Ameron International Provides Details of 1999 Results and Questions and Answers by James S. Marlen, Ameron's Chairman.Business Editors PASADENA, Calif.--(BUSINESS WIRE)--Feb. 17, 2000 Ameron International Corporation (NYSE NYSE See: New York Stock Exchange : AMN Amn abbr. airman ) today provided the attached financial details for fiscal year ended November November: see month. 30, 1999. Ameron had previously reported record 1999 results of $5.54 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share on sales of $545.1 million, compared to earnings of $5.08 per share and sales of $552.1 million in 1998. Fiscal 1999 earnings, excluding gains from sales of assets, totaled $5.33 per share, compared to $4.25 per share from operations in 1998, an improvement of over 25%. Fourth-quarter earnings totaled $1.62 per share in 1999 and $1.58 per share in 1998, excluding asset sales and other nonrecurring charges Nonrecurring Charge An expense occurring only once on a company's financial statement. Notes: An extraordinary item is an example of a nonrecurring charge. Also known as "nonrecurring item". . Also attached are questions and answers provided by James James, person in the Bible James, in the Gospel of St. Luke, kinsman of St. Jude. The original does not specify the relationship. James, rivers, United States James. Marlen, Ameron's Chairman, President and Chief Executive Officer. The questions and answers provide insight to Ameron's outlook and strategies. The questions and answers can also be viewed on Ameron's web page at www.ameron.com. Ameron International Corporation is a multinational multinational Of, relating to, or being a company with subsidiaries or other operations in a number of countries. The diversity of operations of such companies subjects them to unique risks (for example, exchange rate changes or government nationalization) manufacturer of highly-engineered products and materials for the industrial, chemical, oil and construction markets. Traded on the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. (AMN), Ameron is a leading producer of high-performance Adj. 1. high-performance - modified to give superior performance; "a high-performance car" superior - of high or superior quality or performance; "superior wisdom derived from experience"; "superior math students" coatings; fiberglass-composite piping; concrete &steel pipe systems and specialized spe·cial·ize v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es v.intr. 1. To pursue a special activity, occupation, or field of study. 2. construction products. The Company operates businesses in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , South America South America, fourth largest continent (1991 est. pop. 299,150,000), c.6,880,000 sq mi (17,819,000 sq km), the southern of the two continents of the Western Hemisphere. , Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). , Australasia Australasia (ôstrəlā`zhə, –shə), islands of the South Pacific, including Australia, New Zealand, New Guinea, and adjacent islands. The term is sometimes used to include all of Oceania. and Asia. It also
participates in several joint-venture companies in the U.S., Saudi
Arabia Saudi Arabia (sä `dē ərā`bēə, sou`–, sô–), officially Kingdom of Saudi Arabia, kingdom (2005 est. pop. and Mexico Mexico, city, MexicoMexico or Mexico City, Span. Ciudad de México (Méjico), city (1990 pop. 8,236,960; 1991 met. area est. 20,899,000), central Mexico, capital and largest city of Mexico. . Cautionary statement for purposes of the &uot;Safe Harbor&uot; provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995: Any statements in this report that refer to Ameron's estimated or anticipated future results are forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. 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 situations. Matters affecting the economy generally, including the state of economics worldwide, can affect Ameron's results. Forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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, Ameron disclaims any intent or obligation to update these forward-looking statements.
Ameron International Corporation
Consolidated Statements of Income
Fourth Quarter Ended November 30,
(In thousands except share and per share data)
(Unaudited)
1999 1998
--------- ---------
Sales $ 133,919 $ 156,939
Cost of Sales ( 99,464) (116,397)
--------- ---------
Gross Profit 34,455 40,542
Selling, General and
Administrative Expense ( 27,162) ( 30,228)
Asset Write-Downs and Other Charges -- ( 19,866)
Other Income, Net 4,860 3,572
Gain from Sale of Property,
Plant and Equipment 1,093 2,862
Gain from Sale of Investment -- 24,000
--------- ---------
Income before Interest and Income Taxes 13,246 20,882
Interest, net ( 2,565) ( 3,931)
--------- ---------
Income before Income Taxes 10,681 16,951
Income Taxes ( 3,418) ( 5,933)
--------- ---------
Net Income $ 7,263 $ 11,018
========= =========
Net Income Per Basic Share (Based on
Weighted Average Shares Outstanding
of 3,991,912 Shares in 1999 and
4,016,852 Shares in 1998) $ 1.82 $ 2.74
========= =========
Net Income Per Diluted Share (Based on
Diluted Common Shares Outstanding
of 4,042,537 Shares in 1999 and
4,084,377 Shares in 1998) $ 1.80 $ 2.71
========= =========
Cash Dividends Paid $ .32 $ .32
========= =========
Ameron International Corporation
Consolidated Statements of Income
Twelve Months Ended November 30,
(In thousands except share and per share data)
1999 1998
--------- ---------
Sales $ 545,081 $ 552,146
Cost of Sales (402,099) (412,934)
--------- ---------
Gross Profit 142,982 139,212
Selling, General and
Administrative Expenses (113,165) (109,345)
Asset Write-Downs and Other Charges -- ( 21,669)
Other Income, Net 14,653 11,943
Gain from Sale of Property,
Plant and Equipment 1,223 2,853
Gain from Sale of Investment -- 24,000
--------- ---------
Income before Interest and Taxes 45,693 46,994
Interest, net ( 12,938) ( 15,077)
--------- ---------
Income before Income Taxes 32,755 31,917
Income Taxes ( 10,482) ( 11,171)
--------- ---------
Net Income $ 22,273 $ 20,746
========= =========
Net Income Per Basic Share (Based on
Weighted Average Shares Outstanding
of 3,996,237 Shares in 1999 and
4,016,852 Shares in 1998) $ 5.57 $ 5.17
========= =========
Net Income Per Diluted Share (Based on
Diluted Common Shares Outstanding
of 4,023,248 Shares in 1999 and
4,084,377 Shares in 1998) $ 5.54 $ 5.08
========= =========
Cash Dividends Paid $ 1.28 $ 1.28
========= =========
Ameron International Corporation
Consolidated Statements of Cash Flows
Twelve Months Ended November 30,
(In thousands)
1999 1998
--------- ---------
Operating Activities
Net Income $ 22,273 $ 20,746
Adjustments to Reconcile
Net Income to Net Cash 14,653 2,326
Changes in Operating Assets
and Liabilities 8,140 15,570
--------- ---------
Cash Provided by Operations 45,066 38,642
Investing Activities
Proceeds from Sale of Assets 3,487 31,395
Additions to Property, Plant
and Equipment (19,672) (32,744)
Acquisitions -- (46,419)
Other, Net ( 96) --
--------- ---------
Cash Used by Investing Activities (16,281) (47,768)
Financing Activities
Short and Long-Term Borrowings, Net (27,729) 19,822
Dividends on Common Stock (5,111) (5,141)
Issuance of Common Stock -- 920
Purchase of Treasury Stock ( 1,415) --
--------- ---------
Cash Provided (Used) by
Financing Activities (34,255) 15,601
Effect of Exchange Rate Changes on Cash ( 385) 53
--------- ---------
Net Change in Cash $ ( 5,855) $ 6,528
========= =========
Ameron International Corporation
Consolidated Balance Sheets
(In thousands)
As of November 30,
1999 1998
--------- ---------
ASSETS
Current Assets
Cash and Equivalents $ 10,521 $ 16,376
Receivables, Net 118,900 136,380
Inventories 95,488 106,654
Other 17,745 14,280
--------- ---------
Total Current Assets 242,654 273,690
Investments and Advances -
Affiliated Companies 23,046 22,712
Property, Plant and Equipment, Net 149,597 157,918
Other Assets 43,670 45,899
--------- ---------
Total Assets $ 458,967 $ 500,219
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-Term Borrowings $ 3,479 $ 3,024
Current Portion of Long-Term Debt 12,595 12,681
Trade Payables 36,667 37,273
Accrued Liabilities 43,552 50,353
Income Taxes Payable 18,848 23,499
--------- ---------
Total Current Liabilities 115,141 126,830
Long-Term Debt, Less Current Portion 135,237 165,308
Other Long-Term Liabilities 30,469 40,913
--------- ---------
Total Liabilities 280,847 333,051
Stockholders' Equity
Common Stock 13,007 13,007
Additional Paid-In Capital 17,857 17,828
Retained Earnings 204,336 187,174
Accumulated Other Comprehensive Loss (12,886) ( 8,062)
Treasury Stock (44,194) (42,779)
--------- ---------
Total Stockholders' Equity 178,120 167,168
--------- ---------
Total Liabilities and
Stockholders' Equity $ 458,967 $ 500,219
========= =========
AMERON INTERNATIONAL CORPORATION
QUESTIONS AND ANSWERS - February 17, 2000
By: James S. Marlen, Chairman, President and Chief Executive Officer
1. Please describe Ameron.
Ameron International Corporation is a multinational
manufacturer of engineered products and specialty materials
for the industrial, chemical, oil and construction markets.
Traded on the New York Stock Exchange (AMN), Ameron is a
leading producer of high-performance coatings;
fiberglass-composite piping; concrete &steel pipe systems
and specialized construction products. The Company operates
businesses in North America, South America, Europe,
Australasia and Asia. It also participates in several
joint-venture companies in the U.S., Saudi Arabia and Mexico.
The Company is organized into four operating segments. Ameron
maintains a small, specialized Research &Engineering center,
which is located in California, and several regional product
development groups.
Through the Concrete &Steel Pipe segment, the Company serves
the water transmission business as a world leader in pressure
pipe technology and manufacturing. In addition to being the
leading producer in the western U.S., Ameron also operates
the largest concrete and steel pipe company in Colombia,
South America and participates in joint ventures in Saudi
Arabia.
The Coatings segment produces specialty coatings -- based on
epoxies, urethanes and acrylics -- designed to protect metal
and general infrastructure against corrosion. Principal
markets include marine vessels, offshore platforms, chemical
plants and water treatment facilities. Ameron is a recognized
innovator, utilizing an extensive worldwide manufacturing
presence, distribution and licensing network. The Coatings
segment operates manufacturing facilities in the U.S.,
Holland, U.K., Australia and New Zealand. Ameron also has an
interest in companies in Mexico and Saudi Arabia.
The Fiberglass-Composite Pipe segment produces composite pipe
systems used in the production and transport of
highly-corrosive fluids. The Company is the world's market
and technology leader, offering a variety of
highly-engineered pipe systems to meet customers' difficult
requirements. With operations located in the U.S., Europe and
Asia, and an investment in a joint venture with a presence in
Saudi Arabia and Kuwait, the Company has a strong competitive
advantage with global oil companies.
The Construction &Allied Products segment operates an
aggregates and ready-mix concrete business in Hawaii and a
pole business throughout the U.S., as the leading producer of
concrete poles. Both operations are recognized for quality
and service.
Principal joint ventures include a 50%-ownership in TAMCO,
the largest steel rebar producer in California, and
investments in Bondstrand Ltd. and Ameron Saudi Arabia Ltd.
(ASAL), strategic joint ventures in Saudi Arabia. Bondstrand
is a 40%-owned fiberglass-composite pipe manufacturer, and
ASAL is a 30%-owned concrete pipe manufacturer.
The Company employs approximately 3,100 employees worldwide,
and its stock trades on the New York Stock Exchange under the
symbol AMN.
2. Who are Ameron's major competitors?
Our competitors range from large, diversified multinational
companies to smaller regional producers. In Coatings, most
are major international companies like PPG, AKZO, ICI,
Sherwin-Williams, and RPM. In Fiberglass-Composite Pipe, the
competitors tend to be smaller and focused on certain niche
markets. A.O. Smith, Star Fiberglass and Denali are
U.S.-based, while FPI is a competitor in Europe and the
Middle East. In Concrete &Steel Pipe, Northwest Pipe is our
primary competitor. Valmont and Union Metal are Pole
Products' primary competitors; and, in Hawaii, Hawaiian
Cement is the major competitor.
3. Explain Ameron's management structure and business planning.
We operate with a very lean headquarters staff. We empower
the operating units, but the understanding is clear: prompt
communication on important matters and thorough financial
reporting. We follow a schedule of operating and strategic
reviews and financial evaluations. In terms of planning,
operating managers have specific targets as part of a
three-year planning cycle. Key managers have a significant
portion of their total compensation tied to achievement of
their own plan target and, to some extent, to that achieved
by the corporation. Therefore, we rely on an incentivized,
pay-for-performance system. As a matter of philosophy, we
ensure sound process management, but we are intensely focused
on results, not only for today, but also in the future.
4. Ameron is often considered a Construction Products or
Building Materials Company. Is this an accurate description?
I do not believe that Ameron can be accurately defined as a
construction products or building materials company. That may
have been a reasonable description ten years ago, but Ameron
has shifted to specialty chemicals and materials.
Fundamentally, Ameron is a technology-oriented company with a
focused growth strategy targeted at the worldwide specialty
coatings and fiberglass-composite materials markets. Our goal
is to create value-added products for these worldwide growth
markets. About 55% of sales relate to what I would call
specialty material and composite products and 45% to
highly-engineered products for the construction and building
sectors.
5. What were 1999 results?
Ameron reported record earnings per diluted share for the
fiscal year ended November 30, 1999 of $5.54 on sales of
$545.1 million, compared to earnings of $5.08 per share and
sales of $552.1 million in 1998. Fiscal 1999 earnings,
excluding gains from sales of assets, totaled $5.33 per
share, compared to $4.25 per share from operations in 1998,
an improvement of over 25%.
With 1999's strong performance, we achieved an earnings
growth rate of 20% per year over the past seven years. In
1998, the Company incurred the only earnings interruption
since 1992, although 1998 was still our second-best year
ever. In the past seven years, the Company has more than
tripled its earnings, from $1.53 to $5.33 per share.
The full-year results reflected the higher demand experienced
by the Concrete &Steel Pipe business, improved sales and
efficiencies in the Construction &Allied Products segment,
and continued strong performances by the Company's
joint-venture companies. The Fiberglass-Composite Pipe
segment had lower sales and profitability as a result of the
lower oil, gas and commodity prices that caused the worldwide
markets served by Ameron to curtail capital investment and
maintenance programs. Coatings was also affected by these
difficult market conditions.
6. What was the consensus estimate for 1999?
The final range for 1999 was $5.18 to $5.25 per share. The
consensus at the beginning of the year was $4.60, so you can
see the significant improvement in earnings that was achieved
throughout 1999.
7. What was the return on equity and capital for 1999?
Our return on equity has improved significantly over the past
years, increasing from 4% in 1992 to around 13% in 1999.
The return on capital has increased from 5% in 1992 to
slightly over 9%. Importantly, current returns exceed our
cost of capital and demonstrate that Ameron is adding
shareholder value.
8. What is Ameron's leverage ratio and book capitalization?
Debt to capital was about 46% at the end of 1999. At our peak
borrowing level in 1998, leverage had increased to 60%. So
over the past year, significant progress has been made in
improving the Company's capital structure.
Significant progress has been made in reducing the Company's
leverage. Debt had been used to fund the Croda Coatings
acquisition and working capital increases. We needed to
reduce debt and also to focus on managing working capital
more effectively to generate more cash. We divested
Gifford-Hill-American, Inc., a non-strategic concrete pipe
joint venture in Texas, and used the proceeds to lower debt.
So, since the peak in 1998, debt has been reduced by
$80 million, and working capital has been brought more in
line with operating requirements. Working capital is down
from its peak by $40 million.
Ameron's book value is $178 million, or over $44 per share.
This compares to the current price of about $35 per share.
9. What was Ameron's cash flow for 1999?
Ameron's cash flow, or EBITDA, has grown steadily over the
past years, going from $32 million in 1992 to almost
$65 million in 1999. With this level of cash flow, Ameron
generates sufficient cash to support capital investment
programs, pay dividends, repay debt and grow. As our
businesses continue to grow, we anticipate cash flow to
increase accordingly. Since 1992, EBITDA has grown from about
$8.30 per share to about $16.00 per share in 1999.
10. What is Ameron's dividend payout?
Since 1992, our payout ratio has declined from around 84% to
23% today -- an indication of the strong earnings improvement
in recent years. The dividend payout has been constant at
$1.28 per share, or an approximate yield of 3.7%, based on
the recent share price of $35.
11. Why did you ultimately decide not to sell TAMCO?
We had decided in mid-year 1998 to divest our 50% ownership
interest in TAMCO to redeploy resources into more strategic
businesses. However, the steel industry became depressed in
late 1998 and early 1999, and steel companies pulled back on
expansion plans and acquisitions in order to conserve cash
and focus on current operations. Therefore, the interest
level and the valuations of TAMCO, which was and is still
operating at record levels, were not acceptable to us and our
joint venture partners.
We are very happy with TAMCO's continued progress and its
long-term potential. We are continuing to invest to improve
productivity and expand capacity through manufacturing
efficiencies and upgrades. TAMCO has had three consecutive
years of record earnings, and we expect another record in
2000.
12. What is the status of the stock repurchase program that was
authorized in 1998?
A share repurchase program to buy back up to 10% of Ameron's
shares (around 400,000 shares) was put in place in August
1998. To date, we have repurchased slightly over 38,000
shares. We must balance our repurchase program with our need
for capital to support operations and strategic growth
initiatives. Additionally, we are constrained by our lenders
and financial covenants.
13. What are your strategic initiatives?
We have developed a clear, succinct strategic plan. First, we
want to continue repositioning the Company toward
high-performance businesses such as Coatings and
Fiberglass-Composite Pipe and related businesses. Second, we
will grow worldwide through alliances and acquisitions and
new product developments, which will result in value-creating
opportunities. Finally, we will protect our leading market
positions and become the low-cost, highest-quality producer
in each market we serve.
14. What is your long-term outlook for Ameron?
Long term, I am optimistic about the potential for each of
our segments. We are the market leader in many of the markets
in which we compete. Demographic projections indicate that
the population of the western U.S. will grow by 30% between
2000 and 2010. These projections are the driving force for
growth of our Concrete &Steel Pipe and Pole businesses.
Additionally, our Coatings and Fiberglass-Composite Pipe
businesses will benefit from a trend toward technical
solutions to complex corrosion problems.
Concrete &Steel Pipe is clearly the leader in water
transmission systems in the western U.S. Our Hawaiian
operations play a similar role with aggregates and ready-mix
concrete, as does our Pole business with concrete poles.
Coatings and Fiberglass-Composite Pipe hold strong positions
in selected niches such as marine and offshore, with a
focused position in chemical, industrial and related markets.
The demand in each of these businesses should be strong in
the future. In the short term, we also expect Coatings and
Fiberglass-Composite Pipe to show good improvements if oil
prices continue to remain at current levels.
I should also mention that we have initiated efforts to grow
worldwide revenues and earnings of Coatings and
Fiberglass-Composite Pipe through a more effective
distribution network, more efficient logistics, and
streamlining product offerings. At the same time, we are
introducing new, advanced products, upgrading manufacturing
facilities and strengthening the worldwide management
organization. We recently overhauled the Coatings' sales and
marketing organization to serve the market more aggressively
with a focused approach that emphasizes market coverage and
customer service.
Again, I have confidence in the long-term potential of each
operating unit. The Company's business mix, geographic reach,
strong market positions, technological strengths, and quality
of management worldwide lead me to conclude that the
prospects for overall continued growth for Ameron are quite
positive.
15. How can you sustain growth?
As I mentioned, I am optimistic about Ameron's long-term
potential, especially given our market leadership positions.
Our businesses are cyclical, but we have been able to
restructure and manage the Company such that the overall
results have continued to show steady and significant
improvement. Each of our businesses has its own drivers. In
Concrete &Steel Pipe, the market demand for water
distribution will remain high for a number of years,
especially as population shifts and grows in the western U.S.
A similar story applies to the Hawaiian and Pole businesses.
In fact, the Hawaiian economy is just starting to show signs
of recovering. In Pole Products, particularly in concrete
poles for residential street lighting, we continue to
penetrate new markets, such as in the Southeast and
Southwest. Coatings and Fiberglass-Composite Pipe are just
now picking up, so we expect good sustainable growth in these
worldwide businesses. We also expect growth from a variety of
innovative products, some of which have been recently
introduced and others planned for introduction in 2000.
16. Do you see acquisitions as a way to grow the Company?
Long-term, acquisitions will be important to achieve our
strategic objectives. We actively search for opportunities,
but are very selective. We will not make acquisitions for the
sake of making acquisitions. They must be strategic and
provide a favorable return on investment.
17. Have recent acquisitions met your expectations?
Our most recent acquisition of any size was the Croda
Coatings business in April 1998. Since then, we have fully
integrated the business with Ameron's traditional coatings
operation. A lot of attention was focused on restructuring
the business, including downsizing, consolidating
manufacturing and distribution, and revamping product lines.
We have, in effect, overhauled the business, and we are now
more focused and more competitive. The financial results are
slightly behind our original projections, primarily because
of poor regional market and economic conditions. Coatings
markets have declined worldwide. Long term, we remain
optimistic about the potential of the businesses in the U.K.,
Australia and New Zealand.
Going in, we realized the need to reorganize and restructure
this business, and that is why we did not pay a significant
premium for it. If you look at other acquisitions in this
field, buyers have paid much higher multiples of earnings.
With the Croda Coatings acquisition we strategically expanded
our coatings business geographically and broadened the
markets we serve. In addition, we acquired valuable
manufacturing technology, particularly in the area of
computerized color mixing and control. Croda Coatings brought
us several new market segments -- agriculture and
construction equipment, wood coatings, fire-resistant
coatings, and even coil and powder coatings in Australia and
New Zealand.
18. Can you discuss any recent new product developments?
Ameron's principal focus is in technology for Coatings and
Fiberglass-Composite Pipe. We hold a leading position and
reputation in both businesses. Ameron invented and patented a
novel class of polymers, which are hybrids of inorganic
siloxanes with traditional organic polymers such as epoxies
and acrylics. This is our PSX(R) technology. This PSX(R)
polysiloxane technology has been expanded with the
introduction of a single-pack acrylic PSX(R) topcoat system
that outperforms traditional polyurethanes. In Europe, we
introduced a line of fire-retardant coatings and new plastic
coatings for the automotive market. We also developed a
breakthrough internal barrier coating for plastic drums. In
Australasia, we completely overhauled the wood finishes
product offering with the introduction of an advanced,
pigmented wood finishes line. In Fiberglass, we used PSX(R)
to develop a line of adhesives for bonding
phenolic-fiberglass, fire-resistant piping.
Ameron's most significant technical advancement and market
opportunity is the development and introduction of a
high-pressure, fiberglass steel-strip-laminate pipe called
SSL(TM), which combines the strength of steel with the
corrosion resistance of fiberglass. This new technology has
been enthusiastically received and has the potential to make
significant inroads into the sizable, worldwide
high-performance pipe market. We are now in prototype
production and expect to begin commercialization in 2000.
In Concrete &Steel Pipe, our emphasis is on the use of
advanced technology to improve productivity and manufacturing
capabilities. Projects include implementation of automated
laser weld-seam tracking and use of unique drive systems to
enhance productivity of mortar-lining equipment. In Hawaii,
we have introduced under the Islecrete brand a unique
lightweight concrete for housing structures, which is being
specified for residential, commercial and military
construction. Our Pole Products business is using technology
and innovation to develop fiberglass lighting and
distribution poles, both new market opportunities.
Ameron's future success depends on how well we use technology
to develop new products and improve manufacturing
efficiencies and capabilities.
19. How much does Ameron invest in technology?
Ameron spent nearly $4.3 million in 1999 on R&. Our R&
budgets differ significantly by business, but most of our R&
efforts are focused in Coatings and Fiberglass-Composite
Pipe.
20. What are your expectations for capital investments for the
next couple of years?
To support and grow the businesses, we plan to invest $15 to
$25 million per year on capital projects. The last couple of
years we purchased two strategic properties (in Hawaii and
California); therefore, our capital expenditures were higher.
The property investments eliminated an element of risk to
operations and reduced costs.
21. What is your forecast for 2000?
We are optimistic about Ameron's long-term growth potential
and expect an overall improvement from operations in 2000.
However, this improvement is not expected until the second
half of 2000; and the first half of 2000 is expected to be
slower than in 1999. The recent strong performance of the
Concrete &Steel Pipe segment should moderate based on the
timing of new orders; however, Construction &Allied Products
should continue to experience steady growth. We expect the
Coatings and Fiberglass-Composite Pipe segments to benefit
from the recovery of their major markets as customers react
to higher oil prices and increase capital and maintenance
spending. Conditions remain favorable for our joint-venture
companies, including TAMCO.
22. What are analysts' expectations for 2000?
Analysts expect earnings in the range of $5.55 to $5.65 per
share, excluding unusual items. Again, earnings totaled $5.33
per share in 1999, excluding nonrecurring gains.
23. What risks to the business do you see in the next few years?
The principal short-term risk is the recovery of oil-related
industries. By recovery, I mean the oil and chemical
companies begin to fund expansion and maintenance programs.
Our Fiberglass-Composite Pipe and Coatings businesses
declined in 1999 because of the lingering impact of the fall
of oil prices in 1998. The strength of our Concrete &Steel
Pipe and Construction &Allied Pipe businesses more than
offset the decline. Going forward, Concrete &Steel Pipe is
expected to slow. Therefore, to maintain the consolidated
earnings level of 1999, both Fiberglass-Composite Pipe and
Coatings must improve.
The current level of oil prices has historically benefited
both Fiberglass-Composite Pipe and Coatings, and we expect to
see an improvement later in 2000. However, if our customers
who are tied to oil prices do not increase spending because
of industry consolidations or because of a perception that
the current oil-price level is not sustainable, spending on
maintenance and capital projects could remain lower than we
anticipate.
24. Why is Ameron not followed by more investment analysts?
Few analysts are interested in companies of our size or in
our industries. Ameron is a micro-cap company, and micro-cap
companies have not benefited in the stock market, as have
large-cap companies. Also, value stocks and stocks in the
manufacturing sector in general have not been rewarded by
Wall Street. There is definitely an investor bias toward
high-technology companies, and funds have shifted from
traditional value companies to the technology and growth
stocks. We are hurt by the lack of visibility and lack of
analyst coverage. As earnings continue to grow, we expect the
investor community to become more interested.
25. Do you think Ameron is fairly valued today?
Ameron is, by any measure, undervalued. We are convinced
that, as superior performance continues, investors will be
rewarded. Our trailing P/E ratio stands at only 6.6.
Currently, the market only seems to reward technology and
Internet stocks. As the market corrects its bias against
small stocks and against basic industries, Ameron's value
should increase. Long term, I believe that our consistently
improving earnings performance will be recognized in a P/E
multiple much higher than at present.
James S. Marlen
Cautionary statement for purposes of the &uot;Safe Harbor&uot; provisions of the Private Securities Litigation Reform Act of 1995: Any statements in this report that refer to Ameron'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 situations. Matters affecting the economy generally, including the state of economics worldwide, can affect Ameron's results. 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, Ameron disclaims any intent or obligation to update these forward-looking statements. |
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