FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 2001
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File No. 1 - 9102
AMERON INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 77-0100596
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
245 South Los Robles Avenue
Pasadena, California 91101-2820
(Address of principal executive offices)
Telephone Number (626) 683-4000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes /X/ No
The number of shares outstanding of Common Stock, $2.50 par value, was 3,869,657
on March 31, 2001. No other class of Common Stock exists.
AMERON INTERNATIONAL CORPORATION
INDEX
Page
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PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Statements of Income 3
Consolidated Balance Sheets 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 10
Item 3. Quantitative & Qualitative Market Risk Disclosure 12
PART II. OTHER INFORMATION
Item 2. Changes in Securities 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURE PAGE 13
Page 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Ameron International Corporation and Subsidiaries
Consolidated Statements of Income
(In thousands, except share and per share data)
(Unaudited)
Three Months Ended
February 28 and 29,
-----------------------------
2001 2000
----------- -----------
Sales $ 121,605 $ 121,365
Cost of Sales (91,706) (93,312)
----------- -----------
Gross Profit 29,899 28,053
Selling, General and
Administrative Expenses (26,498) (27,142)
Other Income, net 1,808 3,633
----------- -----------
Income before Interest
and Income Taxes 5,209 4,544
Interest Income 53 30
Interest Expense (3,068) (3,306)
----------- -----------
Income before Income Taxes 2,194 1,268
Provision for Income Taxes (614) (317)
----------- -----------
Net Income $ 1,580 $ 951
=========== ===========
Net Income per Share (Basic) $ .41 $ .24
=========== ===========
Net Income per Share (Diluted) $ .41 $ .24
=========== ===========
Weighted Average Shares(Basic) 3,869,357 3,991,912
=========== ===========
Weighted Average Shares (Diluted) 3,893,968 4,002,853
=========== ===========
Cash Dividends per Share $ .32 $ .32
=========== ===========
See accompanying notes to consolidated financial statements.
Page 3
Ameron International Corporation and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share and per share data)
February 28, November 30,
2001 2000
(Unaudited)
----------- ------------
ASSETS
Current Assets
Cash and Cash Equivalents $ 12,924 $ 11,514
Receivables, Less Allowances of $6,288
in 2001 and $6,616 in 2000 123,017 139,961
Inventories 87,985 82,470
Deferred Income Taxes 23,751 23,720
Prepaid Expenses and Other Current Assets 7,648 6,305
--------- ---------
Total Current Assets 255,325 263,970
Investments, Advances and Equity in
Undistributed Earnings of Joint Ventures 21,673 21,773
Property, Plant and Equipment, Net 148,656 145,196
Other Assets 49,247 47,510
--------- ---------
Total Assets $ 474,901 $ 478,449
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-Term Borrowings $ 4,463 $ 5,001
Current Portion of Long-Term Debt 8,878 8,848
Trade Payables 40,186 41,127
Accrued Liabilities 49,907 58,265
Income Taxes Payable 16,191 15,103
--------- ---------
Total Current Liabilities 119,625 128,344
Long-Term Debt, Less Current Portion 141,696 140,718
Other Long-Term Liabilities 27,895 26,957
--------- ---------
Total Liabilities 289,216 296,019
--------- ---------
Stockholders' Equity
Common Stock, Par Value $2.50 a Share,
Authorized 12,000,000 Shares, Outstanding
3,869,357 Shares in 2001 and 2000,
Net of Treasury Shares 13,007 13,007
Additional Paid-In Capital 18,532 17,857
Retained Earnings 224,962 224,620
Accumulated Other Comprehensive Loss (22,144) (24,382)
Less Treasury Stock (1,333,655 Shares
in 2001 and 2000) (48,672) (48,672)
--------- ---------
Total Stockholders' Equity 185,685 182,430
--------- ---------
Total Liabilities and Stockholders' Equity $ 474,901 $ 478,449
========= =========
See accompanying notes to consolidated financial statements.
Page 4
Ameron International Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands, unaudited)
Three Months Ended
February 28 and 29,
-----------------------
2001 2000
-------- --------
Cash Flows from Operating Activities
Net Income $ 1,580 $ 951
Adjustments to Reconcile Net Income to Net Cash
Provided by (Used in) Operating Activities:
Depreciation 4,375 4,046
Amortization 198 421
Deferred Income Taxes 113 156
Equity in Earnings of Joint Ventures (999) (1,765)
Dividends from Joint Ventures 1,368 3,957
Loss (Gain) from Sale of Assets 56 (17)
Other Noncash Expenses 675 --
Changes in Operating Assets and Liabilities:
Receivables 18,219 739
Inventories (5,424) (1,607)
Prepaid Expenses and Other Current Assets (1,315) (2,165)
Trade Payables, Accrued Liabilities and
Income Taxes Payable (8,667) (5,062)
Other Long-Term Assets and Liabilities (1,032) (2,375)
-------- --------
Net Cash Provided by (Used In)
Operating Activities 9,147 (2,721)
-------- --------
Cash Flows from Investing Activities
Proceeds from Sale of Property, Plant and Equipment 109 75
Additions to Property, Plant and Equipment (6,950) (4,126)
-------- --------
Net Cash Used in Investing Activities (6,841) (4,051)
-------- --------
Cash Flows from Financing Activities
Net Change in Short-Term Borrowings (402) (217)
Issuance of Debt 2,418 6,700
Repayment of Debt (1,900) (1,142)
Dividends on Common Stock (1,238) (1,277)
-------- --------
Net Cash (Used in) Provided By
Financing Activities (1,122) 4,064
-------- --------
Effect of Exchange Rate Changes
on Cash and Cash Equivalents 226 146
-------- --------
Net Change in Cash and Cash Equivalents 1,410 (2,562)
Cash and Cash Equivalents at Beginning of Period 11,514 10,521
-------- --------
Cash and Cash Equivalents at End of Period $ 12,924 $ 7,959
======== ========
See accompanying notes to consolidated financial statements.
Page 5
Ameron International Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(In Thousands Except Share Data)
(Unaudited)
Note 1. Basis Of Presentation
Consolidated financial statements for the interim periods included herein are
unaudited; however, they contain all adjustments, including normal recurring
accruals, which in the opinion of management, are necessary to present fairly
the consolidated financial position of Ameron International Corporation (the
"Company" or "Ameron") at February 28, 2001, and its consolidated results of
operations and consolidated cash flows for the three months ended February
28, 2001 and February 29, 2000. Accounting measurements at interim dates
inherently involve greater reliance on estimates than at year-end. Results of
operations for the periods presented are not necessarily indicative of the
results to be expected for the full year.
The consolidated financial statements do not include certain footnote
disclosures and financial information normally included in consolidated
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America and, therefore, should be read in
conjunction with the consolidated financial statements and notes included in
Ameron's Annual Report on Form 10-K for the year ended November 30, 2000.
Note 2. Accounting Change
Effective December 1, 2000, Ameron adopted Statement of Financial Accounting
Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities". SFAS No. 133 establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. The Company uses derivative
products, such as forward and option contracts, primarily to hedge the foreign
currency market exposures which affect certain assets and liabilities and
forecasted transactions with customers and vendors. The Company designates such
derivatives primarily as fair value hedges. As of both February 28, 2001 and
December 1, 2000, the fair value of derivatives held by the Company were not
significant. Additionally, the adoption of SFAS No. 133 at December 1, 2000 did
not result in a cumulative adjustment to either income or other comprehensive
income for a change in accounting principle.
In 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting
Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements," and
further amended it to defer the effective date. SAB 101 summarized certain of
the SEC's views on the application of generally accepted accounting principles
to revenue recognition. The Company is required to adopt the provisions of SAB
101 no later than November 30, 2001. The Company does not believe SAB 101 will
have a material impact on the financial statements.
Page 6
Note 3. Inventories
Inventories are stated at the lower of cost (principally first-in, first-out)or
market. Inventories were comprised of the following:
February 28, November 30,
2001 2000
------------ ------------
Finished Products $58,652 $51,570
Products in Process 10,698 18,788
Materials and Supplies 18,635 12,112
------- -------
$87,985 $82,470
======= =======
Note 4. Supplemental Disclosure of Cash Flow Information
Three Months Ended
February 28 and 29,
---------------------
2001 2000
------ ------
Interest Paid $3,581 $1,795
Income Taxes Paid $ 608 $2,351
Note 5. Joint Ventures
Operating results of joint ventures, which were accounted for by the equity
method, were as follows:
Three Months Ended
February 28 and 29,
-----------------------
2001 2000
------- -------
Net Sales $52,930 $55,404
Gross Profit $15,571 $17,985
Net Income $ 6,718 $ 7,905
Amounts shown above represent the operating results of Ameron Saudi Arabia,
Ltd., Bondstrand, Ltd. and Oasis-Ameron, Ltd. for the three months ended
December 31, 2000 and 1999 and TAMCO for the three months ended February 28,
2001 and February 29, 2000. Ameron's equity in earnings of joint ventures is
included in other income.
Note 6. Net Income Per Share
Net income per basic share is computed on the basis of the weighted average
number of common shares outstanding each period. Net income per diluted share is
computed on the basis of the weighted average total of common shares outstanding
each period plus the effect of outstanding stock options, excluding those that
would be anti-dilutive, using the treasury stock method.
Page 7
Following is a reconciliation of the weighted average number of shares used in
the computation of basic and diluted net income per share:
Three Months Ended
February 28 and 29,
---------------------------
2001 2000
--------- ---------
Basic Average Common
Shares Outstanding 3,869,357 3,991,912
Dilutive Effect of
Stock Options 24,611 10,941
--------- ---------
Diluted Average Common
Shares Outstanding 3,893,968 4,002,853
========= =========
Note 7. Other Comprehensive Income
Comprehensive income was computed as follows:
Three Months Ended
February 28 and 29,
-----------------------
2001 2000
------- -------
Net Income $ 1,580 $ 951
Foreign Currency Translation
Adjustment 2,238 (2,810)
------- -------
Comprehensive Income/(Loss) $ 3,818 $(1,859)
======= =======
Note 8. Debt
The Company's long-term debt consisted of the following:
February 28, November 30,
2001 2000
------------ ------------
Fixed-rate unsecured notes payable, bearing
interest at 7.92%, in annual principal
installments of $8,333, commencing in 2001 $ 50,000 $ 50,000
Variable-rate industrial development bonds,
Payable in 2016 (3.30% at February 28, 2001) 7,200 7,200
Variable-rate unsecured bank revolving credit
facilities (approximately 5.99% at February 28, 2001) 92,693 91,594
Variable-rate unsecured bank loan, payable in
Dutch guilders, with annual principal installments
of approximately $545 (5.76% at February 28, 2001) 681 772
--------- ---------
150,574 149,566
Less Current portion (8,878) (8,848)
--------- ---------
$ 141,696 $ 140,718
========= =========
Page 8
Note 9. Segment Information
The Company provides certain information about operating segments in accordance
with SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information." In accordance with SFAS No. 131, the Company has determined that
is has four operating segments: Performance Coatings & Finishes Group,
Fiberglass-Composite Pipe Group, Water Transmission Group, and Infrastructure
Products Group. Each of these segments has a dedicated management team and is
managed separately, primarily because of differences in products. Inter-segment
sales were not significant. Following is information related to each operating
segment included in, and in a manner consistent with, internal management
reports:
Three Months Ended
February 28 and 29,
----------------------------
2001 2000
--------- ---------
Sales
Performance Coatings & Finishes $ 42,745 $ 41,700
Fiberglass-Composite Pipe 23,692 21,577
Water Transmission 28,098 33,391
Infrastructure Products 27,518 24,731
Eliminations (448) (34)
--------- ---------
Total Sales $ 121,605 $ 121,365
========= =========
Income (Loss) Before Interest
and Income Taxes
Performance Coatings & Finishes $ 104 $ (428)
Fiberglass-Composite Pipe 2,241 1,369
Water Transmission 3,442 4,507
Infrastructure Products 3,087 2,495
Corporate & Unallocated (3,665) (3,399)
--------- ---------
Total Income Before Interest
and Income Taxes $ 5,209 $ 4,544
========= =========
February 28, November 30,
2001 2000
------------ ------------
Assets
Performance Coatings & Finishes $ 135,780 $ 131,300
Fiberglass-Composite Pipe 128,537 127,904
Water Transmission 98,492 112,254
Infrastructure Products 65,729 61,503
Corporate & Unallocated 174,840 169,212
Eliminations (128,477) (123,724)
--------- ---------
Total Assets $ 474,901 $ 478,449
========= =========
Page 9
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Ameron International Corporation and Subsidiaries
February 28, 2001
INTRODUCTION
Management's Discussion and Analysis should be read in conjunction with the same
discussion included in the Company's 2000 Annual Report on Form 10-K. Reference
should also be made to the financial statements included in this Form 10-Q for
comparative consolidated balance sheets and statements of income and cash flows.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of fiscal 2001 the Company generated $9.1 million of
cash from operating activities compared to using $2.7 million for the same
period in 2000. The higher operating cash flow came principally from collection
of receivables which primarily increased because of the strong fourth quarter
2000 sales of the Water Transmission Group.
Cash used in investing activities consisted of capital expenditures for normal
replacement and upgrades of machinery and equipment and the construction of a
new pole manufacturing plant in Anniston, Alabama. Management estimates that
capital expenditures during fiscal 2001 will be between $15.0 million and $25.0
million. Capital expenditures will be funded by existing cash balances, cash
generated from operations and existing lines of credit.
Cash used in financing activities was $1.1 million, primarily due to the payment
of common stock dividends.
Cash and cash equivalents at February 28, 2001 totaled $12.9 million, an
increase of $1.4 million from November 30, 2000.
At February 28, 2001 the Company had approximately $105.0 million in unused
committed and uncommitted credit lines available from foreign and domestic
banks.
The Company believes that cash and cash equivalents on hand, anticipated cash
flows from operations and funds from existing lines of credit will be sufficient
to meet future operating requirements.
Page 10
RESULTS OF OPERATIONS - FIRST QUARTER
The Company earned 41 cents per diluted share on sales of $121.6 million for the
first quarter of fiscal 2001, compared to earnings of 24 cents per diluted share
on sales of $121.4 million for the same period in 2000. The slight increase was
attributed primarily to higher sales and profitability of the Performance
Coatings & Finishes, Fiberglass-Composite Pipe, and Infrastructure Products
Groups, offset by the lower sales and profitability of the Water Transmission
business and Ameron's steel joint venture, TAMCO.
As expected, sales of the Water Transmission Group decreased $5.3 million in the
first quarter of 2001, compared to the same period of 2000. Sales were lower
because of temporarily slower market activity, as reflected in a lower backlog
at the beginning of the quarter. Profitability decreased $1.1 million in the
first quarter of 2001, compared to the first quarter of 2000, as a result of
lower sales. Water Transmission should benefit from an improved backlog in the
second half of 2001.
Sales of the Company's worldwide Fiberglass-Composite Pipe business increased
$2.1 million in the first quarter of 2001, compared to the first quarter of
2000, primarily due to the continued worldwide demand for oil field piping.
Profits increased by $900,000 in the first quarter of 2001, compared to the
first quarter of 2000, due to higher sales. Overall, the outlook for
Fiberglass-Composite Pipe remains strong in 2001.
Sales of the Performance Coatings & Finishes Group increased $1.0 million in the
first quarter of 2001, compared to the first quarter of 2000. The increase was
due primarily to the increased worldwide activity in key marine and offshore
markets. Performance Coatings & Finishes' results of operations improved by
$500,000 because of higher sales. An improvement of market conditions is
expected to continue in 2001.
Infrastructure Products Group had $2.8 million higher sales, and $600,000 higher
profits in the first quarter of 2001 primarily due to the normalized business
activities in Hawaii, which suffered from a strike in the same period of 2000.
Ameron's pole business declined slightly due to the start-up costs of a new
concrete pole plant in Alabama.
Selling, General and Administrative expenses were comparable to the prior year
both in dollars and as a percentage of sales. Included in selling, general and
administrative expenses for the quarter was $590,000 of expense related to
extending the life of certain stock options.
Other income declined because of lower equity income of $800,000 and foreign
exchange losses of $800,000. Equity income was lower as TAMCO was impacted by
the power crisis in California.
The effective tax rate was 28% in the first quarter of 2001, compared to 25% for
the same period in 2000. The effective tax rate reflects the anticipated income
taxes on income from domestic operations, as well as foreign operations and
joint ventures, which are taxed at rates lower than U.S. statutory tax rates.
Page 11
Item 3. Quantitative and Qualitative Market Risk Disclosure
No material changes have occurred in the quantitative and qualitative market
risk disclosure of the Company as presented in Ameron's Annual Report on Form
10-K for the year ended November 30, 2000.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
Any of the above statements that refer to the Company's estimated or anticipated
future results are forward-looking and reflect the Company's current analysis of
existing trends and information. Actual results may differ from current
expectations based on a number of factors affecting Ameron's businesses,
including competitive conditions and changing market conditions. Matters
affecting the economy generally, including the state of economies worldwide, can
affect the Company's results. These forward-looking statements represent the
Company's judgment only as of the date of this report. Since actual results
could differ materially, the reader is cautioned not to rely on these
forward-looking statements. Moreover, the Company disclaims any intent or
obligation to update these forward looking statements.
Part II. OTHER INFORMATION
Item 2. Changes in Securities
Terms of lending agreements place restrictions on cash dividends,
stock repurchases, borrowings, investments and guarantees. Under the
most restrictive provisions of these agreements, approximately $8.9
million of consolidated retained earnings were not restricted at
February 28, 2001.
Item 6. Exhibits and Reports on Form 8-K
No report on Form 8-K was filed for the Company in the first quarter
of 2001.
Page 12
Signature Page
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Ameron International Corporation
Date: April 13, 2001
/s/ Gary Wagner
---------------------------------
Gary Wagner
Senior Vice President,
Chief Financial Officer
Page 13