Note 11.  Product Warranties and Guarantees

The Company's product warranty accrual reflects management's estimate of probable liability associated with product warranties.  Management establishes product warranty accruals based on historical experience and other currently available information.

Changes in the product warranty accrual for the three months ended February 29, 2004 were as follows: 

Balance, Beginning of Period                                             $   3,770
Payments                                                                      (443)
Change in Liability for Warranties Issued During the Period                    598
                                                                         ---------
Balance, End of Period                                                   $   3,925
                                                                         =========

Note 12.  Goodwill and Other Intangible Assets

During 2003, the Company completed the required transitional goodwill and intangible asset impairment tests.  Annual tests were completed during the quarter ended February 29, 2004.  No impairment losses were identified as a result of these tests.  Changes in the Company's carrying amount of goodwill by business segment were as follows: 

                                                              Foreign Currency
                                                                   Translation
Segment                                    November 30,2003        Adjustments     February 29, 2004
- -------------------------------------     ------------------     --------------     ----------------
Performance Coatings & Finishes                   $   11,473         $      360           $   11,833
Fiberglass-Composite Pipe                              1,440                  -                1,440
Water Transmission                                         -                  -                    -
Infrastructure Products                                  201                  -                  201
                                                   ---------          ---------            ---------
Total                                             $   13,114         $      360           $   13,474

                                                   =========          =========            =========

                                                February 29, 2004                      November 30, 2003
                                       ----------------------------------     -----------------------------------
                                      Gross Intangible        Accumulated    Gross Intangible         Accumulated
                                                Assets       Amortization              Assets        Amortization
                                       ---------------     --------------     ---------------      --------------
Trademarks                                   $   2,135          $  (2,050)          $   2,076           $  (1,975)
Non-Compete Agreements                           2,105             (1,837)              2,105              (1,794)
Patents                                            212               (212)                212                (212)
Leasehold Interests                              1,930             (1,930)              1,930              (1,930)
                                              --------          ---------            --------           ---------
Total                                        $   6,382          $  (6,029)          $   6,323           $  (5,911)

                                              ========          =========            ========           =========

                                                                                        Three Months Ended
                                                                                        February 29 and 28,
                                                                                     ------------------------

                                                                                       2004           2003
                                                                                     ---------      ---------
Reported Net (Loss)/Income                                                           $  (2,753)      $  2,175
Add/(Deduct):  Stock-based employee compensation expense/
  (benefit) included in reported net income, net of tax                                    553           (148)

Deduct:  Stock-based employee compensation
  expense determined under SFAS No. 123,

  net of tax                                                                              (177)          (205)

                                                                                     ---------      ---------
Pro Forma Net (Loss)/Income                                                          $  (2,377)     $   1,822
                                                                                     =========      =========
Basic Net (Loss)/Income Per Share:
  As Reported                                                                        $    (.34)     $     .28
  Pro Forma                                                                          $    (.29)     $     .23

Diluted Net (Loss)/Income Per Share:
  As Reported                                                                        $    (.34)     $     .27
  Pro Forma                                                                          $    (.29)     $     .23

Note 14.  Employee Benefit Plans

For the quarter ended February 29, 2004 and February 28, 2003, net pension and postretirement costs were comprised of the following:

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                                                                                                      U.S. Postretirement 

                                                                     Pension Benefits                     Health Care
                                                          -----------------------------------------   -------------------
                                                               U.S. Plans         Non U.S. Plans                  

                                                          -------------------    ------------------
                                                                       Three Months Ended February 29 and 28,

                                                          ---------------------------------------------------------------

                                                            2004       2003       2004       2003       2004        2003

                                                          --------   --------   --------   --------   --------   --------
Service cost                                              $    862   $    713   $    202   $    193   $     28   $     26
Interest cost                                                2,723      2,662        297        313         50         48
Expected return on plan assets                              (2,629)    (2,380)      (224)      (292)        (8)        (8)

Amortization of unrecognized 

   prior service cost                                          217        231        106        145         (4)        (4)
Amortization of unrecognized 

   net transition obligation                                    --         --         --         --         18         18

Amortization of accumulated loss                             1,538      1,345         --         --         12          5

                                                          --------   --------   --------   --------   --------   --------
Net periodic cost                                         $  2,711   $  2,571   $    381   $    359   $     96   $     85
                                                          ========   ========   ========   ========   ========   ========

The Company's policy is to make pension plan contributions to the extent such contributions are mandatory, actuarially determined and tax deductible. The Company expects to contribute $3,547 to the U.S. pension plans by August 15, 2004, and also expects to contribute $1,105 each quarter beginning March 15, 2004.

 Item 2.  Management's Discussion and Analysis of Financial
              Condition and Results of Operations

Ameron International Corporation and Subsidiaries
February 29, 2004

INTRODUCTION

Ameron International Corporation ("Ameron" or the "Company") is a multinational manufacturer of highly-engineered products and materials for the chemical, industrial, energy, transportation and infrastructure markets.  Ameron is a leading producer of water transmission lines; high-performance coatings and finishes for the protection of metals and structures; fiberglass-composite pipe for transporting oil, chemicals and corrosive fluids and specialized materials and products used in infrastructure projects.  The Company operates businesses in North America, South America, Europe, Australasia and Asia.  The Company has four operating segments. The Performance Coatings & Finishes Group manufactures and markets high-performance industrial and marine coatings. The Fiberglass-Composite Pipe Group manufactures and markets filament-wound and molded composite fiberglass pipe, tubing, fittings and well screens.  The Water Transmission Group manufactures and supplies concrete and steel pressure pipe, concrete non-pressure pipe, protective linings for pipe, and fabricated steel products. The Infrastructure Products Group manufactures and sells ready-mix concrete, sand and aggregates, concrete pipe and culverts, and concrete and steel lighting and traffic poles.  The markets served by the Performance Coatings & Finishes Group and the Fiberglass-Composite Pipe Group are worldwide in scope. The Water Transmission Group serves primarily the western U.S.  The Infrastructure Products Group's quarry and ready-mix business operates exclusively in Hawaii, and poles are sold throughout the U.S.  Ameron also participates in several joint-venture companies, directly in the U.S., and Saudi Arabia, and indirectly in Kuwait and Egypt.

Management's Discussion and Analysis should be read in conjunction with the same discussion included in the Company's 2003 Annual Report. 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.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management's Discussion and Analysis of Liquidity and Capital Resources and Results of Operations are based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.  The preparation of these financial statements requires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities during the reporting periods.  Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results could differ from those estimates.  The following critical accounting policies and estimates affect the preparation of the Company's consolidated financial statements.

The Company's significant accounting policies are disclosed in Note 1 of Notes to Consolidated Financial Statements in the Company's 2003 Annual Report.  Management believes the following accounting policies affect the more significant estimates used in preparing the consolidated financial statements.

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The consolidated financial statements include the accounts of Ameron International Corporation and all wholly-owned subsidiaries.  All material intercompany accounts and transactions have been eliminated.  The functional currencies for the Company's foreign operations are the applicable local currencies.  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 resulting translation adjustments are recorded in accumulated other comprehensive loss.  The Company advances funds to certain foreign subsidiaries that are not expected to be repaid in the foreseeable future.  Translation adjustments arising from these advances are also included in accumulated other comprehensive loss.  The timing of repayments of intercompany advances could materially impact the Company's consolidated financial statements.  Additionally, earnings of foreign subsidiaries are often reinvested outside the U.S.  Unforeseen repatriation of such earnings could result in significant unrecognized U.S. tax liability.  Gains or losses resulting from foreign currency transactions are included in other income.

Revenue for the Performance Coatings & Finishes, Fiberglass-Composite Pipe and Infrastructure Products segments is recognized when risk of ownership and title pass, primarily at the time goods are shipped, provided that an agreement exists between the customer and the Company, the price is fixed or determinable and collection is reasonably assured.  In limited circumstances within the Performance Coatings & Finishes Group, revenue recognition associated with shipment of coatings for marine dry dockings is delayed until product returns are processed.  Revenue is recognized for the Water Transmission Group primarily under the percentage-of-completion method, typically based on completed units of production, since products manufactured under enforceable and binding construction contracts typically are designed for specific applications, are not interchangeable between projects, and are not manufactured  for stock.  In some cases, if products are manufactured for stock or are not related to specific construction contracts, revenue is recognized under the same criteria used by the other three segments.    Revenue under the percentage-of-completion method is subject to a greater level of estimation, which affects the timing of revenue recognition, costs and profits.  Estimates are reviewed on a consistent basis and are adjusted periodically to reflect current expectations.

The Company expenses environmental clean-up costs related to existing conditions resulting from past or current operations on a site-by-site basis.  Liabilities and costs associated with these matters, as well as other pending litigation and asserted claims arising in the ordinary course of business, require estimates of future costs and judgments based on the knowledge and experience of management and its legal counsel.  When estimates of the Company's exposure can be reasonably estimated and probable, liabilities and expenses are recorded.  The ultimate resolution of any such exposure to the Company may differ due to subsequent developments.

Inventories are stated at the lower of cost or market with cost determined principally on the first-in, first-out (FIFO) method.  Certain steel inventories used by the Water Transmission Group are valued using the last-in, first-out (LIFO) method.  Reserves are established for excess, obsolete and rework inventories based on age, estimates of salability and forecasted future demand.  Management records an allowance for doubtful accounts receivable based on historical experience and expected trends.  A significant reduction in demand or significant worsening of customer credit quality could materially impact the Company's consolidated financial statements.  Property, plant and equipment is stated on the basis of cost and depreciated principally on a straight-line method based on the estimated useful lives of the related assets, generally three to 40 years.

Investments in unconsolidated joint ventures or affiliates ("joint ventures") over which the Company has significant influence are accounted for under the equity method of accounting, whereby the investment is carried at the cost of acquisition, plus the Company's equity in undistributed earnings or losses since acquisition.  Investments in joint ventures over which the Company does not have the ability to exert significant influence over the investee's operating and financing activities are accounted for under the cost method of accounting.  The Company's investment in TAMCO is accounted for under the equity method.  Investments in Ameron Saudi Arabia, Ltd., Bondstrand, Ltd. and Oasis-Ameron, Ltd. are accounted for under the cost method due to management's current assessment of the Company's  influence over these joint ventures.  

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable.  If the estimated future, undiscounted cash flows from the use of an asset are less than its carrying value, a write-down is recorded to reduce the related assets to estimated fair value.  

The Company is self insured for a portion of the losses and liabilities primarily associated with workers' compensation claims and general, product and vehicle liability.  Losses are accrued based upon the Company's estimates of the aggregate liability for claims incurred using historical experience and certain actuarial assumptions followed in the insurance industry.  The estimate of self insurance liability includes an estimate of incurred but not reported claims, based on data compiled from historical experience.  Actual experience could differ significantly from these estimates and could materially impact the Company's consolidated financial statements.

The Company follows the guidance of Statement of Financial Accounting Standards ("SFAS") No. 87, "Employers' Accounting for Pensions," and SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," when accounting for pension and other postretirement benefits.  Under these accounting standards, assumptions are made regarding the valuation of benefit obligations and the performance of plan assets that are controlled and invested by third-party fiduciaries.  Delayed recognition of differences between actual results and expected or estimated results is a guiding principle of these standards.  Such delayed recognition provides a gradual recognition of benefit obligations and investment performance over the working lives of the employees who benefit under the plans, based on various assumptions.  Assumed discount rates are used to calculate the present values of benefit payments which are projected to be made in the future, including projections of increases in employee's annual compensation and health care costs.  Management also projects the future return on invested assets based principally on prior performance.  These projected returns reduce the net benefit costs the Company records in the current period.  Management consults with its actuaries when determining these assumptions.  Unforecasted program changes, including termination, freezing of benefits or acceleration of benefits, could result in an immediate recognition of unrecognized benefit obligations; and such recognition could materially impact the Company's consolidated financial statements.

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Management incentive compensation is accrued based on current estimates of the Company's ability to achieve short-term and long-term performance targets.

Deferred income tax assets and liabilities are computed for differences between the financial statement and income tax bases of assets and liabilities.  Such deferred income tax asset and liability computations are based on enacted tax laws and rates applicable to periods in which the differences are expected to reverse.  Valuation allowances are established, when necessary, to reduce deferred income tax assets to the amounts expected to be realized.  Quarterly income taxes are estimated based on the mix of income by jurisdiction forecasted for the full fiscal year.  The Company believes that it has adequately provided for tax-related matters.  The Company is subject to examination by taxing authorities in various jurisdictions.  Matters raised upon audit may involve substantial amounts and could be material.  Management considers it unlikely that resolution of any such matters would have a material adverse effect upon the Company's consolidated financial statements.

 LIQUIDITY AND CAPITAL RESOURCES

During the first quarter of 2004, the Company generated cash from operating activities of $6.7 million, compared to $12.9 million in the same period in 2003.  The lower operating cash flow in 2004 was primarily due to lower earnings and reduced current liabilities, partially offset by lower current assets, principally receivables.  Receivables decreased in the first quarter of 2004 due to the timing of collections.  Operating liabilities decreased due to payments of employee benefits and income taxes.  

Net cash used in investing activities totaled $2.9 million in the first quarter of 2004, compared to $3.7 million in the same period in 2003.  In 2004, net cash used in investing activities consisted of proceeds from the sale of assets of  $.1 million, offset by capital expenditures of $3.0 million.  Capital expenditures were primarily for normal replacement and upgrades of machinery and equipment.  During the fiscal year ending November 30, 2004, the Company anticipates spending between $20 and $30 million on capital expenditures. Capital expenditures are expected to be funded by existing cash balances, cash generated from operations or additional borrowings.

Net cash provided by financing activities was $.3 million during the first quarter of 2004, compared to $7.0 million used in the same period in 2003.  The net cash provided by financing activities in 2004 consisted of debt issuance of $2.2 million, payment of common stock dividends totaling $1.6 million, and treasury stock purchases of $.3 million.

In January 2003, the Company finalized a three-year, $100 million revolving credit facility with six banks (the "Revolver").  Under the Revolver, the Company may, at its option, borrow at floating interest rates based on specified margins over money market rates, at any time until January 2006, when all borrowings under the Revolver must be repaid.  Also in January 2003, the Company issued $50 million of notes payable to an insurance company at a fixed rate of 5.36%.  These fixed-rate notes payable amortize $10 million per year beginning in November 2005, with a final maturity in November 2009.  The Revolver and the 5.36% notes payable replaced a $150 million revolving credit facility that was maintained at November 30, 2002.

The lending agreements contain various restrictive covenants, including the requirement to maintain specified amounts of net worth and restrictions on cash dividends, borrowings, liens, investments and guarantees.  The Company is required to maintain consolidated net worth of $181.5 million plus 50% of net income and 75% of proceeds from any equity issued after January 24, 2003.  The Company's consolidated net worth exceeded the covenant amount by $70.6 million as of February 29, 2004.  The Company is required to maintain a consolidated leverage ratio of consolidated funded indebtedness to earnings before interest, taxes, depreciation and amortization ("EBITDA") of no more than 3 times.  As of February 29, 2004, the Company maintained a debt leverage ratio of 1.57 times EBITDA.  The Revolver and the notes payable require that the Company maintain qualified consolidated tangible assets at least equal to the outstanding secured funded indebtedness.  As of February 29, 2004, qualifying tangible assets equaled 1.70 times funded indebtedness.  Under the most restrictive fixed charge coverage ratio, the sum of EBITDA, rental expense and cash taxes must be at least 1.5 times the sum of interest expense, rental expense, dividends and scheduled funded debt payments.  As of February 29, 2004, the Company maintained a ratio of 2.82 times.

Cash and cash equivalents at February 29, 2004 totaled $24.9 million, an increase of $4.5 million from November 30, 2003.  At February 29, 2004, the Company had total debt outstanding of $96.8 million and approximately $103 million in unused committed and uncommitted credit lines available from foreign and domestic banks.  The Company's highest borrowing and the average borrowing level during 2004 were $96.8 million and $96.1 million, respectively.

Management believes that cash flows from operations and current cash balances, together with currently available lines of credit will be sufficient to meet operating requirements in 2004. Cash available from operations could be affected by any general economic downturn or any downturn or adverse changes in the Company's business, such as loss of customers or significant raw material price increases.  Management does not believe it likely that business or economic conditions will worsen or that costs will increase sufficiently to impact short-term liquidity. 

14

The Company's contractual obligations and commercial commitments at February 29, 2004 are summarized as follows (in thousands):

                                                                        Payments Due by Period
                                                          -------------------------------------------------
                                                                   Less than      1 - 3    3 - 5    After 5
Contractual Obligations                                    Total      1 year      years    years      years
- -----------------------------------------------------------------------------------------------------------
Long-Term Debt (a)                                      $ 96,605    $  8,333   $ 42,572  $20,000    $25,700
Operating Leases                                          36,460       4,938      6,094    4,113     21,315
                                                         --------------------------------------------------
Total Contractual Obligations (b)                       $133,065    $ 13,271   $ 48,666  $24,113    $47,015
                                                         ==================================================
                                                                        Commitments Expiring
                                                                            Per Period
                                                        ---------------------------------------------------
                                                                    Less than     1 - 3    3 - 5    After 5
Commercial Commitments                                     Total       1 year     years    years      years
- -----------------------------------------------------------------------------------------------------------
Lines of Credit (a)                                      $   175      $   175      $ --     $ --       $ --
Standby Letters of Credit (c)                              2,153        2,153        --       --         --
                                                         --------------------------------------------------
Total Commercial Commitments (b)                         $ 2,328      $ 2,328      $ --     $ --       $ --
                                                         ==================================================
(a) Included in long-term debt is $5,505 outstanding under a revolving credit facility, and bank lines
    supported by the Revolver, due in 2006.  Lines of credit represent short-term borrowings by the
    Company's foreign subsidiaries.
(b) The Company has no capitalized lease obligations, unconditional purchase obligations, guarantees, or
    standby repurchase obligations.
(c) Not included are standby letters of credit totaling $16,065 supporting industrial development bonds with a
    principal of $15,700.  The principal amount of the industrial development bonds is included in long-term debt.

RESULTS OF OPERATIONS

General

The Company had a net loss of $2.8 million, or a loss of $.34 per diluted share, on sales of $129.7 million for the quarter ended February 29, 2004, compared to net income of $2.2 million, or $.27 per diluted share, on sales of $130.6 million for the same period in 2003. The Performance Coatings & Finishes and Fiberglass-Composite Pipe Groups had higher sales due to the impact of changing foreign currency rates, while the Water Transmission and Infrastructure Products Groups had lower sales as a result of labor disputes during the quarter and severe weather conditions in Hawaii.  All operating segments, except for the Fiberglass-Composite Pipe Group, had lower segment income.  The decrease in earnings resulted from lower sales, lower gross profits, and higher selling, general and administrative expenses, partially offset by higher equity in earnings of joint venture and income tax benefits.

Sales

Sales decreased $.9 million during the first quarter of 2004, compared to the same period in 2003.  Sales decreased primarily due to the impact of weather in Hawaii and strikes that took place in California and Hawaii that adversely impacted the Water Transmission and Infrastructure Products Groups, partially offset by higher sales by the Performance Coatings & Finishes Group due principally to favorable exchange rates.

Performance Coatings & Finishes' sales increased $5.1 million in the first quarter of 2004, compared to the first quarter of 2003, due principally to the appreciation of foreign currencies relative to the U.S. dollar.  Sales in local currencies by operations outside the U.S. were slightly higher, while sales in the U.S. were lower due to weather conditions affecting industrial and offshore markets.   Sales of protective coatings in the U.S. also declined due to continued sluggishness in U.S. chemical, industrial and marine markets caused by general economic conditions.  European operations benefited from demand in the Middle East, Africa and countries of the former Soviet Union.  Future improvements by the group remain dependent on increased spending in worldwide industrial, marine and offshore markets, which appear to be strengthening.  The outlook for  the Performance Coatings & Finishes Group remains positive.

Fiberglass-Composite Pipe's sales increased $.6 million due to the impact of favorable foreign exchange rates.  Industrial and onshore oilfield tubing sales by U.S. operations increased.  Sales into European industrial markets were flat, and sales by Asian operations were lower due to the timing of projects.  High oil prices continue to support demand for oilfield tubing and piping for marine and offshore applications.  The Asian marine and offshore market remains robust.  The outlook for the Fiberglass-Composite Pipe Group continues to be positive and improving.

15

The Water Transmission Group's sales decreased $5.7 million during the first quarter of 2004 due to labor disputes at two plants in Southern California.  As previously announced, in early February, workers at two of the Water Transmission Group's plants struck over disagreements related to wages, pensions and medical benefits.  Agreement was reached with workers at one of the plants at the end of February.  Negotiations continue with workers at the second plant.  Sales of protective lining products for sewer pipe also declined due to a cyclical slowdown in the waste water market and competition from alternative products.  Revenue is recognized in the Water Transmission Group primarily under the percentage of completion method and is subject to a certain level of estimation, which affects the timing of revenue recognition, costs and profits.  Estimates are reviewed on a consistent basis and are adjusted when actual results are expected to significantly differ from those estimates.  The market for concrete and steel-pressure pipe in the western U.S. remains soft.  Even though the business may be able to make up much of the revenue lost in the first quarter due to the strikes, full-year results may be below the unusually high levels of the last several years.  Longer term, the outlook remains positive.

Infrastructure Products' sales decreased by $1.7 million as a result of a labor dispute and wet weather conditions in Hawaii.  Early in the quarter, unseasonably wet weather severely hampered Hawaiian operations; and, in early February, as previously reported, workers struck most of Ameron's aggregate and ready-mix concrete operations on Oahu.  Negotiations with the union continue.  Pole sales improved as housing construction remained robust throughout the U.S. due to low interest rates.  The outlook for the Infrastructure Products Group remains favorable. 

Gross Profit

Gross profit in the first quarter of 2004 was $29.9 million, or 23.1% of sales, compared to $32.7 million, or 25.0% of sales, in the same period in 2003.  Gross profit decreased $2.7 million due to lower margins and lower plant utilization.

Gross profit of the Performance Coatings & Finishes Group was flat in the first quarter of 2004 even though sales increased, compared to the same period in 2003.  Profit margins were impacted as the weak dollar lowered profits on sales by European operations into dollar-based markets in the Middle East, Eastern Europe and Russia, and manufacturing costs increased in the U.S.

The Fiberglass-Composite Pipe Group's gross profit increased $.7 million in the first quarter of 2004, compared to the same period in 2003.  The increase was due primarily to lower raw material costs and improved plant utilization.  

Gross profit of the Water Transmission Group decreased $2.7 million in the first quarter of 2004, compared to the same period in 2003.  The decrease was due primarily to lower sales and lower plant utilization as a result of the strikes and higher workers' compensation costs.

The Infrastructure Products Group's gross profit decreased $.9 million in the first quarter of 2004, compared to the same period in 2003.  The decrease was due primarily to weather and the labor dispute in Hawaii which reduced profits on lower sales and reduced plant efficiencies.

Selling, General and Administration Expenses

Selling, general and administrative ("SG&A") expenses totaled $33.3 million, or 25.7% of sales, in the first quarter of 2004, compared to $28.6 million, or 21.9%, in the same period in 2003.  The $4.7 million increase was due to higher stock compensation expense of approximately $1.0 million, higher insurance and pension costs of nearly $1.0 million, and higher marketing expenses of $.3 million.  SG&A was also $1.4 million higher as costs of foreign operations translated into higher U.S. dollars due to exchange rates.  Additionally in 2003, SG&A included a recovery of roughly $1.0 million, representing amounts agreed to be reimbursed to the Company by its own and a supplier's insurance companies for past legal fees and costs in excess of the negotiated settlement of the Central Arizona Project lawsuits.

Equity in Earnings of Joint Venture and Other Income

Equity in earnings of joint venture increased to $.5 million in the first quarter of 2004 from a loss of $.2 million in the same period in 2003.  Equity income increased due to TAMCO, Ameron's 50%-owned mini-mill in California.  Ameron's equity in TAMCO's earnings increased as TAMCO benefited from the strong demand for rebar in the western U.S. and higher prices fueled by demand in China for steel products.

Other income included royalties and fees from licensees, foreign currency transaction losses, and other miscellaneous income. Other income decreased to $.6 million in the first quarter of 2004 from $.9 million in the same period in 2003 primarily due to  foreign exchange transaction losses.

Interest

Interest expense totaled $1.8 million in 2004, compared to $1.5 million in 2003.  The increase reflected the higher-interest, fixed-rate notes placed in 2003.

16

Provision for Income Taxes

The provision for income taxes in 2004 was a benefit of $1.3 million, compared to an expense of $1.1 million in 2003.  The effective tax rate decreased to 32% in 2004 from 34% in 2003.  The effective tax rate was lower due to lower anticipated earnings from domestic operations.  Income from certain foreign operations and joint ventures is taxed at rates that are lower than U.S. statutory tax rates.

   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 2003 Annual Report.

   Item 4.  Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of February 29, 2004 pursuant to Exchange Act Rule 13a-14.  Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's periodic Securities and Exchange Commission filings.  No significant changes were made in the Company's internal controls or in other factors that could significantly affect these controls subsequent to February 29, 2004.

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 1.  Legal Proceedings

The Company is one of numerous defendants in various asbestos-related personal injury lawsuits.  These cases generally seek unspecified damages for asbestos-related diseases based on alleged exposure to products previously manufactured by the Company and others, and at this time the Company is generally not aware of the extent of injuries allegedly suffered by the individuals or the facts supporting the claim that injuries were caused by the Company's products.  Based upon the information available to it at this time, the Company is not in a position to evaluate its potential exposure, if any, as a result of such claims.  Hence, no amounts have been accrued for loss contingencies related to these lawsuits in accordance with SFAS No. 5, "Accounting for Contingencies."  The Company continues to vigorously defend all such lawsuits.  As of February 29, 2004, the Company was a defendant in asbestos-related cases involving 18,489 claimants, compared to 17,447 claimants as of November 30, 2003.  The Company is not in a position to estimate the number of additional claims that may be filed against it in the future.  For the quarter ended February 29, 2004, there were new claims involving 1,077 claimants, dismissals and/or settlements involving 35 claimants and no judgments.  Net costs and expenses incurred by the Company for the quarter ended February 29, 2004 in connection with asbestos-related claims were less than $.1 million.  

The Company is one of numerous defendants in various silica-related personal injury lawsuits.  These cases generally seek unspecified damages for silica-related diseases based on alleged exposure to products previously manufactured by the Company and others, and at this time the Company is not aware of the extent of injuries allegedly suffered by the individuals or the facts supporting the claim that injuries were caused by the Company's products.  Based upon the information available to it at this time, the Company is not in a position to evaluate its potential exposure, if any, as a result of such claims.  Hence, no amounts have been accrued for loss contingencies related to these lawsuits in accordance with SFAS No. 5.  The Company continues to vigorously defend all such lawsuits.  As of February 29, 2004, the Company was a defendant in silica-related cases involving 6,846 claimants, compared to 6,847 claimants as of November 30, 2003.  The Company is not in a position to estimate the number of additional claims that may be filed against it in the future.  For the quarter ended February 29, 2004, there were no new claims, dismissals and/or settlements involving 1 claimant and no judgments.  Net costs and expenses incurred by the Company  for the quarter ended February 29, 2004 in connection with silica-related claims were less than $.1 million.

 

 

17