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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, 1996 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-9102
AMERON INTERNATIONAL CORPORATION
(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.
The Registrant estimates that as of February 11, 1997 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 $179 million.
On February 11, 1997 there were 4,001,037 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 1996 ANNUAL REPORT TO STOCKHOLDERS (PARTS I, II
AND IV).
2. PORTIONS OF AMERON'S PROXY STATEMENT FOR THE 1997 ANNUAL MEETING OF
STOCKHOLDERS (PART III).
PART I
AMERON INTERNATIONAL CORPORATION
AMERON INTERNATIONAL CORPORATION, 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 of
highly engineered products to the industrial, chemical, energy and construction
markets. All references to "the year" or "the fiscal year" pertain to the
twelve months ended November 30, 1996. All references to the "Annual Report"
pertain to the Company's 1996 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 1996, the Company's name was changed to Ameron International Corporation
in order to better reflect its expanded, global focus. Also in 1996, the
Company acquired assets of Centron, a leading manufacturer of fiberglass
pipe for the worldwide oil field market. In late 1996, the Company
acquired the worldwide Devoe marine coatings business of Imperial Chemical
Industries PLC.
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), (6) and (18) of Notes to
Consolidated Financial Statements on pages 44, 45, 50, 52 and 53 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 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 plant in 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 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 its wholly-
owned domestic subsidiary, Centron International Inc., at its
plant in Texas, by wholly-owned subsidiaries in The
Netherlands and Singapore, and by a jointly-owned affiliate in
Saudi Arabia.
c) The Concrete & Steel Pipe Group supplies products and services
used in the construction of pipeline facilities for various
utilities. Six plants are located in three of the continental
western states. Also included within this group is American
Pipe & Construction International, a wholly-owned subsidiary,
with two plants in Colombia. 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
and polyethylene 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.
2
d) The Construction & Allied Products Group includes the Hawaii
Division, which supplies 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 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
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 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. 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 simply 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 three and nine times annually.
Average days' sales in accounts receivable range between
36 and 97 for all segments.
(v) The value of backlog orders at November 30, 1996 and 1995
by industry segment is shown below. A substantial portion
of the November 30, 1996 backlog is expected to be billed
and recorded as sales during the fiscal year 1997.
3
Industry Segment 1996 1995
---------------- -------- --------
(in thousands)
Protective Coatings Group $ 10,291 $ 6,139
Fiberglass Pipe Group 19,819 20,691
Concrete & Steel Pipe Group 59,718 96,864
Construction & Allied Products Group 14,978 15,581
-------- --------
Total $104,806 $139,275
======== ========
(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 consist 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 typically 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 44 of the
Annual Report, which information is incorporated herein by
reference.
b) The Company'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 Company 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 Company's capital expenditures,
earnings, or competitive position.
d) At year-end the Company and its consolidated subsidiaries employed
approximately 2,611 persons. Of those, approximately 1,080 were
covered by labor union contracts, and there are six separate
bargaining agreements subject to renegotiation in 1997. 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 (6) and (18) of Notes to Consolidated
Financial Statements on pages 45, 50, 52 and 53 of the Annual Report is
incorporated herein by reference.
4
Export sales in the aggregate from domestic operations during the last
three fiscal years were:
In thousands
------------
1996 $30,980
1995 15,552
1994 13,648
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 GROUP
Protective Coatings division - USA
Brea, CA Office, Laboratory
Little Rock, AR Office, Plant
Ameron B.V.
Geldermalsen, The Netherlands Office, Plant
FIBERGLASS PIPE GROUP
Fiberglass Pipe division - USA
Houston, TX * Office
Burkburnett, TX Office, Plant
Spartanburg, SC Plant
Centron International, Inc. Office, Plant
Mineral Wells, TX
5
Ameron B.V.
Geldermalsen, The Netherlands Office, Plant
Ameron (Pte) Ltd.
Singapore *Office, Plant
CONCRETE AND STEEL PIPE GROUP
Southern division
Rancho Cucamonga, CA *Office
Etiwanda, CA Plant
Fontana *Office, Plant
Lakeside, CA Plant
Phoenix, AZ Office, Plant
Northern division
Tracy, CA Office, Plant
Portland, OR Office, Plant
Protective Linings division
Brea, CA Office, Plant
Fabrication Plant
South Gate, CA Office, Plant
American Pipe & Construction International
Bogota, Colombia Office, Plant
Cali, Colombia Plant
CONSTRUCTION & ALLIED PRODUCTS GROUP
Hawaii division
Honolulu, Oahu, HI *Office, Plant
Kailua, Oahu, HI *Plant, Quarry
Barbers Point, Oahu, HI Plant
Puunene, Maui, HI *Office, Plant, Quarry
Pole Products 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
An action was filed in 1992 in the U.S. District for the District of Arizona by
the Central Arizona Water Conservation District ("CAWCD") seeking damages
against several parties, including the Company and the Company's customer, Peter
Kiewit Sons' Company ("Kiewit"), 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 U.S. Court of Claims and with the Arizona
Projects Office of the USBR in connection with the CAP siphons. The CAWCD
alleged that the six CAP siphons were defective and that the USBR and the
defendants in the U.S. District Court action were liable for the repair or
replacement of those siphons at a claimed estimated cost of $146.7 million. On
September 14, 1994 the U.S. District granted the Company's motion to dismiss the
CAWCD action and entered judgment against the CAWCD and in favor of the Company
and its co-defendants. CAWCD has filed a notice of appeal with the Ninth
Circuit Court of Appeals.
Separately, on September 28, 1995 the Contracting Officer for the USBR issued a
final decision claiming for the USBR approximately $40 million in damages
against Kiewit, based in part on the Contracting Officer's finding that the
siphons supplied by the Company were defective. That claim amount is considered
by the Company to be duplicative of the damages sought by the CAWCD for the
repair or replacement of the siphons in its aforementioned action in the U.S.
District for the District of Arizona. The Contracting Officer's final decision
has been appealed by Kiewit to the U.S. Department of the Interior Board of
Contract Appeals ("IBCA"). The Company is actively cooperating with, and
assisting, Kiewit in the administrative appeal of that final decision before the
IBCA.
The Company internally, as well as through independent third party consultants,
has conducted engineering analyses regarding the allegations that the CAP
siphons were defective 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, whether by
the CAWCD or by the USBR. The Company has recorded provisions deemed adequate
by the Company to permit it to continue to vigorously defend its position in
this matter. The Company believes that it has meritorious defenses to these
actions and that resultant liability, if any, should not have a material adverse
effect on the financial position of the Company.
In July 1992 the Company was served with a complaint in an action brought by the
City & 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 alleged that the pipeline was defective. The amounts
claimed by plaintiff were substantial. In June of 1996 a settlement of this
litigation was reached by the Company. The terms of that settlement were
considered by management to be favorable to the Company, and did not have a
material effect on the Company's financial position or its results of
operations.
7
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
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, 1996 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 62 Senior Vice President, Human Resources 1992
Raymond E. Foscante 54 Senior Vice President, Technology and
Business Development 1996
Javier Solis 50 Senior Vice President of Administration,
Secretary & General Counsel 1984
S. Daniel Stracner 50 Vice President, Communications &
Public Affairs 1993
Gary Wagner 45 Senior Vice President & Chief Financial
Officer, Treasurer 1990
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.
8
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Common Stock, $2.50 Par Value, of the Company, 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 11, 1997, there were 1,723
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 Company's Common Stock
during that period are set out under the caption Per Share Data shown on page 50
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 (12) of Notes to Consolidated Financial Statements on page 48
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 34 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 1996 and 1995
is shown under Ameron 1996 Financial Review on pages 35-38 of the Annual Report,
which information is incorporated herein by reference. The information required
for 1994 is as follows:
Results of Operations: 1994 Compared with 1993
GENERAL. Ameron earned $2.75 per share ($10.8 million after taxes) on sales of
$417.7 million for 1994, compared to a net loss of $6.28 per share (loss of
$24.3 million after taxes) in 1993 on sales of $453.4 million. During 1993,
Ameron recognized costs totaling $45.8 million ($31.5 million after taxes)
associated with a comprehensive restructuring of the Company. Excluding the
after-tax effect of restructuring charges, earnings per share for 1993 would
have been $1.87. During 1994, a non-strategic steel fabrication subsidiary in
Colombia was sold as part of the restructuring program; the sale resulted in a
net after-tax gain of $1.8 million or $.46 per share. Adjusting for the gain on
the sale of this subsidiary, earnings per share for 1994 were $2.29, a 22%
increase over equivalent 1993 earnings of $1.87 per share.
The earnings improvement was due principally to the positive impact of the
restructuring on Ameron's business segments, as well as continued growth of the
Protective Coatings business and the Construction & Allied Products segment. The
Concrete & Steel Pipe business had lower earnings as a result of project delays,
and the Fiberglass Pipe business declined because of completion of major
fiberglass pipe projects in North Africa during 1993.
9
SALES. Compared to 1993, sales declined $35.7 million or 8% in 1994, primarily
because of completion of major fiberglass pipe projects in North Africa; lower
shipments of protective coatings from Ameron B.V., the Company's subsidiary in
The Netherlands; and project delays in California that reduced shipments of
concrete and steel pipe. The sales decline was offset partially by stronger
Protective Coatings sales in the United States and improved market penetration
by the Pole Products business within the Construction & Allied Products Group.
Total Protective Coatings sales were $134.2 million in 1994, compared to $137.8
million in 1993. The modest decline of $3.6 million reflects relatively flat
market conditions in Europe at the time and lower shipments to North Africa.
Sales of industrial coatings and product finishes in the United States reached
record high levels in 1994. The favorable sales performance resulted in part
from the successful introduction of PSX, Ameron's proprietary new polysiloxane
technology. Also contributing were market share gains in product finishes for
the original equipment manufacturer market and several large protective coatings
projects.
Total Fiberglass Pipe segment sales were $66.2 million in 1994, compared with
$92.9 million in 1993. The sales decrease ($26.7 million) was attributable to
the completion of several major crude oil projects in North Africa in 1993.
Sales in the United States were down in 1994, mostly due to the general softness
in oilfield markets and reduced demand for fuel-handling systems used for
service station rehabilitation.
Concrete & Steel Pipe segment sales totaled $101.6 million in 1994, compared to
$110.3 million in 1993. The sales decline ($8.7 million) occurred primarily
because of delivery delays on several major projects in California
Construction & Allied Products sales totaled $115.6 million in 1994, compared
with $112.4 million in 1993. The main reason for the $3.2 million increase was
sales growth achieved by the Pole Products business, which more than offset a
slight sales decline at the Company's Hawaiian operations. The growth in the
Pole Products business was due to market share gains in the steel pole product
line for traffic and street lighting applications, generally stronger market
demand and successful market expansion programs. Continued softness in the
private construction sector accounted for the modest sales decline in Hawaii.
GROSS PROFIT. Gross profit margin of $104.0 million or 24.9% of sales in 1994
was lower than the $119.9 million or 26.4% of sales reported in 1993. The
decline in gross profit ($15.9 million) in 1994 was due principally to the lower
sales volume in 1994, particularly in the European Fiberglass Pipe operations.
The lower gross profit margin rate resulted mainly from the completion of
Fiberglass Pipe projects in North Africa that had favorably affected 1993
operations. The gross profit of the Concrete & Steel Pipe segment was
unfavorably impacted by price competition, product mix and project delivery
delays in California. Protective Coatings had a slightly lower gross profit
margin due to product mix, while Construction & Allied Products had a higher
gross profit margin because of productivity gains and favorable pricing.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses totaled $86.8 million in 1994, compared with $115.4
million in 1993. The $28.6 million decrease was attributable to the significant
reduction in the Company's overhead structure resulting from the comprehensive
restructuring in 1993. In addition, charges to income for environmental and
legal claims decreased $12.2 million in 1994 compared to 1993. In 1993 an
additional $9.0 million was reserved for environmental and legal matters as part
of the restructuring. The decrease in selling, general and administrative
expenses also reflects reduced selling expenses as a result of lower sales
volume.
RESTRUCTURING. During 1994, the Company disbursed approximately $3.5 million for
plant consolidation and employee severance costs in connection with its 1993
restructuring plan.
GAIN ON THE SALE OF ASSETS. The gains from the sale of assets in 1994 were
realized principally from the divestiture of a wholly-owned non-strategic steel
fabrication subsidiary in Colombia.
OTHER INCOME. Equity in earnings of affiliated companies recorded in 1994
totaled $1.7 million, a slight decline from the amount recorded in 1993. Two
affiliates, Gifford-Hill-American, Inc., a pressure pipe operation in
10
Texas, and Tamco, a steel mini-mill in Southern California, reported sizable
improvements in sales and earnings in 1994. Sales and earnings of the
Company's Saudi Arabian affiliates, Oasis-Ameron, Ltd., Bondstrand, Ltd. and
Ameron Saudi Arabia, Ltd., were lower than in 1993.
Other income also includes royalties and fees received from affiliated companies
and licensees, as well as miscellaneous income earned from various sources.
INTEREST EXPENSE. Interest expense totaled $11.2 million in 1994, a decrease of
$1.5 million from 1993. Interest in 1993 was higher because of the recording of
accrued interest on income tax obligations related to prior years.
PROVISION FOR INCOME TAXES. Income tax expense aggregated $7.0 million in
1994, which represents an overall effective tax rate of 42.5% of pretax
income. This compares to the effective tax rate of 45.0% in 1993 after
adjusting for restructuring and related charges.
EQUITY IN EARNINGS OF AFFILIATED COMPANIES. Equity in earnings of affiliated
companies recorded in 1994 totaled $1.4 million, a slight decline from the
$1.8 million recorded in 1993. Two affiliates, Gifford-Hill-American, Inc.,
a pressure pipe operation in Texas, and Tamco, a steel mini-mill in Southern
California, reported sizable improvements in sales and earnings in 1994. Sales
and earnings of the Company's Saudi Arabian affiliates, Oasis-Ameron, Ltd.,
Bondstrand, Ltd. and Ameron Saudi Arabia, Ltd., were lower than in 1993.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements, the report thereon of Arthur Andersen LLP
dated January 13, 1997 and Notes to Consolidated Financial Statements comprising
pages 39 through 51 of the Annual Report, are incorporated herein by reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
(Not applicable)
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to the directors is contained under the section
entitled, "Election of Directors" in the Company's Proxy Statement which was
filed on February 24, 1997 in connection with the Annual Meeting of Stockholders
to be held on March 26, 1997. Such information is incorporated herein by
reference.
Information with respect to the executive officers of the Company 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 Company's
Proxy Statement which was filed on February 25, 1997 in connection with the 1997
Annual Meeting of Stockholders to be held on March 26, 1997. Such information
is incorporated herein by reference.
11
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 Statements of Operations for the years
ended November 30, 1996, 1995 and 1994 39
Consolidated Balance Sheets at November 30, 1996
and 1995 40-41
Consolidated Statements of Cash Flows for the years
ended November 30, 1996, 1995 and 1994 42
Consolidated Statements of Stockholders' Equity
for the years ended November 30, 1996, 1995 and 1994 43
Notes to Consolidated Financial Statements 44-50
(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 (6) of Notes to Consolidated Financial Statements on page 46
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 1996 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.
PAGES OF
SCHEDULE SCHEDULES OF AMERON INTERNATIONAL AND SUBSIDIARIES THIS REPORT
-------- -------------------------------------------------- -----------
Report of Independent Public Accountants 13
II Valuation and Qualifying Accounts and Reserves 14-16
12
(A) (3) EXHIBITS THIS REPORT
-----------
3(i) Certificate of Incorporation 18
3(ii) Bylaws 19
4 Instrument Defining the Rights of Security Holders,
Including Indentures 20
10 Material Contracts 21
13 Annual Report 22
21 Subsidiaries of the Registrant 23
23 Consent of Independent Public Accountants 24
(B) REPORTS ON FORM 8-K
A report on Form 8-K was filed by the Corporation on September 26, 1996
reporting under Item 5 the financial results for the Company's third
quarter ended August 31, 1996.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Stockholders and the Board of Directors, Ameron International
Corporation:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in Ameron's Annual Report to
Stockholders incorporated by reference in this Form 10-K, and have issued our
report thereon dated January 13, 1997. Our audits were made for the purpose of
forming an opinion on those statements taken as a whole. The schedule listed in
the index above is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states 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 LLP
Los Angeles, California
January 13, 1997
13
AMERON INTERNATIONAL AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEAR ENDED NOVEMBER 30, 1996
(In thousands)
Addi-
tions Deduc-
Balance Charged tions, Reclas-
at to Payments 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 $ 4,800 $ 2,583 $ (1,325) $ (119) $ 5,939
Reserve for realization of investments
in affiliates $ 9,359 $ 1,408 $ (1,172) $ -- $ 9,595
Reserve for write-down of assets related to
certain foreign affiliates $ 3,219 $ 694 $ (60) $ -- $ 3,853
Included in current liabilities
Reserve for pending claims and litigation $ 3,086 $ 3,864 $ (1,718) $ (44) $ 5,188
Restructuring reserve $ 539 $ (94) $ (99) $ -- $ 346
Other reserves $ 764 $ 616 $ (761) $ 60 $ 679
Reserve for self-insured programs $ 5,874 $ 6,564 $ (6,121) $ -- $ 6,317
Included in long-term liabilities
Reserve for pending claims and litigation $ 13,788 $ 2,175 $ (1,034) $ -- $ 14,929
Restructuring reserve $ 1,261 $ (430) $ (831) $ -- $ --
Reserve for self-insured programs $ 6,771 $ -- $ -- $ -- $ 6,771
14
AMERON INTERNATIONAL AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEAR ENDED NOVEMBER 30, 1995
(In thousands)
Addi-
tions Deduc-
Balance Charged tions, Reclas-
at to Payments 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 $ 4,135 $ 1,710 $ (1,138) $ 93 $ 4,800
Reserve for realization of investments
in affiliates $ 9,748 $ -- $ -- $ (389)(1) $ 9,359
Reserve for write-down of assets related to
certain foreign affiliates $ 3,216 $ 3 $ -- $ -- $ 3,219
Included in current liabilities
Reserve for pending claims and litigation $ 6,218 $ 1,109 $ (1,894) $(2,347) $ 3,086
Restructuring reserve $ 3,646 $ -- $ (1,846) $(1,261) $ 539
Other reserves $ 1,336 $ 62 $ (633) $ (1) $ 764
Reserve for self-insured programs $ 4,392 $ 5,413 $ (3,931) $ -- $ 5,874
Included in long-term liabilities
Reserve for pending claims and litigation $ 10,429 $ 1,330 $ (387) $ 2,416 $ 13,788
Restructuring reserve $ -- $ -- $ -- $ 1,261 $ 1,261
Reserve for self-insured programs $ 6,771 $ -- $ -- $ -- $ 6,771
(1) Included as equity in earnings of affiliated companies in Consolidated
Statement of Operations
15
AMERON INTERNATIONAL AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEAR ENDED NOVEMBER 30, 1994
(In thousands)
Addi-
tions Deduc-
Balance Charged tions, Reclas-
at to Payments 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 $ 4,315 $ 1,314 $ (1,793) $ 299 $ 4,135
Reserve for realization of investments
in affiliates $ 7,323 $ 2,425 $ -- $ -- $ 9,748
Reserve for write-down of assets related to
certain foreign affiliates $ 11,990 $ 236 $ (9,259) $ 249 $ 3,216
Included in current liabilities
Reserve for pending claims and litigation $ 7,188 $ 2,232 $ (2,844) $ (358) $ 6,218
Restructuring reserve $ 7,643 $ -- $ (3,997) $ -- $ 3,646
Other reserves $ 1,797 $ 732 $ (493) $ (700) $ 1,336
Reserve for self-insured programs $ 7,541 $ 5,997 $ (8,782) $ (364) $ 4,392
Included in long-term liabilities
Reserve for pending claims and litigation $ 9,484 $ 120 $ (963) $ 1,788 $ 10,429
Other reserves $ 1,722 $ -- $ (771) $ (951) $ --
Reserve for self-insured programs $ 4,867 $ -- $ -- $ 1,904 $ 6,771
16
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 INTERNATIONAL CORPORATION
By:
-----------------------------------------------
Javier Solis, Senior Vice President & Secretary
Date: February 21, 1997
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: 2-27-97 Director, Chairman of the Board,
----------------------------- President and Chief Executive Officer
James S. Marlen (Principal Executive Officer)
Date: 2-27-97 Senior Vice President & Chief Financial
----------------------------- Officer, Treasurer (Principal Financial
Gary Wagner & Accounting Officer)
Date: 2-24-97 Director
-----------------------------
Stephen W. Foss
Date: 2-21-97 Director
-----------------------------
A. Frederick Gerstell
Date: 2-24-97 Director
-----------------------------
J. Michael Hagan
Date: 2-21-97 Director
-----------------------------
Terry L. Haines
Date: 2-22-97 Director
-----------------------------
John F. King
Date: 2-21-97 Director
-----------------------------
Alan L. Ockene
Date: Director
-----------------------------
Richard J. Pearson
Date: 2-24-97 Director
-----------------------------
David L. Sliney
Date: 2-24-97 Director
-----------------------------
F. H. Fentener van Vlissingen
17