ameron_10q307.htm
United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
(Mark One)
 
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 26, 2007
 
OR
 
 
 ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from __________ to __________

Commission File Number 1-9102

AMERON INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
 
Delaware
77-0100596
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)

245 South Los Robles Avenue
Pasadena, CA 91101-3638
(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 ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Large accelerated filer ¨
Accelerated filer x
Non-accelerated filer ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes ¨  No x

The number of outstanding shares of Common Stock, $2.50 par value, was 9,138,721 on August 26, 2007.  No other class of Common Stock exists.
 
 
AMERON INTERNATIONAL CORPORATION AND SUBSIDIARIES
 
FORM 10-Q
 
For the Quarter Ended August 26, 2007
 
Table of Contents

 
 
   
     
   3
     
   18
     
   25
     
   25
     
   
     
   26
     
   26
     
   26
     
   27
     
   27


 


2
AMERON INTERNATIONAL CORPORATION AND SUBSIDIARIES

 
PART I – FINANCIAL INFORMATION
 
 
ITEM 1 – FINANCIAL STATEMENTS
 
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

 
 
Three Months Ended
 
 
Nine Months Ended
 
 
 
August 26,
 
 
September 3,
 
 
August 26,
 
 
September 3,
 
(Dollars in thousands, except per share data)
 
2007
 
 
2006
 
 
2007
 
 
2006
 
Sales
 
$
165,048
 
 
$
139,941
 
 
$
442,159
 
 
$
398,570
 
Cost of sales
 
 
(128,047
)
 
 
(103,859
)
 
 
(339,076
)
 
 
(299,135
)
Gross profit
 
 
37,001
 
 
 
36,082
 
 
 
103,083
 
 
 
99,435
 
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
Selling, general and administrative expenses
 
 
(21,669
)
 
 
(22,302
)
 
 
(69,128
)
 
 
(68,811
)
Other income, net
 
 
1,760
 
 
 
1,458
 
 
 
3,715
 
 
 
10,822
 
Income from continuing operations before interest, income taxes and equity in earnings of joint venture
 
 
17,092
 
 
 
15,238
 
 
 
37,670
 
 
 
41,446
 
Interest income/(expense), net
 
 
62
  
 
 
(628
)
 
 
410
 
 
 
(2,547
)
Income from continuing operations before income taxes and equity in earnings of joint venture
 
 
17,154
 
 
 
14,610
 
 
 
38,080
 
 
 
38,899
 
Provision for income taxes
 
 
426
  
 
 
(2,538
)
 
 
(6,631
)
 
 
(10,450
)
Income from continuing operations before equity in earnings of joint venture
 
 
17,580
 
 
 
12,072
 
 
 
31,449
 
 
 
28,449
 
Equity in earnings of joint venture, net of taxes
 
 
3,079
 
 
 
4,910
 
 
 
12,335
 
 
 
9,493
 
Income from continuing operations
 
 
20,659
 
 
 
16,982
 
 
 
43,784
 
 
 
37,942
 
Income from discontinued operations, net of taxes
 
 
463
 
 
 
997
 
 
 
1,609
 
 
 
2,350
 
Net income
 
$
21,122
 
 
$
17,979
 
 
$
45,393
 
 
$
40,292
 
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
Basic earnings per share:
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
Income from continuing operations
 
$
2.28
 
 
$
1.94
 
 
$
4.85
 
 
$
4.37
 
Income from discontinued operations, net of taxes
 
 
.05
 
 
 
.11
 
 
 
.18
 
 
 
.27
 
Net income
 
$
2.33
 
 
$
2.05
 
 
$
5.03
 
 
$
4.64
 
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
Diluted earnings per share:
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
Income from continuing operations
 
$
2.27
 
 
$
1.91
 
 
$
4.83
 
 
$
4.29
 
Income from discontinued operations, net of taxes
 
 
.05
 
 
 
.11
 
 
 
.18
 
 
 
.27
 
Net income
 
$
2.32
 
 
$
2.02
 
 
$
5.01
 
 
$
4.56
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average shares (basic)
 
 
9,044,129
 
 
 
8,748,617
 
 
 
9,020,798
 
 
 
8,677,515
 
Weighted-average shares (diluted)
 
 
9,089,574
 
 
 
8,890,919
 
 
 
9,068,593
 
 
 
8,840,106
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash dividends per share
 
$
.25
 
 
$
.20
 
 
$
.65
 
 
$
.60
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 

3
AMERON INTERNATIONAL CORPORATION AND SUBSIDIARIES
 

CONSOLIDATED BALANCE SHEETS – ASSETS (UNAUDITED)

 
 
August 26,
 
 
November 30,
 
(Dollars in thousands)
 
2007
 
 
2006
 
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
Cash and cash equivalents
 
$
126,563
 
 
$
139,479
 
Receivables, less allowances of $5,881 in 2007 and $4,912 in 2006
 
 
159,980
 
 
 
160,173
 
Inventories
 
 
112,260
 
 
 
77,134
 
Deferred income taxes
 
 
24,027
 
 
 
23,861
 
Prepaid expenses and other current assets
 
 
13,473
 
 
 
15,921
 
 
 
 
  
 
 
 
 
 
    Total current assets
 
 
436,303
 
 
 
416,568
 
 
 
 
  
 
 
 
 
 
Investments in joint ventures
 
 
  
 
 
 
 
 
Equity method
 
 
17,428
 
 
 
14,501
 
Cost method
 
 
3,784
 
 
 
3,784
 
 
 
 
  
 
 
 
 
 
Property, plant and equipment
 
 
  
 
 
 
 
 
Land
 
 
35,764
 
 
 
33,327
 
Buildings
 
 
77,266
 
 
 
57,434
 
Machinery and equipment
 
 
277,337
 
 
 
261,538
 
Construction in progress
 
 
28,559
 
 
 
20,657
 
 
 
 
  
 
 
 
 
 
    Total property, plant and equipment at cost
 
 
418,926
 
 
 
372,956
 
Accumulated depreciation
 
 
(251,927
)
 
 
(238,486
)
 
 
 
  
 
 
 
 
 
    Total property, plant and equipment, net
 
 
166,999
 
 
 
134,470
 
Goodwill and intangible assets, net of accumulated amortization of $1,106 in 2007 and $3,017 in 2006
 
 
2,124
 
 
 
2,143
 
Other assets
 
 
51,163
 
 
 
63,198
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
677,801
 
 
$
634,664
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 


4
AMERON INTERNATIONAL CORPORATION AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS – LIABILITIES AND STOCKHOLDERS' EQUITY (UNAUDITED)

 
 
August 26,
 
 
November 30,
 
(Dollars in thousands, except per share data)
 
2007
 
 
2006
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
Current portion of long-term debt
 
$
10,000
 
 
$
10,000
 
Trade payables
 
 
40,271
 
 
 
45,650
 
Accrued liabilities
 
 
88,448
 
 
 
68,970
 
Income taxes payable
 
 
-
 
 
 
11,481
 
 
 
 
  
 
 
 
 
 
Total current liabilities
 
 
138,719
 
 
 
136,101
 
 
 
 
  
 
 
 
 
 
Long-term debt, less current portion
 
 
71,338
 
 
 
72,525
 
Other long-term liabilities
 
 
58,825
 
 
 
62,813
 
 
 
 
  
 
 
 
 
 
Total liabilities
 
 
268,882
 
 
 
271,439
 
 
 
 
  
 
 
 
 
 
Commitments and contingencies
 
 
  
 
 
 
 
 
Stockholders' equity
 
 
  
 
 
 
 
 
 
 
 
  
 
 
 
 
 
Common stock, par value $2.50 per share, authorized 24,000,000 shares, outstanding 9,138,721 shares in 2007 and 9,075,094 shares in 2006, net of treasury shares
 
 
29,623
 
 
 
29,431
 
Additional paid-in capital
 
 
44,192
 
 
 
39,500
 
Retained earnings
 
 
411,363
 
 
 
371,894
 
Accumulated other comprehensive loss
 
 
(24,296
)
 
 
(27,232
)
Treasury stock (2,710,321 shares in 2007 and 2,697,148 shares in 2006)
 
 
(51,963
)
 
 
(50,368
)
 
 
 
  
 
 
 
 
 
Total stockholders' equity
 
 
408,919
 
 
 
363,225
 
 
 
 
 
 
 
 
 
 
Total liabilities and stockholders' equity
 
$
677,801
 
 
$
634,664
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 

5
AMERON INTERNATIONAL CORPORATION AND SUBSIDIARIES

 
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 
 
Nine Months Ended
 
 
 
August 26,
 
 
September 3,
 
(Dollars in thousands)
 
2007
 
 
2006
 
OPERATING ACTIVITIES
 
 
 
 
 
 
Net income
 
$
45,393
 
 
$
40,292
 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
  
 
 
 
 
 
Depreciation
 
 
11,958
 
 
 
13,894
 
Amortization
 
 
19
 
 
 
134
 
Net earnings in excess of distributions from joint ventures
 
 
(2,927
)
 
 
(3,308
)
Gain from sale of property, plant and equipment
 
 
(44
)
 
 
(9,118
)
Gain from sale of discontinued operations
 
 
(1,453
)
 
 
(215
)
Stock compensation expense
 
 
1,793
 
 
 
2,829
 
Other
 
 
(166
) 
 
 
(38
)
Changes in operating assets and liabilities:
 
 
  
 
 
 
 
 
Receivables, net
 
 
1,032
  
 
 
(6,926
)
Inventories
 
 
(34,191
)
 
 
(30,737
)
Prepaid expenses and other current assets
 
 
2,455
 
 
 
(7,126
)
Other assets
 
 
(2,674
)
 
 
457
 
Trade payables
 
 
(5,721
)
 
 
1,459
 
Accrued liabilities and income taxes payable
 
 
7,936
 
 
 
18,660
 
Other long-term liabilities
 
 
(4,045
)
 
 
(17,863
)
Net cash provided by operating activities
 
 
19,365
 
 
 
2,394
 
 
 
 
  
 
 
 
 
 
INVESTING ACTIVITIES
 
 
  
 
 
 
 
 
Proceeds from sale of property, plant and equipment
 
 
385
 
 
 
590
 
Proceeds from sale of discontinued operations
 
 
5,910
 
 
 
115,000
 
Additions to property, plant and equipment
 
 
(33,301
)
 
 
(18,128
)
Net cash (used in)/provided by investing activities
 
 
(27,006
)
 
 
97,462
  
 
 
 
  
 
 
 
 
 
FINANCING ACTIVITIES
 
 
  
 
 
 
 
 
Net change in short-term borrowings
 
 
-
 
 
 
(8,333
) 
Issuance of debt
 
 
1,036
 
 
 
6,670
 
Repayment of debt
 
 
(2,665
)
 
 
(529
)
Dividends on common stock
 
 
(5,924
)
 
 
(5,286
)
Issuance of common stock
 
 
1,136
 
 
 
4,186
 
Excess tax benefits related to stock-based compensation
 
 
1,955
 
 
 
-
 
Purchase of treasury stock
 
 
(1,595
)
 
 
(1,203
)
Net cash used in financing activities
 
 
(6,057
)
 
 
(4,495
)
 
 
 
  
 
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
 
 
782
 
 
 
923
 
Net change in cash and cash equivalents
 
 
(12,916
)
 
 
96,284
 
Cash and cash equivalents at beginning of period
 
 
139,479
 
 
 
44,671
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents at end of period
 
$
126,563
 
 
$
140,955
 
 
 The accompanying notes are an integral part of these consolidated financial statements.
 

6
AMERON INTERNATIONAL CORPORATION AND SUBSIDIARIES

 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 subsidiaries (the "Company" or "Ameron" or the "Registrant") as of August 26, 2007, and consolidated results of operations and cash flows for the nine months ended August 26, 2007.  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.
 
For accounting consistency, the quarter typically ends on the Sunday closest to the end of the relevant calendar month.  The Company’s fiscal year ends on November 30, regardless of the day of the week.  Each quarter consists of approximately 13 weeks, but the number of days per quarter can change from period to period.  The quarters ended August 26, 2007 and September 3, 2006 consisted of 91 days each.  The nine months ended August 26, 2007 and September 3, 2006 consisted of 269 days and 277 days, respectively.

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 the Company’s Annual Report on Form 10-K for the year ended November 30, 2006 ("2006 Annual Report").

NOTE 2 – NEW ACCOUNTING PRONOUNCEMENTS

In June 2006, the Financial Accounting Standards Board (“FASB”) issued Emerging Issues Task Force (“EITF”) Issue No. 06-03, "How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross Versus Net Presentation)."  EITF 06-03 requires that any tax assessed by a governmental authority that is imposed concurrent with or subsequent to a revenue-producing transaction between a seller and a customer should be presented on a gross (included in revenues and costs) or a net (excluded from revenues) basis.  In addition, for any such taxes that are reported on a gross basis, a company should disclose the amounts of those taxes in interim and annual financial statements for each period for which an income statement is presented if those amounts are significant.  EITF 06-03 was first effective for the interim period ended February 25, 2007.  The Company presents such taxes on a net basis in its income statements.  The adoption of EITF 06-03 did not have a material effect on the Company’s consolidated financial statements.

In July 2006, the FASB issued Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109.”  FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with Statement of Financial Accounting Standard (“SFAS”) No. 109 and prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken or expected to be taken on a tax return.  FIN 48 requires the impact of a tax position to be recognized in the financial statements if that position is more likely than not of being sustained by the taxing authority.  FIN 48 is first effective for the first quarter of 2008.  The Company is evaluating whether the adoption of FIN 48 will have a material effect on its consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which formally defines fair value, creates a standardized framework for measuring fair value in generally accepted accounting principles (“GAAP”), and expands fair value measurement disclosures.  SFAS No. 157 will be effective for the year ending November 30, 2008.  The adoption of SFAS No. 157 is not expected to have a material effect on the Company’s consolidated financial statements.
 
7
AMERON INTERNATIONAL CORPORATION AND SUBSIDIARIES

In September 2006, the FASB issued SFAS No. 158, "Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans," amending FASB Statement No. 87, “Employers’ Accounting for Pensions,” FASB Statement No. 88, “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits,” FASB Statement No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions,” and FASB Statement No. 132, “Employers’ Disclosures about Pensions and Other Postretirement Benefits.”  SFAS No. 158 requires companies to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its financial statements and to recognize changes in that status in the year in which the changes occur.  SFAS No. 158 also requires a company to measure the funded status of a plan as of the date of its year-end financial statements.  SFAS No. 158 will be first effective as of November 30, 2007.  If SFAS No. 158 had been applied at November 30, 2006 using the November 30, 2006 actuarial valuation, accumulated other comprehensive loss would have increased by approximately $54,600,000 ($36,900,000 after tax) representing the difference between the funded status of the Company’s pension and other post-retirement benefit plans based on the projected and accumulated benefit obligations, respectively, and the amounts recorded on the Company’s balance sheet at November 30, 2006.  The ultimate impact is contingent on plan asset returns and the assumptions that will be used to measure the funded status of each of Ameron’s pension and postretirement benefit plans as of November 30, 2007.
 
In February 2007 the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.”  SFAS 159 permits companies to choose to measure many financial instruments and certain other items at fair value.  SFAS 159 seeks to improve the overall quality of financial reporting by providing companies the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions.  SFAS 159 will be effective for the year ending November 30, 2008.  The Company is evaluating whether the adoption of SFAS 159 will have a material effect on its consolidated financial statements.

NOTE 3 – DISCONTINUED OPERATIONS

On August 1, 2006, the Company completed the sale of its Performance Coatings & Finishes business (the "Coatings Business") to PPG Industries, Inc. ("PPG").  PPG and the Company are disputing a post-closing adjustment of $3,423,000.  The Company believes it is entitled to the disputed amount under the terms of the Purchase Agreement (the “Agreement”).  The Company and PPG are in active negotiations to resolve the dispute.  If the parties are unable to resolve the dispute the Agreement provides a process for resolution.  Certain real properties that were used in the Coatings Business were excluded from the sale. 

During the third quarter of 2007, the Company recognized a gain of $463,000 on the sale of two properties which were formerly used by the Coatings Business.  In the nine months ended August 26, 2007, the Company recognized a gain of $1,453,000 on the sale of properties that were formerly used by the Coatings Business.   In addition to the gain on the sale of the properties, the Company recognized $156,000 of research and development tax credits that related to the Coatings Business in 2007.  The 2007 tax credit was attributable to the retroactive application of tax legislation enacted in December 2006.  Results for the nine months ended September 3, 2006 represented the net income from normal operations of the Coatings Business prior to the divestiture.  During the third quarter of 2006, the Company completed the sale of its Coatings Business and recognized a pretax gain of $1,162,000.  Provision for income taxes related to the gain was $947,000, which resulted in a net gain of $215,000 in the third quarter and first nine months of 2006.

The results of discontinued operations were as follows:
 
 
Three Months Ended
 
 
Nine Months Ended
 
 
 
August 26,
 
 
September 3,
 
 
August 26,
 
 
September 3,
 
(In thousands)
 
2007
 
 
2006
 
 
2007
 
 
2006
 
Revenue from discontinued operations
 
$
-
 
 
$
41,828
 
 
$
-
 
 
$
152,190
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income from discontinued operations before disposal, before income taxes
 
$
-
 
 
$
2,187
 
 
$
-
 
 
$
5,202
 
Income taxes on income from discontinued operations
 
 
-
 
 
 
(1,405
)
 
 
156
 
 
 
(3,067
)
Income from discontinued operations before disposal, net of taxes
 
 
-
 
 
 
782
 
 
 
156
 
 
 
2,135
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
Gain on sale of discontinued operations, before income taxes
 
 
463
 
 
 
1,162
 
 
 
1,453
 
 
 
1,162
 
Income taxes on gain on sale of discontinued operations
 
 
-
 
 
 
(947
) 
 
 
-
 
 
 
(947
) 
Gain on sale of discontinued operations, net of taxes
 
 
463
 
 
 
215
 
 
 
1,453
 
 
 
215
 
Income from discontinued operations, net of taxes
 
$
463
 
 
$
997
 
 
$
1,609
 
 
$
2,350
 
 
8
AMERON INTERNATIONAL CORPORATION AND SUBSIDIARIES

Income from discontinued operations, net of taxes, totaled $463,000, or $.05 per diluted share, and $1,609,000, or $.18 per diluted share, for the three and nine months ended August 26, 2007, respectively, compared to income of $997,000, or $.11 per diluted share, and $2,350,000, or $.27 per diluted share, for the same periods in 2006. 
 
Prior period income statement amounts have been reclassified to present the operating results of the Coatings Business as a discontinued operation.  Prior period balance sheets and cash flow statements have not been adjusted.
 
 NOTE 4 - RECEIVABLES

The Company’s receivables consisted of the following:
 
 
August 26,
 
 
November 30,
 
(In thousands)
 
2007
 
 
2006
 
Trade
 
$
140,046
 
 
$
124,308
 
Other
 
 
21,660
 
 
 
31,299
 
Joint ventures
 
 
4,155
 
 
 
9,478
 
Allowances
 
 
(5,881
)
 
 
(4,912
)
 
 
$
159,980
 
 
$
160,173
 

Trade receivables included unbilled receivables related to percentage-of-completion revenue recognition of $28,236,000 and $32,278,000 at August 26, 2007 and November 30, 2006, respectively.
 
NOTE 5 – INVENTORIES

Inventories are stated at the lower of cost or market.  Inventories consisted of the following:
 
 
August 26,
 
 
November 30,
 
(In thousands)
 
2007
 
 
2006
 
Finished products
 
$
41,224
 
 
$
30,802
 
Materials and supplies
 
 
35,576
 
 
 
22,224
 
Products in process
 
 
35,460
 
 
 
24,108
 
 
 
$
112,260
 
 
$
77,134
 

NOTE 6 – SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Supplemental cash flow information included the following:
 
 
Nine Months Ended
 
 
 
August 26,
 
 
September 3,
 
(In thousands)
 
2007
 
 
2006
 
Interest paid
 
$
2,178
 
 
$
3,452
 
Income taxes paid
 
 
18,873
 
 
 
6,624
 

NOTE 7 – JOINT VENTURES

Operating results of TAMCO, an investment which is accounted for under the equity method, were as follows:
 
 
 
Three Months Ended
 
 
Nine Months Ended
 
 
 
August 26,
 
 
September 3,
 
 
August 26,
 
 
September 3,
 
(In thousands)
 
2007
 
 
2006
 
 
2007
 
 
2006
 
Net sales
 
$
63,251
 
 
$
69,521
 
 
$
211,122
 
 
$
193,293
 
 
 
 
  
 
 
 
 
 
 
 
  
 
 
 
 
 
Gross profit
 
 
15,064
 
 
 
21,258
 
 
 
55,974
 
 
 
43,353
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
 
6,944
 
 
 
10,960
 
 
 
27,819
 
 
 
21,191
 

Investments in Ameron Saudi Arabia, Ltd. ("ASAL") and Bondstrand, Ltd. ("BL") are accounted for under the cost method due to management's current assessment of the Company's influence over these joint ventures.
 
9
AMERON INTERNATIONAL CORPORATION AND SUBSIDIARIES
 
Earnings and dividends from the Company's joint ventures were as follows:
 
 
 
Three Months Ended
 
 
Nine Months Ended
 
 
 
August 26,
 
 
September 3,
 
 
August 26,
 
 
September 3,
 
(In thousands)
 
2007
 
 
2006
 
 
2007
 
 
2006
 
Earnings from joint ventures
 
 
 
 
 
 
 
 
 
 
 
 
Equity in earnings of TAMCO before income taxes
 
$
3,472
 
 
$
5,481
 
 
$
13,910
 
 
$
10,596
 
Less provision for income taxes
 
 
(393
)
 
 
(571
)
 
 
(1,575
)
 
 
(1,103
)
Equity in earnings of TAMCO, net of taxes
 
$
3,079
 
 
$
4,910
 
 
$
12,335
 
 
$
9,493
 
Dividends received from joint ventures
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TAMCO
 
$
3,998
 
 
$
2,998
 
 
$
10,983
 
 
$
7,288
 
ASAL
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
BL
 
 
1,254
 
 
 
-
 
 
 
1,254
 
 
 
-
 

Earnings from ASAL and BL, if any, are included in other income, net.  During the third quarter of 2007, earnings from BL totaled $1,254,000.
 
NOTE 8 – 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 restricted stock, using the treasury stock method.  All outstanding common stock equivalents consisting of restricted shares of 62,517 and 98,002, and options to purchase 67,250 and 301,068 common shares, were dilutive for the three and nine months ended August 26, 2007 and September 3, 2006, respectively.   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
 
 
Nine Months Ended
 
 
 
August 26,
 
 
September 3,
 
 
August 26,
 
 
September 3,
 
(In thousands, except per share data)
 
2007
 
 
2006
 
 
2007
 
 
2006
 
Numerator:
 
 
 
 
 
 
 
 
 
 
 
 
Income from continuing operations
 
$
20,659
 
 
$
16,982
 
 
$
43,784
 
 
$
37,942
 
Income from discontinued operations, net of taxes
 
 
463
 
 
 
997
 
 
 
1,609
 
 
 
2,350
 
Net income
 
$
21,122
 
 
$
17,979
 
 
$
45,393
 
 
$
40,292
 
 
 
 
  
 
 
 
 
 
 
 
  
 
 
 
 
 
Denominator for basic income per share:
 
 
  
 
 
 
 
 
 
 
  
 
 
 
 
 
Weighted-average shares outstanding, basic
 
 
9,044,129
 
 
 
8,748,617
 
 
 
9,020,798
 
 
 
8,677,515
 
 
 
 
  
 
 
 
 
 
 
 
  
 
 
 
 
 
Denominator for diluted income per share:
 
 
  
 
 
 
 
 
 
 
  
 
 
 
 
 
Weighted-average shares outstanding, basic
 
 
9,044,129
 
 
 
8,748,617
 
 
 
9,020,798
 
 
 
8,677,515
 
Dilutive effect of stock options and restricted stock
 
 
45,445
 
 
 
142,302
 
 
 
47,795
 
 
 
162,591
 
Weighted-average shares outstanding, diluted
 
 
9,089,574
 
 
 
8,890,919
 
 
 
9,068,593
 
 
 
8,840,106
 
 
 
 
  
 
 
 
 
 
 
 
  
 
 
 
 
 
Basic net income per share:
 
 
  
 
 
 
 
 
 
 
  
 
 
 
 
 
Income from continuing operations
 
$
2.28
 
 
$
1.94
 
 
$
4.85
 
 
$
4.37
 
Income from discontinued operations, net of taxes
 
 
.05
 
 
 
.11
 
 
 
.18
 
 
 
.27
 
Net income
 
$
2.33
 
 
$
2.05
 
 
$
5.03
 
 
$
4.64
 
 
 
 
  
 
 
 
 
 
 
 
  
 
 
 
 
 
Diluted net income per share:
 
 
  
 
 
 
 
 
 
 
  
 
 
 
 
 
Income from continuing operations
 
$
2.27
 
 
$
1.91
 
 
$
4.83
 
 
$
4.29
 
Income from discontinued operations, net of taxes
 
 
.05
 
 
 
.11
 
 
 
.18
 
 
 
.27
 
Net income
 
$
2.32
 
 
$
2.02
 
 
$
5.01
 
 
$
4.56
 

10
AMERON INTERNATIONAL CORPORATION AND SUBSIDIARIES
 
NOTE 9 – COMPREHENSIVE INCOME

Comprehensive income was as follows:
 
 
Three Months Ended
 
 
Nine Months Ended
 
 
 
August 26,
 
 
September 3,
 
 
August 26,
 
 
September 3,
 
(In thousands)
 
2007
 
 
2006
 
 
2007
 
 
2006
 
Net income
 
$
21,122
 
 
$
17,979
 
 
$
45,393
 
 
$
40,292
 
Foreign currency translation adjustment
 
 
155
 
 
 
(4,066
) 
 
 
2,936
 
 
 
421
 
Comprehensive income
 
$
21,277
 
 
$
13,913
 
 
$
48,329
 
 
$
40,713
 
 
NOTE 10 – DEBT

The Company's long-term debt consisted of the following:
 
 
August 26,
 
 
November 30,
 
(In thousands)
 
2007
 
 
2006
 
Fixed-rate notes:
 
 
 
 
 
 
5.36%, payable in annual principal installments of $10,000
 
$
30,000
 
 
$
30,000
 
4.25%, payable in Singapore dollars, in annual principal installments of $6,704, starting in 2008
 
 
33,522
 
 
 
33,173
 
Variable-rate industrial development bonds:
 
 
  
 
 
 
 
 
  payable in 2016 (3.90% at August 26, 2007)
 
 
7,200
 
 
 
7,200
 
  payable in 2021 (3.90% at August 26, 2007)
 
 
8,500
 
 
 
8,500
 
Variable-rate bank revolving credit facility (12.95% at August 26, 2007)
 
 
2,116
 
 
 
3,652
 
Total long-term debt
 
 
81,338
 
 
 
82,525
 
Less current portion
 
 
(10,000
)
 
 
(10,000
)
Long-term debt, less current portion
 
$
71,338
 
 
$
72,525
 

The Company maintains a $100,000,000 revolving credit facility with six banks (the "Revolver").  Under the Revolver, the Company may, at its option, borrow at floating interest rates (LIBOR plus a spread ranging from .75% to 1.625% determined by the Company's financial condition and performance), at any time until September 2010, when all borrowings under the Revolver must be repaid.  The
lending agreements contain various restrictive covenants, including the requirement to maintain specified amounts of net worth and restrictions on cash dividends, borrowings, liens, investments, guarantees, and financial covenants.  The Company was in compliance with all covenants as of August 26, 2007.  The Revolver, the 4.25% term notes and the 5.36% term notes are collateralized by substantially all of the Company's assets.  The industrial development bonds are supported by standby letters of credit that are issued under the Revolver.  The interest rate on the industrial development bonds is based on a weekly index of tax-exempt issues plus a spread of .20%.  Certain note agreements contain provisions regarding the Company's ability to grant security interests or liens in association with other debt instruments.  If the Company grants such a security interest or lien, then such notes will be collateralized equally and ratably as long as such other debt shall be collateralized.

The Company intends for short-term borrowings under certain bank facilities utilized by the Company and its foreign subsidiaries to be refinanced on a long-term basis via the Revolver.  In addition, the amount available under the Revolver exceeds such short-term borrowings at August 26, 2007.  Accordingly, amounts due under these bank facilities have been classified as long-term debt and are considered payable when the Revolver is due.
 
11
AMERON INTERNATIONAL CORPORATION AND SUBSIDIARIES
 
NOTE 11 – 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 and three reportable segments: Fiberglass-Composite Pipe, Water Transmission and Infrastructure Products.  Infrastructure Products consists of two operating segments, the Pole Products and Hawaii Divisions, which are aggregated.  In the prior periods, the Company included a fourth reportable segment, Performance Coatings & Finishes, which was sold effective August 1, 2006.  The results from this segment have been reported as discontinued operations for all reporting periods.  Each of the segments has a dedicated management team and is managed separately, primarily because of differences in products.  The Company's Chief Operating Decision Maker is the Chief Executive Officer who primarily reviews sales and income before interest, income taxes and equity in earnings of joint venture for each operating segment in making decisions about allocating resources and assessing performance.  The Company allocates certain selling, general and administrative expenses to operating segments utilizing assumptions believed to be appropriate in the circumstances.  Costs of shared services (e.g., costs of Company-wide insurance programs or benefit plans) are allocated to the operating segments based on revenue, wages or net assets employed.  Other items not related to current operations or of an unusual nature, such as adjustments to reflect inventory balances of certain steel inventories under the last-in, first-out ("LIFO") method, certain unusual legal costs and expenses, interest expense and income taxes, are not allocated to the reportable segments.
Following is information related to each reportable segment included in, and in a manner consistent with, internal management reports:
 
 
Three Months Ended
 
 
Nine Months Ended
 
 
 
August 26,
 
 
September 3,
 
 
August 26,
 
 
September 3,
 
(In thousands)
 
2007
 
 
2006
 
 
2007
 
 
2006
 
Sales
 
 
 
 
 
 
 
 
 
 
 
 
Fiberglass-Composite Pipe
 
$
62,554
 
 
$
48,477
 
 
$
170,183
 
 
$
131,326
 
Water Transmission
 
 
48,959
 
 
 
36,999
 
 
 
121,810
 
 
 
118,086
 
Infrastructure Products
 
 
53,528
 
 
 
54,580
 
 
 
152,460
 
 
 
149,857
 
Eliminations
 
 
7
  
 
 
(115
)
 
 
(2,294
)
 
 
(699
)
Total sales
 
$
165,048
 
 
$
139,941
 
 
$
442,159
 
 
$
398,570
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income from Continuing Operations Before Interest, Income Taxes and Equity in Earnings of Joint Venture
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fiberglass-Composite Pipe
 
$
18,850
 
 
$
10,850
 
 
$
44,588
 
 
$
26,746
 
Water Transmission
 
 
(2,999
) 
 
 
668
 
 
 
(6,330
)
 
 
4,099
 
Infrastructure Products
 
 
9,250
 
 
 
9,063
 
 
 
25,981
 
 
 
23,442
 
Corporate & unallocated
 
 
(8,009
)
 
 
(5,343
) 
 
 
(26,569
)
 
 
(12,841
)
Total Income from Continuing Operations Before Interest, Income Taxes and Equity in Earnings of Joint Venture
 
$
17,092
 
 
$
15,238
 
 
$
37,670
 
 
$
41,446
 
 
The Corporate and unallocated amounts for the first nine months of 2006 included a pretax gain of $9,052,000 related to the sale of property.
 
 
 
August 26,
 
 
November 30,
 
 
 
2007
 
 
2006
 
Assets
 
 
 
 
 
 
Fiberglass-Composite Pipe
 
$
229,642
 
 
$
206,326
 
Water Transmission
 
 
208,743
 
 
 
167,463
 
Infrastructure Products
 
 
108,804
 
 
 
97,249
 
Corporate & unallocated
 
 
244,251
 
 
 
271,023
 
Eliminations
 
 
(113,639
)
 
 
(107,397
)
Total Assets
 
$
677,801
 
 
$
634,664
 
 
 
12
AMERON INTERNATIONAL CORPORATION AND SUBSIDIARIES
 
NOTE 12 – COMMITMENTS AND CONTINGENCIES

The Company is one of numerous defendants in various asbestos-related personal injury lawsuits. These cases generally seek unspecified damages for asbestos-related diseases based on alleged exposure to products previously manufactured by the Company and others, and at this time the Company is generally not aware of the extent of injuries allegedly suffered by the individuals or the facts supporting the claim that injuries were caused by the Company's products. Based upon the information available to it at this time, the Company is not in a position to evaluate its potential exposure, if any, as a result of such claims. Hence, no amounts have been accrued for loss contingencies related to these lawsuits in accordance with SFAS No. 5, "Accounting for Contingencies." The Company continues to vigorously defend all such lawsuits. As of August 26, 2007, the Company was a defendant in asbestos-related cases involving 131 claimants, compared to 132 claimants as of May 27, 2007.  The Company is not in a position to estimate the number of additional claims that may be filed against it in the future. For the quarter ended August 26, 2007, there were new claims involving 3 claimants, dismissals and/or settlements involving 4 claimants and no judgments.  Net costs and expenses incurred by the Company for the quarter ended August 26, 2007 in connection with asbestos-related claims were $425,000.
 
In May 2003, Dominion Exploration and Production, Inc. and Pioneer Natural Resources USA, Inc., (collectively "Dominion") brought an action against the Company in Civil District Court for the Parish of Orleans, Louisiana as owners of an offshore production facility known as a SPAR constructed for Dominion.  Dominion seeks damages allegedly sustained by it resulting from delays in delivery of the SPAR caused by the removal and replacement of certain coatings containing lead and/or lead chromate for which the manufacturer of the SPAR alleged the Company was responsible.  Dominion contends that the Company made certain misrepresentations and warranties to Dominion concerning the lead-free nature of those coatings.  Dominion's petition as filed alleged a claim for damages in an unspecified amount; however, Dominion's economic expert has since estimated Dominion's damages at approximately $128,000,000, a figure which the Company contests.  This matter is in discovery, and no trial date has yet been established.  The Company believes that it has meritorious defenses to this action.   Based upon the information available to it at this time, the Company is not in a position to evaluate the ultimate outcome of this matter.

In April 2004, Sable Offshore Energy Inc. ("Sable"), as agent for certain owners of the Sable Offshore Energy Project, brought an action against various coatings suppliers and application contractors, including the Company and two of its subsidiaries, Ameron (UK) Limited and Ameron B.V., (collectively "Ameron Subsidiaries"), in the Supreme Court of Nova Scotia, Canada.  Sable seeks damages allegedly sustained by it resulting from performance problems with several coating systems used on the Sable Offshore Energy Project, including coatings products furnished by the Company and the Ameron Subsidiaries.  Sable's originating notice and statement of claim alleged a claim for damages in an unspecified amount; however, Sable has since alleged that its claim for damages against all defendants is approximately 428,000,000 Canadian dollars, a figure which the Company and the Ameron Subsidiaries contest.  This matter is in discovery, and no trial date has yet been established.  The Company believes that it has meritorious defenses to this action.  Based upon the information available to it at this time, the Company is not in a position to evaluate the ultimate outcome of this matter.

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 are either adequately reserved, covered by insurance, or would not have a material effect on the Company's financial position, cash flows, or its results of operations if disposed of unfavorably.

The Company is 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. 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, cash flows, or its results of operations.
 
13
AMERON INTERNATIONAL CORPORATION AND SUBSIDIARIES
 
NOTE 13 – PRODUCT WARRANTIES AND GUARANTEES

The Company's product warranty accrual reflects management's estimate of probable liability associated with product warranties.  The Company generally provides a standard product warranty covering defects for a period not exceeding one year from date of purchase.  Management establishes product warranty accruals based on historical experience and other currently-available information.  Changes in the product warranty accrual were as follows:

 
 
Nine Months Ended
 
 
 
August 26,
 
 
September 3,
 
(In thousands)
 
2007
 
 
2006
 
Balance, beginning of period
 
$
3,146
 
 
$
4,026
 
Payments
 
 
(775
)
 
 
(599
)
Warranties issued during the period
 
 
876
 
 
 
1,456
 
Warranties extinguished upon sale of discontinued operations
 
 
-
 
 
 
(1,969
) 
Balance, end of period
 
$
3,247
 
 
$
2,914
 


NOTE 14 – GOODWILL AND OTHER INTANGIBLE ASSETS

SFAS No. 142, "Goodwill and Other Intangible Assets," requires that goodwill and intangible assets with indefinite useful lives not be amortized but instead be tested for impairment at least annually.  SFAS No. 142 also requires that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values.
 
Changes in the Company’s carrying amount of goodwill by business segment were as follows:
 
 
 
 
 
 
 
 
Foreign
 
 
 
 
 
 
 
 
 
 
 
 
Currency
 
 
 
 
 
 
November 30,
 
 
Acquisition/
 
 
Translation
 
 
August 26,
 
(In thousands)
 
2006
 
 
(Disposition)
 
 
Adjustments
 
 
2007
 
Fiberglass-Composite Pipe
 
$
1,440
 
 
$
-
 
 
$
-
 
 
$
1,440
 
Water Transmission
 
 
390
 
 
 
-
 
 
 
-
 
 
 
390
 
Infrastructure Products
 
 
201
 
 
 
-
 
 
 
-
 
 
 
201
 
 
 
$
2,031
 
 
$
-
 
 
$
-
 
 
$
2,031
 

The Company's intangible assets, other than goodwill, and related accumulated amortization consisted of the following:
 
 
 
August 26, 2007
 
 
November 30, 2006
 
 
 
Gross Intangible
 
 
Accumulated
 
 
Gross Intangible
 
 
Accumulated
 
(In thousands)
 
Assets
 
 
Amortization
 
 
Assets
 
 
Amortization
 
Trademarks
 
$
100
 
 
$
(100
)
 
$
100
 
 
$
(100
)
Non-compete agreements
 
 
252
 
 
 
(159
)
 
 
252
 
 
 
(140
)
Patents
 
 
212
 
 
 
(212
)
 
 
212
 
 
 
(212
)
Leasehold interests
 
 
-
 
 
 
-
 
 
 
1,930
 
 
 
(1,930
)
 
 
$
564
 
 
$
(471
)
 
$
2,494
 
 
$
(2,382
)

All of the Company's intangible assets, other than goodwill, are subject to amortization.  Amortization expenses for the three and nine months ended August 26, 2007 were $7,000 and $19,000, respectively.  Amortization expenses for the three and nine months ended September 3, 2006 were $35,000 and $134,000, respectively.  At August 26, 2007, estimated future amortization expenses were as follows: $5,000 for the remaining three months of 2007, $23,000 for 2008, $24,000 for 2009, $23,000 for 2010, $16,000 for 2011 and $2,000 for 2012.
 
14
AMERON INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTE 15 – INCENTIVE STOCK COMPENSATION PLANS

As of August 26, 2007, the Company had outstanding grants under the following share-based compensation plans:

 ·     1994 Non-Employee Director Stock Option Plan ("1994 Plan") - The 1994 Plan was terminated in 2001, except as to the outstanding options.  A total of 240,000 new shares of common stock were made available for awards to non-employee directors.  Non-employee directors were granted options to purchase the Company's common stock at prices not less than 100% of market value on the dates of grant.  Such options vested in equal annual installments over four years and terminate ten years from the dates of grant.

·     2001 Stock Incentive Plan ("2001 Plan") - The 2001 Plan was terminated in 2004, except as to the outstanding stock options and restricted stock grants.  A total of 380,000 new shares of common stock were made available for awards to key employees and non-employee directors.  The 2001 Plan served as the successor to the 1994 Plan and superseded that plan.  Non-employee directors were granted options under the 2001 Plan to purchase the Company's common stock at prices not less than 100% of market value on the dates of grant.  Such options vested in equal annual installments over four years.  Such options terminate ten years from the dates of grant.  Key employees were granted restricted stock under the 2001 Plan.  Such restricted stock grants vested in equal annual installments over four years.

·     2004 Stock Incentive Plan ("2004 Plan") - The 2004 Plan serves as the successor to the 2001 Plan and supersedes that plan.  A total of 525,000 new shares of common stock were made available for awards to key employees and non-employee directors and may include, but are not limited to, stock options and restricted stock grants.  Non-employee directors were granted options under the 2004 Plan to purchase the Company's common stock at prices not less than 100% of market value on the dates of grant.  Such options vest in equal annual installments over four years.  Such options terminate ten years from the dates of grant.  Key employees were granted restricted stock under the 2004 Plan.  Such restricted stock grants vest in equal annual installments over three years.  For the nine months ended August 26, 2007, the Company granted 28,550 restricted shares to key employees with fair value on the grant date of $2,305,000 and 6,000 restricted shares to non-employee directors with fair value on the grant date of $417,000.

In addition to the above, on January 24, 2001, non-employee directors were granted options to purchase the Company's common stock at prices not less than 100% of market value on the date of grant.  Such options vested in equal annual installments over four years and terminate ten years from the date of grant.  At August 26, 2007, there were 13,000 shares subject to such stock options.
 
The Company's income before income taxes and equity in earnings of joint venture for the three months ended August 26, 2007 and September 3, 2006 included compensation expense of $529,000 and $446,000, respectively, related to stock-based compensation arrangements.  For the nine months ended August 26, 2007 and September 3, 2006, compensation expenses were $1,793,000 and $2,829,000, respectively, related to stock-based compensation arrangements.  There were no capitalized share-based compensation costs, for the three and nine months ended August 26, 2007 and September 3, 2006.

Tax benefits and excess tax benefits resulting from the exercise of stock options are reflected as financing cash flows in the Company’s statements of cash flows.  For the nine months ended August 26, 2007, excess tax benefits totaled $1,955,000.


15
AMERON INTERNATIONAL CORPORATION AND SUBSIDIARIES

The following table summarizes the stock option activity for the nine months ended August 26, 2007:
 
 
 
 
 
 
 
 
Weighted-
 
 
 
 
 
 
 
 
 
Weighted-
 
 
Average
 
 
 
 
 
 
 
 
 
Average
 
 
Remaining
 
 
Aggregate
 
 
 
Number of
 
 
Exercise Price
 
 
Contractual
 
 
Intrinsic Value
 
Options
 
Options
 
 
per Share
 
 
Term (Years)
 
 
(in thousands)
 
Outstanding at November 30, 2006
 
 
120,500
 
 
$
27.25
 
 
 
 
 
 
 
Exercised
 
 
(22,000
)
 
 
23.97
 
 
 
 
 
 
 
Outstanding at February 25, 2007
 
 
98,500
 
 
 
27.98
 
 
 
5.40
 
 
$
5,037
 
Exercised
 
 
(8,500
)
 
 
23.77
 
 
 
 
 
 
 
 
 
Outstanding at May 27, 2007
 
 
90,000
 
 
 
28.43
 
 
 
5.07
 
 
$
4,416
 
Exercised
 
 
(22,750
)
 
 
27.42
 
 
 
 
 
 
 
 
 
Outstanding at August 26, 2007
 
 
67,250
 
 
 
28.77
 
 
 
4.97
 
 
$
4,222
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Options exercisable at August 26, 2007
 
 
62,750
 
 
 
28.43
 
 
 
4.80
 
 
$
3,961
 

For the three and nine months ended August 26, 2007, no options were granted, forfeited or expired.  The aggregate intrinsic value in the table above represents the total pretax intrinsic value, which is the difference between the closing price of the Company’s stock on the last trading day of the third quarter of 2007 and the exercise price times the number of shares that would have been received by the option holders if the options were exercised on such trading day.  This amount will change based on the fair market value of the Company's stock.  The aggregate intrinsic value of stock options exercised during the three and nine months ended August 26, 2007 was $1,500,000 and $3,050,000, respectively.  As of August 26, 2007, unrecognized compensation cost related to stock-based compensation arrangements totaled $2,880,000 which is expected to be recognized over a weighted-average period of three years.

No shares of restricted stock were granted during the third quarter of 2007.  For the nine months ended August 26, 2007, 34,550 shares of restricted stock were granted.  The weighted-average grant-date, fair value of such restricted stock was $76.47 per share.  The fair value of restricted stock which vested during the nine months ended August 26, 2007 was $3,562,000.  For the nine months ended September 3, 2006, 51,000 shares of restricted stock were granted.  The weighted-average grant-date, fair value of such restricted stock was $55.31 per share.  The fair value of restricted stock which vested during the nine months ended September 3, 2006 was $2,969,000.

Net cash proceeds from the exercise of stock options during the three and nine months ended August 26, 2007 were $625,000 and $1,136,000, respectively.  Net cash proceeds from the exercise of stock options during the three and nine months ended September 3, 2006 were $2,777,000 and $4,186,000, respectively.  The Company's policy is to issue shares from its authorized shares upon the exercise of stock options.

NOTE 16 – EMPLOYEE BENEFIT PLANS

For the three and nine months ended August 26, 2007 and September 3, 2006, net pension and postretirement costs were comprised of the following:

Employee Benefits (Three Months)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Postretirement
 
 
 
Pension Benefits
 
 
Benefits
 
 
 
U.S. Plans
 
 
Non-U.S. Plans
 
 
 
 
 
 
 
 
 
Three Months Ended August 26 and September 3,
 
 
Three Months Ended August 26 and September 3,
 
(In thousands)
 
2007
 
 
2006
 
 
2007
 
 
2006