(Mark One)
Commission File No. 1 - 9102
|
DELAWARE (State or other jurisdiction of incorporation or organization) |
77-0100596 (I.R.S. Employer Identification No.) |
245
South Los Robles Avenue
Pasadena, California 91101-2820
(Address of principal executive offices)
(626) 683-4000
(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /x/ No / /
The number of shares outstanding of Common Stock, $2.50 par value, was 3,873,007 on March 22, 2002. No other class of Common Stock exists.
1
Page
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Statements of Income 3
Consolidated Balance Sheets 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 10
Item 3. Quantitative and Qualitative Market Risk Disclosure 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13 Item 2. Changes in Securities 13 Item 6. Exhibits and Reports on Form 8-K 13 SIGNATURE PAGE 14 |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Three Months Ended
February 28,
-------------------------
2002 2001
----------- -----------
Sales $ 120,702 $ 121,605
Cost of Sales (90,263) (91,706)
----------- -----------
Gross Profit 30,439 29,899
Selling, General and
Administrative Expenses (27,238) (26,498)
Equity in Earnings of Joint Ventures 814 999
Other Income, Net 977 809
----------- -----------
Income before Interest
and Income Taxes 4,992 5,209
Interest Income 18 53
Interest Expense (2,406) (3,068)
----------- -----------
Income before Income Taxes 2,604 2,194
Provision for Income Taxes (833) (614)
----------- -----------
Net Income $ 1,771 $ 1,580
=========== ===========
Net Income per Share (Basic) $ 0.46 $ 0.41
=========== ===========
Net Income per Share (Diluted) $ 0.43 $ 0.41
=========== ===========
Weighted Average Shares (Basic) 3,873,007 3,869,357
=========== ===========
Weighted Average Shares (Diluted) 4,139,386 3,893,968
=========== ===========
Cash Dividends per Share $ .32 $ .32
=========== ===========
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February 28, November 30,
2002 2001
( Unaudited )
----------- -----------
ASSETS
Current Assets
Cash and Cash Equivalents $ 13,931 $ 11,315
Receivables, Less Allowances of $6,861
in 2002 and $6,699 in 2001 129,269 135,963
Inventories 91,719 92,534
Deferred Income Taxes 19,242 19,242
Prepaid Expenses and Other Current Assets 8,947 6,654
--------- ---------
Total Current Assets 263,108 265,708
Investments, Advances and Equity in
Undistributed Earnings of Joint Ventures 18,787 18,780
Property, Plant and Equipment, Net 143,616 145,801
Intangible assets, Net of Accumulated Amortization
of $7,726 in 2002 and $7,623 in 2001 12,964 13,158
Other Assets 42,331 41,633
--------- ---------
Total Assets $ 480,806 $ 485,080
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-Term Borrowings $ 1,379 $ 4,080
Current Portion of Long-Term Debt 8,461 8,597
Trade Payables 43,337 46,703
Accrued Liabilities 40,692 47,486
Income Taxes Payable 4,711 2,352
--------- ---------
Total Current Liabilities 98,580 109,218
Long-Term Debt, Less Current Portion 142,384 137,197
Other Long-Term Liabilities 34,708 34,418
--------- ---------
Total Liabilities 275,672 280,833
--------- ---------
Stockholders' Equity
Common Stock, Par Value $2.50 a Share,
Authorized 12,000,000 Shares, Outstanding
3,873,007 Shares in 2002 and 2001,
Net of Treasury Shares 13,017 13,017
Additional Paid-In Capital 20,346 19,457
Retained Earnings 247,938 247,406
Accumulated Other Comprehensive Loss (27,508) (26,974)
Treasury Stock (1,333,655 Shares
in 2002 and 2001) (48,659) (48,659)
--------- ---------
Total Stockholders' Equity 205,134 204,247
--------- ---------
Total Liabilities and Stockholders' Equity $ 480,806 $ 485,080
========= =========
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Three Months Ended
February 28,
-----------------------
2002 2001
-------- --------
Cash Flows from Operating Activities
Net Income $ 1,771 $ 1,580
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 4,408 4,375
Amortization 173 198
Provision for Deferred Income Taxes 88 113
Equity in Earnings of Joint Ventures (814) (999)
Dividends from Joint Ventures 825 1,368
(Gain)/Loss on Sale of Assets (34) 56
Stock Compensation Expense 889 675
Changes in Operating Assets and Liabilities:
Receivables 6,013 18,219
Inventories 984 (5,424)
Prepaid Expenses and Other Current Assets (2,348) (1,315)
Other Assets (698) (1,863)
Trade Payables (3,027) (1,342)
Other Current Liabilities (4,411) (7,325)
Other Long-Term Liabilities 214 831
-------- --------
Net Cash Provided by Operating Activities 4,033 9,147
-------- --------
Cash Flows from Investing Activities
Proceeds from Sale of Property, Plant and Equipment 134 109
Additions to Property, Plant and Equipment (2,825) (6,950)
-------- --------
Net Cash Used in Investing Activities (2,691) (6,841)
-------- --------
Cash Flows from Financing Activities
Net Change in Short-Term Borrowings (2,861) (402)
Issuance of Debt 5,570 2,418
Repayment of Debt, Net (130) (1,900)
Dividends on Common Stock (1,239) (1,238)
-------- --------
Net Cash Provided By (Used in)
Financing Activities 1,340 (1,122)
-------- --------
Effect of Exchange Rate Changes
on Cash and Cash Equivalents (66) 226
-------- --------
Net Change in Cash and Cash Equivalents 2,616 1,410
Cash and Cash Equivalents at Beginning of Period 11,315 11,514
-------- --------
Cash and Cash Equivalents at End of Period $ 13,931 $ 12,924
======== ========
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Note 1. Basis Of Presentation
Consolidated financial statements for the interim periods included herein are unaudited; however, they contain all adjustments, including normal recurring accruals, which in the opinion of management, are necessary to present fairly the consolidated financial position of Ameron International Corporation and all wholly-owned subsidiaries (the "Company" or "Ameron") at February 28, 2002, and its consolidated results of operations and cash flows for the three months ended February 28, 2002 and 2001. Accounting measurements at interim dates inherently involve greater reliance on estimates than at year-end. Results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.
The consolidated financial statements do not include certain footnote disclosures and financial information normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America and, therefore, should be read in conjunction with the consolidated financial statements and notes included in Ameron's Annual Report on Form 10-K for the year ended November 30, 2001.
Note 2. New Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board issued two new pronouncements: SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires the purchase method of accounting for business combinations initiated after June 30, 2001 and eliminates the pooling-of-interests method. The Company does not believe that the adoption of SFAS No. 141 will have a material impact on its financial statements.
SFAS No. 142 requires, among other things, the discontinuance of goodwill amortization. In addition, the standard includes provisions for the reclassification of certain existing recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles, reclassification of certain intangibles out of previously reported goodwill and the identification of reporting units for purposes of assessing potential future impairments of goodwill. SFAS No. 142 also requires the Company to complete a transitional goodwill impairment test six months from the date of adoption. SFAS No. 142 is effective for the Company and will be adopted beginning December 1, 2002. The Company is currently evaluating the impact of adopting SFAS No. 142.
SFAS No. 143, "Accounting for Asset Retirement Obligations," which becomes effective for the Company on December 1, 2002, addresses the obligations and asset retirement costs associated with the retirement of tangible long-lived assets. It requires that the fair value of the liability for an asset retirement obligation be recorded when incurred. The asset retirement costs must be capitalized as part of the carrying value of the long-lived asset. If the liability is settled for an amount other than the recorded balance, either a gain or loss will be recognized at settlement. The Company is currently assessing the impact of adopting SFAS No. 143.
SFAS No. 144, "Impairment or Disposal of Long-Lived Assets," will become effective for the Company on December 1, 2002. SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets and provides guidance on implementation issues related to SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," and addresses the accounting for a segment of a business accounted for as a discontinued operation. The Company is currently assessing the impact of adopting SFAS No. 144.
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Note 3. Inventories
Inventories are stated at the lower of cost (principally first-in, first-out) or market. Inventories were comprised of the following:
February 28, November 30,
2002 2001
---------- -----------
Finished Products $ 58,528 $ 58,397
Products in Process 13,097 12,053
Materials and Supplies 20,094 22,084
---------- -----------
$ 91,719 $ 92,534
========== ===========
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Note 4. Supplemental Disclosure of Cash Flow Information
Three Months Ended
February 28,
----------------------
2002 2001
------- -------
Interest Paid $ 2,903 $ 3,581
Income Taxes (Refunded) Paid $(1,577) $ 608
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Note 5. Joint Ventures
Operating results of joint ventures, which
were accounted for by the equity method, were as follows:
Three Months Ended
February 28,
------------------------
2002 2001
-------- --------
Net Sales $ 51,729 $ 52,930
Gross Profit $ 14,927 $ 15,571
Net Income $ 7,305 $ 6,718
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Amounts shown above include the operating results of Ameron Saudi Arabia, Ltd., Bondstrand, Ltd. and Oasis-Ameron, Ltd. for the three months ended December 31, 2001 and 2000 and TAMCO for the three months ended February 28, 2002 and 2001. Ameron's equity in earnings of joint ventures is included in other income.
Note 6. Net Income Per Share
Basic net income per share is computed on the basis of the weighted average number of common shares outstanding during the periods presented. Diluted net income per share is computed on the basis of the weighted average number of common shares outstanding plus the effect of outstanding stock options and other common stock equivalents, using the treasury stock method. All outstanding common stock equivalents were dilutive for the three months ended February 28, 2002. For the three months ended February 28, 2001, options to purchase 224,000 common shares were anti-dilutive.
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Following is a reconciliation of the weighted average number of shares used in the computation of basic and diluted net income per share:
Three Months Ended
February 28,
---------------------------
2002 2001
--------- ---------
Basic Average Common
Shares Outstanding 3,873,007 3,869,357
Dilutive Effect of
Common Stock Equivalents 266,379 24,611
--------- ---------
Diluted Average Common
Shares Outstanding 4,139,386 3,893,968
========= =========
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Note 7. Comprehensive Income
Comprehensive income was computed as follows:
Three Months Ended
February 28,
-----------------------
2002 2001
------- -------
Net Income $ 1,771 $ 1,580
Foreign Currency Translation
Adjustment (554) 2,238
Comprehensive Income from Joint Venture 20 --
------- -------
Comprehensive Income $ 1,237 $ 3,818
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Note 8. Debt
The Company's long-term debt consisted of the following:
February 28, November 30,
2002 2001
------------ ------------
Fixed-rate unsecured notes payable, bearing
interest at 7.92%, in annual principal
installments of $8,333 $ 41,666 $ 41,666
Variable-rate industrial development bonds,
Payable in 2016 (1.30% at February 28, 2002) 7,200 7,200
Variable-rate industrial development bonds,
Payable in 2021 (1.45% at February 28, 2002) 8,500 8,500
Variable-rate unsecured bank revolving credit
facilities (2.45% at February 28, 2002) 90,097 84,910
Variable-rate unsecured bank loan,
Payable in 2004 (18.67% at February 28, 2002) 3,254 3,254
Variable-rate unsecured bank loan, payable in
Euros, with quarterly principal installments
of approximately $128 (3.97% at February 28, 2002) 128 264
--------- ---------
150,845 145,794
Less Current portion (8,461) (8,597)
--------- ---------
$ 142,384 $ 137,197
========= =========
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Note 9. Segment Information
The Company provides certain information about operating segments in accordance with SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information." In accordance with SFAS No. 131, the Company has determined that it has four operating segments: Performance Coatings & Finishes, Fiberglass-Composite Pipe, Water Transmission, and Infrastructure Products. Each of these segments has a dedicated management team and is managed separately, primarily because of differences in products. Inter-segment sales were not significant. The Company allocates certain selling, general and administrative expenses to operating segments utilizing assumptions believed to be appropriate in the circumstances. Following is information related to each operating segment included in, and in a manner consistent with, internal management reports:
Three Months Ended
February 28,
----------------------------
2002 2001
--------- ---------
Sales
Performance Coatings & Finishes $ 38,225 $ 42,745
Fiberglass-Composite Pipe 21,593 23,692
Water Transmission 33,379 28,098
Infrastructure Products 27,749 27,518
Eliminations (244) (448)
--------- ---------
Total Sales $ 120,702 $ 121,605
========= =========
Income (Loss) Before Interest
and Income Taxes
Performance Coatings & Finishes $ (700) $ 104
Fiberglass-Composite Pipe 2,402 2,241
Water Transmission 4,622 3,442
Infrastructure Products 2,976 3,087
Corporate & Unallocated (4,308) (3,665)
--------- ---------
Total Income Before Interest
and Income Taxes $ 4,992 $ 5,209
========= =========
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February 28, November 30,
2002 2001
--------- ---------
Assets
Performance Coatings & Finishes $ 129,306 $ 133,332
Fiberglass-Composite Pipe 130,687 133,267
Water Transmission 120,156 123,175
Infrastructure Products 67,333 65,518
Corporate & Unallocated 160,173 168,697
Eliminations (126,849) (138,909)
--------- ---------
Total Assets $ 480,806 $ 485,080
========= =========
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Note 10. Commitments & Contingencies
An action was filed in 1992 in the U.S. District
Court for the District of Arizona by the Central Arizona Water Conservation District ("CAWCD")
seeking damages against several parties, including the Company 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 damages for the repair or replacement of those siphons. On September 14, 1994, the U.S.
District Court granted the Company's motion to dismiss the CAWCD action
and entered judgement against the CAWCD and in favor of the Company and its
co-defendants. CAWCD filed a notice of appeal with the Ninth Circuit
Court of Appeals.
9 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 Court for the District of Arizona.
The Contracting Officer's final decision was 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. Trial on
that appeal commenced in November 2000; however, the proceeding was stayed with
the concurrence of the parties pending efforts aimed at a possible settlement of
the matter. Settlement efforts involving the USBR, Kiewit, the Company and
various insurance carriers are continuing. In the meantime, activity on
the IBCA appeal, as well as the aforementioned CAWCD appeal, continues to be
suspended. 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
believes that it has meritorious defenses to these actions and that resultant
liability, if any, should not have a material effect on the financial position
of the Company or its results of operations. In addition, certain other claims, suits and
complaints that arise in the ordinary course of business, have been filed or are
pending against the Company. Management believes that these matters, and
the matters discussed above, are either adequately reserved, covered by
insurance, or would not have a material effect on the Company's financial position
or its results of operations if disposed of unfavorably. The Company is also subject to federal, state and
local laws and regulations concerning the environment and is currently
participating in administrative proceedings at several sites under these
laws. In the early 1970's, the Company disposed of certain quantities of
waste at the Stringfellow Hazardous Waste Site in Riverside County, California,
which is one of several priority sites on the Superfund list established by the
U.S. Environmental Protection Agency. During 2001 the Company settled the
only current action against it in connection with the remediation of that
site. The settlement did not have a material impact on the Company's
financial position or its results of operations. While the Company finds it difficult to estimate with any
certainty the total cost of remediation at the several sites, on the basis of
currently available information and reserves provided, the Company believes that
the outcome of such environmental regulatory proceedings will not have a
material effect on the Company's financial position or its results of
operations. The Company is one of numerous defendants in various pending
lawsuits brought in the State of Mississippi in the past several months
involving 315 individuals alleging personal injury from exposure
to asbestos-containing products. None of such lawsuits specifies any
dollar amount sought as damages by such individuals, 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 such 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 these claims. The Company intends to vigorously defend all
asbestos-related lawsuits. Item
2. Management's Discussion and Analysis of Financial Ameron
International Corporation and Subsidiaries INTRODUCTION Management's Discussion and Analysis should
be read in conjunction with the same discussion included in the Company's 2001 Annual Report on Form 10-K. Reference should also be made to the
financial statements included in this Form 10-Q for comparative consolidated
balance sheets and statements of income and cash flows. LIQUIDITY AND CAPITAL RESOURCES During the three months ended February 28, 2002 the Company generated
$4.0 million of cash from operating
activities compared to $9.1 million for the same period in 2001.
The lower operating cash flow in 2002 came principally from lower 10 receivable collections, partially offset by a decreased buildup in inventories. Net cash of $2.7 million was used in investing activities for the three
months ended February 28, 2002, compared to $6.8 million used in the same
period in 2001. Cash used in investing activities consisted primarily of capital expenditures for normal replacement and upgrades of machinery and
equipment. Cash used in investing activities in 2001 also included capital expenditures for a
new concrete pole plant in Alabama, which was completed in 2001. Management estimates that capital expenditures during fiscal
2002
will be between $15.0 million and $25.0 million. Capital
expenditures are expected to be funded by existing cash balances, cash generated from
operations and additional borrowings. Net cash provided by financing activities was $1.3 million in 2002, compared
with net cash used of $1.1 million in 2001. The increase resulted from additional net borrowings of $2.6 million,
which were used to finance operations, for capital expenditures
and for payment of common stock dividends of $1.2 million during the
first quarter of 2002. Cash and cash equivalents at February 28, 2002 totaled $13.9 million, an
increase of $2.6 million from November 30, 2001. At February 28, 2002 the Company had
total debt outstanding of $152.2 million and approximately $97.9 million in unused committed and uncommitted credit
lines available from foreign and domestic banks. 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 2002. 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 material price increases. The Company's contractual obligations and commercial commitments at
February 28, 2002 are summarized as follows (in thousands):
Condition
and Results of Operations
February 28, 2002
Payments Due by Period
-------------------------------------------------
Less than 1 - 3 4 - 5 After 5
Contractual Obligations Total 1 year years years years
-----------------------------------------------------------------------------------------------------------
Long-Term Debt (a) $150,845 $ 8,461 $118,350 $ 8,334 $15,700
Operating Leases 42,771 5,014 7,988 4,694 25,075
--------------------------------------------------
Total Contractual Obligations (b) $193,616 $13,475 $126,338 $13,028 $40,775
==================================================
Amount of Commitment
Expiration Per Period
---------------------------------------------------
Total Amounts Less than 1 - 3 4 - 5 After 5
Commercial Commitments Committed 1 year years years years
-----------------------------------------------------------------------------------------------------------
Line of Credit (a) $ 1,379 $ 1,379 $ -- $ -- $ --
Standby Letters of Credit (c) 4,893 4,893 -- -- --
Guarantees (d) 4,692 4,692 -- -- --
--------------------------------------------------
Total Commercial Commitments (b) $10,964 $10,964 $ -- $ -- $ --
==================================================
(a) Included in long-term debt is $90,097 outstanding under unsecured bank lines supported by a revolving
credit facility, due in 2003. Lines of credit represent short-term borrowings by the Company's foreign
subsidiaries.
(b) The Company has no capitalized lease obligations, unconditional purchase obligations, or standby
repurchase obligations.
(c) Not included are standby letters of credit of $15,700 supporting industrial development bonds and $3,254
supporting a bank loan, which are included in long-term debt.
(d) The Company guarantees bank credit facilities for a joint venture.
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RESULTS OF OPERATIONS
Net income totaled $1.8 million, or 43 cents per diluted share, on sales of $120.7 million for the first quarter of 2002, compared to earnings of $1.6 million, or 41 cents per diluted share, on sales of $121.6 million for the same period in 2001.
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Net income improved due primarily to lower interest expense and a strong performance by the Water Transmission Group.
Sales of the Water Transmission Group increased $5.3 million in the first quarter of 2002, compared to the same period of 2001. Sales were higher due to the continued demand for water piping for new developments in California and Arizona. Segment income increased $1.2 million in the first quarter of 2002, compared to the same period of 2001, as a result of higher sales. 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, costs and profit. Estimates are reviewed on a consistent basis and are adjusted when actual results are expected to significantly differ from those estimates. The outlook for the Water Transmission Group is positive, due to the strong order backlog and increased bidding activity.
Sales of the Company's worldwide Fiberglass-Composite Pipe Group decreased $2.1 million in the first quarter of 2002, compared to the same period of 2001. Sales decreased because of the continued sluggishness in domestic and Asian industrial and fuel-handling markets, as well as softening in the worldwide oilfield market. Segment income increased by $.2 million in the first quarter of 2002, compared to the same period of 2001, despite lower sales, due to cost reduction programs and lower raw material costs. The outlook for the Fiberglass-Composite Pipe Group is positive due to recent increases in oil prices which should strengthen the demand for fiberglass pipe.
Sales of the Performance Coatings & Finishes Group decreased $4.5 million in the first quarter of 2002, compared to the same period of 2001. Sales of high-performance protective coatings declined in both Europe and the U.S. while sales of light-industrial finishes in the U.K., Australia and New Zealand were flat. Segment income decreased $.8 million in the first quarter of 2002, compared to the same period of 2001, as a result of lower sales. The outlook for the Performance Coatings & Finishes Group is dependent on the timing and strength of the economic recovery.
Sales of the Infrastructure Products Group increased $.2 million in the first quarter of 2002, compared to the same period of 2001. Segment income decreased by $.1 million for the first quarter of 2002, compared to the same period of 2001. Hawaiian operations declined slightly due to weather, and sales of pole products increased as low interest rates continued to drive the strong U.S. housing market. The outlook for the Infrastructure Products Group appears to be improving due to the pace of military and residential construction in Hawaii.
The Company's gross profit for the three months ended February 28, 2002 was $30.4 million, an increase of $.5 million from 2001, despite a slight decrease in sales. Gross profit margins for the Company as a whole improved slightly in the first quarter of 2002, compared to the same period in 2001. Gross profit margins for the Water Transmission Group improved due to higher capacity utilization. Margins for each of the other segments improved primarily due to changes in mix and lower raw material costs.
Selling, General and Administrative expenses were higher in the first quarter of 2002, compared to the same period of 2001, primarily due to higher insurance and benefit costs.
Interest expense was $2.4 million for the three months ended February 28, 2002, compared with $3.1 million for the same period in 2001. The lower interest expense resulted primarily from lower interest rates on the Company's variable-rate debt.
The effective tax rate was 32% in the first quarter of 2002, compared to 28% for the same period in 2001. The higher effective tax rate reflected the anticipated mix of income from domestic operations, foreign operations and joint ventures. Income from certain foreign operations and joint ventures is taxed at rates substantially 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 Annual Report on Form 10-K for the year ended November 30, 2001.
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
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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 pending lawsuits brought in the State of Mississippi in the past several months involving 315 individuals alleging personal injury from exposure to asbestos-containing products. None of such lawsuits specifies any dollar amount sought as damages by such individuals, 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 such 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 these claims. The Company intends to vigorously defend all asbestos-related lawsuits.
Item 2. Changes in Securities
Terms of lending agreements place restrictions on cash dividends, stock repurchases, borrowings, investments and guarantees. Under the most restrictive provisions of these agreements, approximately $16.8 million of consolidated retained earnings were not restricted at February 28, 2002.
Item 6. Exhibits and Reports on Form 8-K
No form 8-K was filed for the Company in the first quarter of 2002.
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Signature Page
Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly authorized.
Ameron International Corporation Date:
March 22, 2002
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By: /s/ Gary Wagner
---------------------------------
Gary Wagner
Senior Vice President, Chief Financial Officer