: Decrease in receivables 3,744,000 2,224,000 5,788,000 (Increase) decrease in inventories (2,489,000) 11,581,000 5,832,000 (Increase) decrease in other current assets 357,000 (5,088,000) (18,000) Decrease in long-term assets 332,000 18,000 816,000 Increase in trade payables, accrued liabilities and income taxes 7,468,000 6,443,000 8,407,000 Increase in long-term liabilities 10,466,000 3,471,000 307,000 ---------------------------------------------------- Net cash provided by operating activities 25,047,000 39,306,000 40,443,000 ---------------------------------------------------- INVESTING ACTIVITIES Proceeds from sale of assets 1,850,000 22,211,000 1,802,000 Additions to property, plant and equipment (14,697,000) (21,027,000) (26,527,000) Investment in life insurance policies (1,613,000) (960,000) (1,850,000) Other (30,000) (2,095,000) (517,000) ----------------------------------------------------- Net cash used in investing activities (14,490,000) (1,871,000) (27,092,000) ----------------------------------------------------- FINANCING ACTIVITIES Net change in debt with maturities of three months or less (221,000) (10,447,000) (2,727,000) Issuance of debt - 15,572,000 25,000,000 Repayment of debt (15,728,000) (24,552,000) (22,491,000) Dividends on common stock (4,950,000) (4,904,000) (4,862,000) Issuance of common stock 70,000 67,000 341,000 ---------------------------------------------------- Net cash used in financing activities (20,829,000) (24,264,000) (4,739,000) ---------------------------------------------------- Effect of exchange rate changes on cash and cash equivalents (437,000) (260,000) (459,000) ---------------------------------------------------- Net change in cash and cash equivalents (10,709,000) 12,911,000 8,153,000 Cash and cash equivalents at beginning of year 26,447,000 13,536,000 5,383,000 ---------------------------------------------------- Cash and cash equivalents at end of year $ 15,738,000 $26,447,000 $13,536,000 ---------------------------------------------------- Other cash flow information: ---------------------------------------------------- Interest paid $ 11,903,000 $10,913,000 $12,486,000 ---------------------------------------------------- ---------------------------------------------------- Income taxes paid $ 3,535,000 $ 5,337,000 $ 2,954,000 ---------------------------------------------------- ----------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements. 36 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock --------------------------- SHARES ADDITIONAL RETAINED OUTSTANDING AMOUNT PAID-IN CAPITAL EARNINGS OTHER - ---------------------------------------------------------------------------------------------------------------------------------- Balance, November 30, 1990 3,778,574 $12,379,000 $10,052,000 $159,289,000 $ 2,071,000 Net income - 1991 7,635,000 Exercise of stock options and issuance of stock to employee savings plan 34,126 85,000 1,087,000 Dividends on common stock of $1.28 a share (4,862,000) Foreign currency translation adjustments (net of deferred income tax benefit of $669,000) (1,553,000) ------------------------------------------------------------------------- Balance, November 30, 1991 3,812,700 12,464,000 11,139,000 162,062,000 518,000 Net income - 1992 5,859,000 Exercise of stock options and issuance of stock to employee savings plan 28,930 72,000 868,000 Dividends on common stock of $1.28 a share (4,904,000) Foreign currency translation adjustments (net of deferred income tax benefit of $230,000) (413,000) ------------------------------------------------------------------------ BALANCE, NOVEMBER 30, 1992 3,841,630 12,536,000 12,007,000 163,017,000 105,000 NET LOSS - 1993 (24,255,000) EXERCISE OF STOCK OPTIONS AND ISSUANCE OF STOCK TO EMPLOYEE SAVINGS PLAN 44,835 112,000 1,407,000 DIVIDENDS ON COMMON STOCK OF $ 1.28 A SHARE (4,950,000) FOREIGN CURRENCY TRANSLATION ADJUSTMENTS (NET OF DEFERRED INCOME TAX BENEFIT OF $644,000) (966,000) MINIMUM PENSION LIABILITY ADJUSTMENT (720,000) -------------------------------------------------------------------------- Balance, November 30, 1993 3,886,465 $12,648,000 $13,414,000 $133,812,000 $(1,581,000) -------------------------------------------------------------------------- --------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements. 37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Ameron, Inc. and all significant wholly-owned subsidiaries (the Company). All material intercompany accounts and transactions have been eliminated. Investments in significant 30- to 50-percent-owned affiliates are accounted for by the equity method, whereby the investment is carried at cost of acquisition, plus the Company's equity in undistributed earnings or losses since acquisition, less reserves. The Company provides technical services and receives fees, royalties and other income from several of its affiliates and licensees, which are included in "Other income." Certain prior year balances have been reclassified to conform with the current year presentation. CASH AND CASH EQUIVALENTS Cash equivalents include time deposits with maturities of three months or less when purchased. At November 30, 1993 and 1992 the Company had approximately $7,200,000 and $17,300,000, respectively, invested in such securities. The carrying value of cash and cash equivalents are a reasonable estimate of their fair value. INVENTORIES Inventories are valued at the lower of cost or market. Cost is principally determined by either the first-in, first-out or average cost methods. Such cost includes raw materials, direct labor and manufacturing overhead. Certain steel inventories are valued using the last-in, first-out cost method. PROPERTY, PLANT AND EQUIPMENT Items capitalized as property, plant and equipment, including improvements to existing facilities, are recorded at cost. Upon sale or retirement, the cost and related accumulated depreciation are removed from the respective accounts and any gain or loss is included in income. Maintenance and repair costs are expensed as incurred. Interest costs applicable to the period of construction of major plant and expansion projects totaling $104,000, $794,000 and $646,000 were capitalized in 1993, 1992 and 1991, respectively. Depreciation is computed principally using the straight-line method based on estimated useful lives of the assets. Annual rates of depreciation are as follows:
Percentage of Cost - ----------------------------------------------------------------------------- Buildings 2 1/2 - 10 Machinery and equipment Autos, trucks and trailers 6 2/3 - 50 Cranes and tractors 10 - 15 Manufacturing equipment 6 2/3 - 33 1/3 Other 5 - 66 2/3
FOREIGN CURRENCY TRANSLATION The functional currency for the majority of the Company's foreign operations is the applicable local currency. 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 gains or losses, net of applicable deferred income taxes, resulting from such translation are included in stockholders' equity. Gains or losses resulting from foreign currency transactions are included in "Other income." INCOME TAXES The Company accounts for income taxes in accordance with Accounting Principles Board Opinion No. 11 "Accounting for Income Taxes." Certain income and expense items are recognized for financial reporting purposes and for income tax reporting purposes in different fiscal periods. Deferred income taxes are provided in the accompanying financial statements to account for significant timing differences. Investment tax credits have been deferred and are being amortized over the estimated average useful lives of the related assets. NET INCOME PER SHARE Net income per share is computed on the basis of the weighted average number of common shares outstanding each year, plus common stock equivalents related to dilutive stock options. The number of shares used in the computation of per share data was 3,861,872 in 1993, 3,827,540 in 1992 and 3,805,781 in 1991. RESEARCH AND DEVELOPMENT COSTS Research and development costs are expensed as incurred. Such costs were approximately $4,100,000 in 1993, $4,000,000 in 1992 and $2,500,000 in 1991. REVENUE RECOGNITION Revenue from sales of protective coatings, fiberglass pipe, construction products and certain other products is recorded at the time the goods are shipped or when title passes. Revenue from sales of concrete and steel pipe is recorded at the time the pipe is inspected and accepted by the customer. - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- NOTE 2 OTHER INCOME Other income for the years ended November 30, included the following:
(In thousands) 1993 1992 1991 - --------------------------------------------------------------------------- Royalties and fees from affiliated companies and licensees $3,967 $3,284 $2,925 Foreign currency gain (loss) (147) (433) 275 Interest income 836 1,543 928 Legal recovery - - 770 Miscellaneous 1,026 283 345 ---------------------------- $5,682 $4,677 $5,243 ---------------------------- ----------------------------
- --------------------------------------------------------------------------- - --------------------------------------------------------------------------- NOTE 3 INVENTORIES Inventories at November 30, were as follows:
(In thousands) 1993 1992 - --------------------------------------------------------------------------- Finished products $34,124 $36,310 Products in process 11,689 9,875 Materials and supplies 15,848 13,729 ------------------- $61,661 $59,914 ------------------- -------------------
Certain steel inventories are valued using the last-in, first-out cost method. These items comprised 7.1% and 6.5% of consolidated inventories at November 30, 1993 and 1992, respectively. If such inventories had been valued using the first-in, first-out cost method, total inventories would have increased by $1,834,000 and $1,538,000 at November 30, 1993 and 1992, respectively. 38 - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- NOTE 4 AFFILIATED COMPANIES The Company's principal investments, which have been accounted for by the equity method, are summarized as follows:
Ownership Business Affiliate Interest - --------------------------------------------------------------------------- Concrete Pipe Products Gifford-Hill-American, Inc. 50% Ameron Saudi Arabia, Ltd. 30% Steel Products Tamco 50% Other Bondstrand, Ltd. 40% Oasis-Ameron, Ltd. 40%
Concrete Steel (In thousands) Pipe Products Products Other Total - ------------------------------------------------------------------------------------------ Investment, November 30, 1993 Cost $ 5,786 $ 8,482 $ 3,244 $17,512 Accumulated equity in undistributed earnings 16,420 8,293 5,082 29,795 Realization reserves (7,323) (7,323) --------------------------------------------------------- $14,883 $16,775 $ 8,326 $39,984 --------------------------------------------------------- --------------------------------------------------------- Investment, November 30,1992 Cost $ 5,786 $ 8,482 $ 3,214 $17,482 Accumulated equity in undistributed earnings 17,013 9,043 4,344 30,400 --------------------------------------------------------- --------------------------------------------------------- $22,799 $17,525 $7,558 $47,882
The Company provides income taxes on its equity in earnings of affiliated companies to the extent that such earnings are expected to be distributed or repatriated. The approximate accumulated amount of undistributed earnings for which no tax has been provided was $7,000,000 at November 30, 1993 and $6,500,000 at November 30,1992. Summarized financial information for affiliates in the Concrete Pipe Products business follows:
Financial Condition (In thousands) 1993 1992 - --------------------------------------------------------------------------- Current assets $56,169 $56,126 Noncurrent assets 42,668 43,854 ---------------------- $98,837 $99,980 ---------------------- ---------------------- Current liabilities $28,810 $14,673 Noncurrent liabilities 1,985 16,653 Stockholders' equity 68,042 68,654 ---------------------- $98,837 $99,980 ---------------------- ----------------------
Results of Operations (In thousands) 1993 1992 1991 - --------------------------------------------------------------------------- Net sales $81,144 $62,873 $49,815 ------------------------------------- ------------------------------------- Gross profit $21,305 $15,938 $ 7,511 ------------------------------------- ------------------------------------- Net income (loss) $ 5,367 $ 2,121 $(6,430) ------------------------------------- -------------------------------------
The Company's investment in Gifford-Hill-American, Inc., which manufactures concrete pressure pipe, was recorded based on audited financial statements as of June 30, 1993 and unaudited financial statements as of October 31, 1993. The Company's investments in Ameron Saudi Arabia, Ltd., Bondstrand, Ltd. and Oasis-Ameron, Ltd. were recorded based on audited financial statements as of December 31, 1992 and unaudited financial statements as of September 30, 1993. The investment in Tamco was based on audited financial statements as of November 30, 1993. Summarized financial information for Tamco, Bondstrand, Ltd. and Oasis- Ameron, Ltd. follows:
Financial Condition (In thousands) 1993 1992 - --------------------------------------------------------------------------- Current assets $46,476 $43,684 Noncurrent assets 34,025 39,436 ---------------------- $80,501 $83,120 ---------------------- ---------------------- Current liabilities $21,045 $17,234 Noncurrent liabilities 4,151 7,542 Stockholders' equity 55,305 58,344 ---------------------- $80,501 $83,120 ---------------------- ----------------------
Results of Operations (In thousands) 1993 1992 1991 - --------------------------------------------------------------------------- Net sales $118,845 $108,093 $123,762 -------------------------------------- -------------------------------------- Gross profit $ 10,953 $ 15,988 $ 13,105 -------------------------------------- -------------------------------------- Net income $ 2,805 $ 7,048 $ 4,630 -------------------------------------- --------------------------------------
The amount of investments and accumulated equity in the undistributed earnings in the Middle Eastern affiliates was approximately $22,200,000 and $26,200,000 at November 30, 1993 and 1992, respectively. Sales and technical services provided by the Company to affiliates in the Middle East totaled approximately $4,100,000 in 1993, $4,300,000 in 1992 and $2,600,000 in 1991, and related receivables aggregated approximately $3,300,000 at November 30, 1993 and $4,500,000 at November 30,1992. Receivables from all affiliated companies approximated $3,600,000 at November 30, 1993 and $5,200,000 at November 30,1992. - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- NOTE 5 SALE OF ASSETS In the fourth quarter of 1991, the Company sold, under the threat of condemnation, its corporate headquarters facility for $21.0 million. The net pretax gain from the sale was $15,054,000. - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- NOTE 6 RESTRUCTURING CHARGES AND WRITE-DOWN OF ASSETS In the fourth quarter of fiscal 1993, the Company recorded a pretax restructuring charge of $31.9 million and wrote down related fixed assets of $1.9 million. The restructuring charges included facility and product line consolidation, severance of approximately 300 salaried employees, revaluation of under performing assets to their expected realizable value and provision for elimination of several non-strategic and unprofitable operations. These costs reflect management's efforts to redeploy the Company's capital and attention to those core businesses which are expected to yield returns consistent with management's expectations and objectives. During the fourth quarter of 1991, management completed an evaluation of the net realizability of operating assets and developed repositioning plans for several of the Company's businesses. As a result of these programs, the Company recorded restructuring costs of $5.6 million and wrote down related assets by $8.9 million. The repositioning efforts pertained primarily to the consolidation of production facilities to eliminate excess capacity and the refocusing of product offerings within selected markets of the concrete and steel pipe, fiberglass pipe and construction products businesses. 39 The following is a detail of restructuring charges and asset write-downs incurred by the Company:
(In thousands) 1993 1991 - ------------------------------------------------------------------------------- Facility and product line consolidation $11,367 $ 1,602 Revalue investments and related assets 9,403 363 Elimination of non-strategic operations 7,494 - Employee severance costs 3,430 783 Fixed asset write downs 1,937 8,891 Environmental clean-up costs on discontinued plant sites - 1,949 Other 166 917 ---------------------- Total $33,797 $14,505 ---------------------- ----------------------
The following is a detail of restructuring charges and asset write- downs by business segment:
(In thousands) 1993 1991 - ------------------------------------------------------------------------------- Protective Coatings $ 5,128 $ 658 Fiberglass Pipe 1,909 2,000 Concrete and Steel Pipe 10,604 6,605 Construction and Allied Products 3,723 3,569 Corporate 12,433 1,673 ---------------------- Total $33,797 $14,505 ---------------------- ----------------------
- ------------------------------------------------------------------------ NOTE 7 EMPLOYEE BENEFIT PLANS The Company has qualified, defined benefit, noncontributory pension plans for employees not covered by union pension plans, which are accounted for in accordance with Financial Accounting Standards Board Statement No. 87. Benefits paid to retirees are based upon age at retirement, years of credited service and average compensation. The Company's funding policy is to make contributions to these plans sufficient to meet the minimum funding requirements of applicable laws and regulations, plus such additional amounts, if any, as the Company's actuarial consultants recommend. Assets of the Company plans are invested in a directed trust. Assets in the trust are invested in equity securities of corporations (including $3,629,000 of the Company's common stock at November 30, 1993), U.S. government obligations, derivative securities, corporate bonds and money market funds. Provisions of Financial Accounting Standards Board Statement No. 87 require the Company to record a minimum pension liability relating to certain unfunded pension obligations, establish an intangible asset relating thereto and reduce stockholders' equity. At November 30, 1993, this minimum pension liability for the under funded plan was remeasured, as required by the statement. As a result, the minimum pension liability was adjusted from $4,261,000 at November 30, 1992 to $6,009,000 at November 30, 1993; the related intangible asset was adjusted from $2,010,000 to $2,599,000 and stockholders' equity reduced by $720,000 in 1993. The adjustment in the minimum pension liability at November 30,1993 resulted mainly from an increase in pension fund liabilities due to changes in plan assumptions partially offset by an increase in pension fund assets as a result of favorable investment returns during 1993. A supplemental non-qualified, non-funded retirement plan for which the Company has purchased cost recovery life insurance on the lives of the participants was adopted in 1991. The Company is the sole owner and beneficiary of such policies. The amount of the coverage is designed to provide sufficient revenues to cover all costs of the plan if assumptions made as to mortality experience, policy earnings and other factors are realized. On November 30, 1993 and 1992 the cash surrender value of these policies was $1,973,000 and $1,376,000. Net periodic pension cost for the years ended November 3O, consists of the following:
(In thousands) 1993 1992 1991 - --------------------------------------------------------------------------- Service cost: Defined benefit plans $ 2,452 $ 2,675 $ 2,474 Supplemental plan 26 29 52 Interest cost: Defined benefit plans 7,744 7,193 6,769 Supplemental plan 146 148 201 Return on plan assets (20,847) (8,125) (15,033) Net (amortization) deferral: Defined benefit plans 11,962 (857) 7,555 Supplemental plan 202 221 327 ------------------------------------ Net periodic pension cost $ 1,685 $ 1,284 $ 2,345 ------------------------------------ ------------------------------------
The following table sets forth the funding status of the qualified, defined benefit plans and the amount recognized in the Company's balance sheet at November 30:
(In thousands) 1993 1992 - ------------------------------------------------------------------------------------------ Over Under Over Under Funded Funded Funded Funded - ------------------------------------------------------------------------------------------ Actuarial present value of: Vested benefit obligation $72,330 $22,959 $57,111 $19,469 Non-vested benefits 657 209 322 75 ---------------------------------------------------- Accumulated benefit obligation 72,987 23,168 57,433 19,544 Effect of salary increases 10,714 --- 14,205 --- ---------------------------------------------------- Actuarial present value of projected benefit obligation 83,701 23,168 71,638 19,544 Less plan assets at market value 95,662 17,159 82,309 15,283 ---------------------------------------------------- Plan assets (in excess of) under projected benefit obligation (11,961) 6,009 (10,671) 4,261 Unrecognized (obligation) asset 13,332 (3,320) 13,130 (2,010) Additional minimum liability --- 3,320 --- 2,010 ---------------------------------------------------- Accrued pension cost in consolidated balance sheets $ 1,371 $ 6,009 $ 2,459 $ 4,261 ---------------------------------------------------- ----------------------------------------------------
The following table sets forth the status of the supplemental benefit plan as of November 30:
(In thousands) 1993 1992 - --------------------------------------------------------------------------- Actuarial present value of: Vested benefit obligation $ 1,783 $ 1,699 Non-vested benefits 13 13 ---------------------- Accumulated benefit obligation 1,796 1,712 Effect of salary increases 114 203 ---------------------- Actuarial present value of projected benefit obligation 1,910 1,915 Unrecognized obligation (852) (1,301) Unrecognized net gain 333 364 ---------------------- Accrued pension cost in consolidated balance sheets $ 1,391 $978 ---------------------- ----------------------
The 1993 actuarial computations for both the qualified, defined benefit plans and the supplemental plan assumed a weighted average discount rate of 7.5% and annual salary increases of 5%. The qualified defined benefit plans assumed an expected long term rate of return of 8.5%. During 1993 a curtailment of salaried staff resulted in the recognition of pension gains and losses in accordance with Financial Accounting Standards Board Statement No. 88 "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits." For the qualified, defined benefit plans a net gain decreased the accrued pension cost by $1,309,000. The supplemental executive retirement plan experienced a net loss, which increased accrued pension cost by $165,000. 40 Approximately 16% of the Company's employees are covered by union sponsored, collectively bargained, multi-employer pension plans. The Company contributed and charged to expense $1,900,000 in 1993 and $1,800,000 in each of the years 1992 and 1991. These contributions are determined in accordance with the provisions of negotiated labor contracts and generally are based on the number of hours worked. Information from the plans' administrators is not available to permit the Company to determine its share of unfunded vested benefits, if any. The Company has no intention of withdrawing from any of these plans, nor is there any intention to terminate such plans. During 1991, the Company implemented an Executive Life Insurance Plan wherein eligible executives are provided with life insurance protection based upon three times base salary. Upon retirement, the executive is provided with life insurance protection based upon final base salary. Benefits may be paid as a lump sum or as an annual income to the identified survivor over ten years. The expense for this plan was $50,000 in 1993, $51,000 in 1992 and $109,000 in 1991. Also during 1991, the Company implemented a Deferred Compensation Plan providing officers and key executives with the opportunity to participate in an unfunded, deferred compensation program. Under the program, participants may defer up to 50% of their base compensation and 100% of bonuses earned, and earn interest on their deferred amounts. The program is not qualified under Section 401 of the Internal Revenue Code. The total of net participant deferrals, which is reflected in accrued liabilities was $2,602,000 at November 30, 1993 and $1,951,000 at November 30, 1992, The expense for this plan was $362,000 in 1993, $506,000 in 1992 and $271,000 in 1991. In connection with the above two plans, whole life insurance contracts were purchased on the related participants. At November 30, 1993 and 1992 the cash surrender value of these policies was $3,159,000 and $2,143,000, net of loans of $1,901,000 and $1,473,000, respectively. The Company provides to certain employees a savings plan under Section 401(k) of the Internal Revenue Code ("the Savings Plan"). The Savings Plan allows for deferral of income up to a certain percentage through contributions to the plan and, within certain restrictions, Company matching contributions in the form of the Company's common stock. In 1993, 1992 and 1991, the Company recorded expenses for matching contributions of $958,000, $873,000 and $833,000, respectively, while 27,635, 26,817, and 22,417 shares of common stock were issued by the Company to the Savings Plan. In December 1990, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions." This statement must be adopted no later than fiscal 1994. The Company has post-retirement benefit plans at certain locations. Since these plans are unfunded, the adoption of this statement will require that the cost of these plans, which is immaterial, be accounted for on an accrual basis. In November 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 112 "Employers' Accounting for Postemployment Benefits--An Amendment of FASB Statements No. 5 and 43." The Statement requires a change in accounting for postemployment benefits and must be adopted by the Company no later than the fiscal year ending November 30, 1995. This statement requires employers to recognize obligations to provide postemployment benefits if certain criteria are met. The Company does not expect implementation of this statement to have a material effect on its financial position or its results of operations. NOTE 8 INCOME TAXES The provision (benefit) for income taxes for the years ended November 30, included the following:
(In thousands) 1993 1992 1991 - ------------------------------------------------------------------------------- Current Federal $ 1,340 $ (24) $5,405 Foreign 6,542 2,463 185 State 145 168 945 ------------------------------------- 8,027 2,607 6,535 ------------------------------------- Deferred Federal (15,918) (1,508) (1,809) Foreign (25) 1,153 559 State (1,816) (603) (233) -------------------------------------- (17,759) (958) (1,483) -------------------------------------- $(9,732) $1,649 $5,052 -------------------------------------- --------------------------------------
The principal types of timing differences and the tax effect of each, which give rise to the deferred tax benefit, for the years ended November 30, follow:
(In thousands) 1993 1992 1991 - --------------------------------------------------------------------------- Accelerated depreciation $33 $(248) $(1,035) Increase in nondeductible reserves (12,163) (608) (3,789) Investment tax credits, net (42) (98) (136) Sale of condemned property - (41) 6,039 Write down of fixed assets (3,472) 14 (2,493) Federal alternative minimum tax credit (1,099) --- --- Other, net (1,016) 23 (69) --------------------------------------- $(17,759) $ (958) $(1,483) --------------------------------------- ---------------------------------------
The tax provision represents effective tax rates of 27.2%, 30.0% and 37.0% of pretax income for the years ended November 30, 1993, 1992 and 1991, respectively. A reconciliation of income taxes provided at the effective income tax rate and the amount computed at the federal statutory income tax rate of 34% follows:
(In thousands) 1993 1992 1991 - ------------------------------------------------------------------------------------------ Domestic pretax income (loss) $(45,011) $(2,469) $13,203 Foreign pretax income 9,203 7,966 460 --------------------------------------- $(35,808) $ 5,497 $13,663 --------------------------------------- --------------------------------------- Taxes at federal statutory rate $(12,175) $1,869 $ 4,645 State taxes (net of federal tax benefit) (1,103) (287) 470 Foreign losses with no federal benefit 2,591 891 632 Percentage depletion (486) (504) (514) Investment tax credit amortization (42) (98) (136) Write down affiliate investment 1,130 --- --- Foreign withholding taxes 807 217 --- Other, net (454) (439) (45) --------------------------------------- $ (9,732) $1,649 $ 5,052 --------------------------------------- ---------------------------------------
In February, 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes." The Company will adopt the new accounting and disclosure requirements beginning in the first quarter of its year ending November 30 ,1994. The Company does not expect adoption of the standard to have a material effect on net income. The Company settled items disputed with the Internal Revenue Service relating to the audit of fiscal years 1985 and 1986. The related payment was not material to the Company's financial statements. 41 NOTE 9 DEBT Short-term borrowings include loans payable to banks by foreign subsidiaries totaling $2,021,000 and $1,027,000 as of November 30, 1993 and 1992, respectively. The average interest rate on these loans was approximately 24.0% in 1993 and 11.6% in 1992. The increased rate in 1993 reflects a higher percentage of short-term borrowings owed by the Company's Colombian subsidiary. Domestically, the Company has uncommitted, short-term, bank credit lines totaling $12,400,000 with interest at various money market rates. As of November 30, 1993, no amount was borrowed under these short-term bank facilities. Long-term debt as of November 30, consisted of the following:
(In thousands) 1993 1992 - ------------------------------------------------------------------------------- Unsecured notes payable to insurance companies: 8.63%, payable in annual installments of $5,000 commencing in 1994, plus accrued interest $25,000 $ 25,000 9.79%, payable in annual installments of $12,000 commencing in 1996, plus accrued interest 60,000 60,000 Variable-rate bank revolving credit facilities, payable by a consolidated subsidiary in Dutch guilders - 4,856 10% mortgage loan, secured by land, with a book value of $3,478 payable in 1995, plus interest 3,767 3,646 7.5% Industrial Revenue Development Bonds, secured by a pipe manufacturing plant - 6,000 7.68% unsecured bank loan, payable by a consolidated subsidiary in Dutch guilders - 5,189 Variable-rate unsecured bank loan, payable by a consolidated subsidiary in Dutch guilders, with annual installments of approximately $687 plus accrued interest through 2002 5,836 7,122 Other indebtedness with various interest rates and maturities 965 - ----------------- 95,568 111,813 Less - Current portion 5,978 5,939 ----------------- $89,590 $105,874 ----------------- -----------------
The Company maintains a $35,000,000 revolving credit facility with four banks. The Company may at its option borrow at interest rates based on specified margins over money market rates, at any time until June, 1994, when all borrowings under the facility must be repaid. As of November 30, 1993 this facility remained unused. Additionally, a consolidated subsidiary maintains revolving credit facilities with three banks. The subsidiary may at its option borrow in various currencies, at interest rates based on specified margins over money market rates. The subsidiary is able to borrow up to the equivalent of $6,900,000 at any time through September, 1996 under one facility, and $3,400,000 through August, 1998 under a second facility. A third arrangement permits borrowings up to $6,300,000, with the amount that can be borrowed reducing semi-annually by $634,000. As of November 3O, 1993, no amount was borrowed under these bank facilities. Future payments due on long-term debt total $5,978,000 in 1994, $9,508,000 in 1995, $17,687,000 in 1996, $17,687,000 in 1997, and $17,687,000 in 1998. The lending agreements contain various restrictive covenants including the requirement to maintain specified amounts of working capital and net worth and restrictions on cash dividends, borrowings, liens, investments and guarantees. Under the most restrictive provisions of the Company's lending agreements, approximately $1,300,000 of retained earnings was not restricted at November 30, 1993. 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 secured equally and ratably as long as such other debt shall be secured. The following disclosure of the estimated fair value of the Company's debt is made in accordance with the requirements of Financial Accounting Standards Board Statement No. 107 "Disclosures about Fair Value of Financial Instruments." The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. Considerable judgement is required to develop the estimates of fair value, thus the estimates provided herein are not necessarily indicative of the amounts that could be realized in a current market exchange.
(In thousands) November 30,1993 - ------------------------------------------------------------------------------- Carrying Fair Amount Value --------------------------- Short-term borrowings $ 2,021 $ 2,021 Fixed-rate long-term debt 88,767 97,500 Variable-rate long-term debt 6,801 6,801
The carrying value of short-term and variable-rate long-term debt are a reasonable estimate of their fair value. The estimated fair value of the Company's fixed-rate long-term debt is based on yields of U.S. government notes plus an estimated spread at November 30, 1993 for similar securities with similar remaining maturities. The Company has guaranteed obligations of various unconsolidated foreign affiliated and nonaffiliated companies of $1,700,000 as of November 30, 1993. - -------------------------------------------------------------------------------- NOTE 10 LEASE COMMITMENTS Rental expense under long-term operating leases of property, trucks and other equipment was $6,068,000 in 1993, $5,512,000 in 1992 and $4,860,000 in 1991. At November 30, 1993, future rental commitments under these leases totaled $69,869,000. Future rental commitments are payable as follows:
Year ending (In thousands) November 30 Amount - ------------------------------------------------------------------------------- 1994 $6,888 1995 5,663 1996 5,248 1997 4,596 1998 4,612 1999-Beyond 42,862 ------- $69,869 ------- -------
Minimum payments for leases have not been reduced by minimum noncancelable sublease rentals aggregating $12,496,000 for operating leases. - -------------------------------------------------------------------------------- NOTE 11 CONTINGENCIES AND COMMITMENTS An action was filed in 1988 by a private litigant against the Company in U.S. District Court for the District of Oregon in connection with the Company's 1988 acquisition of the steel fabrication assets of Kaiser Steel Corporation. The amounts claimed by the plaintiff were substantial. Following trial and two appeals to the Ninth Circuit Court of Appeals, this action was settled in September 1993 on terms deemed to be favorable to the Company. An action was filed in 1992 in the U.S. District Court for the District of Arizona by the Central Arizona Water Conservation District ("CAWCD") seeking damages against several parties, including the Company, in connection with six prestressed concrete pipe siphons furnished and installed in the 1970's as part of the Central Arizona Project ("CAP"), a federal project to bring water from the Colorado River to Arizona. The CAWCD also filed separate actions against the U.S. Bureau of Reclamation ("USBR") and with the Arizona Projects Office of the USBR in connection with the CAP siphons. The CAWCD alleges that the six CAP siphons are defective and 42 that the USBR and the defendants in the U.S. District Court action are liable for the repair or replacement of those siphons at a claimed estimated cost of $146.7 million. The Company has internally, as well as through independent third-party consultants, conducted engineering analyses regarding this issue and believes that the siphons were manufactured in accordance with the project specifications and other contract requirements; and, therefore, it is not liable for any claims relating to the siphons. The Company has recorded reserves that it believes are adequate to cover costs associated with the Company's continued vigorous defense of its position in this matter. The Company continues to believe that it has meritorious defenses to this action and that resultant liability, if any, should not have a material adverse effect on the financial position of the Company and its results of operations. In July 1992 the Company was served with a complaint in an action brought by the City and County of San Francisco in Superior Court of the State of California against the Company and two co-defendants, in connection with a pipeline referred to as San Andreas Pipeline No. 3, a water transmission pipeline which was installed between 1980 and 1982. The Company furnished the pipe used in that pipeline. Plaintiff alleges that the pipeline is defective and seeks damages of $44.0 million to replace the entire pipeline. The Company has recorded reserves that it believes are adequate to cover costs associated with the Company's continued vigorous defense of its position in this matter. The Company believes that it has meritorious defenses to this action and that resultant liability, if any, should not have a material adverse effect on the financial position of the Company and its results of operations. In addition, certain other claims, suits and complaints which arise in the ordinary course of business, have been filed or are pending against the Company. Management believes that these matters, and the matters discussed above, are either adequately reserved, covered by insurance, or would not have a material adverse effect on the financial position of the Company or its results of operations if disposed of unfavorably. The Company is also 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 adverse effect on the Company's financial position or its results of operations. At November 30, 1993, the Company had reserves of approximately $7.0 million for potential environmental liabilities and approximately $9.7 million associated with product liability and other legal claims. The Company insures for property loss, workers' compensation, general liability and automotive liability, subject to specific retention levels. Consulting actuaries assist the Company in determining its liability for retained claims. - ------------------------------------------------------------------------------- NOTE 12 CAPITAL STOCK The certificate of incorporation in Delaware authorizes 12,000,000 shares of $2.50 par value common stock, 1,000,000 shares of $1.00 par value preferred stock and 100,000 shares of $1.00 par value series A junior participating cumulative preferred stock. The preferred stock may be issued in series, with the rights and preferences of each series to be established by the Board of Directors. As of November 30, 1993, the Company had no shares of preferred stock or series A junior participating cumulative preferred stock outstanding. The Company has a Stockholders' Rights Agreement, which entitles stockholders to purchase common stock if a party acquires 15% or more of the Company's common shares or announces a tender offer for at least 15% of its common shares outstanding. - ------------------------------------------------------------------------------- NOTE 13 INCENTIVE STOCK COMPENSATION PLAN On January 27, 1992, the Board of Directors of the Company adopted the Incentive Stock Compensation Plan (the "1992 Incentive Plan"). On March 30, 1992, the 1992 Incentive Plan was approved by the stockholders at the Annual Stockholders' Meeting. Under the terms of the 1992 Incentive Plan, 1.5 percent of the total number of shares of Common Stock outstanding on the preceding December 31 are available for grant of awards in the following calendar year to key employees. The Company has reserved 146,850 shares of common stock for sale to employees under the 1992 Incentive Plan at November 30, 1993. The plan provides for the issuance of options to purchase not more than 250,000 shares of common stock in the form of incentive options under the provisions of Section 422 of the Internal Revenue Code. Options can be incentive stock options or nonqualified options and may be granted for up to ten years. A summary of all stock option transactions (including those under the 1992 Incentive Plan, as well as those under predecessor stock option plans) for 1993, 1992 and 1991 is as follows:
Number of Shares Option Price per Share - --------------------------------------------------------------------------------- Outstanding at November 30, 1990 106,988 $14.63 to $43.75 Granted 38,500 37.38 Exercised (12,950) 23.50 to 43.75 Expired (2,250) 43.75 ------- Outstanding at November 30, 1991 130,288 14.63 to 43.75 Granted 25,200 34.75 Exercised (2,113) 31.75 Expired (16,650) 31.75 to 43.75 ------- Outstanding at November 30,1992 136,725 14.63 to 43.75 Granted 40,700 31.00 to 32.75 Exercised (2,200) 32.00 Expired (28,375) 32.00 to 43.75 ------- Outstanding at November 30, 1993 146,850 14.63 to 43.75 ------- -------
Options for 79,875 shares were exercisable at November 30, 1993. The remaining outstanding options become exercisable in varying amounts through 1997. Awards under the 1992 Incentive Plan may include but are not limited to stock bonuses, stock options, convertible securities and restricted stock grants. Restrictions may limit the sale, transfer, voting rights and dividends on these shares. At November 30, 1993, 15,000 restricted shares were outstanding, and 65,549 shares were available for future grants. - ------------------------------------------------------------------------------- NOTE 14 BUSINESS SEGMENTS AND GRAPHIC AREAS Financial information for 1993, 1992 and 1991, with respect to the various business segments of the Company, appears on pages 46 and 47. 43 QUARTERLY FINANCIAL DATA Summarized quarterly financial data for the years ended November 30, 1993 and 1992 follow (in thousands except per share data):
1993 ------------------------------------------------------------ First Second Third Fourth Quarter Quarter Quarter Quarter - ---------------------------------------------------------------------------------------------------- Sales $96,454 $121,633 $124,039 $111,231 Gross Profit 27,002 34,477 33,662 24,728 Net Income (loss) 783 3,994 2,865 (31,897)(1) Net Income (loss) per share .20 1.04 .72 (8.24)(1) 1992 ------------------------------------------------------------ First Second Third Fourth Quarter Quarter Quarter Quarter - ---------------------------------------------------------------------------------------------------- Sales $93,922 $117,000 $117,584 $117,971 Gross Profit 23,337 31,177 31,848 32,166 Net Income (loss) (1,963) 2,780 3,122 1,920 Net Income (loss) per share (.51) .72 .81 .51 The Company traditionally experiences seasonal patterns associated with weather and contractor schedules, which result in lower sales during the first quarter. (1) Includes $31.5 million in fourth-quarter charges, or $8.15 per share, net of income taxes, for restructuring and other related items.
PER SHARE DATA Market Price Dividends ---------------------------------------- Quarters Ended 1993 1992 1993 1992 - ----------------------------------------------------------------------------- February 28 --High $35 $36 1/2 $.32 $.32 --Low 32 32 1/4 May 31 --High 33 34 3/4 .32 .32 --Low 31 29 3/4 August 31 --High 38 33 1/2 .32 .32 --Low 32 1/4 29 November 30 --High 38 3/4 35 .32 .32 --Low 35 3/4 31 1/8
44 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS - -------------------------------------------------------------------------------- To the Stockholders and the Board of Directors, Ameron, Inc.: We have audited the accompanying consolidated balance sheets of Ameron, Inc. (a Delaware corporation) and subsidiaries as of November 30, 1993 and 1992, and the related consolidated statements of operations, cash flows and stockholders' equity for each of the three years in the period ended November 30, 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of Gifford-Hill-American, Inc. as of November 30, 1992 and 1991, the investment in which is reflected in the accompanying financial statements using the equity method of accounting (see Note 4). The investment in this company is insignificant to consolidated assets. The equity in its net losses represents 15 and 17 percent of consolidated net income for 1992 and 1991, respectively. Those statements were audited by other auditors whose report has been furnished to us and our opinion, insofar as it relates to the amounts included for that company, is based on the report of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ameron, Inc. and subsidiaries as of November 30, 1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended November 30, 1993, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN & CO. LOS ANGELES, CALIFORNIA JANUARY 13, 1994 REPORT OF MANAGEMENT - -------------------------------------------------------------------------------- We have prepared the accompanying consolidated financial statements and related financial information of Ameron, Inc. and subsidiaries in conformity with generally accepted accounting principles appropriate in the circumstances. Management is primarily responsible for the integrity of the financial information included in this Annual Report. In preparing the financial statements, management makes estimates as necessary based upon currently available information and judgments of current conditions and circumstances. Ameron maintains a system of internal accounting controls supported by documentation to provide reasonable assurance that assets are safeguarded and the accounting records reflect the authorized transactions of the Company. We believe the Company's system provides this appropriate balance in accordance with established policies and procedures as implemented by qualified personnel. The independent auditors, Arthur Andersen & Co., appointed by the Board of Directors, are responsible for expressing their opinion as to whether the consolidated financial statements present fairly in all material respects the financial position, operating results and cash flows of the Company. In this process, they evaluate the system of internal accounting controls to establish the audit procedures. Their opinion appears on this page. The Audit Committee of the Board of Directors is composed of four directors who are not officers or employees of the Company. They meet periodically with management, Arthur Andersen & Co. and the internal auditors to review the audit scope and results, discuss internal control and financial reporting subjects, and review management actions on these matters. Arthur Andersen & Co. and the internal auditors have full and free access to the members of the Audit Committee. /s/ James S. Marlen JAMES S. MARLEN President & Chief Executive Officer /s/ Gary Wagner GARY WAGNER Senior Vice President & Chief Financial Officer, Treasurer 45 BUSINESS SEGMENTS & GEOGRAPHIC AREAS Ameron classifies its business operations into four segments: PROTECTIVE COATINGS SYSTEMS--high-performance coatings and product finishes; FIBERGLASS PIPE SYSTEMS--filament-wound fiberglass pipe, tubing and fittings; CONCRETE & STEEL PIPE SYSTEMS--concrete and steel pressure pipe, concrete non-pressure pipe and protective linings for pipe and fabricated products; CONSTRUCTION & ALLIED PRODUCTS--ready-mix concrete, sand and aggregates,concrete pipe, and concrete and steel lighting and traffic poles. lntersegment sales were not significant. Operating profit (loss) for reportable segments is exclusive of certain unallocated corporate income and expense. Identifiable assets by segment are those assets that are used exclusively by such segment. Corporate assets are principally cash, receivables, property and equipment. Capital expenditures do not include plant and equipment from business acquisitions. A summary of sales, operating profit (loss), assets, depreciation and capital expenditures by segment follows.
Business Segments -------------------------------------------------------------------------------------- PROTECTIVE FIBERGLASS CONCRETE & CONSTRUCTION & CORPORATE & (In thousands) COATINGS PIPE STEEL PIPE ALLIED PRODUCTS ADJUSTMENTS CONSOLIDATED - ------------------------------------------------------------------------------------------------------------------------------- 1993 Sales $137,776 $ 92,947 $110,261 $112,373 $ -- $453,357 Operating profit (loss) 1,494 14,207 (15,067) 6,607 (30,360) (23,119) Identifiable assets 66,958 58,481 72,838 58,973 40,608 297,858 Investments, advances and equity in undistributed earnings of affiliated companies 39,984 39,984 Capital expenditures 3,202 4,302 2,581 3,864 748 14,697 Depreciation 2,350 3,774 4,871 4,852 597 16,444 - ------------------------------------------------------------------------------------------------------------------------------- 1992 Sales $139,948 $ 73,706 $113,417 $119,406 $ -- $446,477 Operating profit 4,807 7,357 6,578 13,745 (16,000) 16,487 Identifiable assets 69,518 67,569 80,830 62,308 51,373 331,598 Investments, advances and equity in undistributed earnings of affiliated companies 47,882 47,882 Capital expenditures 4,363 8,778 2,057 4,310 1,519 21,027 Depreciation 2,107 3,053 4,867 4,816 806 15,649 - ------------------------------------------------------------------------------------------------------------------------------- 1991 Sales $132,145 $ 72,459 $136,214 $124,318 $ -- $465,136 Operating profit 4,965 5,690 4,391 12,257 465 27,768 Identifiable assets 66,668 55,990 93,994 65,188 56,731 338,571 Investments, advances and equity in undistributed earnings of affiliated companies 45,901 45,901 Capital expenditures 2,569 4,936 6,705 11,136 1,181 26,527 Depreciation 2,137 2,912 5,924 4,831 900 16,704
46 Sales for export or to any individual customer did not exceed 10% of consolidated sales. Information with respect to the Company's geographic segments is as follows:
Geographic Areas ------------------------------------------------------------------------ UNITED INVESTMENTS & (In thousands) STATES EUROPE OTHER ELIMINATIONS CONSOLIDATED - ------------------------------------------------------------------------------------------------------------------------------- 1993 Sales to unaffiliated customers $339,993 $ 90,634 $ 22,730 $ -- $453,357 Intercompany sales between geographic areas 3,416 1,075 6,284 (10,775) -- --------------------------------------------------------------------- Total sales $343,409 $ 91,709 $ 29,014 $(10,775) $453,357 --------------------------------------------------------------------- --------------------------------------------------------------------- Operating profit (loss) $(32,398) $ 11,247 $ (1,968) $ -- $(23,119) Identifiable assets 225,168 53,479 19,211 -- 297,858 Investments, advances and equity in undistributed earnings of affiliated companies -- -- -- 39,984 39,984 - ------------------------------------------------------------------------------------------------------------------------------- 1992 Sales to unaffiliated customers $349,644 $ 79,739 $ 17,094 $ -- $446,477 Intercompany sales between geographic areas 3,785 382 5,084 (9,251) -- --------------------------------------------------------------------- Total sales $353,429 $ 80,121 $ 22,178 $ (9,251) $446,477 --------------------------------------------------------------------- --------------------------------------------------------------------- Operating profit $ 3,956 $ 8,043 $ 4,488 $ -- $ 16,487 Identifiable assets 249,470 63,356 18,772 -- 331,598 Investments, advances and equity in undistributed earnings of affiliated companies 47,882 47,882 - ------------------------------------------------------------------------------------------------------------------------------- 1991 Sales to unaffiliated customers $386,676 $ 64,214 $ 14,246 $ -- $465,136 Intercompany sales between geographic areas 2,479 328 3,724 (6,531) -- --------------------------------------------------------------------- Total sales $389,155 $ 64,542 $ 17,970 $ (6,531) $465,136 --------------------------------------------------------------------- --------------------------------------------------------------------- Operating profit $ 23,939 $ 1,489 $ 2,340 $ -- $ 27,768 Identifiable assets 278,206 44,136 16,229 -- 338,571 Investments, advances and equity in undistributed earnings of affiliated companies 45,901 45,901 - -----------------------------------------------------------------------------------------------------------------------------
47 EX-21 7 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT ------------------------------ Parents - ------- None
Jurisdiction of Percent of Subsidiaries Consolidated Incorporation Stock Owned - ------------------------ --------------- ----------- American Pipe & Construction International California 100 Ameron B.V. The Netherlands 100 Ameron Canada, Inc. Canada 100 Ameron FSC Guam 100 Ameron (Hong Kong) Ltd. Hong Kong 100 Ameron (Pte) Ltd. Singapore 100 Subsidiaries Not Consolidated and Fifty-Percent or Less Owned Companies - ------------------------------------- Gifford-Hill-American, Inc. Texas 50 Tamco California 50 Bondstrand, Ltd. Saudi Arabia 40 Oasis-Ameron, Ltd. Saudi Arabia 40 Ameron Saudi Arabia, Ltd. Saudi Arabia 30
Names of insignificant subsidiaries, other subsidiaries not consolidated and fifty-percent or less owned companies are omitted because when considered in the aggregate as a single subsidiary they do not constitute a significant subsidiary. EXHIBIT 21 43 EX-23 8 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS ----------------------------------------- As independent public accountants, we hereby consent to the incorporation of our reports included and incorporated by reference in this Form 10-K, into Ameron, Inc.'s previously filed Registration Statements File No. 33-3400 and 33-57308. ARTHUR ANDERSEN & CO. Los Angeles, California February 24, 1994 EXHIBIT 23 44 -----END PRIVACY-ENHANCED MESSAGE-----