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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Quarterly Period Ended: May 31, 1995
() Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from _______________
to _______________
Commission File Number 0-2733
AZTEC MANUFACTURING CO.
(Exact name of registrant as specified in its charter)
TEXAS 75-0948250
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(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
400 North Tarrant, Crowley, Texas 76036
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (817) 297-4361
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NONE
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(Former name, former address and former fiscal year, if changed since last
report)
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 _____
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Indicate the number of outstanding of each of the issuer's classes of common
stock, as of the close of the period covered by this report.
Outstanding at May 31, 1995
Common Stock, $1.00 Par Value 5,743,910
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Class Number of Shares
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AZTEC MANUFACTURING CO.
INDEX
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<TABLE>
<CAPTION>
PART I. Financial Information Page No.
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<S> <C>
Item 1. Financial Statements
Consolidated Condensed Balance Sheets at
May 31, 1995 and February 28, 1995 3
Consolidated Condensed Statements of Income
Periods Ended May 31, 1995 and May 31, 1994 4
Consolidated Condensed Statements of Cash Flow
Periods Ended May 31, 1995 and May 31, 1994 5
Notes to Consolidated Condensed Financial
Statements 6
Computation of Income per Common Share 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. Other Information
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Item 2. Changes in Securities 9
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
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Page 2
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ITEM I. FINANCIAL STATEMENTS
PART I. FINANCIAL INFORMATION
AZTEC MANUFACTURING CO.
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
5/31/95 2/28/95
ASSETS UNAUDITED AUDITED
- --------------------------------------------- ------------- -------------
<S> <C> <C>
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $ 72,937 $ 192,764
ACCOUNTS RECEIVABLE (NET OF ALLOWANCE) 8,845,172 10,896,521
INVENTORIES:
RAW MATERIALS 4,932,055 5,020,587
WORK-IN-PROCESS 1,355,389 1,471,331
FINISHED GOODS 891,245 741,360
PREPAID EXPENSES AND OTHER 85,590 97,217
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TOTAL CURRENT ASSETS 16,182,388 18,419,780
PROPERTY, PLANT AND EQUIPMENT, NET 15,298,971 15,265,814
PROPERTY HELD FOR SALE, NET 2,021,900 2,038,288
INTANGIBLE ASSETS, NET 4,695,484 4,781,581
OTHER ASSETS 285,704 285,704
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TOTAL ASSETS $ 38,484,447 $ 40,791,167
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LIABILITIES AND SHAREHOLDERS' EQUITY
- ---------------------------------------------
CURRENT LIABILITIES
LONG TERM DEBT DUE WITHIN ONE YEAR $ 1,515,593 $ 1,515,593
ACCOUNTS PAYABLE 3,507,383 4,131,414
ACCRUED LIABILITIES 2,693,986 2,656,137
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TOTAL CURRENT LIABILITIES 7,716,962 8,303,144
LONG-TERM DEBT DUE AFTER ONE YEAR 8,201,220 10,484,094
DEFERRED INCOME TAX 627,856 627,856
SHAREHOLDERS' EQUITY:
COMMON STOCK, $1 PAR VALUE
SHARES AUTHORIZED - 25,000,000
SHARES ISSUED - 5,743,910 and 5,741,260 5,743,910 5,741,260
CAPITAL IN EXCESS OF PAR VALUE 9,225,298 9,219,998
RETAINED EARNINGS 6,969,201 6,414,815
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TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 38,484,447 $ 40,791,167
============= =============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
Page 3
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AZTEC MANUFACTURING CO.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
5/31/95 5/31/94
UNAUDITED UNAUDITED
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<S> <C> <C>
NET SALES $ 12,068,508 $ 11,276,004
COSTS AND EXPENSES:
COST OF SALES 9,120,235 7,923,125
SELLING/G & A EXPENSE 1,801,295 1,871,161
INTEREST EXPENSE 288,191 165,711
OTHER (INCOME) EXPENSE (74,498) 145,306
RESEARCH & DEVELOPMENT 16,738 26,629
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11,151,961 10,131,932
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INCOME BEFORE
INCOME TAXES 916,547 1,144,072
PROVISION FOR
INCOME TAXES 362,167 451,906
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NET INCOME $ 554,380 $ 692,166
============= =============
INCOME PER SHARE:
NET INCOME $ 0.10 $ 0.12
============= =============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
Page 4
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AZTEC MANUFACTURING CO.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
MAY 31, 1995
<TABLE>
<CAPTION>
THREE MONTHS ENDING
5/31/95 5/31/94
UNAUDITED UNAUDITED
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 554,380 $ 692,166
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATIONS:
PROVISION FOR BAD DEBTS 74,500 169,413
AMORTIZATION AND DEPRECIATION 522,645 401,306
INCREASE (DECREASE) FROM CHANGES IN ASSETS & LIABILITIES:
ACCOUNTS RECEIVABLE 1,976,852 (616,159)
INVENTORIES 54,589 (103,746)
PREPAID EXPENSE 11,627 19,805
ACCOUNTS PAYABLE (624,031) 169,381
ACCRUED LIABILITIES 152,674 317,010
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NET CASH PROVIDED BY OPERATIONS 2,723,236 1,049,176
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CASH FLOWS FROM INVESTING ACTIVITIES:
PURCHASE OF PROPERTY/PLANT/EQUIPMENT (453,314) (571,216)
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NET CASH PROVIDED BY (USED FOR) (453,314) (571,216)
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INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES:
EXERCISE OF STOCK OPTIONS 7,950 104,731
REPAYMENT OF REVOLVING LOAN (1,935,642) (50,267)
PAYMENTS ON LONG TERM NOTES (347,232) (283,898)
DIVIDENDS PAID (114,825) (112,910)
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NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES (2,389,749) (342,344)
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INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS (119,827) 135,616
CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD 192,764 117,249
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CASH & CASH EQUIVALENTS, END OF PERIOD $ 72,937 $ 252,865
============= =============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
Page 5
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AZTEC MANUFACTURING CO.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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1. A summary of the Company's significant accounting policies is presented on
Page 12 of its 1995 Annual Shareholders' Report.
2. In the opinion of Management of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments (consisting of
only normal recurring accruals) necessary to present fairly the financial
position of the Company as of May 31, 1995, and the results of operations
and cash flows for the three-month periods ended May 31, 1995 and May 31,
1994.
3. The revolving loan and term notes are subject to a loan agreement which
states that the Company must comply with various financial covenants
including minimum requirements with regard to working capital, debt-to-net
worth ratio, and cash flows. The Company is in compliance (or has obtained
a waiver through May 31, 1995 for the event of noncompliance, including
maintaining a debt coverage ratio less than the minimum ratio of 2.25 to 1)
with these covenants as of May 31, 1995.
The Company amended it's debt facility with it's current lender during the
quarter ending May 31, 1995, effective July 1, 1995. The amendments are
discussed in Management's Discussion and Analysis of Financial Condition as
well as exhibit 10-0 attached.
Page 6
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AZTEC MANUFACTURING CO.
COMPUTATION OF INCOME PER COMMON SHARE
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<CAPTION>
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THREE MONTHS ENDING
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MAY 31, 1995 MAY 31, 1994
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<S> <C> <C>
Net Income Applicable to Common Shares $ 554,380 $ 692,166
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Weighted Average Common And Common 5,743,910 5,622,166
Equivalent Shares Outstanding
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Income per Common Share Fully Diluted $ .10 $ .12
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Cash Dividend $- 0 - $- 0 -
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</TABLE>
Page 7
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Net Cash provided from operations for the three-month period ending May 31,
1995, was $2,608,000 compared to $1,049,000 during the same period in 1994. This
increase is primarily the result of a reduction in outstanding receivables at
the Calvert Company. Working capital on May 31, 1995, was $8,465,000, with a
current ratio of 2.10 to 1.
Uses of cash during the period ended May 31, 1995, included the purchase of
equipment in the amount of $453,000 and the repayment of bank debt in the amount
of $2,283,000.
The Company's credit facility with it's current lender was amended during the
period ended May 31, 1995, effective July 1, 1995, from $15,000,000 to
$18,500,000. This agreement is made up of a $10,000,000 revolving line of credit
and a $8,500,000 term note. Other terms of this agreement are discussed in the
attached exhibit 10-0.
The Company's primary sources of liquidity and capital resources in the near
term will consist of cash flow from operations and available borrowings under
the Company's revolving line of credit mentioned above. The Company's current
availability under the revolving line is approximately $8,500,000.
RESULTS OF OPERATIONS
---------------------
Consolidated net sales for the period ending May 31, 1995 as compared to the
same period in 1994, were up approximately $793,000, a 7 percent increase. Net
sales in the Electrical Products Segment, as compared to the same period in
1994, were up 10 percent. Volumes were up in Aztec's three electrical product
companies that make up this segment. Net sales in the Company's Galvanizing
Segment were up 36 percent over the same period in 1994, due to the addition of
Arizona Galvanizing, as well as increased overall volumes of production. Net
sales in the Oil Field Products Segment were down as compared to the same period
in 1994, by 68 percent. This segment has continued the decline which started in
the fourth quarter of fiscal 1995. Depressed activity in the domestic Oil and
Gas industry will continue to have an adverse affect on this segment.
Consolidated operating income for the period ending May 31, 1995, as compared to
the same period in 1994, was down 12 percent. Gross operating income in the
Electrical Products Segment was down due to overall lower margins. The Calvert
Company, which experienced a significant write down in the fourth quarter of
fiscal 1995, should continue to improve throughout the year as lower margin
contracts are replaced in the backlog with higher margin contracts. Continued
improvements in production efficiencies and personnel changes are also having a
positive affect on Calvert's margins. Gross operating income in the Galvanizing
Segment was up 40 percent over the same period last year due to the addition of
Arizona Galvanizing as well as increased volumes in overall production. The Oil
Field Products Segment showed a gross operating loss due to low volumes of
production as compared to an operating income in the same period in 1994.
General corporate expenses for the period ending May 31, 1995, as compared to
the same period in 1994, were down due to lower accruals for employee benefits
and profit sharing expense.
Page 8
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Interest expense was higher for the period ending May 31, 1995, as compared to
1994 due to increased debt associated with the construction of Arizona
Galvanizing and higher interest rates.
PART II. OTHER INFORMATION
AZTEC MANUFACTURING CO.
ITEM 2. CHANGES IN SECURITIES
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Title of Class - Common Stock, $1 par value
<TABLE>
<CAPTION>
Number of Common Stock Capital in
Shares $1 Par Value Excess of Par
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<S> <C> <C> <C>
Balance at February 28, 1995 5,741,260 $5,741,260 $9,219,998
Exercise of Stock Options 2,650 $ 2,650 $ 5,300
Balance at May 31, 1995 5,743,910 $5,743,910 $9,225,298
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(A) EXHIBITS - The following exhibit is filed as part of this report:
10 - 0 Loan commitment letter from Marine Midland
Business Loans Incorporated for $18.5 million.
(B) REPORTS ON FORM 8-K - There were no reports on Form 8-K filed for the
three months ended May 31, 1995.
All other schedules and compliance information called for by the instructions
for Form 10-Q have been omitted since the required information is not present or
not present in amounts sufficient to require submission.
Page 9
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AZTEC MANUFACTURING CO.
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(Registrant)
Date: June 29, 1995 /s/Dana Perry
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Dana Perry, Vice President for Finance
Chief Financial Officer
Page 10
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EXHIBIT INDEX
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<CAPTION>
Sequentially
Exhibit Description Numbered Page
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<S> <C> <C>
10 - 0 Loan commitment letter from Marine Midland Business Loans
Incorporated
</TABLE>
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EXHIBIT 10 - 0 PAGE 1 OF 2
MARINE MIDLAND BUSINESS LOANS INCORPORATED
12655 NORTH CENTRAL EXPRESSWAY, SUITE 300, DALLAS, TEXAS 75247-1717
June 20, 1995
Mr. Dana Perry
Aztec Manufacturing Company
P.O. Box 668
400 N. Tarrant
Crowley, Texas 76036
Re: Renewal and Amendment of Lending Facilities
Dear Dana,
This correspondence is to inform you of the approved amendments to your
lending facility in advance of an amendment to the loan documents. The following
items have been approved by the appropriate credit authorities and are only
contingent on acceptable Marine Midland Bank review of updated real property
appraisals and legal documentation.
1) Contract maturity has been extended to 12 May 97.
3) Increase term loan limit from 6,000,000 to 8,500,000 with borrowings
limited to the lesser of line or the sum of 75% of FMV on updated real property
appraisals plus 50% of NBV of real property at Arizona Galvanizing plus 65% of
NBV of machinery and equipment.
4) Increase revolver line limit from 9,000,000 to 10,000,000 with borrowings
limited to the same borrowing base formulas.
5) Decrease interest rate from Prime plus 1.25% to Prime plus .5%, collection
days from 2 business days to 1 business day, collateral management fee from 800
monthly to 400 monthly, effective 1 Jul 95.
6) Amend interest rate earndown provisions from current to:
a. For FYE 29Feb96, achieve net profit after tax of 2,200,000 or
greater and interest rate is reduced by .25%.
b. For FYE 28Feb97, achieve net profit after tax of 2,000,000 or
greater and interest rate is reduced by .25%.
TELEPHONE: (214) 385-3500
FACSIMILE: (214) 239-6408 MEMBER HSBC GROUP
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EXHIBIT 10 - 0 PAGE 2 OF 2
Reduced rate to be effective upon receipt of certified financial
statements.
7) Amend Debt Coverage Ratio from 2.5 times to 1.75 times, revise Minimum
Tangible Net Worth from 16,000,000 to 14,600,000, and Total Liabilities to
TNW from 1:1 to 1.85:1.
It is further acknowledged that as of the quarter ending 31May95 the company is
in violation of the Debt Coverage Ration of 2.5 times. Please allow this
correspondence to waive the Lender's enforcement of its rights against the
Debtor arising from this Event of Default to the extent, and only to the extent,
that this specific Event of Default existed under the Loan and Security
Agreement on or as of 31May95. This waiver shall be effective only for the above
mentioned Event of Default on the date specified and is not a waiver any other
Events of Default now existing or hereafter arising.
Sincerely,
/s/Neal T. Legan
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Neal T. Legan
Assistant Vice President
