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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, 1997 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: (626) 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 20, 1998 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 $222 million.
On February 20, 1998 there were 4,006,362 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 1997 ANNUAL REPORT TO STOCKHOLDERS (PARTS I, II AND
IV).
2. PORTIONS OF AMERON'S PROXY STATEMENT FOR THE 1998 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 for sale 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, 1997. All
references to the "Annual Report" pertain to the Company's 1997 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 (17) of Notes to
Consolidated Financial Statements on pages 52,53,54,58,60 and 61 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. 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.
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.
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
plant in Texas, by its wholly-owned domestic subsidiary, Centron
International Inc., at its plant in Texas, by wholly-owned
subsidiaries in The Netherlands, Singapore, and Malaysia, by a
jointly-owned affiliate in Saudi Arabia and by a licensee in
Indonesia.
c) The Concrete & Steel Pipe Group supplies products and services
used in the construction of pipeline facilities for various
utilities. Five plants are operated in Arizona and California.
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 by affiliated companies in Saudi
Arabia and by a licensee in Abu Dhabi. 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 Ameron
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 eight times annually.
Average days' sales in accounts receivable range between 44
and 93 for all segments.
(v) The value of backlog orders at November 30, 1997 and 1996
by industry segment is shown below. A substantial portion
of the November 30, 1997 backlog is expected to be billed
and recorded as sales during the fiscal year 1998.
3
Industry Segment 1997 1996
---------------- ------- --------
(in thousands)
Protective Coatings Group $ 6,580 $ 10,291
Fiberglass Pipe Group 25,440 19,819
Concrete & Steel Pipe Group 71,463 59,718
Construction & Allied Products Group 21,899 14,978
--------- --------
Total $125,382 $104,806
--------- --------
--------- --------
(vi) The results of uncontrolled affiliated companies are not
reflected in the amounts reported for each industry segment.
(vii) 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.
(viii) 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 52 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 2,761 persons. Of those, approximately 900 were covered
by labor union contracts, and there are four separate bargaining
agreements subject to renegotiation in 1998.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES.
The information contained in Notes (6) and (17) of Notes to Consolidated
Financial Statements on pages 53, 54, 58, 60 and 61 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
------------
1997 $38,815
1996 30,980
1995 15,552
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
Centron International, Inc.
Mineral Wells, TX Office, Plant
5
Ameron B.V.
Geldermalsen, The Netherlands Office, Plant
Ameron (Pte) Ltd.
Singapore *Office, Plant
Ameron Malaysia Sdn. Bhd.
Malaysia *Office,Plant
CONCRETE AND STEEL PIPE GROUP
Southern division
Rancho Cucamonga, CA *Office
Etiwanda, CA Plant
Fontana, CA *Office, Plant
Lakeside, CA Plant
Phoenix, AZ Office, Plant
Northern division
Tracy, CA 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
Ventura, CA *Office
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 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, 1997 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 63 Senior Vice President, Human Resources 1992
Raymond E. Foscante 55 Senior Vice President, Technology and
Business Development 1996
Thomas P. Giese 53 Vice President; Group President Concrete
& Steel Pipe Group 1997
James R. McLaughlin 50 Vice President & Treasurer 1997
Dewey H. Norton 53 Vice President, Controller 1997
Gordon G. Robertson 58 Vice President; Group President
Fiberglass Pipe Group 1997
Javier Solis 51 Senior Vice President of Administration,
Secretary & General Counsel 1984
8
S. Daniel Stracner 51 Vice President, Communications &
Public Affairs 1993
Michael J. Tornberg 50 Vice President; Group President
Protective Coatings Group 1997
Gary Wagner 46 Senior Vice President & Chief Financial
Officer 1990
Robert F. Wilkinson 58 Vice President; President Ameron Hawaii 1997
All of the executive officers named above have held high level managerial or
executive positions with the Company for more than the past five years except
Messrs. McLaughlin, Norton, Tornberg and Wilkinson.
Mr. McLaughlin joined the Company in 1994 as Director of Financial Planning and
Analysis. In 1997 he was named Vice President and Treasurer. Prior to joining
the Company, he was Director of Operational Analysis for GenCorp Polymer
Products, a division of GenCorp Inc.
Prior to joining the Company in 1997 as Vice President, Controller, Mr. Norton
was Vice President, Finance with Baldwin Filters since 1993.
Mr. Tornberg joined the Company in 1995 as Vice President, Business Development.
In 1996 he was named Group President, Protective Coatings Group. Prior to
coming to the Company, he was with GenCorp Inc. where he served as Director of
Operations for the Coated Fabrics and Wallcovering businesses and Vice President
of the Residential Wallcoverings Division from 1988.
Mr. Wilkinson joined the Company in mid-1996 and was named President of Ameron
Hawaii in December. Prior to that time he served as President and Chief
Executive Officer of Sinclair Paint Company and as President and Chief Operating
Officer of Frazee Paint Company.
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 20, 1998, there were 1,617
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 prices of the Company's Common Stock
during that period are set out under the caption Per Share Data shown on page 58
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 56
of the Annual Report, which is incorporated herein by reference.
9
ITEM 6 - SELECTED FINANCIAL DATA
The information required by this item is contained in the Selected Consolidated
Financial Information shown on page 42 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 1997 and 1996
is shown under Ameron 1997 Financial Review on pages 43-46 of the Annual Report,
which information is incorporated herein by reference. The information required
for 1995 is as follows:
Results of Operations: 1995 Compared with 1994
GENERAL. Net income in 1995 was $12.5 million or $3.15 per share on sales of
$481.4 million, compared to net income of $10.8 million or $2.75 per share on
sales of $417.7 million in 1994. Results in 1994 included a gain on the sale of
a non-strategic steel fabrication subsidiary in Colombia, which resulted in a
net after-tax gain of $1.8 million or $.46 per share. After adjusting for the
gain on the sale of this subsidiary, earnings per share for 1994 were $2.29. The
increase in 1995 earnings over equivalent 1994 earnings was 38%.
The sales and earnings improvement over 1994 reflects a significant increase in
concrete and steel pipe deliveries in California, as well as improved
performance by the Fiberglass Pipe business segment. Net income in 1995 also
benefited from improved performance at certain affiliated companies.
SALES. Compared to 1994, sales increased $63.7 million or 15% in 1995, primarily
because of significantly improved deliveries of concrete and steel pipe in
California and increased shipments of fiberglass pipe to Central Africa, the
Middle East, Europe and the Pacific Rim. These sales increases were partially
offset by lower Protective Coatings shipments to North Africa from the Company's
subsidiary in The Netherlands.
Protective Coatings sales were $130.5 million in 1995 compared to $134.2 million
in 1994. Sales of protective coatings and product finishes in the U.S. increased
over 1994 record sales. Ameron's product line based on proprietary
PSX-Registered Trademark- technology continued to grow as an important component
of its high-performance product sales. The primary product in that series, PSX
700, tripled sales in 1995 compared to 1994 and was among the segment's top five
products in sales volume. Modest gains were made in key U.S. market segments,
notably rail, marine and offshore. Sales in Europe, while adversely affected by
the reduction in shipments to North Africa, showed improvements in core
industrial segments in Western and Eastern Europe and in the Middle East.
Fiberglass Pipe sales improved to $82.8 million in 1995, versus $66.2 million in
1994. The increase in sales can be attributed to strong oilfield, industrial,
offshore and marine markets in Europe, Central Africa, the Middle East and the
Pacific Rim. Sales in the U.S. declined during 1995.
Concrete and Steel Pipe sales totaled $153.2 million in 1995, compared to $101.6
million in 1994. The primary reason for the $51.6 million increase was the
commencement of several major water transmission pipelines in California,
including the Coastal Aqueduct, the Eastside pipeline and the Los Vaqueros
pipeline -- the largest concrete pipe contract in Ameron's history.
10
Construction & Allied Products sales totaled $115.0 million in 1995 compared to
$115.6 million in 1994. The Pole Products business enjoyed significant growth in
traffic signal, highway lighting and street lighting applications due to broader
geographic coverage. The Company's Hawaiian operation, which is the largest
supplier of ready-mix concrete on the Islands continued to experience a downturn
in sales due to reduced construction spending in Hawaii.
GROSS PROFIT. Gross profit of $116.7 million in 1995 was higher than the $104.0
million reported in 1994. The improvement in gross profit in 1995 was due mainly
to the increase in sales volume in 1995, as discussed above. Gross profit as a
percent of sales declined from 24.9% in 1994 to 24.2% in 1995. The decrease in
margin resulted principally from a change in the product mix caused by higher
sales of lower margin concrete and steel pipe, coupled with decreased margins
due to higher raw material costs and competitive pricing in the Protective
Coatings segment. This decline was partially offset by improved gross profit
margins in the Company's other business segments as a result of improved pricing
and increased capacity utilization.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses totaled $95.8 million in 1995 or 19.9% of sales,
compared to $86.8 million or 20.8% of sales in 1994. The $9.0 million increase
was attributable primarily to the substantial increase in business activity over
1994.
GAIN ON THE SALE OF ASSETS. The gain from the sale of assets in 1994 was
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 1995
totaled $3.8 million, an increase of $2.2 million from 1994. Two affiliates,
Tamco, which operates a steel mini-mill in Southern California, and
Bondstrand, Ltd., a fiberglass pipe manufacturer in Saudi Arabia, reported
higher sales and earnings in 1995. Sales and earnings of the Company's
concrete pipe producing affiliates, Gifford-Hill-American, Inc. in Texas and
Ameron Saudi Arabia, Ltd. were lower in 1995 than in the previous year.
Royalty and fee income from affiliated companies and licensees declined in
1995 from the prior year as a result of decreased sales reported by
affiliated companies. Foreign currency losses were incurred by the Company's
Colombian and European operations. Miscellaneous income included sublease and
property rental income as well as other income from various sources.
INTEREST. Interest expense totaled $11.7 million in 1995, an increase of $.5
million from 1994 due to higher borrowing levels maintained throughout the year.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements, the report thereon of Arthur Andersen LLP
dated January 19, 1998 and Notes to Consolidated Financial Statements comprising
pages 47 through 59 of the Annual Report, are incorporated herein by reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
(Not applicable)
11
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 25, 1998 in connection with the Annual Meeting of Stockholders
to be held on March 25, 1998. Such information is incorporated herein by
reference.
Information with respect to the executive officers who are not directors 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 2-, 1998 in connection with the 1998
Annual Meeting of Stockholders to be held on March 25, 1998. Such information
is incorporated herein by reference.
12
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) (1) FINANCIAL STATEMENTS:
The financial statements to be filed hereunder are cross-referenced,
in the index immediately following, to the Annual Report, as to
sections incorporated herein by reference.
INDEX TO FINANCIAL STATEMENTS
Statement Page Reference
--------- to Annual Report
----------------
Consolidated Statements of Operations for the years
ended November 30, 1997, 1996 and 1995 47
Consolidated Balance Sheets at November 30, 1997
and 1996 48-49
Consolidated Statements of Cash Flows for the years
ended November 30, 1997, 1996 and 1995 50
Consolidated Statements of Stockholders' Equity
for the years ended November 30, 1997, 1996 and 1995 51
Notes to Consolidated Financial Statements 52-58
(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 pages 53-54 the Annual
Report, which information is incorporated herein by
reference.
13
(a) (2) FINANCIAL STATEMENT SCHEDULES:
The following additional financial data should be read in conjunction
with the consolidated financial statements in the 1997 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 14
II Valuation and Qualifying Accounts and Reserves 15-17
(a) (3) EXHIBITS
3(i) Certificate of Incorporation [Incorporated by
reference to Annual Report on Form 10-K filed
with the Commission for Registrant's fiscal
year ended November 30, 1996.]
3(ii) Bylaws
4 Instrument Defining the Rights of Security Holders,
Including Indentures
1. Note Agreement dated September 1, 1990 re: Senior
Notes due September 15, 2000, which document is
incorporated by reference to Annual Report on
Form 10-K filed with the Commission for
Registrant's fiscal year ended November 30, 1990.
2. Note Agreement dated November 15, 1991 re: Senior
Notes due November 15, 1998, which document is
incorporated by reference to Annual Report on Form
10-K filed with the Commission for Registrant's
fiscal year ended November 30, 1991.
3. Note Purchase Agreement dated August 28, 1996 re:
Senior Notes due September 1, 2006, which document
is incorporated by reference to Annual Report on
Form 10-K filed with the Commission for Registrant's
fiscal year ended November 30, 1996.
The Company agrees to provide to the Securities and
Exchange Commission, on request, copies of instruments
defining the rights of security holders of long-term
debt of the Company.
10 Material Contracts
13 Annual Report
21 Subsidiaries of the Registrant
23 Consent of Independent Public Accountants
(b) REPORTS ON FORM 8-K
A report on Form 8-K was filed by the Corporation on September 25, 1997
reporting under Item 5 the financial results for the Company's third
quarter ended August 31, 1997.
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 19, 1998. 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 19, 1998
14
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:/s/ Javier Solis
-----------------------------------------------
Javier Solis, Senior Vice President & Secretary
Date: February 26, 1998
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: 2-26-98 /s/ James S. Marlen Director, Chairman of the Board, President and
--------------------------------- Chief Executive Officer (Principal Executive
James S. Marlen Officer)
Date: 2-24-98 /s/ Gary Wagner Senior Vice President & Chief Financial Officer
--------------------------------- (Principal Financial & Accounting Officer)
Gary Wagner
Date: 2-24-98 /s/ Stephen W. Foss Director
---------------------------------
Stephen W. Foss
Date: Director
---------------------------------
A. Frederick Gerstell
Date: Director
---------------------------------
J. Michael Hagan
Date: 2-24-98 /s/ Terry L. Haines Director
---------------------------------
Terry L. Haines
Date: 2-24-98 /s/ John F. King Director
---------------------------------
John F. King
Date: 2-16-98 /s/ Alan L. Ockene Director
---------------------------------
Alan L. Ockene
Date: 2-24-98 /s/ Richard J. Pearson Director
---------------------------------
Richard J. Pearson
Date: 2-24-98 /s/ David L. Sliney Director
---------------------------------
David L. Sliney
Date: 2-13-98 /s/ F. H. Fentener van Vlissingen Director
---------------------------------
F. H. Fentener van Vlissingen
18
AMERON INTERNATIONAL CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEAR ENDED NOVEMBER 30, 1997
(In thousands)
Addi- Deduc-
tions tions,
Balance Charged Pay- Reclas-
at to ments sifica- Balance
Begin- Costs and tions at
ning and Write- and End
Classification of Year Expense offs Others of Year
- --------------------------- ----------- --------- -------- --------- ----------
Deducted from asset accounts
Allowance for
doubtful accounts $ 5,939 $ 1,798 $ (1,692) $ (643) $ 5,402
Reserve for realization
of investments in
affiliates $ 9,595 $ 1,700 $ - $ - $ 11,295
Reserve for write-down
of assets related to
certain foreign
affiliates $ 3,853 $ - $ - $ - $ 3,853
Included in current liabilities
Reserve for pending
claims and litigation $ 5,188 $ 1,409 $ (3,140) $ (115) $ 3,342
Restructuring reserve $ 346 $ 62 $ (410) $ 2 $ -
Other reserves $ 679 $ 620 $ (938) $ 15 $ 376
Reserve for self-insured
programs $ 6,317 $ 443 $ (4,010) $ (697) $ 2,053
Included in long-term liabilities
Reserve for pending
claims and litigation $ 14,927 $ 1,850 $ (947) $ 57 $ 15,887
Other Reserves $ - $ 125 $ (84) $ - $ 41
Reserve for self-insured
programs $ 6,771 $ - $ - $ 900 $ 7,671
15
AMERON INTERNATIONAL CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEAR ENDED NOVEMBER 30, 1996
(In thousands)
Addi- Deduc-
tions tions,
Balance Charged Pay- Reclas-
at to ments sifica- Balance
Begin- Costs and tions at
ning and Write- and End
Classification of Year Expense offs Others of Year
- --------------------------- ----------- --------- -------- --------- ----------
Deducted from asset accounts
Allowance for
doubtful accounts $ 4,800 $ 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 $ 2,174 $ (1,035) $ - $ 14,927
Restructuring reserve $ 1,261 $ (430) $ (831) $ - $ -
Reserve for self-insured
programs $ 6,771 $ - $ - $ - $ 6,771
16
AMERON INTERNATIONAL CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEAR ENDED NOVEMBER 30, 1995
(In thousands)
Addi- Deduc-
tions tions,
Balance Charged Pay- Reclas-
at to ments sifica- Balance
Begin- Costs and tions at
ning and Write- and End
Classification of Year Expense offs Others of Year
- --------------------------- ----------- --------- -------- --------- ----------
Deducted from asset accounts
Allowance for
doubtful accounts $ 4,135 $ 1,710 $ (1,138) $ 93 $ 4,800
Reserve for investments
in affiliates $ 9,748 $ - $ - $ (389) $ 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 Income
17