<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Quarterly Period Ended: August 31, 1996
( ) 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
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
400 North Tarrant, Crowley, Texas 76036
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (817) 297-4361
-----------------------------
NONE
- --------------------------------------------------------------------------------
(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
----- -----
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 August 31, 1996
Common Stock, $1.00 Par Value 5,998,614
----------------------------- ------------------------------------
Class Number of Shares
<PAGE>
AZTEC MANUFACTURING CO.
INDEX
-----
PART I. Financial Information Page No.
--------------------- --------
Item 1. Financial Statements
Consolidated Condensed Balance Sheets at
August 31, 1996 and February 29, 1996 3
Consolidated Condensed Statements of Income
Periods Ended August 31, 1996 and August 31, 1995 4
Consolidated Condensed Statements of Cash Flow
Periods Ended August 31, 1996 and August 31, 1995 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 8-9
PART II. Other Information
-----------------
Item 2. Changes in Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
Page 2
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
AZTEC MANUFACTURING CO.
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
8/31/96 2/29/96
ASSETS UNAUDITED AUDITED
- -------------------------------------- -------------- --------------
<S> <C> <C>
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $ 2,149,629 $ 416,223
ACCOUNTS RECEIVABLE (NET OF ALLOWANCE) 9,051,901 9,483,471
INVENTORIES:
RAW MATERIALS 4,627,713 4,934,538
WORK-IN-PROCESS 818,121 991,197
FINISHED GOODS 705,129 746,813
PREPAID EXPENSES AND OTHER 68,695 192,047
-------------- --------------
TOTAL CURRENT ASSETS $ 17,421,188 $ 16,764,289
PROPERTY, PLANT AND EQUIPMENT, NET 16,684,644 16,824,952
PROPERTY HELD FOR SALE, NET 1,404,866 1,504,756
INTANGIBLE ASSETS, NET 7,097,599 7,292,973
OTHER ASSETS 534,341 234,340
-------------- --------------
TOTAL ASSETS $ 43,142,638 $ 42,621,310
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
- --------------------------------------
CURRENT LIABILITIES
LONG TERM DEBT DUE WITHIN ONE YEAR $ 1,716,667 $ 1,558,926
ACCOUNTS PAYABLE 2,418,194 4,077,754
ACCRUED LIABILITIES 3,542,797 3,248,920
-------------- --------------
TOTAL CURRENT LIABILITIES $ 7,677,658 $ 8,885,600
LONG-TERM DEBT DUE AFTER ONE YEAR 8,480,555 9,516,472
DEFERRED INCOME TAX 1,058,993 1,058,993
SHAREHOLDERS' EQUITY:
COMMON STOCK, $1 PAR VALUE
SHARES AUTHORIZED - 25,000,000
SHARES ISSUED - 5,998,614 and 5,772,895 5,998,614 5,772,895
CAPITAL IN EXCESS OF PAR VALUE 9,954,388 9,283,268
RETAINED EARNINGS 10,698,561 8,830,213
LESS COMMON STOCK HELD IN TREASURY
(232,362 SHARES AT COST) (726,131) (726,131)
-------------- --------------
TOTAL SHAREHOLDERS' EQUITY $ 25,925,432 $ 23,160,245
-------------- --------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 43,142,638 $ 42,621,310
============== ==============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
Page 3
<PAGE>
AZTEC MANUFACTURING CO.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
8/31/96 8/31/95 8/31/96 8/31/95
UNAUDITED UNAUDITED UNAUDITED UNAUDITED
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $ 13,889,096 $ 11,332,351 $ 28,124,693 $ 23,400,859
COSTS AND EXPENSES:
COST OF SALES 9,977,112 8,427,641 20,194,592 17,547,876
SELLING/G & A EXPENSE 1,964,538 1,754,631 4,019,233 3,555,926
INTEREST EXPENSE 261,296 239,242 489,510 527,433
OTHER (INCOME) EXPENSE 126,946 (44,864) 284,929 (119,362)
RESEARCH & DEVELOPMENT 30,390 14,376 49,062 31,115
------------ ------------ ------------ ------------
$ 12,360,282 $ 10,391,026 $ 25,037,326 $ 21,542,988
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 1,528,814 941,325 3,087,367 1,857,871
PROVISION FOR INCOME TAXES 603,420 371,845 1,218,931 734,011
----------- ----------- ----------- -----------
NET INCOME $ 925,394 $ 569,480 $ 1,868,436 $ 1,123,860
=========== =========== =========== ===========
INCOME PER SHARE:
INCOME PER SHARE - PRIMARY $ 0.16 $ 0.10 $ 0.33 $ 0.20
INCOME PER SHARE- FULLY DILUTED $ 0.16 $ 0.10 $ 0.32 $ 0.20
=========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
Page 4
<PAGE>
AZTEC MANUFACTURING CO.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
SIX MONTHS ENDING
8/31/96 8/31/95
UNAUDITED UNAUDITED
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 1,868,436 $ 1,123,860
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATIONS:
PROVISION FOR BAD DEBTS 198,610 (5,868)
AMORTIZATION AND DEPRECIATION 1,321,637 1,060,510
GAINS ON SALE OF PROPERTY 1,310 1,596
INCREASE (DECREASE) FROM CHANGES IN ASSETS & LIABILITIES:
ACCOUNTS RECEIVABLE 232,960 3,210,497
INVENTORIES 521,585 (172,136)
PREPAID EXPENSE 123,352 42,817
OTHER ASSETS 5,324 (463)
ACCOUNTS PAYABLE (1,659,560) (259,016)
ACCRUED LIABILITIES 293,878 313,640
------------ ------------
NET CASH PROVIDED BY OPERATIONS 2,907,532 5,315,437
------------ ------------
CASH FLOWS USED FOR INVESTING ACTIVITIES:
PURCHASE OF INVESTMENTS (300,000) 0
PURCHASE OF PROPERTY/PLANT/EQUIPMENT (892,700) (1,104,029)
------------ ------------
NET CASH USED FOR
INVESTING ACTIVITIES (1,192,700) (1,104,029)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
EXERCISE OF STOCK OPTIONS 896,839 20,400
CHANGE IN REVOLVING LOAN (6,420,378) (3,645,472
PAYMENTS ON LONG TERM NOTES 5,542,113 (726,131)
------------ ------------
NET CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES 18,574 (4,351,203)
------------ ------------
INCREASE/(DECREASE) IN CASH & CASH EQUIVALENTS 1,733,406 (139,795)
CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD 416,223 192,764
------------ ------------
CASH & CASH EQUIVALENTS, END OF PERIOD $ 2,149,629 $ 52,969
============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
Page 5
<PAGE>
AZTEC MANUFACTURING CO.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
1. A summary of the Company's significant accounting policies is presented on
Page 11 of its 1996 Annual Shareholders' Report.
2. In the opinion of Management of the Company, the accompanying unaudited
consolidated condensed financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present fairly
the financial position of the Company as of August 31, 1996, and the
results of operations and cash flows for the three-month and six-month
periods ended August 31, 1996 and August 31, 1995.
3. The Company arranged a new credit facility with a new lender effective
July 1, 1996. The arrangement is discussed in Management's Discussion and
Analysis of Financial Conditions. The facility included a $10 Million term
note for 6 years at a fixed rate of 7.86 percent and a $10 million
revolving note for 3 years at LIBOR plus 1 percent.
Page 6
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AZTEC MANUFACTURING CO.
COMPUTATION OF INCOME PER COMMON SHARE
--------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDING SIX MONTHS ENDING
========================================================================================
8/31/96 8/31/95 8/31/96 8/31/95
========================================================================================
<S> <C> <C> <C> <C>
Net Income Applicable to Common Shares $ 925,394 $ 569,480 $1,868,436 $1,123,860
========================================================================================
Weighted Average Common and Common 5,826,376 5,748,060 5,826,376 5,748,060
Equivalent Shares Outstanding
========================================================================================
Income Per Common Share: Primary $ .16 $ .10 $ .33 $ .20
Income Per Common Share: Fully Diluted $ .16 $ .10 $ .32 $ .20
========================================================================================
Cash Dividend $ 0 $ 0 $ 0 $ .03
========================================================================================
</TABLE>
Page 7
<PAGE>
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 six-month period ending August 31,
1996 was $2,908,000 compared to $5,315,000 during the same period in 1995.
Working capital on August 31, 1996, was $9,744,000, with a current ratio of 2.27
to 1.
Uses of cash during the period ended August 31, 1996 included the purchase of
equipment in the amount of $1,193,000 and the repayment of bank debt. Cash
generated from the exercise of stock options amounted to $897,000.
The Company arranged a new credit facility with a new lender effective July 1,
1996. This agreement is made up of a three year $10,000,000 revolving line of
credit and a six year $10,000,000 term note. The revolving line of credit will
be used for future acquisitions and working capital.
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 credit facility mentioned above. The Company's current
availability under the credit facility is approximately $10,000,000.
RESULTS OF OPERATIONS
----------------------
Consolidated net sales were up for the three-month and six-month periods ending
August 31, 1996 as compared to the same periods in 1995. Net sales in the
Electrical Products Segment were up 14 percent for the three-month period ending
August 31, 1996 and 6 percent for the six-month period ending August 31, 1996,
as compared to the same periods in 1995. Backlogs at each of the three
companies that make up the Electrical Products Segment continue to improve.
Net sales in the Company's Galvanizing Segment were up 38 and 43 percent for the
three and six-month periods ending August 31, 1996, as compared to the same
periods in 1995. These increases were due to higher volumes of steel processed
as well as improved selling prices. The addition of Arkansas Galvanizing, the
Company's eighth galvanizer, also had a positive impact. Net sales in the Oil
Field Products Segment were up 22 and 30 percent for the three and six-month
periods ending August 31, 1996, as compared to the same periods in 1995. This
can be accounted for by higher prices of crude oil and natural gas.
Consolidated operating income for the three-month and six-month periods ending
August 31, 1996, as compared to the same periods in 1995, was up 35 and 36
percent, respectively. Gross operating income in the Electrical Products
Segment was up 28 for the three and six-month periods ending August 31, 1996, as
compared to the same periods in 1995. The Calvert Company continues to improve
as lower margin contracts are replaced in the backlog with higher margin
contracts. The Galvanizing Segment's gross operating income was up 41 percent
for the three and six-month periods ending August 31, 1996 as compared the same
periods in 1995. This increase was a result of improved volumes and selling
prices as well as improved operating efficiencies. The addition of Arkansas
Galvanizing also had a positive impact on margins. The Oil Field Products
Segment showed a lower gross operating loss for the three and six-month periods
ending August 31, 1996, as compared to the same periods in 1995.
Page 8
<PAGE>
General corporate expenses for the three month and six month periods ending
August 31, 1996, as compared to the same periods in 1995, were up due to higher
accruals for employee benefits and profit sharing expense.
Interest expense was lower for the six month period ending August 31, 1996, as
compared to 1995, due to reduced debt and lower interest rates.
Page 9
<PAGE>
PART II. OTHER INFORMATION
AZTEC MANUFACTURING CO.
ITEM 2. CHANGES IN SECURITIES
- ------------------------------
Title of Class - Common Stock, $1 par value
Number of Common Stock Capital in
Shares $1 Par Value Excess of Par
---------- ------------ -------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Balance at February 29, 1996 5,772,895 $ 5,772,895 $ 9,283,268
Exercise of Stock Options 225,719 $ 225,719 $ 671,120
Balance at August 31, 1996 5,998,614 $ 5,998,614 $ 9,954,388
</TABLE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
Aztec Manufacturing Co.'s 1996 Annual Meeting held July 9, 1996.
(A) Messrs. Bowen, Richards, and Rosen were elected directors for a three-year
term expiring at the 1999 Annual Meeting of Shareholders.
Messrs. Johnson, Walker, Perry, Martin, Schumacher, and Downey all
continued as directors after the meeting.
(B) Ernst & Young LLP was appointed auditors of the Company for the year ending
February 28, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(A) EXHIBITS - There were no exhibits filed with this 10-Q for the six-months
ended August 31, 1996.
(B) REPORTS ON FORM 8-K - There were no reports on Form 8-K filed for the six
months ended August 31, 1996.
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 10
<PAGE>
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.
-------------------------------------
(Registrant)
Date: September 20, 1996 /s/Dana Perry
------------------------------ --------------------------------------
Dana Perry, Vice President for Finance
Chief Financial Officer
EXHIBIT INDEX
Page 11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> AUG-31-1996
<CASH> 2,149,629
<SECURITIES> 0
<RECEIVABLES> 9,450,511
<ALLOWANCES> (398,610)
<INVENTORY> 6,150,963
<CURRENT-ASSETS> 17,421,188
<PP&E> 30,899,747
<DEPRECIATION> 12,810,237
<TOTAL-ASSETS> 43,142,638
<CURRENT-LIABILITIES> 7,677,658
<BONDS> 8,480,555
0
0
<COMMON> 5,998,614
<OTHER-SE> 19,926,818
<TOTAL-LIABILITY-AND-EQUITY> 43,142,638
<SALES> 28,124,693
<TOTAL-REVENUES> 28,124,693
<CGS> 20,194,592
<TOTAL-COSTS> 24,547,816
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 489,510
<INCOME-PRETAX> 3,087,367
<INCOME-TAX> 1,218,931
<INCOME-CONTINUING> 1,868,436
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,868,436
<EPS-PRIMARY> .33
<EPS-DILUTED> .32
</TABLE>
