INTRODUCTION

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; fiberglass-composite pipe for transporting oil, chemicals and corrosive fluids and specialized materials and products used in infrastructure and energy projects. The Company operates businesses in North America, South America, Europe and Asia. The Company has three reportable segments. 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, such as large-diameter wind towers. The Infrastructure Products Group consists of two operating segments, which are aggregated: the Hawaii Division which manufactures and sells ready-mix concrete, sand and aggregates, concrete pipe and culverts and the Pole Products Division which manufactures and sells concrete and steel lighting and traffic poles. The markets served by the Fiberglass-Composite Pipe Group are worldwide in scope. The Water Transmission Group serves primarily the western U.S. for pipe and sells wind towers primarily west of the Mississippi river. 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.

During the third quarter of 2006, the Company sold its Performance Coatings & Finishes business ("Coatings Business"). The results from this segment are reported as discontinued operations for all the reporting periods. Accordingly, the following discussions generally reflect summary results from continuing operations unless otherwise noted. However, the net income and net income per share discussions include the impact of discontinued operations.

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 are 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 that are not readily apparent from other sources. 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 I, Item 1 in the Company's report on Form 10-K for fiscal year ended November 30, 2007. 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 are 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 permanently 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.

Table of Contents

Revenue for the 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. 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, typically are designed for specific applications, are not interchangeable between projects, and are not manufactured for stock. Revenue for the period is determined by multiplying total estimated contract revenue by the percentage-of-completion of the contract and then subtracting the amount of previously recognized revenue. Cost of earned revenue is computed by multiplying estimated contract completion cost by the percentage-of-completion of the contract and then subtracting the amount of previously recognized cost. 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 two 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. Costs attributable to unpriced change orders are treated as costs of contract performance in the period, and contract revenue is recognized if recovery is probable. Disputed or unapproved change orders are treated as claims. Recognition of amounts of additional contract revenue relating to claims occurs when amounts are received or awarded with recognition based on the percentage-of-completion methodology.

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 levels or costs could materially impact the Company's financial statements. Reserves are established for excess, obsolete and rework inventories based on 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. and Bondstrand, 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 are stated at cost and 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 values 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 asset to estimated fair value. 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 liabilities 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 purchases varying levels of insurance to cover a portion of the losses in excess of the self-insured limits. Currently, the Company's primary self-insurance limits are $1.0 million per workers' compensation claim, $.1 million per general, property or product liability claim, and $.25 million per vehicle liability claim.

Table of Contents

The Company follows the guidance of Statement of Financial Accounting Standards ("SFAS") No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans," 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 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 values 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 returns on invested assets based principally on prior performance. These projected returns reduce the net benefit costs the Company records in the current period. Actual results could vary significantly from projected results, and such deviations could materially impact the Company's consolidated financial statements. Management consults with the Company's actuaries when determining these assumptions. 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.

The Company adopted SFAS No. 157, "Fair Value Measurements," which provides a framework for measuring fair value. As defined in SFAS No. 157, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that the Company believes market participants would use in pricing assets or liabilities, including assumptions about risk and the risks inherent in the inputs to valuation techniques. These inputs can be readily observable, market corroborated or generally unobservable. The Company primarily applies the market approach for recurring fair value measurements and endeavors to utilize the best available information. Accordingly, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The Company classifies fair value balances based on the observability of those inputs. The ultimate exit price could be significantly different than currently estimated by the Company.

Management incentive compensation is accrued based on current estimates of the Company's ability to achieve short-term and long-term performance targets. The Company's actual performance could be significantly different than currently estimated by the Company.

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. Actual income and the mix of income by jurisdiction could be significantly different than currently estimated. The Company believes that it has adequately provided for tax-related matters.

The amount of income taxes the Company pays is subject to ongoing audits by federal, state and foreign tax authorities. The Company's estimate of the potential outcome of any uncertain tax issue is subject to management's assessment of relevant risks, facts, and circumstances existing at that time, pursuant to the Financial Accounting Standards Board ("FASB") Interpretation ("FIN") No. 48, "Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109." FIN No. 48 requires a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. A liability is recorded for the difference between the benefit recognized and measured pursuant to FIN No. 48 and tax position taken or expected to be taken on the tax return. To the extent that the Company's assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. The Company reports tax-related interest and penalties as a component of income tax expense.

Table of Contents

LIQUIDITY AND CAPITAL RESOURCES

As of August 31, 2008, the Company's working capital, including cash and cash equivalents, totaled $317.5 million, an increase of $3.2 million from working capital of $314.3 million as of November 30, 2007. Higher working capital resulted primarily from a decrease in accrued wages, employee benefits, and income taxes payable, partially offset by an increase in trade payables, an increase in cash and a decrease in receivables. Cash and cash equivalents totaled $158.3 million as of August 31, 2008, compared to $155.4 million as of November 30, 2007.

For the nine months ended August 31, 2008, net cash of $59.5 million was generated from operating activities, compared to $19.4 million in the similar period in 2007. In the nine months ended August 31, 2008, the Company's cash provided by operating activities included net income of $41.1 million, plus non-cash adjustments (depreciation, amortization, equity income from joint ventures in excess of dividends and stock compensation expense) of $15.4 million, plus net changes in operating assets and liabilities of $3.0 million. In the nine months ended August 26, 2007, the Company's cash from operating activities included net income of $45.4 million, plus similar non-cash adjustments of $10.7 million and less gain from sale of property, plant and equipment of $1.5 million and less changes in operating assets and liabilities of $35.2 million. The non-cash adjustments in 2008 were higher due primarily to higher stock compensation expense, offset by higher equity in earnings in excess of dividends received from TAMCO. The positive change in operating assets and liabilities in 2008 was primarily due to a decrease of receivables in 2008 and the growth of inventories in 2007 partially offset by a net reduction in liabilities in 2008. Receivables declined in 2008 due to the timing of production and sales by the Water Transmission Group. Inventories grew in 2007 due to the Company's entry into the wind tower business.

Net cash used in investing activities totaled $43.2 million in the nine months ended August 31, 2008, compared to $27.0 million used in the nine months ended August 26, 2007. Net cash used in investing activities during the first nine months of 2008 consisted of capital expenditures of $44.5 million, compared to $33.3 million in the same period in 2007. Capital expenditures were primarily for normal replacement and upgrades of machinery and equipment in both 2008 and 2007. Capital expenditures for both years also included the expansion of the Company's steel fabrication plant in California to manufacture large-diameter wind towers. During the year ending November 30, 2008, the Company anticipates spending between $50 and $65 million on capital expenditures. In addition, the Company anticipates that within the next 12 months it will fund up to $35 million of a capacity expansion program at TAMCO. Capital expenditures are expected to be funded by existing cash balances, cash generated from operations or additional borrowings.

Net cash used in financing activities totaled $12.5 million during the nine months ended August 31, 2008, compared to $6.1 million used in the nine months ended August 26, 2007. Net cash used in 2008 consisted of net repayment of debt of $4.1 million, payment of Common Stock dividends of $7.8 million and treasury stock purchases of $2.8 million, related to the payment of taxes associated with the vesting of restricted shares. Also in 2008, the Company received $.8 million from the issuance of Common Stock related to exercised stock options and recognized tax benefits related to stock-based compensation of $1.3 million. Net cash used in 2007 consisted of net repayment of debt of $1.6 million, payment of Common Stock dividends of $5.9 million and treasury stock purchases of $1.6 million. In 2007, the Company received $1.1 million from the issuance of Common Stock related to exercised stock options and recognized tax benefits related to stock-based compensation of $2.0 million.

The Company utilizes a $100.0 million 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 based on the Company's financial condition and performance), at any time until September 2010, when all borrowings under the Revolver must be repaid.

Table of Contents

The Company's lending agreements contain various restrictive covenants, including the requirements to maintain specified amounts of net worth and restrictions on cash dividends, borrowings, liens, investments, guarantees, and financial covenants. 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 $175.1 million as of August 31, 2008. 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. At August 31, 2008, the Company maintained a consolidated leverage ratio of .74 times EBITDA. Lending agreements require that the Company maintain qualified consolidated tangible assets at least equal to the outstanding secured funded indebtedness. At August 31, 2008, qualifying tangible assets equaled 3.03 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 1.5 times the sum of interest expense, rental expense, dividends and scheduled funded debt payments. At August 31, 2008, the Company maintained such a fixed charge coverage ratio of 3.31 times. Under the most restrictive provisions of the Company's lending agreements, approximately $32.7 million of retained earnings was not restricted, at August 31, 2008, as to the declaration of cash dividends or the repurchase of Company stock. At August 31, 2008, the Company was in compliance with all covenants.

At August 31, 2008, the Company had total debt outstanding of $71.7 million, compared to $74.6 million at November 30, 2007, and approximately $115.1 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 2008 were $74.5 million and $73.3 million, respectively.

The Company contributed $1.1 million to the non-U.S. defined benefit pension plans and $3.0 million to the U.S. defined benefit pension plan during the first nine months of 2008. The Company expects to contribute approximately an additional $.1 million to the non-U.S. pension plans during the remainder of fiscal year 2008.

Management believes that cash flow from operations and current cash balances, together with currently available lines of credit, will be sufficient to meet operating requirements in 2008. Cash available from operations could be affected by any general economic downturn or any decline or adverse changes in the Company's business, such as a loss of customers or significant raw material price increases. Management does not currently believe it likely that business or economic conditions will worsen or that costs will increase sufficiently to impact short-term liquidity.

Table of Contents

               AMERON INTERNATIONAL CORPORATION AND SUBSIDIARIES

The Company's contractual obligations and commercial commitments at August 31,
2008 are summarized as follows (in thousands):

                                                            Payments Due by Period
                                                   Less than                                       After 5
Contractual Obligations               Total         1 year         1-3 years       3-5 years        years
Long-term debt                      $  71,682     $    17,196     $    24,392     $    14,394     $  15,700

Interest payments on debt (a)           8,543           1,473           3,794           1,501         1,775

Operating leases                       41,492           5,377           9,604           5,362        21,149

Purchase obligations (b)                   53              53               -               -             -

Uncertain tax positions                   432             432               -               -             -

Total contractual obligations (c)   $ 122,202     $    24,531     $    37,790     $    21,257     $  38,624




                                                            Commitments Expiring Per Period
                                                     Less than                                             After
Contractual Commitments              Total            1 year          1-3 years         3-5 years         5 years
Standby letters of credit (d)      $    2,100       $     2,100     $           -     $           -     $          -

Total commercial commitments (c)   $    2,100       $     2,100     $           -     $           -     $          -

(a) Future interest payments related to debt obligations, excluding 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, unconditional purchase obligations or standby repurchases obligations.
(d) Not included are standby letters of credit totaling $16,067 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: 2008 COMPARED WITH 2007

General

Income from continuing operations totaled $15.0 million, or $1.63 per diluted share, on sales of $170.1 million in the quarter ended August 31, 2008, compared to income from continuing operations of $20.7 million, or $2.27 per diluted share, on sales of $165.0 million in the same period in 2007. Income from continuing operations was lower in 2008 due to $5.3 million of tax benefits recognized in the third quarter of 2007 associated with the dissolution of the Company's wholly-owned United Kingdom subsidiary and the 2008 decline in profits from consolidated operations offset by higher earnings from TAMCO, the Company's 50%-owned steel venture in California. The Fiberglass-Composite Pipe Group had higher sales and profits due primarily to continued strong market conditions and the acquisition of the business of Polyplaster, Ltda. ("Polyplaster") in Brazil in the fourth quarter of 2007. The Water Transmission Group had higher sales and continuing losses due to underutilized plant capacity, low project margins and manufacturing inefficiencies. The Infrastructure Products Group had lower sales and income due to weaker markets and higher costs in Hawaii and due to the decline in pole sales associated with weak residential construction throughout the U.S.

Table of Contents

Income from continuing operations totaled $41.1 million, or $4.48 per diluted share, on sales of $479.7 million in the nine months ended August 31, 2008, compared to income from continuing operations of $43.8 million, or $4.83 per diluted share, on sales of $442.2 million in the same period in 2007. Income . . .