For the fiscal year ended November 30, 2005

OR

 /  / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

Commission file number 1-9102

AMERON INTERNATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes / /  No /x/

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes / /  No /x/

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /x/  No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /x/

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).  Yes /x/  No / /

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

The aggregate market value of voting and non-voting common equity held by non-affiliates was approximately $275 million on May 29, 2005, based upon the last reported sales price of such stock on the New York Stock Exchange on that date.

On February 1, 2006 there were 8,695,891 shares of Common Stock, $2.50 par value, outstanding. No other class of Common Stock exists.

DOCUMENTS INCORPORATED BY REFERENCE

1. PORTIONS OF AMERON'S PROXY STATEMENT FOR THE 2006 ANNUAL MEETING OF STOCKHOLDERS (PART III).

PART I

AMERON INTERNATIONAL CORPORATION

AMERON INTERNATIONAL CORPORATION, a Delaware corporation, and its consolidated subsidiaries are collectively referred to herein as "Ameron", the "Company", the "Registrant" or the "Corporation" unless the context clearly indicates otherwise. The business of the Company has been divided into business segments in Item 1(c)(1), herein. Substantially all activities relate to the manufacture of highly engineered products for sale to the industrial, chemical, energy and construction markets. All references to "the year" or "the fiscal year" pertain to the 12 months ended November 30, 2005.  All references to the "Proxy Statement" pertain to the Company's Proxy Statement to be filed on or about February 22, 2006 in connection with the 2006 Annual Meeting of Stockholders.

ITEM 1 - BUSINESS

(a) GENERAL DEVELOPMENT OF BUSINESS.

Although the Company's antecedents date back to 1907, it evolved directly from the merger of two separate firms in 1929, resulting in the incorporation of American Concrete Pipe Company on April 22, 1929. Various name changes occurred between that time and 1942, at which time the Company's name became American Pipe and Construction Co. By the late 1960's the Company was almost exclusively engaged in manufacturing and had expanded its product lines to include not only concrete and steel pipe but also high-performance protective coatings, ready-mix concrete, aggregates and fiberglass pipe and fittings.  At the beginning of 1970, the Company's name was changed to Ameron, Inc. In the meantime, other manufactured product lines were added, including concrete and steel poles for street and area lighting and steel poles for traffic signals.  In 1996, the Company's name was changed to Ameron International Corporation.

(b) FINANCIAL INFORMATION AS TO INDUSTRY SEGMENTS.

Financial information on segments and joint ventures may be found in Notes (1), (5) and (17) of the Notes to Consolidated Financial Statements, under Part II, Item 8, herein.

(c) NARRATIVE DESCRIPTION OF BUSINESS.

(1) For geographical and operational convenience, the Company is organized into divisions. These divisions are combined into groups serving various industry segments, as follows:

a) The Performance Coatings & Finishes Group develops, manufactures and markets high-performance coatings and surfacer systems on a worldwide basis. These products are utilized for the preservation of structures, such as metallic and concrete facilities and equipment, to prevent degradation by corrosion, abrasion, marine fouling and other forms of chemical and physical attack. The primary markets served include marine, offshore, petrochemical, power generation, petroleum, chemical, steel, pulp and paper, railroad, bridge, mining, metal processing and original equipment manufacturing. These products are marketed by direct sales, as well as through manufacturers' representatives, distributors and licensees. Competition is based upon quality, price and service. Manufacture of these products is carried out in the Company's plant in Arkansas, by wholly-owned subsidiaries in the Netherlands, the United Kingdom, Australia and New Zealand, by a joint venture in Saudi Arabia and by various third-party licensees.

b) The Fiberglass-Composite Pipe Group develops, manufactures and markets filament-wound and molded fiberglass pipe and fittings. These products are used by a wide range of process industries, including industrial, petroleum, chemical processing and petrochemical industries, for service station piping systems, aboard marine vessels and offshore oil platforms, and are marketed as an alternative to metallic piping systems which ultimately fail under corrosive operating conditions. These products are marketed directly, as well as through manufacturers' representatives, distributors and licensees. Competition is based upon quality, price and service. Manufacture of these products is carried out in the Company's plant in Texas, by its wholly-owned domestic subsidiary, Centron International Inc. ("Centron"), at a plant in Texas, by wholly-owned subsidiaries in the Netherlands, Singapore, and Malaysia, by a joint venture in Saudi Arabia and by a third-party licensee.

c) The Water Transmission Group supplies products and services used in the construction of water pipelines. Five pipe manufacturing plants are located in Arizona and California. Also included within this group is American Pipe & Construction International, a wholly-owned subsidiary, with two plants in Colombia. These plants manufacture concrete cylinder pipe, prestressed concrete cylinder pipe, steel pipe and reinforced concrete pipe for water transmission, storm and industrial waste water and sewage collection. These products are marketed directly using the Company's own personnel and by competitive bidding. Customers include local, state and federal agencies, developers and general contractors. Normally no one customer or group of customers will account for sales equal to or greater than 10 percent of the Company's consolidated revenue. However, occasionally, when more than one unusually large project is in progress, combined sales to U.S., state or local government agencies and/or general contractors for those agencies can reach those proportions. Besides competing with several other welded steel pipe and concrete pipe manufacturers located in the market area, alternative products such as ductile iron, plastic, and clay pipe compete with the Company's concrete and steel pipe products, but ordinarily these other materials do not offer the full diameter range produced by the Company. Principal methods of competition are price, delivery schedule and service. The Company's technology is used in the Middle East through affiliated companies. This segment also includes the manufacturing and marketing, on a worldwide basis directly and through manufacturers' representatives, of polyvinyl chloride and polyethylene sheet lining for the protection of concrete pipe and cast-in-place concrete structures from the corrosive effects of sewer gases, acids and industrial chemicals. Competition is based upon quality, price and service. Manufacture of this product is carried out in the Company's plant in California. This segment also includes engineered design, fabrication and direct sale of specialized proprietary equipment which is outside the regular business of the Company's other business segments. Competition for such work is based upon quality, price and service.

d) The Infrastructure Products Group supplies ready-mix concrete, crushed and sized basaltic aggregates, dune sand, concrete pipe and box culverts, primarily to the construction industry in Hawaii, and manufactures and markets concrete and steel poles for highway, street and outdoor area lighting and for traffic signals nationwide. Ample raw materials are available locally in Hawaii. As to rock products, the Company has exclusive rights to quarries containing many years' reserves. There is only one major source of supply for cement in Hawaii. Within the market area there are competitors for each of the segment's products. No single competitor offers the full range of products sold by the Company in Hawaii. An appreciable portion of the segment's business is obtained through competitive bidding. Sales of poles are nationwide, but with a stronger concentration in the western U.S.  Marketing is handled by the Company's own sales force and by outside sales agents for poles. Competition for such products is mainly based on price and quality, but with some consideration for service and delivery. Poles are manufactured in two plants in California, as well as in plants in Washington, Oklahoma and Alabama.

e) The Company has four partially-owned affiliated companies ("joint ventures"):  Ameron Saudi Arabia, Ltd. ("ASAL"), Bondstrand, Ltd. ("BL"), Oasis-Ameron, Ltd. ("OAL") and TAMCO.  ASAL, owned 30% by the Company, manufactures and sells concrete pressure pipe and provides steel pipe lining and coating services to customers in Saudi Arabia.  BL, owned 40% by Ameron, manufactures and sells glass reinforced epoxy pipe and fittings in Saudi Arabia.  OAL, 40% owned by the Company, sells protective and architectural coatings in Saudi Arabia.  TAMCO, 50% owned by the Company, operates a steel mini-mill in California, used for the production of reinforcing bar sold into construction markets in the western U.S.  ASAL is included under the Water Transmission Group segment.  BL is in the Fiberglass-Composite Pipe Group, and OAL is in the Performance Coatings & Finishes Group.  TAMCO is not included in the four operating groups.

The Company benefits from the payment of dividends and certain license fees from its joint ventures.  Additionally, Ameron's consolidated operations sell product into Middle Eastern markets, primarily fiberglass pipe and coatings.  While the joint ventures in Saudi Arabia and, to a limited extent, the Company's direct sales of products into the Middle East are subject to political and economic conditions throughout the Middle East, the Company's exposure is concentrated primarily in Saudi Arabia.  Significant unrest in the Middle East or Saudi Arabia could have a material impact on the Company.  Ameron's and its joint ventures' products have not been typically sold into Iraq.  Therefore, unrest in Iraq has not had a material impact on the Company.

f) Except as individually shown in the above descriptions of industry segments, the following comments or situations apply to all segments:

(i) Because of the number of manufacturing locations and the variety of raw materials essential to the business, no critical situations exist with respect to supply of materials. The Company has multiple sources for raw materials. The effects of increases in costs of energy are being mitigated to the extent practical through conservation and through addition or substitution of equipment to manage the use and reduce consumption of energy.

(ii) The Company owns certain patents and trademarks, both U.S. and foreign, related to its products. The Company licenses its patents, trademarks, know-how and technical assistance to various of its subsidiary and affiliated companies and to various third-party licensees. It licenses these proprietary items to some extent in the U.S., and to a greater degree abroad. These patents, trademarks, and licenses do not constitute a material portion of the Company's total business. No franchises or concessions exist.

(iii) Many of the Company's products are used in connection with capital goods, water and sewage transmission and construction of capital facilities. Favorable or adverse effects on general sales volume and earnings can result from weather conditions. Normally, sales volume and earnings will be lowest in the first fiscal quarter. Seasonal effects typically accelerate or slow the business volume and normally do not bring about severe changes in full-year activity.

(iv) With respect to working capital items, the Company does not encounter any requirements which are not common to other companies engaged in similar industries. No unusual amounts of inventory are required to meet seasonal delivery requirements. All of the Company's industry segments turn their inventory between four and nine times annually. Average days' sales in accounts receivable range between 43 and 138 for all segments.

(v) The value of backlog orders at November 30, 2005 and 2004 by industry segment is shown below. A substantial portion of the November 30, 2005 backlog is expected to be billed and recorded as sales during 2006. The Fiberglass-Composite Pipe Group experienced a 50% increase in backlog due to the significant surge in oilfield activity. The Water Transmission Group's backlog declined 16% from the end of 2004.  The backlog at the end of 2004 included a series of orders totaling approximately $76,000,000 for a major sewer upgrade program in Sacramento, California and an award for a major water distribution piping project in Southern California totaling $25,000,000.  The decline in backlog at the end of 2005 was the result of partially fulfilling these two large orders during 2005.

(vi) There was no significant change in competitive conditions or the competitive position of the Company in the industries and localities in which it operates. There is no knowledge of any change in the competitive situation which would be material to an understanding of the business.

(vii) Sales contracts in all of the Company's business segments normally consist of purchase orders, which in some cases are issued pursuant to master purchase agreements. Contracts seldom involve commitments of more than one year by the Company.  In those instances when the Company commits to sell products under longer-term contracts, the Company will typically contractually arrange to fix a portion of the associated costs.   Payment is normally due from 30 to 60 days after shipment, with progress payments prior to shipment in some circumstances. It is the Company's practice to require letters of credit prior to shipment of foreign orders, subject to limited exceptions. The Company does not typically extend long-term credit to purchasers of its products.

(viii) A number of the Company's operations operate outside the U.S. and are affected by changes in foreign exchange rates.  Sales, profits, assets and liabilities could be materially impacted by changes in foreign exchange rates.  From time to time, the Company borrows in various currencies to reduce the level of net assets subject to changes in foreign exchange rates or purchases foreign exchange forward and option contracts to hedge firm commitments, such as receivables and payables, denominated in foreign currencies. The Company does not typically hedge anticipated sales or items subject to translation adjustments, such as intercompany transactions of a long-term investment nature.

(2) a) Approximate costs during each of the last three fiscal years for research and development were approximately $6,729,000 in 2005, $5,645,000 in 2004, and $5,653,000 in 2003. These costs, which are included in selling, general and administrative expenses, relate primarily to the development, design and testing of products, and are expensed as incurred.

b) The Company's business is not dependent on any single customer or few customers, the loss of any one or more of whom would have a material adverse effect on its business, except as described above.

c) For many years the Company has been consistently installing or improving devices to control or eliminate the discharge of pollutants into the environment. Accordingly, compliance with federal, state, and locally-enacted provisions relating to protection of the environment is not having, and is not expected to have, a material effect upon the Company's capital expenditures, earnings, or competitive position.

d) At year-end the Company and its consolidated subsidiaries employed approximately 3,000 persons. Of those, approximately 1,000 were covered by labor union contracts.  One separate bargaining agreement remains subject to renegotiation in 2006.

(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES.

Export sales in the aggregate from U.S. operations during the last three fiscal years were:

Financial information about foreign and domestic operations may be found in Notes (1), (5), and (17) of the Notes to Consolidated Financial Statements, under Part II, Item 8.

(e) AVAILABLE INFORMATION

(1) The Company's Internet address is www.ameron.com

(2) The Company makes available free of charge through its Internet website, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the Securities and Exchange Commission (the "Commission").

ITEM 2 - PROPERTIES

(a) The location and general character of principal plants and other materially important physical properties used in the Company's operations are tabulated below. Property is owned in fee simple except where otherwise indicated by footnote. In addition to the property shown, the Company owns vacant land adjacent to or in the proximity of some of its operating locations and holds this property available for use when it may be needed to accommodate expanded or new operations. Properties listed do not include any temporary project sites which are generally leased for the duration of the respective projects or leased or owned warehouses that could be easily replaced. With the exception of the Kailua, Oahu property, shown under the Infrastructure Products Group industry segment, there are no material leases with respect to which expiration or inability to renew would have any material adverse effect on the Company's operations. The lease term on the Kailua property extends to the year 2052. Kailua is the principal source of quarried rock and aggregates for the Company's operations on Oahu, Hawaii; and, in management's opinion, rock reserves are adequate for its requirements during the term of the lease.

(b) The Company believes that its existing facilities are adequate for current and presently foreseeable operations. Because of the cyclical nature of certain of the Company's operations, and the substantial amounts involved in some individual orders, the level of utilization of particular facilities may vary significantly from time to time in the normal course of operations.

INDUSTRY SEGMENT - GROUP

*Leased

ITEM 3 - LEGAL PROCEEDINGS

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 or future similar claims, if any, that may be filed. Hence, no amounts have been accrued for loss contingencies related to these lawsuits in accordance with Statements of Financial Accounting Standards ("SFAS") No. 5, "Accounting for Contingencies." The Company continues to vigorously defend all such lawsuits. As of November 30, 2005, the Company was a defendant in asbestos-related cases involving 8,906 claimants, compared to 18,298 claimants as of November 30, 2004.  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 fiscal year ended November 30, 2005, there were new claims involving 72 claimants, dismissals and/or settlements involving 9,464 claimants and no judgments. No net costs and expenses were incurred by the Company for the fiscal year ended November 30, 2005 in connection with asbestos-related claims.

The Company is one of numerous defendants in various silica-related personal injury lawsuits. These cases generally seek unspecified damages for silica-related diseases based on alleged exposure to products previously manufactured by the Company and others, 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 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 or future similar claims, if any, that may be filed.  Hence, no amounts have been accrued for loss contingencies related to these lawsuits in accordance with SFAS No. 5.  The Company continues to vigorously defend all such lawsuits.  As of November 30, 2005, the Company was a defendant in silica-related cases involving 7,447 claimants, compared to 8,226 claimants as of November 30, 2004.  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 fiscal year ended November 30, 2005, there were new claims involving 1,187 claimants, dismissals and/or settlements involving 1,966 claimants and no judgments.  Net costs and expenses incurred by the Company for the fiscal year ended November 30, 2005 in connection with silica-related claims were approximately $.4 million.

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 by J. Ray McDermott, Inc. and certain of its affiliates (collectively "McDermott").  Dominion seeks damages allegedly sustained by it resulting from delays in McDermott's delivery of the SPAR caused by the removal and replacement of certain coatings containing lead and/or lead chromate for which McDermott 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 million, 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 million 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.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There was no matter submitted to a vote of security holders during the fourth quarter of 2005.

Executive Officers of the Registrant

The following sets forth information with respect to individuals who served as executive officers as of November 30, 2005 and who are not directors of the Company. All executive officers are appointed by the Board of Directors to serve at the discretion of the Board of Directors.

All of the executive officers named above have held high-level managerial or executive positions with the Company for more than the past five years.

PART II

ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Common Stock, $2.50 par value, of the Company, its only outstanding class of common equity, is traded on the New York Stock Exchange, the only exchange on which it is presently listed. On February 1, 2006, there were 1,095 stockholders of record of such stock. Information regarding incentive stock compensation plans may be found in Note (12) of the Notes to Consolidated Financial Statements, under Part II, Item 8.

Dividends have been paid each quarter during the prior two years. Information as to the amount of dividends paid during the reporting period and the high and low prices of the Company's common stock during such period are set out in Supplementary Data - Quarterly Financial Data (Unaudited) following the Notes to Consolidated Financial Statements, under Part II, Item 8.

Terms of lending agreements which place restrictions on cash dividends are discussed in Management's Discussion and Analysis of Financial Condition and Results of Operations under Item 7, herein, and Note (10) of the Notes to Consolidated Financial Statements, under Part II, Item 8.

ISSUER PURCHASES OF EQUITY SECURITIES

**Shares may be repurchased by the Company to pay taxes applicable to the vesting of restricted stock.  The number of shares does not include shares which may be repurchased to pay social security taxes applicable to the vesting of such restricted stock.

ITEM 6 - SELECTED FINANCIAL DATA

SELECTED CONSOLIDATED FINANCIAL INFORMATION

(1) Share and per share data reflect a two-for-one stock split declared in 2003.

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Ameron International Corporation ("Ameron" or the "Company") is a multinational manufacturer of highly-engineered products and materials for the chemical, industrial, energy, transportation and infrastructure markets. Ameron is a leading producer of water transmission lines; high-performance coatings and finishes for the protection of metals and structures; fiberglass-composite pipe for transporting oil, chemicals and corrosive fluids; and specialized materials and products used in infrastructure projects. The Company operates businesses in North America, South America, Europe, Australasia and Asia. The Company has four reportable segments. The Performance Coatings & Finishes Group manufactures and markets high-performance industrial and marine coatings. The Fiberglass-Composite Pipe Group manufactures and markets filament-wound and molded composite fiberglass pipe, tubing, fittings and well screens. The Water Transmission Group manufactures and supplies concrete and steel pressure pipe, concrete non-pressure pipe, protective linings for pipe, and fabricated steel products. The Infrastructure Products Group manufactures and sells ready-mix concrete, sand and aggregates, concrete pipe and culverts, and concrete and steel lighting and traffic poles. The markets served by the Performance Coatings & Finishes Group and the Fiberglass-Composite Pipe Group are worldwide in scope. The Water Transmission Group serves primarily the western U.S. The Infrastructure Products Group's quarry and ready-mix business operates exclusively in Hawaii, and poles are sold throughout the U.S. Ameron also participates in several joint-venture companies, directly in the U.S. and Saudi Arabia, and indirectly in Egypt.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management's Discussion and Analysis of Liquidity and Capital Resources and Results of Operations are based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities during the reporting periods. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates.

A summary of the Company's significant accounting policies is provided in Note (1) of the Notes to Consolidated Financial Statements, under Part II, Item 8.  In addition, Management believes the following accounting policies affect the more significant estimates used in preparing the consolidated financial statements.

The consolidated financial statements include the accounts of Ameron International Corporation and all wholly-owned subsidiaries. All material intercompany accounts and transactions have been eliminated. The functional currencies for the Company's foreign operations are the applicable local currencies. The translation from the applicable foreign currencies to U.S. dollars is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted-average exchange rate during the period. The resulting translation adjustments are recorded in accumulated other comprehensive income/(loss). The Company advances funds to certain foreign subsidiaries that are not expected to be repaid in the foreseeable future. Translation adjustments arising from these advances are also included in accumulated other comprehensive income/(loss). The timing of repayments of intercompany advances could materially impact the Company's consolidated financial statements. Additionally, earnings of foreign subsidiaries are often reinvested outside the U.S. Unforeseen repatriation of such earnings could result in significant unrecognized U.S. tax liability. Gains or losses resulting from foreign currency transactions are included in other income, net.

Revenue for the Performance Coatings & Finishes, Fiberglass-Composite Pipe and Infrastructure Products segments is recognized when risk of ownership and title pass, primarily at the time goods are shipped, provided that an agreement exists between the customer and the Company, the price is fixed or determinable and collection is reasonably assured. In limited circumstances within the Performance Coatings & Finishes Group, revenue recognition associated with shipment of coatings for marine dry dockings is delayed until product returns are processed. Revenue is recognized for the Water Transmission Group primarily under the percentage-of-completion method, typically based on completed units of production, since products are manufactured under enforceable and binding construction contracts, are typically designed for specific applications, are not interchangeable between projects, and are not manufactured for stock. In some cases, if products are manufactured for stock or are not related to specific construction contracts, revenue is recognized under the same criteria used by the other three segments. Revenue under the percentage-of-completion method is subject to a greater level of estimation, which affects the timing of revenue recognition, costs and profits. Estimates are reviewed on a consistent basis and are adjusted periodically to reflect current expectations.

The Company expenses environmental clean-up costs related to existing conditions resulting from past or current operations on a site-by-site basis. Liabilities and costs associated with these matters, as well as other pending litigation and asserted claims arising in the ordinary course of business, require estimates of future costs and judgments based on the knowledge and experience of management and its legal counsel. When the Company's exposures can be reasonably estimated and are probable, liabilities and expenses are recorded. The ultimate resolution of any such exposure to the Company may differ due to subsequent developments.

Inventories are stated at the lower of cost or market with cost determined principally on the first-in, first-out ("FIFO") method. Certain steel inventories used by the Water Transmission Group are valued using the last-in, first-out ("LIFO") method. Significant changes in steel inventory levels or costs could materially impact the Company's financial statements. Reserves are established for excess, obsolete and rework inventories based on age, estimates of salability and forecasted future demand. Management records an allowance for doubtful accounts receivable based on historical experience and expected trends. A significant reduction in demand or a significant worsening of customer credit quality could materially impact the Company's consolidated financial statements.

Investments in unconsolidated joint ventures or affiliates ("joint ventures") over which the Company has significant influence are accounted for under the equity method of accounting, whereby the investment is carried at the cost of acquisition, plus the Company's equity in undistributed earnings or losses since acquisition. Investments in joint ventures over which the Company does not have the ability to exert significant influence over the investees' operating and financing activities are accounted for under the cost method of accounting. The Company's investment in TAMCO, a steel mini-mill in California, is accounted for under the equity method. Investments in Ameron Saudi Arabia, Ltd., Bondstrand, Ltd. and Oasis-Ameron, Ltd. are accounted for under the cost method due to management's current assessment of the Company's influence over these joint ventures.

Property, plant and equipment is stated on the basis of cost and is depreciated principally using a straight-line method based on the estimated useful lives of the related assets, generally three to 40 years.

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. If the estimated future, undiscounted cash flows from the use of an asset are less than its carrying value, a write-down is recorded to reduce the related assets to estimated fair value. The Company also reviews intangible assets for impairment at least annually, based on the estimated future, discounted cash flows associated with such assets. Actual cash flows may differ significantly from estimated cash flows. Additionally, current estimates of future cash flows may differ from subsequent estimates of future cash flows. Changes in estimated or actual cash flows could materially impact the Company's consolidated financial statements.

The Company is self insured for a portion of the losses and liabilities primarily associated with workers' compensation claims and general, product and vehicle liability. Losses are accrued based upon the Company's estimates of the aggregate liability for claims incurred using historical experience and certain actuarial assumptions followed in the insurance industry. The estimate of self insurance liability includes an estimate of incurred but not reported claims, based on data compiled from historical experience. Actual experience could differ significantly from these estimates and could materially impact the Company's consolidated financial statements.

The Company follows the guidance of Statements of Financial Accounting Standards ("SFAS") No. 87, "Employers' Accounting for Pensions," and SFAS No. 106, "Employers Accounting for Postretirement Benefits Other Than Pensions," when accounting for pension and other postretirement benefits. Under these accounting standards, assumptions are made regarding the valuation of benefit obligations and, in certain cases, the performance of plan assets that are controlled and invested by third-party fiduciaries. Delayed recognition of differences between actual results and expected or estimated results is a guiding principle of these standards. Such delayed recognition provides a gradual recognition of benefit obligations and investment performance over the working lives of the employees who benefit under the plans, based on various assumptions. Assumed discount rates are used to calculate the present value of benefit payments which are projected to be made in the future, including projections of increases in employees annual compensation and health care costs. Management also projects the future return on invested assets based principally on prior performance and future expectations. These projected returns reduce the net benefit costs the Company records in the current period. Management consults with actuaries when determining these assumptions. Actual results could vary significantly from projected results, and such deviation could materially impact the Company's consolidated financial statements. Unforecasted program changes, including termination, freezing of benefits or acceleration of benefits, could result in an immediate recognition of unrecognized benefit obligations; and such recognition could materially impact the Company's consolidated financial statements.

During 2005, the Company changed the assumed discount rate and projected rates of increase in compensation levels and health care costs. The discount rate is based on market interest rates. At November 30, 2005, the Company decreased the discount rate from 5.85% to 5.60% as a result of the market interest rates on long-term, fixed-rate debt securities of highly-rated corporations. In estimating the expected return on assets, the Company considers past performance and future expectations for various types of investments as well as the expected long-term allocation of assets. At November 30, 2005, the Company maintained the expected long-term rate of return on assets assumption at 8.75% to reflect expectations for future returns from investments in the equity markets. In projecting the rate of increase in compensation levels, the Company considers movements in inflation rates as reflected by market interest rates. At November 30, 2005, the Company decreased the assumed annual rate of compensation increase from 3.35% to 3.10%. In selecting the rate of increase in health care costs, the Company considers past performance and forecasts of future health care cost trends. At November 30, 2005, the Company increased the rate of increase in health care costs from 9.00% to 10.00%, decreasing ratably until reaching 5.00% in 2010 and beyond.

Different assumptions would impact the Company's projected benefit obligations and annual net periodic benefit costs related to pensions, and the accrued other benefit obligations and benefit costs related to postretirement benefits. The following reflects the impact associated with a change in certain assumptions (in thousands):

Additional information regarding pensions and other postretirement benefits may be found in Note (15) of the Notes to Consolidated Financial Statements, under Part II, Item 8.

Management incentive compensation is accrued based on current estimates of the Company's ability to achieve short-term and long-term performance targets.

Deferred income tax assets and liabilities are computed for differences between the financial statement and income tax bases of assets and liabilities. Such deferred income tax asset and liability computations are based on enacted tax laws and rates applicable to periods in which the differences are expected to reverse. Valuation allowances are established, when necessary, to reduce deferred income tax assets to the amounts expected to be realized. Quarterly income taxes are estimated based on the mix of income by jurisdiction forecasted for the full fiscal year. The Company believes that it has adequately provided for tax-related matters. The Company is subject to examination by taxing authorities in various jurisdictions. Matters raised upon audit may involve substantial amounts, and an adverse finding could have a material impact on the Company's consolidated financial statements.

LIQUIDITY AND CAPITAL RESOURCES

During 2005, the Company generated $37.2 million of cash from operating activities compared to $10.1 million in the same period in 2004. The higher operating cash flow in 2005 was primarily due to higher earnings, excluding the gains on property sales in 2004 and 2005, partially offset by an increase in net operating capital.  The increase in operating assets was the result of higher receivables and inventories due to higher sales.  Operating liabilities increased due to higher trade payables and pension liabilities.

Net cash used in investing activities totaled $21.5 million in 2005, compared to $4.2 million provided by in 2004.  Net cash used in 2005 for investing activities consisted of proceeds from the sale of assets, including $1.8 million from the sale of excess property held by the Company's European coatings business, offset by capital expenditures which were primarily for normal replacement and upgrades of machinery and equipment and for a new fiberglass pipe plant in Malaysia.  In 2004, the Company generated $15.3 million from the sale of property vacated as part of a plant consolidation within the Water Transmission Group, and $7.2 million from the liquidation of life insurance policies.  During the fiscal year ending November 30, 2006, the Company anticipates spending between approximately $25 and $35 million on capital expenditures. Capital expenditures are expected to be funded by existing cash balances, cash generated from operations or additional borrowings.

No net cash was provided by financing activities in 2005, compared to $5.0 million used in 2004.  Cash used in 2005 consisted of payment of common stock dividends of $6.8 million, debt issuance costs of $.3 million, offset by issuance of debt of $2.4 million, and a net $4.8 million from the issuance of common stock related to the exercise of stock options and treasury shares used to pay withholding taxes on vested restricted shares.

In November 2005, the Company amended and extended a $100.0 million revolving credit facility with six banks (the "Revolver"). Under the amendment, the maturity date of the Revolver was extended to September 2010. Under the Revolver, the Company may, at its option, borrow at floating interest rates based on specified margins over money market rates, at any time until September 2010, when all borrowings under the Revolver must be repaid. Also in November 2005, the Company issued SGD51.0 million, equivalent to approximately US$30.0 million, of senior secured notes payable to an insurance company at a fixed rate of 4.25% per annum. Proceeds from the notes payable were used to repatriate earnings from a foreign subsidiary in connection with The American Jobs Creation Act of 2004. These fixed-rate notes are payable in Singapore dollars equivalent to approximately US$6.0 million per year, beginning in November 2008, with a final maturity in November 2012.

The Company's lending agreements contain various restrictive covenants, including the requirement to maintain specified amounts of net worth and restrictions on cash dividends, borrowings, liens, investments and guarantees. The Company is required to maintain consolidated net worth of $181.4 million plus 50% of net income and 75% of proceeds from any equity issued after January 24, 2003. The Company's consolidated net worth exceeded the covenant amount by $79.2 million as of November 30, 2005. The Company is required to maintain a consolidated leverage ratio of consolidated funded indebtedness to earnings before interest, taxes, depreciation and amortization ("EBITDA") of no more than 2.5 times. As of November 30, 2005, the Company maintained a consolidated leverage ratio of 1.32 times EBITDA. Lending agreements require that the Company maintain qualified consolidated tangible assets at least equal to the outstanding secured funded indebtedness. As of November 30, 2005, qualifying tangible assets equaled 2.05 times funded indebtedness. Under the most restrictive fixed charge coverage ratio, the sum of EBITDA and rental expense less cash taxes must be at least 1.25 times the sum of interest expense, rental expense, dividends and scheduled funded debt payments. As of November 30, 2005, the Company maintained such a fixed charge coverage ratio of 1.72 times.

Cash and cash equivalents at November 30, 2005 totaled $44.7 million, an increase of $14.5 million from November 30, 2004. At November 30, 2005, the Company had total debt outstanding of $95.4 million and approximately $118.0 million in unused committed and uncommitted credit lines available from foreign and domestic banks. The Company's highest borrowing and the average borrowing levels during 2005 were $128.1 million and $107.0 million, respectively.  Debt and cash increased at November 30, 2005 partly due to the timing of the issuance of the fixed-rate notes outlined above.

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 2006. The Company expects to contribute $16.6 million to the U.S. pension plan and $1.3 million for the non-U.S. pension plan in 2006.  Cash available from operations could be affected by any general economic downturn or any downturn or any decline or adverse changes in the Company's business, such as loss of customers or significant raw material price increases. Management believes it is unlikely that business or economic conditions will worsen or that operating costs will increase sufficiently to impact short-term liquidity.

The Company's contractual obligations and commercial commitments at November 30, 2005 are summarized as follows (in thousands):

(a) Included in long-term debt is $1,251 outstanding under a revolving credit facility which is supported by the Revolver.

(b) Obligation to purchase sand used in the Company's ready-mix operations in Hawaii.

(c) The Company has no capitalized lease obligations, guarantees or standby repurchase obligations.

(d) Not included are standby letters of credit totaling $16,065 supporting industrial development bonds with principal of $15,700. The principal amount of the industrial development bonds is included in long-term debt. The standby letters of credit are issued under the Revolver.

RESULTS OF OPERATIONS: 2005 COMPARED WITH 2004

General

Net income totaled $32.6 million, or $3.80 per diluted share, on sales of $704.6 million for the year ended November 30, 2005, compared to net income of $13.5 million, or $1.59 per diluted share, on sales of $605.9 million for the same period in 2004.  Net income rose in 2005 primarily due to improved operations.  Additionally, net income in 2004 was adversely impacted by labor strikes, the costs associated with the termination of two executive benefit plans and increased reserves associated with LIFO accounting of certain steel inventories, partially offset by the gain on the sale of property.

All operating segments had higher sales and segment income in 2005 compared to 2004.  The Water Transmission Group had record sales in 2005 due principally to a major sewer upgrade project in Northern California.  The Infrastructure Products Group had significantly higher sales and profits due to the strong construction sector in Hawaii and throughout the U.S.  In 2004, the Water Transmission and Infrastructure Products Groups were disrupted by labor strikes.  The Fiberglass-Composite Pipe Group achieved record sales and profits in 2005 as a result of the increased demand for oilfield piping in North America, continued strong demand in the marine market worldwide and increased shipments to the Middle East from Ameron's Asian operations.  The Performance Coatings & Finishes Group had higher sales, primarily from U.S. operations, due to improved market conditions, and from operations in Australia and New Zealand, due to volume gains and favorable currency translation.  Equity income from TAMCO, Ameron's 50%-owned steel mini-mill in Southern California, declined $1.8 million from 2004's record level.  The decline was attributable to higher conversion costs, primarily energy costs.

Sales

Sales increased $98.7 million in 2005, compared to 2004.  Sales increased due to a large sewer pipe project, increased demand for protective lining products, higher demand for onshore oilfield piping, the impact of foreign exchange rates on the Company's foreign coatings and fiberglass pipe operations and higher demand for concrete and steel poles due to the continued strength of housing construction throughout the U.S.   Prior-year sales were adversely impacted by the labor strikes within the Water Transmission and Infrastructure Products Groups.

Performance Coatings & Finishes' sales increased $10.2 million in 2005.  The sales increase resulted from improved market conditions in the U.S., higher selling prices, higher shipments of lighter-duty product finishes by Ameron's Australian and New Zealand operations, and favorable foreign currency exchange rates.   Ameron's European coatings operations had essentially flat sales as lower shipments to the Middle East and lower intumescent sales due to timing of product introductions offset selling price gains in Europe.  The relative strength of the euro and the British pound constrained exports of Ameron's  European operations, and sales of marine coatings declined primarily due to the loss in the middle of 2004 of a contract to supply coatings to the U.S. Navy.  The U.S. coatings market has strengthened, and orders are increasing.  The Performance Coatings & Finishes Group should benefit as the U.S. market improves.  In addition, the business is expected to participate in the rebuilding of the chemical, oil and industrial infrastructure along the U.S. Gulf Coast.

The Fiberglass-Composite Pipe Group's sales increased $17.8 million in 2005 due primarily to demand for onshore oilfield piping in the U.S. and Canada, higher fiberglass pipe demand for marine applications and increased shipments from Ameron's Asian operations of fiberglass pipe to the Middle East for industrial projects.  Sales of piping supplied by Ameron's operations in Europe declined due to market conditions and the impact of the appreciated euro on exports into the Middle East and the former Soviet Union.  The strength of demand for oilfield and marine piping continues to be driven by high oil prices and the high cost of steel piping, the principal substitute for fiberglass pipe.  Ameron's new state-of-the-art fiberglass pipe plant in Malaysia is scheduled to begin production during the second quarter of 2006.  The backlog for the Fiberglass-Composite Pipe Group increased compared to the level at year-end 2004, and the key market segments such as oilfield and marine remain strong.  The outlook for the Fiberglass-Composite Pipe Group is favorable.

The Water Transmission Group's sales increased $38.5 million in 2005 compared to the same period in 2004.  The sales improvement was primarily due to pipe sales for a major sewer upgrade project in Northern California, higher demand for protective lining products that are used to provide corrosion protection of concrete sewer pipe, and sales of towers used for wind-powered electrical generation.  Also, the Group's operations and sales were adversely affected by labor disputes at two plants in 2004.  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 recognition, costs and profits.  Estimates are reviewed on a consistent basis and are adjusted when actual results are expected to significantly differ from those estimates.  The Water Transmission Group entered 2006 with a lower backlog due to completion of most of the major sewer project.  Market conditions remain soft due to fiscal constraints and continuation of a cyclical slowdown in water infrastructure spending in the Company's markets.

Infrastructure Products' sales increased $32.7 million in 2005 compared to 2004 due to higher housing and commercial construction spending in Hawaii and throughout the U.S.   In addition, Ameron's Hawaiian operations recovered from a labor dispute in 2004 at the Company's principal aggregates and ready-mix concrete operations on Oahu in Hawaii.  Construction spending in Hawaii and demand for aggregates and ready-mix concrete used for public infrastructure, housing and military construction, remain strong.  Sales of steel and concrete poles increased due to the continued strength of housing construction throughout the U.S.   Additionally, Ameron benefited from a major pole-replacement program sponsored by a utility in Southern California.  The forecast for the Infrastructure Products Group remains positive due to expectations of continued high level of spending on residential, commercial, and military construction spurred partly by low interest rates.

Gross Profit

Gross profit in 2005 was $182.1 million, or 25.8% of sales, compared to gross profit of $148.4 million, or 24.5% of sales, in 2004.  Gross profit increased $33.7 million due to higher sales and improved margins due to a favorable mix of projects.

In 2005, gross profit of the Performance Coatings & Finishes Group was essentially equal to gross profit in 2004.  Higher profit of $2.9 million from increased sales was offset by lower margins.  Profit margins were adversely impacted by higher raw material costs and underutilization of plant capacity.

The Fiberglass-Composite Pipe Group's gross profit increased $.8 million in 2005 compared to gross profit in 2004 due to higher sales.  Higher sales generated $6.2 million higher gross profit, offset by lower margins of $5.4 million due to an unfavorable shift in product mix to industrial and onshore oilfield from higher margin offshore applications, higher raw material costs and lower plant utilization in Europe.

Gross profit of the Water Transmission Group increased $16.0 million in 2005 compared to gross profit in 2004.  Gross profit increased $7.6 million because of higher sales and $8.4 million due to higher margins.  Profit margins were higher largely due to a favorable change in product and project mix due primarily to the large sewer project.  Profits were impacted in 2004 by inefficient plant utilization caused by two labor strikes, higher workers' compensation costs and weak market conditions.  The margins on projects in backlog at the beginning of 2006 are lower than achieved in 2005 due to the soft market in the Western U.S. and competitive pressures.

The Infrastructure Products Group's gross profit increased $8.4 million compared to gross profit in 2004.  Gross profit increased $6.7 million from higher sales and $1.7 million due to higher margins.  Profit margins were higher due to improved plant utilization, improved pricing, and a favorable change in product mix.  Plant operating efficiency had been adversely affected by a labor strike in Hawaii in 2004.

Additionally, consolidated gross profit was $8.4 million lower in 2004 compared to the same period in 2005 due primarily to increased reserves in 2004 associated with LIFO accounting of certain steel inventories used by the Water Transmission Group.  The LIFO method is used to defer income taxes on operating profit of the Water Transmission Group.  Income taxes and the LIFO reserves are not allocated to the operating segments.

Selling, General and Administrative Expenses ("SG&A")

SG&A totaled $146.0 million, or 20.7% of sales, in 2005, compared to $137.5 million, or 22.7% in 2004.  SG&A increased $8.5 million due to higher legal expenses of $5.1 million, higher severance costs of $1.2 million, higher stock and incentive compensation expense of $3.4 million, offset by insurance recoveries of $1.5 million.

Pension Plan Curtailment/Settlement

In June 2004, the Company terminated two executive benefit plans and incurred a pretax expense of $12.8 million due to the termination of the plans and distribution to plan participants.

Other Income, Net

Other income decreased to $7.1 million in 2005 from $17.9 million in 2004.  Other income included royalties and fees from licensees, foreign currency transaction gains and losses, and other miscellaneous income.  Included in 2004 was a gain of $13.1 million on the sale of excess property vacated as part of a program to streamline pipe manufacturing operations within the Water Transmission Group.  Included in 2005 was a gain of $1.8 million on the sale of excess properties held by the Performance Coatings & Finishes Group.  Income from investments accounted for under the cost method increased from $.4 million in 2004 to $1.8 million in 2005 due to the timing of dividend payments.  The fiberglass pipe and coatings ventures continued to perform well due to the strength of oilfield and infrastructure markets in Saudi Arabia.  The concrete pipe venture experienced a cyclical lull and increased competition from alternative products.

Interest

Net interest expense totaled $5.2 million in 2005, compared to $5.3 million in 2004.  The decrease reflected higher interest income from short-term investments offset partially by higher average borrowing levels and slightly higher interest rates.

Provision for Income Taxes

Income taxes increased to $14.5 million compared to $8.0 million in 2004.  The effective tax rate decreased from 75% in 2004 to 38% in 2005.  The effective tax rate was significantly higher in 2004 due to IRS limitations on the deductibility of a portion of the settlements associated with the executive benefit plan termination.  Approximately $18.5 million of the $24.7 million paid to participants of the terminated plans did not receive an associated tax benefit.  Excluding the impact of the termination of the benefit plans, the effective rate in 2005 would have been higher than in 2004 due to higher levels of earnings from domestic operations.  Income from certain foreign operations is taxed at rates that are lower than the U.S. statutory tax rates.  Also, the rate in 2005 was higher as a result of the one-time repatriation of foreign earnings under the American Jobs Creation Act of 2004.

Equity in Earnings of Joint Venture, Net of Taxes

RESULTS OF OPERATIONS: 2004 COMPARED WITH 2003

General

Net income totaled $13.5 million, or $1.59 per diluted share, on sales of $605.9 million for the year ended November 30, 2004, compared to net income of $29.9 million, or $3.67 per diluted share, on sales of $600.5 million for the same period in 2003. All operating segments had higher sales except the Water Transmission Group. Sales of the Water Transmission Group declined in 2004 because of labor disputes that resulted in strikes at two of its plants and weak demand in its primary market, the western U.S. Net income was lower in 2004 as lower gross profits, higher SG&A and the curtailment and settlement costs associated with the termination of the benefit plans were partially offset by higher other income, lower taxes and higher equity in the earnings of TAMCO. Excluding income from joint ventures, the Fiberglass-Composite Pipe Group had higher segment income, while the Performance Coatings & Finishes, Water Transmission and Infrastructure Products Groups had lower segment income.

Sales

Sales increased $5.4 million in 2004, compared to 2003. Sales increased due to the impact of changing foreign exchange rates on the Company's foreign coatings and fiberglass pipe operations and higher demand for poles, partially offset by reduced demand in markets served by the Water Transmission Group.

Performance Coatings & Finishes' sales increased $9.3 million in 2004 due to the appreciation of foreign currencies relative to the U.S. dollar. Sales in local currencies by operations outside the U.S. increased, while sales in the U.S. were lower. Improvements came from sales of fire protection coatings in Europe and coil coatings in New Zealand. Sales of protective coatings in the U.S. and Europe declined as a result of continued weakness in spending in the heavy-industrial and chemical markets.  Additionally, sales of coatings for use in offshore oil and gas exploration and production weakened in 2004 as offshore construction slowed in the U.S. The anticipated upturn in spending by industrial customers in the U.S. and Europe remained slower than expected in 2004.

Fiberglass-Composite Pipe's sales increased $1.7 million in 2004 due primarily to the impact of favorable foreign exchange rates and partly to the strength of Asian operations. Asian operations, which serve the marine construction markets located in Korea, China and Japan, benefited from the strong worldwide demand for oil tankers and offshore production vessels. New marine construction in Asia increased due to high oil prices and regulations requiring double-hull tankers. The industrial markets in the U.S. and Europe remained slow due to general economic conditions and a shift of new facilities to Asia and other developing markets. Sales in the U.S. were down due to the weak industrial market and lower activity in the U.S. offshore construction market. Sales of oilfield tubing for onshore applications were flat as spending was concentrated on larger offshore projects constructed in Asia. 

The Water Transmission Group's sales decreased $11.3 million in 2004 due to weak market conditions and labor disputes at two of the Groups principal plants in Southern California in the first half of 2004.  Workers at the two plants struck in early February. Agreement was reached at one of the plants in the first quarter, at the end of February, and the second plant in the second quarter, at the end of March. Sales of protective-lining products for sewer pipe also declined due to a cyclical slowdown in the waste water market and increased competition from alternative products and suppliers. Water Transmission's year-end backlog was significantly higher than at the end of 2003 as a series of large projects were successfully bid. 

Infrastructure Products' sales increased $5.8 million in 2004 due to strong housing and commercial construction spending, which was spurred by low interest rates. Ameron's Hawaiian operations recovered from a labor dispute at the Company's principal aggregates and ready-mix concrete operations on Oahu in Hawaii which began in February and ended in early April. Construction spending in Hawaii was deferred during the strikes. Ameron's pole business had higher sales of concrete poles used in street lighting, primarily associated with housing starts. Sales of steel traffic poles also increased.

Gross Profit

Gross profit in 2004 was $148.4 million, or 24.5% of sales, compared to gross profit of $166.5 million, or 27.7% of sales, in 2003. Gross profit decreased $18.1 million due to lower margins, the impact in the first half of the strikes on plant utilization and a net $7.3 million expense related to an increase in LIFO reserves caused by higher steel prices.

In 2004, gross profit of the Performance Coatings & Finishes Group was flat compared to gross profit in 2003. Higher profit of $2.8 million from increased sales was offset by a similar reduction in gross profit due to lower margins. Profit margins were adversely impacted by higher manufacturing costs of $1.8 million in the U.S. and Europe, due to inefficient plant utilization, and higher raw material costs of $.7 million. The Group was unable to increase prices sufficiently to cover additional costs due to competitive pressures, especially in dollar-based markets in the Middle East and the former Soviet Union served by the Company's European operations.

The Fiberglass-Composite Pipe Group's gross profit increased $2.4 million in 2004 due to higher sales and improved margins. Higher sales generated $.6 million higher gross profit, while improved margins contributed $1.8 million. The margin increase resulted from the mix of products sold in 2004, especially from Asian operations which benefited from the strength of local markets, and improved conditions in worldwide oilfield markets.

Gross profit of the Water Transmission Group decreased $11.1 million in 2004. Gross profit decreased $2.7 million because of lower sales and $8.4 million due to lower margins. Profit margins were lower due to competitive pressures brought on by slow market conditions and increased workers' compensation costs of $1.2 million. Margins in 2004 and 2003 were adversely affected by the San Francisco/Oakland Bay Bridge project, for which the Water Transmission Group provided lower-margin steel pilings. Deliveries to the San Francisco/Oakland Bay Bridge project were completed in 2004.

The Infrastructure Products Group's gross profit declined slightly as profit on higher sales was offset by slightly lower margins. Margins declined due to wet weather and the labor dispute in Hawaii in the first half of 2004, reducing profits $1.6 million. Higher concrete poles sales generated increased gross profit of approximately $1.3 million.

Additionally, consolidated gross profit was $7.8 million lower in 2004 compared to the same period in 2003 due primarily to increased reserves associated with LIFO accounting of certain steel inventories used by the Water Transmission Group. The LIFO method is used to defer income taxes on operating profit of the Water Transmission Group. Income taxes and the LIFO reserves are not allocated to the operating segments. Gross profit was also $1.3 million lower as a result of other inventory adjustments.

Selling, General and Administrative Expenses ("SG&A")

SG&A totaled $137.5 million, or 22.7% of sales, in 2004, compared to $127.4 million, or 21.2%, in 2003. SG&A increased $10.1 million due to higher costs of third-party insurance coverage of $2.2 million, higher legal and consulting expenses of $3.4 million and Sarbanes-Oxley 404 auditing and implementation costs of $3.5 million, offset by lower compensation expenses of $1.9 million. The appreciation of foreign currencies increased SG&A of foreign operations by approximately $3.9 million. Additionally in 2003, SG&A included a legal expense recovery of $1.0 million, representing amounts agreed to be reimbursed to the Company by its own and a supplier's insurance companies for past legal fees and costs in excess of the negotiated settlement of the Central Arizona Project lawsuit.

Pension Plan Curtailment/Settlement

In June 2004, the Company terminated two executive benefit plans in consideration of ongoing costs, anticipated legislative restrictions on such programs, and a preference for executive benefit plans having more predictable costs.  The Company incurred a pretax expense of $12.8 million due to the termination of the plans and distributions to plan participants.  The Company recorded this expense in accordance with SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits." SFAS No. 88 requires settlement accounting if the cost of all settlements, including lump-sum retirement benefits paid, in a year exceeds, or is expected to exceed, the total of the service and interest cost components of pension expense for the same period. In addition to the termination and settlement costs, Ameron expensed $1.8 million under the plans in 2004 and $2.1 million in 2003.

Other Income, Net

Other income increased to $17.9 million in 2004 from $10.9 million in 2003. Other income included royalties and fees from licensees, foreign currency transaction gains and losses, and other miscellaneous income. Included in 2004 was a gain of $13.1 million on the sale of excess property vacated as part of a program to streamline pipe manufacturing operations within the Water Transmission Group. Included in 2003 was a gain of $2.5 million on the sale of Ameron's minority interest in a Mexican coatings venture. Income from investments accounted for under the cost method decreased from $6.3 million in 2003 to $.5 million in 2004 due to the timing of dividend payments. The fiberglass pipe and coatings ventures continued to perform well due to the strength of oilfield and infrastructure markets in Saudi Arabia. The concrete pipe venture experienced a cyclical lull and increased competition from alternative products. 

Interest

Interest expense totaled $5.3 million in 2004, compared to $6.6 million in 2003. The decrease reflected lower average borrowing levels in combination with lower average effective interest rates related to the repayment of fixed-rate debt with a higher interest rate and increased utilization of floating-rate debt.

Provision for Income Taxes

Income taxes declined to $8.0 million compared to $14.0 million in 2003. The effective tax rate increased from 32% in 2003 to 75% in 2004. The effective tax rate was significantly higher in 2004 due to IRS limitations on the deductibility of a portion of the settlements associated with the executive benefit plan terminations. Approximately $18.5 million of the $24.7 million paid to participants of the terminated plans did not receive an associated tax benefit. Excluding the impact of the termination of the benefit plans, the effective rate in 2004 would have been less than in 2003 due to lower level of earnings from domestic operations. Income from certain foreign operations is taxed at rates that are lower than the U.S. statutory tax rates.

Equity in Earnings of Joint Venture, Net of Taxes

Equity income, which consists of Ameron's share of the results of TAMCO, increased from $.6 million in 2003 to $10.8 million in 2004. TAMCO performed well throughout 2004 due to increased demand for steel rebar and higher selling prices. The worldwide market for steel products increased dramatically in 2004 because of demand for steel in China.

OFF-BALANCE SHEET FINANCING

The Company does not have any off-balance sheet financing, other than listed in the Liquidity and Capital Resources section herein. All of the Company's subsidiaries are included in the financial statements, and the Company does not have relationships with any special purpose entities.

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 or future similar claims, if any, that may be filed. 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 November 30, 2005, the Company was a defendant in asbestos-related cases involving 8,906 claimants, compared to 18,298 claimants as of November 30, 2004.  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 fiscal year ended November 30, 2005, there were new claims involving 72 claimants, dismissals and/or settlements involving 9,464 claimants and no judgments.  No net costs and expenses were incurred by the Company for the fiscal year ended November 30, 2005 in connection with asbestos-related claims.

The Company is one of numerous defendants in various silica-related personal injury lawsuits. These cases generally seek unspecified damages for silica-related diseases based on alleged exposure to products previously manufactured by the Company and others, 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 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 or future similar claims, if any, that may be filed.  Hence, no amounts have been accrued for loss contingencies related to these lawsuits in accordance with SFAS No. 5.  The Company continues to vigorously defend all such lawsuits.  As of November 30, 2005, the Company was a defendant in silica-related cases involving 7,447 claimants, compared to 8,226 claimants as of November 30, 2004.  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 fiscal year ended November 30, 2005, there were new claims involving 1,187 claimants, dismissals and/or settlements involving 1,966 claimants and no judgments.  Net costs and expenses incurred by the Company for the fiscal year ended November 30, 2005 in connection with silica-related claims were approximately $.4 million.

In April 2003, the Company was served with a complaint in an action brought by J. Ray McDermott, Inc., J. Ray McDermott, S.A. and SparTEC, Inc. (collectively "McDermott") in the District Court of Harris County, Texas against the Company and two co-defendants, in connection with certain coatings supplied by the defendants in 2002 for an offshore production facility known as a SPAR being constructed by McDermott for Dominion Exploration and Production, Inc. and Pioneer Natural Resources USA, Inc. (collectively "Dominion"). The Company reached a settlement with McDermott in May 2005. In May 2003, Dominion brought an action against the Company in Civil District Court for the Parish of Orleans, Louisiana.  Dominion seeks damages allegedly sustained by it resulting from delays in McDermott's delivery of the SPAR caused by the removal and replacement of certain coatings containing lead and/or lead chromate for which McDermott 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 million, 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. Legal costs and expenses related to these lawsuits totaled $5.0 million in 2005.

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 million 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.

NEW ACCOUNTING PRONOUNCEMENTS

In November 2004, the Financial Accounting Standards Board ("FASB") issued SFAS No. 151, "Inventory Costs," which clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material. SFAS No. 151 will be effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The adoption of SFAS No. 151 is not expected to have a material impact on the Company's consolidated financial statements.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based Payments." SFAS No. 123 (R) requires companies to measure all employee stock-based compensation awards using a fair-value method and record such expense in their consolidated financial statements.  The adoption of SFAS No. 123 (R) will require additional accounting related to the income tax effects and additional disclosure regarding the cash flow effects resulting from share-based payment arrangements. The Company is allowed to select either of two alternative transition methods. Under the first method, the Modified Prospective Application method, SFAS 123 (R) applies to new awards and modified awards after the effective date, and to any unvested awards as service is rendered on or after the effective date. Under the second method, the Modified Retrospective Application method, SFAS No. 123 (R) applies to either all prior years for which SFAS No. 123 was effective or only to prior interim periods in the year of adoption. The Company plans to adopt SFAS No. 123 (R) using the Modified Prospective Application method.  SFAS No. 123 (R) is effective beginning in the first quarter of 2006 and will apply to all outstanding and unvested option awards at adoption date. The Company has completed a preliminary evaluation of the effect of adoption of SFAS 123 (R).  The adoption of SFAS 123 (R) is expected to increase SG&A by approximately $.2 million in 2006 based upon options outstanding as of November 30, 2005.

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Any of the statements contained in this report that refer to the Company's forecasted, 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 conditions. In addition, 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.

ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Risk

The Company operates internationally, giving rise to exposure to market risks from changes in foreign exchange rates. From time to time, the Company borrows in various currencies to reduce the level of net assets subject to changes in foreign exchange rates or purchases foreign exchange forward and option contracts to hedge firm commitments, such as receivables and payables, denominated in foreign currencies. The Company does not use the contracts for speculative or trading purposes. At November 30, 2005, the
Company had 15 foreign currency forward contracts expiring at various dates through March 2006, with an aggregate notional value and fair value of $5.1 million and $5.0 million, respectively. Such instruments are carried at fair value, with related adjustments recorded in other income.

Debt Risk

The Company has variable-rate, short-term and long-term debt as well as fixed-rate, long-term debt. The fair value of the Company's fixed-rate debt is subject to changes in interest rates. The estimated fair value of the Company's variable-rate debt approximates the carrying value of such debt since the variable interest rates are market-based, and the Company believes such debt could be refinanced on materially similar terms. The Company is subject to the availability of credit to support new requirements, to refinance amortizing long-term debt and to refinance short-term debt.

As of November 30, 2005, the estimated fair value of notes payable by the Company totaling $8.3 million, with a fixed rate of 7.92% per annum, was $8.6 million. The Company is required to repay these notes in 2006.  As of November 30, 2005, the estimated fair value of notes payable by the Company totaling $40.0 million, with a fixed rate of 5.36% per annum, was $40.0 million. The Company is required to repay these notes in annual installments of $10.0 million from 2006 to 2009, inclusive.  As of November 30, 2005, the estimated value of notes payable by the Company's wholly-owned subsidiary in Singapore totaling approximately $30.2 million, with a fixed rate of 4.25% per annum, was $30.3 million.  These notes must be repaid in installments of approximately $6.0 million per year beginning in 2008.  The Company had $7.2 million of variable-rate industrial development bonds payable at a rate of 3.25% per annum as of November 30, 2005, payable in 2016. The Company also had $8.5 million of variable-rate industrial development bonds payable at a rate of 3.25% per annum as of November 30, 2005, payable in 2021. The industrial revenue bonds are supported by the Revolver.  The Company borrowed $1.3 million under various foreign short-term bank facilities, that are supported by the Revolver which permits borrowings up to $100.0 million through September 2010. The average interest rate of such borrowings by foreign subsidiaries was 8.96% per annum as of November 30, 2005.

CONSOLIDATED STATEMENTS OF INCOME

The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED BALANCE SHEETS - ASSETS

The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED BALANCE SHEETS - LIABILITIES AND STOCKHOLDERS' EQUITY

The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

The accompanying notes are an integral part of these consolidated financial statements

CONSOLIDATED STATEMENTS OF CASH FLOWS

 The accompanying notes are an integral part of these consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation