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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [Fee Required]
For the Fiscal Year Ended: FEBRUARY 29, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
Commission File No. 0-2733
AZTEC MANUFACTURING CO.
(Exact name of registrant as specified in its charter)
TEXAS 75-0948250
(State of incorporation) (I.R.S. Employer Identification Number)
400 NORTH TARRANT
CROWLEY, TEXAS 76036
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (817) 297-4361
Securities registered pursuant to section 12(b) of the act: NONE
Securities registered pursuant to section 12(g) of the act:
TITLE OF EACH CLASS
-------------------
COMMON STOCK, $1.00 PAR VALUE
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
---
The aggregate market value of Common Stock held by non-affiliates on May 2,
1996, was approximately $31,309,530. As of May 2, 1996, there were 5,569,042
shares of Aztec Manufacturing Co. Common Stock $1.00 par value outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part I, Part II and Part IV incorporate certain information by reference from
the Registrant's Annual Report to Shareholders for the year ended February 29,
1996. Part III incorporates information by reference from the Proxy Statement
for the 1996 Annual Meeting of Shareholders of Registrant.
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PART I
ITEM 1. BUSINESS
Aztec Manufacturing Co. ("Aztec" or the "Company") was incorporated under the
laws of the state of Texas on March 26, 1956. Aztec, through its subsidiaries,
operates under three segments. These segments are Electrical Products,
Galvanizing and Oil Field Products, which are discussed further below.
Aztec started in 1956 as an oil field-related company servicing oil field supply
companies and steel mills. The Company was located in Fort Worth, Texas, but
subsequently moved to Crowley, Texas. In 1965, Aztec diversified into the
galvanizing industry and opened its first location in Crowley, Texas. Oil field
operations were expanded with the opening of its Houston facility in 1967.
Galvanizing operations were expanded with the formation of Aztec Industries in
Jackson, Mississippi in 1969, the opening of a galvanizing facility in Houston
in 1975, the acquisition of Automatic Processing in Moss Point, Mississippi and
the formation of Aztec Mfg. Co. - Waskom in Waskom, Texas in 1986. Aztec added
to its Oil Field Products Segment in 1986 with the purchase of Parks Machine, a
job shop screw machine facility, located in Crowley, Texas. Aztec closed its
Houston Tubing facility in 1989 due to the depressed domestic oil industry. The
Electrical Products Segment was formed with the purchase of Rig-A-Lite
Partnership, LTD. in Houston, Texas, in March 1990 and the acquisition of The
Calvert Company located in Jackson, Mississippi, in September 1990. Aztec
closed and liquidated Parks Machine in November 1992, due to the low level of
oil field activity. Aztec added to its Electrical Products Segment with the
acquisition of Atkinson Industries, Inc., in March 1993. Gulf Coast
Galvanizing, Inc., located in Citronelle, Alabama, was acquired in January 1994.
Aztec completed and opened in November 1994 a new galvanizing facility in
Goodyear, Arizona, near Phoenix. Arkansas Galvanizing, Inc., located in Prairie
Grove, Arkansas, is the Company's eighth galvanizing facility, and was acquired
in February, 1996.
A three-year summary of sales, operating profit and identifiable assets by
industry segment is included in Note 9 to the Consolidated Financial Statements
on page 15 of the Registrant's 1996 Annual Report to Shareholders. Such
information is hereby incorporated by reference.
Aztec provides services and manufacturing of products in the following areas:
ELECTRICAL PRODUCTS SEGMENT
This segment includes Rig-A-Lite, which manufactures and assembles lighting
fixtures for hostile and hazardous environments in the industrial market. Rig-
A-Lite also engages in the assembly and installation of electrical components
and lighting fixtures on drilling rigs for the petroleum industry. Also in this
segment is Calvert, which designs, manufactures and installs electrical bus duct
systems for the power generation industry. A bus duct consists of insulated
power conductors housed in a metal enclosure. Individual pieces of bus duct are
arranged in whatever physical configuration that may be required to distribute
electrical power to or from a generator, transformer, switching device or other
electrical apparatus. Bus duct systems that can be provided are non-segregated
phase, segregated phase and isolated phase styles with numerous amperage and
voltage ratings. Atkinson Industries, Inc., was acquired in March, 1993 and
added to Aztec's Electrical Products Segment. Atkinson, located in Pittsburg,
Kansas, manufactures factory-fabricated electrical power centers and assemblies
for the industrial and power generation industries. The market for Aztec's
Electrical Products Segment is highly competitive and consists of a few large
national companies, as well as numerous small independents. Competition is
based primarily on product quality, range of product line, price and service.
The Company believes that it can compete favorably with regard to each of these
factors. Copper, aluminum and steel are the primary raw materials used in this
segment and are readily available. This Segment's products are sold through
manufacturers' representatives and its internal sales force. This Segment is
not dependent on any single customer or limited number of customers for sales,
and the loss of any single customer would not have a material adverse effect on
revenues. Backlog of orders was approximately $7,600,000 at February 29, 1996,
$9,100,000 at February 28, 1995, and $8,600,000 at February 28, 1994. All of
the fiscal 1995 backlog will be delivered in the next 18 months. Orders
included in the backlog are represented by contracts and
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purchase orders that the Company believes to be firm. Historically, no material
amount of orders included in the backlog has been canceled. The Company
experiences no seasonal fluctuations in this segment's business nor does it
follow any unusual practices relating to working capital items such as inventory
and rights to return merchandise. Due dates of a portion of certain receivables
are extended for periods of up to one year to insure customer satisfaction with
the Company's product. The Company has established a $200,000 reserve at the end
of fiscal 1996 against receivables for any possible loss of these receivables.
The total number of employees in this segment is 241.
GALVANIZING SEGMENT
Custom hot-dip galvanizing service is provided for industries handling
fabricated metal products. This process provides corrosion protection of
fabricated steel for extended periods up to 50 years. Galvanizing is a highly
competitive business. Aztec competes with other independent galvanizing
companies, captive galvanizing facilities operated by manufacturers, and
alternate forms of corrosion protection such as paint. Market conditions are,
therefore, highly competitive in pricing. Aztec is limited to some extent in
its galvanizing market to areas within a close proximity of its existing
locations, due to freight cost. Zinc is the principal raw material used in the
galvanizing process and currently is readily available. Aztec has a broad
customer base in galvanizing. No one customer represented as much as 10 percent
of consolidated revenues. The backlog of galvanizing orders generally is
nominal due to the short time requirement involved in the process. The Company
experiences no seasonal fluctuations in this segment's business nor does it
follow any unusual practices relating to working capital items such as
inventory, rights to return merchandise, and extended payment terms to
customers. Total employment in this segment is 202 persons.
OIL FIELD PRODUCTS SEGMENT
Aztec processes oil field tubing to the extent of upsetting, threading, testing
and heat treating and also manufacturers oil field pup joints. The principal
market is the oil industry, with distribution through supply houses, steel mills
and other manufacturers in the metal fittings industry. This business is highly
competitive and price sensitive, with competition coming from several small oil
field tubing processors. The current depressed domestic oil and gas market has
had an adverse effect on operations. The Company closed its Houston Tubing
facility in March 1989, and currently is liquidating this facility. The low
level of activity in the Company's screw machine operation prompted the Company
to close this facility in November 1992. Steel is the principal raw material
used in this segment and currently is readily available. Aztec has a limited
customer base in this area, but no one customer represents as much as 10 percent
of consolidated revenues. Backlog consisted of approximately $137,000 at
February 29, 1996, $50,000 at February 28, 1995, and $447,000 at February 28,
1994, respectively. Backlogs are expected to be filled within the coming fiscal
year. The Company experiences no seasonal fluctuations in this segment's
business nor does it follow any unusual practices relating to working capital
items such as inventory, rights to return merchandise, and extended payment
terms to customers. Total employment in this segment is 51 persons.
GENERAL
In fiscal 1996, the Company did not introduce a new product line or a new
industry segment or make public its intentions to introduce a new product or do
business in a new industry segment.
There are no significant patents, trademarks, licenses, franchises or
concessions. The Company does not have a material portion of business that may
be subject to renegotiation of profits or termination of contracts or
subcontracts at the election of the Government. There were no material amounts
spent on research and development activities during the preceding three fiscal
years.
ENVIRONMENTAL
The Company complies, in all material respects, with the relevant legislation
and regulations affecting its operations and the discharge of wastes. The cost
of compliance with such provisions and regulations during 1996 approximated
$176,000. While the Company believes that it will continue to be able to
operate profitably, increasing governmental regulations may continue to reduce
its profitability. The Company has been named in environmental proceedings that
are further described in Item 3 - Legal Proceedings.
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EXECUTIVE OFFICERS OF THE REGISTRANT
Business Experience for Past Five Years;
Name Age Position or Office with Registrant Held Since
- ----------------- --- ---------------------------------------- ----------
L. C. Martin 70 Chairman, President and Chief 1958
Executive Officer
D. L. Perry 47 Vice President of Finance, Chief 1992
Financial Officer Assistant Secretary 1977
F. L. Wright, Jr. 55 Senior Vice President/Galvanizing Segment 1992
Vice President/Galvanizing Segment 1989
General Mgr./Galvanizing Segment 1987
R. O. Grosso 50 Vice President/Electrical Products Segment 1995
Each executive officer was elected by the Board of Directors to hold office
until the next Annual Meeting or until his successor is elected. There are no
family relationships between Executive Officers of the Registrant.
ITEM 2. PROPERTIES
The following table sets forth information about the Company's principal
facilities owned on February 29, 1996:
Location Acres Sq. Footage Segment/Occupant
- -------- ----- ----------- ----------------
Crowley, Texas 152.0 7,772 Corporate Office
25,600 Galvanizing
193,245 Oil Field Products
Houston, Texas 8.7 25,800 Galvanizing
59.1 145,450 Oil Field Products (currently
under contract to sell)*
5.4 67,440 Electrical Products
Waskom, Texas 10.6 30,400 Galvanizing
Moss Point, Mississippi 13.5 16,000 Galvanizing
Jackson, Mississippi 5.6 22,800 Galvanizing
5.1 36,160 Electrical Products
Pittsburg, Kansas 15.3 42,000 Electrical Products
Citronelle, Alabama 10.8 33,960 Galvanizing
Goodyear, Arizona 11.75 36,750 Galvanizing
Prairie Grove, Arkansas 11.5 34,000 Galvanizing
* The Company has a three year lease with a Purchase Option Agreement and a six
month Option To Purchase Agreement to sell this idle facility.
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ITEM 3. LEGAL PROCEEDINGS
ENVIRONMENTAL PROCEEDINGS
In the course of its Galvanizing Operations, the Company is subject to
occasional governmental proceedings and orders pertaining to noise, air
emissions, and water discharges into the environment. As part of its continuing
environmental program, the Company has complied with such proceedings and orders
without any materially adverse effect on its business.
In August 1988, the Company received a letter from the Texas Water Commission
("TWC") regarding remedial actions at a chemical waste disposal site near
Ranger, Texas. Records indicate the Company may have generated a portion of the
waste placed at the site and therefore has been deemed by the TWC to be a
potentially responsible party ("PRP"), with respect to the site under Texas
Solid Waste Disposal Act, Chapter 361, Texas Health and Safety Code. The
Company, together with other companies which also may have generated waste
placed at the site, is participating with the TWC in a clean-up study at the
site. The Company provides for costs related to contingencies when a loss is
probable and the amount is reasonably determinable. It is the opinion of
management, based on past experience, that the ultimate resolution of this
contingency, to the extent not previously provided for, will not have a material
adverse effect on the Company. No material adverse findings have resulted from
the reviews to date.
Other than the matter described in the preceding paragraph, registrant is not a
party to, nor is its property the subject of, any material pending legal
proceedings. The registrant is involved in ordinary routine litigation
incidental to business. For additional information relating to contingencies,
see Note 10 to the Consolidated Financial Statements on page 16 of the
Registrant's 1996 Annual Report to Shareholders.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of fiscal year ended February
29, 1996, to a vote of security holders through the solicitation of proxies or
otherwise.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The common stock, $1.00 par value, of Registrant ("Common Stock") is traded in
the over-the-counter market. The information contained under the caption "Stock
Prices and Dividends Per Share" on Page 7 of Registrant's 1996 Annual Report to
Shareholders is incorporated herein by reference.
The approximate number of holders of record of Common Stock of Registrant at May
2, 1996 was 1,413.
ITEM 6. SELECTED FINANCIAL DATA
The information contained under the caption "Consolidated Summary of Operations
and Other Financial Information" on page 6 of Registrant's 1996 Annual Report to
Shareholders is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information contained under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 4, 5 and 6
of Registrant's 1996 Annual Report to Shareholders is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated balance sheets of Aztec Manufacturing Co. as of February 29,
1996 and 1995, and the related consolidated statements of income, shareholders'
equity, and cash flows for each of the three years in the period ended February
29, 1996 and the report of the independent auditors and the information required
by item 302 of Regulation of S-K are on pages 7 through 16 of Registrant's 1996
Annual Report to Shareholders and are incorporated herein by reference.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no disagreements with accountants on any matter of accounting
principles or practices or financial statement disclosures during the twenty-
four (24) months ended February 29, 1996 or the subsequent interim period.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The information required by the item with regard to executive officers is
included in Part I, Item 1 of this report under the heading "Executive Officers
of the Registrant."
The other information required by the item is incorporated herein by reference
to the Registrant's Proxy Statement for the 1996 Annual Meeting of Shareholders.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by reference to the
Registrant's Proxy Statement for the 1996 Annual Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated herein by reference to the
Registrant's Proxy Statement for the 1996 Annual Meeting of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by reference to the
Registrant's Proxy Statement for the 1996 Annual Meeting of Shareholders.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) 1. FINANCIAL STATEMENTS
The following financial statements and report of independent auditors have been
incorporated herein by reference to pages 8 through 16 of Registrant's 1996
Annual Report to Shareholders.
Pages of 1996 Annual
Report to Shareholders
----------------------
Report of Independent Auditors 7
Consolidated Balance Sheets as of February 29, 1996 and
February 28, 1995 8
Consolidated Statements of Income for the years ended
February 29, 1996, February 28, 1995, and 1994 9
Consolidated Statements of Shareholders' Equity for the
years ended February 29, 1996, February 28, 1995, and 1994 9
Consolidated Statements of Cash Flows for the years ended
February 29, 1996, February 28, 1995, and 1994 10
Notes to Consolidated Financial Statements 11-16
2. FINANCIAL STATEMENT SCHEDULES
All schedules and compliance information have been omitted since the required
information is not present or is not present in amounts sufficient to require
submission of the schedule, or because the information required is included in
the consolidated financial statements and the notes thereto.
3. EXHIBITS
The following exhibits are filed as a part of this report:
3(i) - Articles of Incorporation, and all amendments thereto (incorporated by
reference to the Annual Report on Form 10-K filed by Registrant for the fiscal
year ended February 28, 1981).
3(ii) - Bylaws including the amendment adopted by the Board of Directors of
registrant on May 17, 1993.
10a - 1982 Incentive Stock Option Plan of Registrant (incorporated by reference
to the Annual Report on Form 10-K filed by Registrant for the fiscal year ended
February 29, 1984).
10b - Employees Benefit Plan and Trust of Aztec Manufacturing Co. (incorporated
by reference to the Annual Report on Form 10-K filed by Registrant for the
fiscal year ended February 28, 1985).
10c - Amendment No. 1 to the Employees Benefit Plan and Trust of Aztec
Manufacturing Co. (incorporated by reference to Exhibit 10c of the Annual Report
on Form 10-K filed by Registrant for the fiscal year ended February 28, 1987).
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10d - 1986 Incentive Stock Option Plan of Aztec Manufacturing Co. (incorporated
by reference to the Annual Report on Form 10-K filed by Registrant for the
fiscal year ended February 28, 1986).
10e - Change In Control Agreement between Registrant and Mr. L. C. Martin dated
March 1, 1986 (incorporated by reference to Exhibit 10e of the Annual Report on
Form 10-K filed by Registrant for the fiscal year ended February 28, 1987).
10g - 1988 Nonstatutory Stock Option Plan of Aztec Manufacturing Co.
(incorporated by reference to Exhibit 10g of the Annual Report on Form 10-K
filed by Registrant for the fiscal year ended February 29, 1988).
10h - 1991 Incentive Stock Option Plan of Aztec Manufacturing Co.
(incorporated by reference to Exhibit 10h of the Annual Report on Form 10-K
filed by Registrant for the fiscal year ended February 28, 1991).
10i - 1991 Nonstatutory Stock Option Plan of Aztec Manufacturing Co.
(incorporated by reference to Exhibit 10i of the Annual Report on Form 10-K
filed by Registrant for the fiscal year ended February 28, 1991).
10j - Buy-Sell and Termination Agreement between Registrant and Mr. L.C. Martin
dated January 27, 1994 (incorporated by reference to Exhibit 10j of the Annual
Report on Form 10-K filed by Registrant for the fiscal year ended February 28,
1994).
13 - Annual Report to Shareholders for the fiscal year ended February 29, 1996
(including the Registrant Proxy Statement for the 1996 Annual Meeting of
Shareholders).*
21 - Subsidiaries of Registrant*.
23 - Consent of Ernst & Young LLP*.
24 - Power of Attorney*.
- -------------------
*Filed herewith.
(B) REPORTS ON FORM 8-K
The Registrant filed a current report on Form 8-K dated February 21, 1995 (Item
2) to report the signing of a Stock Purchase Agreement between Arkansas
Galvanizing, Inc. and Aztec Manufacturing Co.
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Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
AZTEC MANUFACTURING CO.
(Registrant)
Date: By:
---------------------------- ---------------------------------------
L. C. Martin, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Registrant and in
the capacities and on the dates indicated.
- ---------------------------------- -------------------------------------------
L. C. Martin, Principal Executive Dana L. Perry, Principal Accounting Officer,
Officer and Director Principal Financial Officer, and Director
- ---------------------------------- -------------------------------------------
Robert H. Johnson, Director Sam Rosen, Director
Dr. H. Kirk Downey* R. J. Schumacher*
- ---------------------------------- -------------------------------------------
Dr. H. Kirk Downey, Director R. J. Schumacher, Director
Martin C. Bowen* John G. Richards*
- ---------------------------------- -------------------------------------------
Martin C. Bowen, Director John G. Richards, Director
W.C. Walker*
- ----------------------------------
W. C. Walker, Director
*
- ----------------------------------
L. C. Martin, Attorney-in-Fact
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EXHIBIT 13
[LOGO OF AZTEC MANUFACTURING CO.]
. 13-YEAR HIGH FOR SALES AND EARNINGS
. 14 STRAIGHT QUARTERS OF SALES GROWTH
. FISCAL YEAR 1997 OUTLOOK EXCELLENT
1996 Annual Report
Fiscal Year Ended February 29, 1996
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A PLAN FOR DIVERSIFIED
GROWTH
Aztec Manufacturing Co., once principally a processor of oil field tubing, has
in recent years aggressively expanded into two financially complementary
industry areas--electrical products and galvanizing services.
The Electrical Products Segment consists of three companies with differing
product lines, each possessing a strong position in a niche market and excellent
prospects for growth.
The Galvanizing Segment, working in a fragmented industry, is being scaled up
rapidly through acquisitions and plant construction, thereby providing
increasingly strong cash flow for overall corporate growth.
The Oil Field Products Segment, now much reduced in size, is being reoriented to
improve its growth and profitability.
FINANCIAL HIGHLIGHTS
(in thousands, except per share amounts)
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<CAPTION>
1996 1995 1994
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<S> <C> <C> <C>
Net Sales $49,184 $44,608 $40,834
Net Income 2,582 1,578 2,172
Income Per Share - Fully Diluted 0.45 0.27 0.37
Total Assets $42,621 $40,791 $34,060
Long-Term Debt 9,516 10,484 6,622
Shareholders' Equity 23,160 21,376 19,548
Net Cash Provided By Operating Activities $ 9,103 $ 40 $ 3,765
Average Shares Outstanding 5,634 5,698 5,625
- -----------------------------------------------------------------------------
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LETTER TO OUR SHAREHOLDERS
Aztec Manufacturing Co. has resumed its strong earnings growth. For both the
fourth quarter and fiscal year ended February 29, 1996, sales, net income and
earnings per share reached the highest levels in thirteen years--setting new
records for Aztec in its current business configuration.
The outlook for ongoing growth in fiscal 1997 is excellent. Aztecs sales
continue to expand, with both the Electrical Products and Galvanizing Segments
contributing. Fiscal 1996 fourth period sales advanced for the 14th straight
quarter, and we look for further increases in fiscal 1997.
Plans for future expansion of Aztec are well under way. Our Electrical Products
Segment is now operating much more efficiently as a result of restructuring, and
we are reviewing new acquisition opportunities in this area. Effective February
1, 1996, we acquired Arkansas Galvanizing, Inc., our eighth and second largest
galvanizing facility, and we are working on additional acquisitions for this
segment as well. In the Oil Field Products Segment, there have been new industry
developments which open up prospects for obtaining a good level of sustained
profitability.
In the operational review on the next two pages, you will find more details
about the specific achievements of our individual operations and the steps being
taken to increase sales and profits. These changes hold much significance for
the future of Aztec, and we hope you will take time to learn about them.
It was with deep sorrow and great personal loss that we recorded, on April 15,
1996, the passing of Mr. R.W. Dial, a member of the Board of Directors since
1958. In the years he served on the Board of our Company, he made invaluable
contributions to its progress.
The Board of Directors on February 20, 1996, declared a year-end cash dividend
of three cents per share, a 50 percent increase over the previous payment. This
dividend was paid March 29, 1996, to Shareholders of record March 15, 1996.
The Aztec annual meeting is scheduled for 10:00 a.m. Tuesday, July 9, 1996, at
the Petroleum Club in the Derrick I Room on the 39th floor of the Continental
Plaza, Fort Worth, Texas. We urge all Shareholders who are able to attend to do
so.
Thank you for your interest and your support of Aztec. The year ahead should
bring good things for our Company. We will keep you informed.
Sincerely,
L.C. Martin
Chairman of the Board,
President and
Chief Executive Officer
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REVIEW OF OPERATIONS
ELECTRICAL PRODUCTS
TARGETING NEW WAYS TO GROW
Aztecs Electrical Products Segment is comprised of Rig-A-Lite Partnership, Ltd.,
The Calvert Company, and Atkinson Industries, Inc. This segment provides a wide
range of specialized electrical equipment and services to utility, industrial,
commercial, communication and petrochemical customers. In fiscal 1996, the
segments continued penetration of its domestic markets, combined with a strong
emphasis on its international markets, produced revenues exceeding $30 million
for the first time, helping the segment generate 61 percent of Aztecs
consolidated revenues.
RIG-A-LITE PARTNERSHIP, LTD. completed another record year in fiscal 1996.
Following up on three consecutive growth years, Rig-A-Lite continues to expand
into a variety of niche markets with a widening array of lighting products for
hazardous and severe environment locations. After a successful introduction in
fiscal 1995, Rig-A-Lites line of lighting products for food processing
applications spearheaded the Companys growth in fiscal 1996. Strengthening its
position in the domestic commercial and industrial markets, Rig-A-Lite expanded
its product portfolio by designing a line of fixtures for application in the
marine environment as well as re-engineering several products for use in very
high temperature locations. In order to carry forward its growth in highly
competitive industrial markets and to react more quickly to new product
opportunities, Rig-A-Lite is continually streamlining and upgrading its
production capabilities. In fiscal 1996, investment in state of the art
computer-controlled equipment gave Rig-A-Lite a low cost and flexible capability
to produce complex subassemblies for its ever-widening product set.
Rig-A-Lite emerged from fiscal 1996 strongly positioned for ongoing growth. As
new technologically advanced light sources are developed and become economically
viable, Rig-A-Lite will create new products and direct its marketing efforts to
an even broader customer base.
ATKINSON INDUSTRIES, INC. completed its record year in fiscal 1996 by tapping
the growth potential of some new market segments. Atkinsons factory fabricated
power centers, control centers, and instrumentation enclosures continued to
command top of the line acceptance in their traditional utility, industrial, and
mining applications. Maintaining its strong market position with key utilities
and major process-related industrial customers provided the impetus for
Atkinsons growth. The general decline in mining-related markets was more than
offset by a strong expansion into the new and fast-growing market for enclosures
to house communications network hub equipment. Having quickly become a
significant part of Atkinsons business, this market holds promise for continued
growth.
Working closely with end-users and major engineering firms, Atkinson has
enhanced its ability to meet customer demands for specialized products and
features. Designing and building customized enclosure layouts to incorporate
highly specialized equipment and controls gives Atkinson customers a completely
integrated system in a rugged, portable, and ready-to-operate package. Even
external trim features have been customized to meet customer requests.
With its expanding capabilities in design and fabrication, penetration of new
market segments, and a reputation for top quality products, Atkinson is now able
to offer future customers a broad array of value-added capabilities.
THE CALVERT COMPANY achieved significant improvement in results in fiscal 1996
over the prior year. Revenues increased by over 15 percent and Calvert returned
to operational profitability by demonstrating tighter cost controls and
increased efficiencies. Calverts broad variety of bus duct products for the
power generation and distribution industries continued to find its greatest
growth in the international marketplace. The rapid development of electrical
power generation infrastructures in the Far East, Asia and South America has
focused the attention of all major suppliers and engineering firms on these
markets. While Calvert continues to deal with both domestic and international
customers, nearly 75 percent of all Calvert shipments are destined eventually
for foreign markets. Dealing efficiently with the demands of designing,
manufacturing, and transporting for those global applications has been a key
factor in Calverts success.
Just as importantly, Calvert has dramatically restructured its internal
capabilities. A Total Quality Management program is now serving to re-engineer
internal processes and procedures while measurably improving both product and
service quality. Product families are being redesigned and standardized to
reduce cost, improve performance, and shorten production cycles. Major
investments have been made by Calvert to expand its production facility and to
update its manufacturing techniques. Long-term partnerships, now being
established with leading engineering and construction firms serving the
worldwide power generation industry, are expected to be strongly supportive to
Calverts future sales growth.
During fiscal 1996, Calvert displayed steady improvement in revenues, profits,
and operational capabilities. That process of improvement will continue as
Calvert moves forward to solidify a leadership role in its global markets.
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REVIEW OF OPERATIONS
GALVANIZING
A RAPID GEOGRAPHICAL EXPANSION
Since 1965, when Aztec built its first galvanizing plant to serve internal
needs, the Galvanizing Segment has been expanded rapidly through construction
and acquisition. Today this division operates a total of eight plants, serving a
broad geographic area in the South and Southwest. It has become one of the
nations largest galvanizing enterprises.
In fiscal 1996 Aztec galvanizing provided long-term, cost-effective corrosion
protection for more than 58,000 tons of fabricated steel products and, with
sales up 33 percent over fiscal 1995, accounted for 35 percent of the Companys
total revenue. This segment has never been unprofitable, and it has offered a
consistent flow of cash to the Corporation as a whole.
Growth potential of this business--in volume throughput, number of customers,
and market area--continues to be supported by plant additions. Arizonas first
and only new galvanizing facility, opened by Aztec near Phoenix in November
1994, became profitable in its first year and continues to build an imposing
customer list.
1996 Segment Sales
[BAR CHART APPEARS HERE]
1996 Operating Income
[BAR CHART APPEARS HERE]
Effective February 1, 1996, Arkansas Galvanizing, Inc. was acquired, giving the
segment a new facility exceeded only by the Crowley operation in volumes
processed.
The result of this aggressive expansion program has been to increase Aztecs
galvanizing volume by 71 percent in just 3 years and to make the segments
services available to customers from Southern California to the Florida
panhandle and northward up into the Mid-continent area.
Because galvanizing provides metallurgically bonded protection, it offers
economic advantages over repetitive application of coatings or use of costly
stainless steel. For many years, the U.S. galvanizing industry has consisted of
a scattering of fragmented small facilities. But consolidation of these units,
led by Aztec along with several other companies, is creating a stronger, more
competitive industry. There is considerable opportunity now ahead for this
resurgent business. The U.S. has tended to lag many parts of the world in
recognizing the economic value of galvanizing. In Europe, for example, about 35
percent of all rolled steel is galvanized, compared to just 6 percent in this
country. Through coordinated industry effort, the U.S. share of market is
expected to be increased in the years ahead.
To capitalize on this larger opportunity, Aztec galvanizing is providing more
value-added services. This strategy is intended not only to improve benefits to
the customer but also to leverage both sales and profitability beyond the
ongoing growth of the Companys facilities.
OIL FIELD PRODUCTS
FINANCIAL BENEFITS FROM PLANT PROGRAM
Because of changing conditions in the industry it serves, Aztecs Oil Field
Products Segment has become a diminishing contributor to overall Corporate
results, accounting for only 4 percent of consolidated revenues in fiscal 1996.
After the close of the Companys fiscal year, a contract was executed to sell the
Companys idle Houston facility. Once this sale is complete, additional cash
flows will be generated due to the elimination of carrying costs, and debt will
be reduced. Meanwhile, this segment continues to produce small-diameter oil
field tubular products and pup joints in its Crowley, Texas plant.
New opportunities are now emerging in the oil industry which could enable this
unit to achieve a good level of sustained profitability in years to come.
3
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL
Aztec Manufacturing Co. (the Company) focuses on three industrial markets:
Electrical Products, Galvanizing, and Oil Field Services. The Company reported
sales of $49.2 million for fiscal 1996 compared with $44.6 million in the
previous year. Net income for fiscal 1996 was $2.6 million or 45 cents per share
compared with $1.6 million or 27 cents per share fully diluted. Net income for
fiscal 1995 reflected a pre-tax charge of $1.3 million for inventory write-downs
and reserves for estimated liabilities. A discussion concerning effects of new
accounting standards can be found in note 1 of Notes to Consolidated Financial
Statements.
LIQUIDITY AND CAPITAL RESOURCES
YEARS ENDED FEBRUARY 29, 1996, FEBRUARY 28, 1995 AND FEBRUARY 28, 1994
The Companys financial condition, though strong in prior years, improved
dramatically during 1996. The improvement is attributed primarily to increased
profitability and better utilization of working capital. The Companys primary
sources of liquidity are cash flows from operating activities and bank debt.
Cash provided by operating activities was $9.1 million in 1996, compared to
$39,500 in 1995 and $3.8 million in 1994. The increased cash flows from
operations in 1996 as compared to 1995 were attributed to improved profits and
reductions in outstanding accounts receivable, primarily at Calvert, as well as
a Company-wide reduction in inventories. The increase in the Companys actual
write-off for credit losses in the amount of $589,000 for 1996 included $334,000
that was attributed to Calvert and recognized in 1995. Subsequent to year end,
the Company executed a six month Option To Purchase Agreement to sell its idle
Houston Tubing Facility. A write-down of $458,000 against this facility was
recorded in fiscal 1996 to adjust the assets to the estimated realizable value
the Company anticipates it will receive upon its disposition.
The Company purchased in February, 1996, 100 percent of the outstanding stock of
Arkansas Galvanizing, Inc. for approximately $4.2 million in cash and the
assumption of approximately $.8 million in liabilities. The purchase was funded
from borrowings under the Companys credit facility. Other major uses of cash
during fiscal 1996 were capital expenditures, repayment of debt, payment of cash
dividends, and the purchase of treasury stock.
Total assets increased to $42.6 million in 1996, from $40.8 in 1995, primarily
attributable to the acquisition of Arkansas Galvanizing, Inc. The Companys long-
term debt-to-equity ratio improved to .46 to 1 in 1996 from .52 to 1 in 1995.
Shareholders equity grew to $23.2 million, up 8 percent from fiscal 1995.
Working capital for 1996 was $7.9 million compared to $10.1 million in 1995. The
Company generally uses available cash to reduce bank debt. Portions of
reductions in accounts receivable and inventories through the course of 1996
were applied to long-term debt, thereby reducing working capital. The Companys
current ratio remains strong at 1.89 to 1 for 1996.
The Company maintains a $16 million credit facility, which consists of a $10
million revolving line of credit and $6 million in term notes. Current
availability under this credit facility is approximately $5.5 million.
Management believes that the credit facility, current assets and cash generated
from operations will be sufficient to accommodate the Companys liquidity needs
for fiscal 1997.
RESULTS OF OPERATIONS
YEAR ENDED FEBRUARY 29, 1996 (1996) COMPARED WITH YEAR ENDED FEBRUARY 28, 1995
(1995)
Consolidated net sales for 1996 grew by $4.6 million or 10 percent over 1995.
The Companys Electrical Products Segment, which is made up of Rig-A-Lite
Partnership L.T.D. (Rig-A-Lite) , The Calvert Company (Calvert) and Atkinson
Industries, Inc. (Atkinson) showed a 10 percent increase in revenues for 1996 as
compared to 1995. Rig-A-Lites consolidated revenues increased 7 percent for
1996. Revenues from the industrial lighting market increased 9 percent for 1996
over 1995 due to continued sales emphasis in this market. Revenues generated
from the petroleum industry were flat for 1996 as compared to 1995. Calverts
revenues increased 15 percent for 1996 due to an intensified emphasis on
marketing. The majority of Calverts products were shipped to foreign markets
during 1996. Atkinson revenues were up 6 percent in 1996, a record year.
Revenues in the Galvanizing Segment were up 33 percent for 1996 as compared to
1995. This increase was primarily due to an approximate 31 percent increase in
the volume of steel processed, as well as improved average selling prices over
1995, including a full year of Arizona Galvanizing operations. The addition of
Arkansas Galvanizing, Inc., effective February 1, 1996, was a small contributor
to revenues for 1996. The Oil Field Products Segment, which consists of the
processing of oil field tubular products at the Crowley facility, was down 51
percent for 1996. This segment generated 4 percent of the consolidated revenues
of the Company in 1996. The Company is guardedly optimistic that this segment
will improve in fiscal 1997.
4
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Consolidated operating income (see note 9 of Notes to Consolidated Financial
Statements) increased $2.6 million or 47 percent for 1996, as compared to 1995.
The Electrical Products Segment showed a dramatic improvement for 1996, with
operating income up 214 percent over 1995. Rig-A-Lites operating income for 1996
was up 10 percent from 1995 due to increased volume as well as improved
operating margins. Calvert showed an operating income for 1996 as compared to an
operating loss in 1995. This was achieved through improved cost controls and
increased efficiencies. Atkinsons operating income for 1996 was up 20 percent
from 1995 due to improved margins and operating efficiencies. The Galvanizing
Segments operating income improved 40 percent, consistent with increased
revenues for 1996. Arkansas Galvanizing should be a significant contributor for
fiscal 1997. The Oil Field Products Segment showed a $428,000 operating loss for
1996 as compared to $1.1 million in operating income for 1995. The operating
loss was attributed to reduced volume.
General corporate expenses for 1996 increased by 47 percent over 1995. This
increase was attributed to higher employee benefits and profit sharing expenses,
higher expense for professional services and increased selling expenses.
Interest expense in 1996, as compared to 1995, increased due to higher interest
rates through the course of the year as well as additional borrowings for the
purchase of Arkansas Galvanizing in February, 1996.
Other (income) expense was made up of scrap sales, gain on sales of equipment,
write-down of assets held for sale, and other (income) expense items not
specifically identifiable to a segment.
YEAR ENDED FEBRUARY 28, 1995 (1995) COMPARED WITH YEAR ENDED FEBRUARY 28, 1994
(1994)
Consolidated net sales in 1995 grew by $3.8 million or 9 percent over 1994. The
Company's Electrical Products Segment revenues were flat for 1995 as compared to
1994. In this segment, Rig-A-Lite's total revenues increased approximately 10
percent in 1995 as compared to 1994. Rig-A-Lite's revenues from the industrial
lighting market increased approximately 38 percent in 1995 as compared to 1994,
due to increased sales emphasis, as well as new product development. Rig-A-
Lite's revenues generated from the petroleum industry were down approximately 42
percent during 1995, due to the slow down in the international petroleum
industry. Revenues from Calvert and Atkinson were down approximately 5 percent
and 4 percent respectively for 1995 as compared to 1994. Revenues in the
Galvanizing Segment were up approximately 34 percent in 1995 over 1994. This
increase was primarily due to an approximate 31 percent increase in the volume
of steel processed, as well as improved average selling prices over 1994. As
expected, the opening of the Company's Arizona Galvanizing facility in late 1995
was a small contributor to 1995 revenues. The Oil Field Products Segment, which
consists of the processing of oil field tubular products at the Crowley
facility, continued its 1994 growth during the first 9 months of 1995. Revenues
for 1995 were up approximately 13 percent from 1994 but began to decline in the
latter part of fiscal 1995. Revenues generated from this segment were less than
10 percent of the Company's consolidated revenues for 1995.
Consolidated operating income (see note 9 of Notes to Consolidated Financial
Statements) decreased $1.1 million, or 17 percent for 1995, as compared to 1994.
The Electrical Products Segment was down approximately 67 percent in 1995.
Rig-A-Lite's operating income in 1995 was higher as compared to 1994, due to
increased volume in the industrial lighting market and from revenues generated
by new product introductions. Operating income at Calvert, which manufactures
electrical bus duct systems for the power generation industry, was adversely
affected by lower margins, production inefficiencies and related inventory
write-downs, estimated warranty costs, and estimated losses on certain future
contracts. Calvert experienced losses and decreases in profitability in both
fiscal 1995 and 1994. Atkinson's operating income in 1995, as compared to 1994,
was lower due to reduced margins being accepted on certain jobs to increase
backlogs. The Galvanizing Segment's operating margins improved due to increased
revenues and improved efficiencies for 1995. The Company's Arizona Galvanizing
facility showed an operating loss of approximately $335,000 during the last
quarter of 1995. The loss included normal start-up costs associated with the
opening of this new facility. Operating income from the Oil Field Products
Segment was up due to increased volume of tubing processed for 1995 as compared
to 1994.
General corporate expenses decreased 32 percent in 1995, as compared to 1994.
This decrease was attributed to lower employee benefit and profit sharing
expense, reduced expenditures for professional services, and a larger percent
being allocated directly to the Company's segments in 1995. Interest expense in
1995, as compared to 1994, was higher due to higher interest rates and larger
outstanding loan balances associated with borrowings related to the construction
of the Company's Arizona Galvanizing facility.
Other (income) expense is made up of scrap sales, gain on sale of equipment and
other (income) expense items not specifically identifiable to a segment.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
ENVIRONMENTAL MATTERS
In the course of its galvanizing operations, the Company is subject to
occasional governmental proceedings and orders pertaining to noise, air
emissions and water discharges into the environment. As part of its continuing
environmental program, the Company has complied with such proceedings and orders
without any materially adverse effect on its business.
In August 1988, the Company received a letter from the Texas Water Commission
("TWC") regarding remedial actions at a chemical waste disposal site near
Ranger, Texas. Records indicate the Company may have generated a portion of the
waste placed at the site and, therefore, has been deemed by the TWC to be a
Potentially Responsible Party ("PRP"), with respect to the site under the Texas
Solid Waste Disposal Act, Chapter 361, Texas Health and Safety Code. The
Company, together with other companies that may have generated waste placed at
the site, is participating with the TWC in a clean-up study at the site. No
materially adverse findings have resulted from the reviews to date.
The Company provides for costs related to contingencies when a loss is probable
and the amount is reasonably determinable. It is the opinion of management,
based on past experience, that the ultimate resolution of these contingencies,
to the extent not previously provided for, will not have a materially adverse
effect on the Company.
CONSOLIDATED SUMMARY OF OPERATIONS AND OTHER FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Fiscal Year
---------------------------------------------------------------
1996(a) 1995 1994(b) 1993 1992
----------- ----------- ----------- ----------- -----------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Summary of operations:
Net sales $49,184 $44,608 $40,834 $30,834 $30,238
Net income 2,582 1,578 2,172 1,073 1,009
Income per share (c):
Net income--assuming no dilution $ .46 $ .28 $ .39 $ .19 $ .18
Net income--assuming full dilution .45 .27 .37 .19 .18
Cash dividends per share .03 .02 .045 .10 .098
Total assets $42,621 $40,791 $34,060 $25,827 $25,986
Long-term debt, excluding current
portion 9,516 10,484 6,622 1,730 3,057
Shareholders' equity 23,160 21,376 19,548 17,547 17,036
</TABLE>
(a) Includes the acquisition of a subsidiary in February 1996.
(b) Includes the acquisition of two subsidiaries in March 1993 and January
1994.
(c) Per share data has been retroactively adjusted for a 5 percent stock
dividend declared and paid in 1992 and the dilutive effect of stock
options.
6
<PAGE>
STOCK PRICES AND DIVIDENDS PER SHARE
<TABLE>
<CAPTION>
FISCAL 1996 FISCAL 1995
Cash Cash
High Bid Low Bid Dividend High Bid Low Bid Dividend
-------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1st Quarter $4-1/2 $3-1/2 $ .00 1st Quarter $6-3/8 $4-5/8 $ .00
2nd Quarter 3-7/8 3-1/8 .00 2nd Quarter 5-1/2 4-5/8 .00
3rd Quarter 4-1/8 3-1/4 .00 3rd Quarter 5-1/8 4-1/8 .00
4th Quarter 5-3/8 3-1/2 .03 4th Quarter 5 3-7/8 .02
Whole Year 5-3/8 3-1/8 .03 Whole Year 6-3/8 3-7/8 .02
</TABLE>
Stock Prices: The above quotations represent prices between dealers and do not
include retail mark-up, mark-down or commission. They may or may not represent
actual transactions. Daily bid/ask closing prices are quoted in the National OTC
List. The Company's common stock trades on the NASDAQ Stock Market under the
symbol: AZTC.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Shareholders
Aztec Manufacturing Co.
We have audited the accompanying consolidated balance sheets of Aztec
Manufacturing Co. as of February 29, 1996 and February 28, 1995, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended February 29, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Aztec
Manufacturing Co. at February 29, 1996 and February 28, 1995, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended February 29, 1996, in conformity with generally
accepted accounting principles.
Ernst & Young LLP
Fort Worth, Texas
March 29, 1996
7
<PAGE>
AZTEC MANUFACTURING CO. CONSOLIDATED BALANCE SHEETS
February 29, 1996 and February 28, 1995
<TABLE>
<CAPTION>
Assets 1996 1995
- ------ ----------------- -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 416,223 $ 192,764
Accounts receivable, net of allowance for doubtful accounts of $200,000 in
1996 and $225,000 in 1995 9,483,471 10,896,521
Inventories 6,672,548 7,233,278
Prepaid expenses and other 192,047 97,217
----------------- -----------------
Total current assets 16,764,289 18,419,780
Property, plant, and equipment, at cost:
Land 1,212,750 1,167,750
Buildings and structures 12,859,464 11,639,249
Machinery and equipment 12,080,903 10,699,045
Furniture and fixtures 1,244,137 1,132,427
Automotive equipment 592,689 517,273
Construction in progress 255,725 107,471
----------------- -----------------
28,245,668 25,263,215
Less accumulated depreciation 11,420,716 9,997,401
----------------- -----------------
Net property, plant, and equipment 16,824,952 15,265,814
Property held for sale, net of accumulated depreciation of $1,209,000 in
1996 and $1,133,100 in 1995 1,504,756 2,038,288
Intangible assets, less accumulated amortization of $1,427,600 in
1996 and $1,313,500 in 1995 425,430 471,285
Costs in excess of fair value of assets purchased, less accumulated
amortization of $642,300 in 1996 and $420,400 in 1995 6,867,543 4,310,296
Other assets 234,340 285,704
----------------- -----------------
$42,621,310 $40,791,167
================= =================
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Accounts payable $ 4,077,754 $ 4,131,414
Accrued salaries and wages 693,338 536,315
Other accrued liabilities 2,038,227 1,974,607
Income taxes 517,355 145,215
Long-term debt due within one year 1,558,926 1,515,593
----------------- -----------------
Total current liabilities 8,885,600 8,303,144
Long-term debt due after one year 9,516,472 10,484,094
Net deferred income tax liability 1,058,993 627,856
Shareholders' equity:
Common stock, $1 par value; 25,000,000 shares authorized; 5,772,895 and
5,741,260 shares issued at February 29, 1996 and February 28, 1995,
respectively 5,772,895 5,741,260
Capital in excess of par value 9,283,268 9,219,998
Retained earnings 8,830,213 6,414,815
Less common stock held in treasury (232,362 shares, at cost) (726,131) --
----------------- -----------------
Total shareholders' equity 23,160,245 21,376,073
----------------- -----------------
$42,621,310 $40,791,167
================= =================
</TABLE>
See accompanying notes.
8
<PAGE>
AZTEC MANUFACTURING CO. CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
Years Ended February 29, 1996 and February 28, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
-------------------- --------------------- -------------------
<S> <C> <C> <C>
Net sales $49,184,383 $44,607,665 $40,834,492
Costs and expenses:
Cost of sales 36,352,710 34,129,695 30,242,734
Selling, general, and administrative 7,548,641 6,566,317 6,684,185
Net (gain) loss on sale of property, plant, an 45,162 3,040 (217,284)
Interest expense 912,586 822,627 559,876
Other expense, net 57,923 477,525 3,787
------------------- --------------------- -------------------
44,917,022 41,999,204 37,273,298
------------------- --------------------- -------------------
Income before income taxes 4,267,361 2,608,461 3,561,194
Income taxes:
Current expense 1,514,762 1,269,735 1,287,130
Deferred expense (benefit) 170,986 (239,406) 101,736
------------------- --------------------- ------------------
1,685,748 1,030,329 1,388,866
------------------- --------------------- ------------------
Net income $ 2,581,613 $ 1,578,132 $ 2,172,328
=================== ===================== ==================
Income per share:
Assuming no dilution $.46 $.28 $.39
----- ----- -----
Assuming full dilution $.45 $.27 $.37
----- ----- -----
</TABLE>
See accompanying notes.
AZTEC MANUFACTURING CO. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended February 29, 1996 and February 28, 1995 and 1994
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Common stock Capital In
-------------------------------------
excess of Retained Treasury
Shares Amount par value earnings stock
------------------- --------------- ----------------- ------------------ -----------
Balance at February 28, 1993 5,622,853 $5,622,853 $8,891,740 $3,032,663 $ -
Exercise of stock options 22,641 22,641 59,515 - -
Cash dividends paid and declared - - - (253,574) -
Net income - - - 2,172,328 -
----------------- ------------------ ----------------- ------------------ ------------
Balance at February 28, 1994 5,645,494 5,645,494 8,951,255 4,951,417 -
Exercise of stock options 95,766 95,766 268,743 - -
Cash dividends declared - - - (114,734) -
Net income - - - 1,578,132 -
------------------ ------------------ ----------------- ------------------ ------------
Balance at February 28, 1995 5,741,260 5,741,260 9,219,998 6,414,815 -
Exercise of stock options 31,635 31,635 63,270 - -
Purchase of treasury stock
(232,362 shares) - - - - (726,131)
Cash dividends declared - - - (166,215) -
Net income - - - 2,581,613 -
-------------------- ----------------- ----------------- ------------------ ------------
Balance at February 29, 1996 5,772,895 $5,772,895 $9,283,268 $8,830,213 ($726,131
===================== ================= ================== ================== ===========
</TABLE>
See accompanying notes.
9
<PAGE>
AZTEC MANUFACTURING CO. CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended February 29, 1996 and February 28,1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---------------- ---------------- ----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 2,581,613 $ 1,578,132 $ 2,172,328
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,890,836 1,407,846 1,221,434
Amortization 336,431 346,427 496,611
Write-down of property held for sale 458,000 - -
Provision for doubtful accounts 564,069 216,000 124,435
Deferred income tax expense (benefit) 170,986 (239,406) 101,736
Net (gain) loss on sale of property, plant, and equipment 45,162 3,040 (217,284)
---------------- ---------------- ----------------
6,047,097 3,312,039 3,899,260
Effect of changes in operating assets and liabilities, net of
acquisition of subsidiaries in 1994 and 1996:
Accounts receivable 2,039,108 (2,341,328) (1,009,578)
Inventories 932,491 (1,926,303) (203,293)
Prepaid expenses and other (83,769) 36,737 454,553
Other assets (17,131) (5,339) 43,457
Accounts payable (208,588) 762,983 448,941
Accrued salaries and wages 135,590 (4,123) 266,019
Other accrued liabilities and income taxes 257,775 204,885 (134,582)
---------------- ---------------- ----------------
Net cash provided by operating activities 9,102,573 39,551 3,764,777
Cash flows from investing activities:
Proceeds from the sale of property, plant, and equipment
and property held for sale 59,140 497,370 646,898
Purchases of property, plant, and equipment (2,861,780) (4,890,348) (1,224,701)
Acquisition of subsidiaries, net of cash acquired (3,931,225) - (7,024,201)
---------------- ---------------- ----------------
Net cash used in investing activities (6,733,865) (4,392,978) (7,602,004)
Cash flows from financing activities:
Proceeds from revolving loan 53,681,381 52,146,909 29,665,153
Proceeds from long-term debt - 1,900,000 5,626,436
Payments on long-term debt (1,490,597) (1,893,304) (3,850,166)
Payments on revolving loan (53,590,073) (47,976,262) (27,548,462)
Cash dividends paid (114,734) (112,910) (140,574)
Proceeds from exercise of stock options 94,905 364,509 82,156
Purchase of treasury stock (726,131) - -
---------------- ---------------- ----------------
Net cash provided by (used in) financing activities (2,145,249) 4,428,942 3,834,543
---------------- ---------------- ----------------
Net increase (decrease) in cash and cash equivalents 223,459 75,515 -2,684
Cash and cash equivalents at beginning of year 192,764 117,249 119,933
---------------- ---------------- ----------------
Cash and cash equivalents at end of year $ 416,223 $ 192,764 $ 117,249
================ ================ ================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 967,000 $ 762,000 $ 534,000
Income taxes $ 1,210,000 $ 1,440,000 $ 1,706,000
</TABLE>
See accompanying notes.
10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization--Aztec Manufacturing Co. (the "Company") operates primarily in
------------
the United States. Information on the CompanyOs operations by segment are
included in Note 9 to the consolidated financial statements.
Basis of consolidation--The consolidated financial statements include the
----------------------
accounts of Aztec Manufacturing Co. and its wholly-owned subsidiaries and
partnerships. All significant intercompany accounts and transactions have
been eliminated in consolidation.
Use of estimates--The preparation of the financial statements in conformity
----------------
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. The primary areas of
estimation affecting the consolidated financial statements include the
determination of the allowance for doubtful accounts receivable,
inventory reserves, warranty and environmental accruals. Actual
results could differ from those estimates and assumptions.
Concentrations of credit risk--Financial instruments that potentially
-----------------------------
subject the Company to significant concentrations of credit risk consist
principally of cash, investments and trade accounts receivable.
The Company maintains cash and cash equivalents with various financial
institutions. These financial institutions are located throughout the
country and Company policy is designed to limit exposure to any one
institution. The Company performs periodic evaluations of the relative
credit standing of those financial institutions that are considered in the
Company's banking relationships.
Concentrations of credit risk with respect to trade accounts receivable are
limited due to the diversity of operating segments. The Company's net
credit losses in 1996, 1995 and 1994 were approximately $589,000, $41,000
and $124,000, respectively. Collateral is usually not required from
customers as a condition of sale.
Inventories--Inventories are stated at the lower of cost (primarily first-
-----------
in, first-out) or market. Provisions for obsolete and slow-moving
inventories are recorded.
Property, plant, and equipment--For financial reporting purposes,
------------------------------
depreciation is computed by the straight-line method using rates based on
the estimated useful lives of the related assets as follows:
Buildings and structures 10-25 years
Machinery and equipment 3-15 years
Furniture and fixtures 5-15 years
Automotive equipment 3 years
Cash equivalents--For purposes of reporting cash flows, the Company
----------------
considers all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents.
Intangible assets and costs in excess of fair value of assets purchased--
-----------------------------------------------------------------------
Intangible assets include purchased intangibles (customer lists,
engineering drawings, noncompete agreements, and sales backlog). Such
intangible assets and costs in excess of fair value of assets purchased are
being amortized over the estimated useful lives of the assets ranging from
5 to 40 years.
Asset impairment--The Financial Accounting Standards Board issued Statement
----------------
of Financial Accounting Standards (SFAS) No. 121, OAccounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed
Of,O in March 1995. SFAS No. 121 requires that long-lived assets and
certain identifiable intangibles (such as those described above) be
reviewed for impairment whenever events or changes in circumstances
indicate the carrying amount of an asset may not be recoverable. The
Statement also requires assets to be disposed of be reported at the lower
of carrying amount or fair value less costs to sell. The new standard is
effective for the fiscal years beginning after DecemberE15, 1995.
Management does not anticipate that this Statement will have a significant
impact on the Company when implemented in fiscal 1997.
Income taxes--Deferred income taxes are recognized using the liability
------------
method. Under this method of accounting, deferred income taxes are recorded
for the difference between the financial reporting and income tax bases of
assets and liabilities using enacted tax rates and laws.
11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock-based compensation--The Company grants stock options for a fixed
------------------------
number of shares to employees and directors with an exercise price equal to
the fair value of the shares at the date of grant. The Company accounts for
stock option grants in accordance with Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees," and accordingly,
recognizes no compensation expense for the stock option grants in which the
exercise price is equal to the fair value of the shares granted.
Fair Value of Financial Investments--The following methods and assumptions
-----------------------------------
were used by the Company in estimating its fair value disclosures for
financial instruments as of February 29, 1996:
Cash and cash equivalents: The carrying amount reported in the
consolidated balance sheet for cash and cash equivalents approximates fair
value.
Long-term debt: The reported amounts of the Company's long-term debt
approximate fair value since interest rates for substantially all of the
debt approximate current rates of interest.
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
1996 1995
-------------- ---------------
(Dollars in thousands)
<S> <C> <C>
Raw materials $ 4,935 $ 5,028
Work-in-process 991 1,464
Finished goods 747 741
-------------- -------------
$6,673 $7,233
============== =============
</TABLE>
3. EMPLOYEE BENEFIT PLANS
The Company has a trusteed profit sharing plan covering substantially all
of its employees. Under the provisions of the plan, the Company contributes
amounts as authorized by the Board of Directors. Contributions to the
profit sharing plan amounted to $426,000 for 1996, $260,500 for 1995 and
$376,500 for 1994.
During fiscal 1994, the Company recorded a deferred compensation liability
and corresponding charge to expense in the amount of $246,000 under the
terms of a "buy-sell and termination" agreement with an officer of the
Company. This agreement provides for the proceeds of an existing life
insurance policy to be used to acquire Company stock from the estate of the
officer in the event of his death or for transfer of the policy to the
officer upon retirement. The deferred compensation amount is equivalent to
the cash surrender value of the life insurance policy and amounted to
$223,000 at February 29, 1996.
4. INCOME TAXES
Deferred federal and state income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for
income tax purposes. Significant components of the Company's net deferred
income tax liabilities and assets as of February 29, 1996 and February 28,
1995 are as follows:
12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. INCOME TAXES (CONTINUED)
<TABLE>
<CAPTION>
1996 1995
------------------- ----------------
(Dollars in thousands)
<S> <C> <C>
Deferred income tax liabilities:
Depreciation methods and property basis dif $ 1,224 $ 1,282
Accounts receivable and inventory 237 124
------------------- ----------------
Total deferred income tax liabilities 1,461 1,406
Deferred income tax assets:
Employee related items 162 174
Intangible assets 118 116
Reserve for environmental liabilities 96 105
Reserve for contract losses - 102
Other 26 281
------------------- -----------------
Total deferred income tax assets 402 778
------------------- -----------------
Net deferred income tax liability $ 1,059 $ 628
=================== =================
Current income tax expense consists of:
1996 1995 1994
------------------- ----------------- ----------------
(Dollars in thousands)
Federal $ 1,393 $ 1,158 $ 1,154
State 122 112 133
------------------- ----------------- ----------------
$ 1,515 $ 1,270 $ 1,287
=================== ================= ================
</TABLE>
A reconciliation from the federal statutory tax rate to the effective tax
rate for the years 1996, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------------------- -------------- ----------------
<S> <C> <C> <C>
Statutory tax rate 34.0% 34.0% 34.0%
Expenses not deductible for tax purposes 2.2 6.7 5.2
State income taxes, net of federal income tax benefit 1.9 2.8 2.5
Other 1.4 (4.0) (2.7)
--------------------- -------------- ----------------
Effective tax rate 39.5% 39.5% 39.0%
===================== ============== ================
</TABLE>
5. INCOME PER SHARE
Net income per share is based on the month-end average number of shares
outstanding during each year, adjusted for the dilutive effect of stock
options.
The average number of shares outstanding is 5,634,341 in 1996, 5,698,496 in
1995 and 5,624,740 in 1994. Cash dividends paid (or declared) per share are
$.03 in 1996, $.02 in 1995 and $.045 in 1994.
6. STOCK OPTIONS
The Company has two Incentive Stock Option Plans for its employees. At
February 29, 1996, options were outstanding and exercisable on 382,280
shares at exercise prices (equal to the market price at the date of grant)
ranging from $3.00 to $4.44 per share. These options expire November 1996
through December 2000. Included in these outstanding options are 15,000
options granted in 1996 with an exercise price of $3.88 and expiring in
December 2000. Approximately 132,400 options were forfeited during fiscal
1996 which were exercisable at prices ranging from $3.00 to $4.65.
The Company also has two Nonstatutory Stock Option Plans for the
independent directors of the Company. Under the plans, options are granted
at 100 percent of the fair value of the shares at the grant date. The
maximum number of shares that may be issued under each of the plans is
115,752 and 157,500 shares. At FebruaryE29, 1996, 183,216 shares have been
granted under these plans, and are immediately exercisable at prices
ranging from $3.69 to $5.67 per share. Options under these plans expire at
various dates through November 2003.
13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. REVOLVING LOAN AND LONG-TERM DEBT
The Company has a term and revolving loan agreement with a bank that allows
for borrowings of up to $6 million and $10 million, respectively.
Outstanding borrowings bear interest at prime plus .50 percent.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1996 1995
---------------- ----------------
(Dollars in thousands)
<S> <C> <C>
Term notes payable to bank ($6 million), due in monthly installments through
March 2000 (interest at 8.75 percent on February 29, 1996) $ 4,029 $ 5,513
Revolving line of credit payable to bank ($10 million), due May 1997 (interest at
8.75 percent on February 29, 1996) 6,578 6,487
Industrial Revenue Bonds, due in August 2003, payable in monthly installments
(interest at 5.60 percent on February 29, 1996) 468 -
---------------- ----------------
11,075 12,000
Less amount due within one year 1,559 1,516
---------------- ----------------
$ 9,516 $10,484
================ ================
</TABLE>
The revolving loan, term notes and Industrial Revenue Bonds are subject to
loan agreements which require the Company to 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 with
these covenants as of February 29, 1996. The CompanyOs long-term debt is
secured by certain inventory, equipment, accounts receivable, and real
property.
Maturities of long-term debt are as follows (dollars in thousands):
<TABLE>
<S> <C>
1997 $ 1,559
1998 8,093
1999 586
2000 380
2001 32
Thereafter 425
-------------
$11,075
=============
</TABLE>
8. QUARTERLY FINANCIAL INFORMATION, UNAUDITED (DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Quarters Ended
5/31/95 8/31/95 11/30/95 2/29/96
------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
1996
----
Net sales $ 12,069 $11,332 $12,975 $12,808
Gross profit 2,948 2,905 3,496 3,483
Net income 554 569 732 727
Net income per share--assuming no dilution .10 .10 .13 .13
Net income per share--assuming full dilution .10 .10 .13 .12
<CAPTION>
Quarters Ended
5/31/94 8/31/94 11/30/94 2/28/95
------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
1995
----
Net sales $ 11,276 $11,089 $10,502 $11,741
Gross profit 3,353 3,229 2,546 1,350
Net income (loss) 692 705 541 (360)
Net income (loss) per share--assuming no dilution .12 .13 .09 (.06)
Net income (loss) per share--assuming full dilution .12 .12 .09 (.06)
</TABLE>
14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. OPERATING SEGMENTS
The Company provides processing services and manufactures products for sale
primarily in the United States in the following segments: (1) Electrical
Products - manufactures petroleum and industrial lighting products,
electrical bus ducts and electrical power center buildings; (2)
Galvanizing - provides custom hot dip galvanizing service for industries
handling fabricated metal products; and (3) Oil Field Products - processes
oil field tubing to the extent of upsetting, threading, testing, and heat
treating; also, manufactures oil field pup joints.
Information regarding operations and assets by segments follows:
<TABLE>
<CAPTION>
Fiscal year ended Fiscal year ended
February 29, February 28,
1996 1995 1994
-------------------- --------------------- ----------------------
(Dollars in thousands)
<S> <C> <C> <C>
Net sales:
Electrical products $ 30,172 $27,547 $27,547
Galvanizing 16,920 12,761 9,490
Oil field products 2,092 4,300 3,797
-------------------- --------------------- ----------------------
$49,184 $44,608 $40,834
==================== ===================== ======================
Operating income (loss) (a):
Electrical products $ 4,264 $ 1,358 $ 4,154
Galvanizing 4,270 3,056 1,982
Oil field products (428) 1,084 455
-------------------- --------------------- ----------------------
8,106 5,498 6,591
General corporate expenses 2,523 1,722 2,549
Interest expense 913 823 560
Other (income) expense, net (b) 403 345 (79)
-------------------- --------------------- ----------------------
3,839 2,890 3,030
-------------------- --------------------- ----------------------
Income before income taxes $ 4,267 $ 2,608 $ 3,561
==================== ===================== ======================
Depreciation and amortization:
Electrical products $ 656 $ 646 $ 621
Galvanizing 1,231 833 639
Oil field products 246 203 204
Corporate 94 72 254
-------------------- --------------------- ----------------------
$ 2,227 $ 1,754 $ 1,718
==================== ===================== ======================
Additions to property, plant, and equipment (including
assets of purchased subsidiaries in 1996 and 1994):
Electrical products $ 1,002 $ 266 $ 1,127
Galvanizing 2,273 4,413 1,143
Oil field products 48 56 73
Corporate 111 155 370
-------------------- --------------------- ----------------------
$ 3,434 $ 4,890 $ 2,713
==================== ===================== ======================
Total assets:
Electrical products $16,454 $19,745 $16,882
Galvanizing 19,499 13,689 8,844
Oil field products 3,531 3,636 4,330
Corporate (c) 3,137 3,721 4,004
-------------------- --------------------- ----------------------
$42,621 $40,791 $34,060
==================== ===================== ======================
</TABLE>
(a) Operating income (loss) consists of net sales less cost of sales,
specifically identifiable general and administrative expenses and
selling expenses.
(b) Other (income) expense, net includes scrap sales, gains and losses on
sale of equipment, write-down of assets held for sale, and other
(income) expense not specifically identifiable to a segment.
(c) Includes $1,504,800, $2,038,300 and $2,311,600 of property held for
sale in 1996, 1995 and 1994, respectively.
15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. COMMITMENTS AND CONTINGENCIES
The Company is subject to various environmental protection reviews by state
and federal government agencies and has been identified as a potential
responsible party in certain investigations conducted by these agencies.
The environmental matters are in various stages of investigation and one
matter was settled during 1994 for an insignificant amount. During 1995 and
1994, approximately $115,000 and $176,000, respectively, was included in
other expense relating to environmental clean-up matters. The Company did
not expense any amounts related to environmental liabilities in 1996. The
ultimate liability, if any, which might result from such reviews or
additional clean-up and remediation expenses cannot presently be
determined; however, as a result of an internal analysis and prior clean-up
efforts, management believes the results will not have a material impact on
the Company and that the recorded reserves for estimated losses are
adequate.
In order to maintain permits to operate certain of the Company's
facilities, future capital expenditures for equipment may be required to
meet new or existing environmental regulations.
11. PROPERTY HELD FOR SALE
The Company closed its Houston Tubing facility in March 1989 due to lagging
sales associated with the slump in the drilling industry. As a result, the
Houston facility is being offered for sale. The Company executed a six
month Option To Purchase Agreement on a portion of the facility to an
unrelated third party and, accordingly, has reduced the carrying value by
$458,000 to reflect the estimated net proceeds from the proposed sale. The
Company believes the carrying value of the remainder of the facility will
be recovered under an existing lease purchase option. Further adjustments
of the estimated carrying value may be necessary if the sale or lease
purchase agreements referred to above are not consummated.
12. ACQUISITIONS
The Company purchased substantially all of the assets of Atkinson
Industries, Inc., a manufacturer of electrical power center buildings and
assemblies in March 1993 for approximately $6.3 million in cash and the
assumption of approximately $0.8 million in liabilities. The assets
purchased and liabilities assumed were recorded at estimated fair value;
the costs in excess of fair value for this acquisition were approximately
$3.3 million.
The Company also purchased substantially all of the assets of Gulf Coast
Galvanizing in January 1994 for approximately $1.6 million in cash and the
assumption of approximately $0.7 million in liabilities. Costs in excess of
estimated fair value of this acquisition were approximately $1.1 million.
In February 1996, the Company purchased all of the stock of Arkansas
Galvanizing, Inc. for approximately $4.2 million in cash and the assumption
of approximately $.8 million in liabilities. Costs in excess of estimated
fair value of this acquisition were approximately $2.8 million. In
connection with this acquisition, the Company agreed to pay the selling
shareholders $450,000 pursuant to an agreement not to compete. The total
potential obligation will be paid and expensed in equal monthly
installments over a 60 month period commencing April 1, 1996.
All acquisitions were accounted for under the purchase method of
accounting. The excess of costs over fair value for these acquisitions is
being amortized over periods of 15 and 25 years.
The pro forma consolidated results of operations for the years ended
February 29, 1996 and February 28, 1995, assuming the Arkansas Galvanizing,
Inc. acquisition had been consummated as of March 1, 1994 is as follows:
<TABLE>
<CAPTION>
(Unaudited)
1996 1995
---------------- -------------------
(Dollars in thousands,
except per share amounts)
<S> <C> <C>
Net sales $52,598 $48,001
Net income 2,797 1,766
Net income per share - assuming no dilution .50 .31
Net income per share - assuming full dilution .49 .31
</TABLE>
16
<PAGE>
CORPORATE INFORMATION
<TABLE>
<CAPTION>
BOARD OF DIRECTORS EXECUTIVE OFFICERS
<S> <C>
L. C. MARTIN L. C. MARTIN
Chairman of the Board, President & Chairman of the Board, President &
Chief Executive Officer of the Company Chief Executive Officer
DANA L. PERRY ROBERT H. JOHNSON
Vice President of Finance Secretary/Treasurer
Chief Financial Officer of the Company
Assistant Secretary of the Company FRED L. WRIGHT, JR.
Senior Vice President/Galvanizing Segment
MARTIN C. BOWEN
President & CEO ROGER O. GROSSO
Performing Arts Fort Worth Vice President/Electrical Products Segment
R. J. SCHUMACHER DANA L. PERRY
President of Texland Petroleum, Inc. Vice President of Finance
Chief Financial Officer, Assistant Secretary
JOHN G. RICHARDS
Fort Worth Investor
W. C. WALKER
Management Consultant OTHER INFORMATION
SAM ROSEN LEGAL COUNSEL
Partner in the Law Firm of Shannon, Gracey, Ratliff & Miller, L.L.P.,
Shannon, Gracey, Ratliff & Miller, L.L.P. Fort Worth, Texas
DR. H. KIRK DOWNEY INDEPENDENT AUDITORS
Professor of Management and Dean of Ernst & Young LLP, Fort Worth, Texas
the M.J. Neeley School of Business,
Texas Christian University TRANSFER AGENT & REGISTRAR
KeyCorp Shareholder Services, Inc.
ROBERT H. JOHNSON Dallas, Texas
CPA and Financial Consultant
Secretary/Treasurer of the Company STOCK LISTING
Nasdaq National Market System
ADVISORY DIRECTOR NASDAQ Symbol - AZTC
WILLIAM D. RATLIFF, JR.
Of Counsel to the Law Firm of FORM 10-K
Shannon, Gracey, Ratliff & Miller, L.L.P. Shareholders may obtain a copy of the Company's current Form
10-K by writing Dana Perry at the Company's Corporate Office.
ANNUAL MEETING
July 9, 1996, 10:00 a.m.
Fort Worth Petroleum Club
Fort Worth, Texas
</TABLE>
<PAGE>
LOCATIONS
ELECTRICAL PRODUCTS SEGMENT
RIG-A-LITE PARTNERSHIP, LTD.
Houston, Texas
THE CALVERT COMPANY
Richland, Mississippi
ATKINSON INDUSTRIES, INC.
Pittsburg, Kansas
GALVANIZING SEGMENT
Crowley, Texas
Houston, Texas
Waskom, Texas
Richland, Mississippi
Moss Point, Mississippi
Citronelle, Alabama
Goodyear, Arizona
Prairie Grove, Arkansas
OIL FIELD PRODUCTS SEGMENT
Crowley, Texas
CORPORATE OFFICE
400 N. Tarrant
P.O. Box 668
Crowley, Texas 76036
817/297-4361 Phone
817/297-4621 Fax
<PAGE>
AZTEC MANUFACTURING CO.
400 NORTH TARRANT - P.O. BOX 668
CROWLEY, TEXAS 76036
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of Aztec Manufacturing Co.:
The Annual Meeting of the Shareholders of AZTEC MANUFACTURING CO. (the
"Company") will be held at the Petroleum Club in the Derrick I Room on the 39th
floor of the Continental Plaza, 777 Main Street, Fort Worth, Texas, on the 9th
day of July, 1996, at 10:00 a.m. for the purpose of considering and acting upon
the following matters:
1. ELECTION OF DIRECTORS. To elect three directors for a term of three
years.
2. APPROVAL OF AUDITORS. To approve the appointment of Ernst & Young
LLP as auditors for the Company for its fiscal year ending February
28, 1997.
3. OTHER BUSINESS. To transact such other business as may properly
come before the meeting or any adjournment or adjournments thereof.
Information regarding the matters to be acted upon at the meeting is contained
in the Proxy Statement attached to this Notice. As of the date of this Notice,
management does not know of any other business to be presented at the meeting.
Only Shareholders of record at the close of business on the 10th day of May,
1996, will be entitled to notice of or to vote at the meeting or any adjournment
or adjournments thereof. A copy of the Annual Report to Shareholders for the
fiscal year ended February 29, 1996 is enclosed herewith.
WE HOPE YOU WILL BE ABLE TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT YOU
PLAN TO ATTEND, PLEASE DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY
IN THE ENCLOSED ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES.
BY ORDER OF THE BOARD OF DIRECTORS
Robert H. Johnson, Secretary
Crowley, Texas
June 1, 1996
<PAGE>
AZTEC MANUFACTURING CO.
P. O. BOX 668
CROWLEY, TEXAS 76036
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 9, 1996
This Proxy Statement is furnished in connection with the solicitation of proxies
by the Board of Directors of Aztec Manufacturing Co. (the "Company") for use at
the regular Annual Meeting of the Shareholders of the Company to be held at the
Petroleum Club in the Derrick I Room on the 39th floor of the Continental Plaza,
777 Main Street, Fort Worth, Texas, on the 9th day of July, 1996, at 10:00 a.m.,
and at any adjournment or adjournments thereof. This Proxy Statement and the
accompanying proxy are being mailed on or about June 1, 1996, to the
Shareholders of the Company.
GENERAL INFORMATION
- -------------------
At the close of business on the 10th day of May, 1996, the record date for
determination of Shareholders entitled to notice of and to vote at the meeting,
there were outstanding 5,590,204 shares of Common Stock, $1.00 par value, of
the Company (the "Common Stock"). The presence, in person or by proxy, of the
holders of a majority of the outstanding shares of Common Stock is necessary to
constitute a quorum at the meeting. All shares represented at the meeting in
person or by proxy shall be counted in determining the presence of a quorum.
Each holder of shares of Common Stock will be entitled to one vote, in person or
by proxy, for each share of Common Stock of the Company owned of record at the
close of business on May 10, 1996. Cumulative voting for directors is not
permitted. Directors are elected by plurality vote and, therefore, the three
nominees receiving the highest number of affirmative votes shall be elected as
directors provided a quorum is present. Abstentions and broker non-votes will
not be considered part of the voting power present with respect to any matter on
which such shares so acted which has the effect of reducing the number of shares
voting affirmatively that is required to approve a matter requiring a majority
vote. Therefore, assuming a quorum is present, if more shares vote "for"
approval of the appointment of the independent auditors than vote "against,"
this matter will pass. All shares of Common Stock represented by a valid proxy
will be voted. A proxy may be revoked at any time before it is voted by filing
with the Secretary of the Company a written revocation thereof or a duly
executed proxy bearing a later date.
The cost of preparing, assembling and mailing the Notice of Annual Meeting of
Shareholders, the Proxy Statement and the accompanying proxy will be borne by
the Company. In addition to solicitation of proxies by mail, certain officers
and employees of the Company, without additional compensation for such services,
may solicit proxies by telephone, telegraph or personal contact. The Company
will also supply brokerage firms and other custodians, nominees, and fiduciaries
with such number of proxy materials as they may require for mailing to
beneficial owners and will reimburse them for their reasonable expenses in
connection therewith.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
- ----------------------------------------------
Meetings of the Board of Directors are held regularly each month, including a
meeting following the conclusion of the Annual Meeting of Shareholders. During
the fiscal year ended February 29, 1996, there were twelve (12) regular meetings
and one (1) special meeting of the Board of Directors. For the fiscal year
ended February 29, 1996, each non-employee director was paid a monthly retainer
of $700 and a fee of $300 for each meeting of the Board of Directors attended.
Mr. Martin, as an employee director, was paid a monthly retainer of $500 and a
fee of $200 for each meeting of the Board of Directors attended. Each committee
member is paid a fee of $300 for each meeting of a committee attended. Each of
the current directors of the Company attended more than 75 percent of the
aggregate of (i) the total number of meetings of the Board of Directors, and
(ii) the total number of meetings held by all committees of the Board on which
he served, held during the fiscal year ended February 29, 1996.
The Company has an Audit Committee . The functions of the Audit Committee are
to (i) meet with the independent auditors to review the audit and its results,
as well as to review internal controls of the Company and (ii) make
recommendations to the Board of Directors as to the engagement or discharge of
independent auditors. The members of the Audit Committee are Robert H. Johnson,
Chairman, W. C. Walker and R. J. Schumacher. During the fiscal year ended
February 29, 1996, that committee had four (4) meetings. The Company has a
Compensation Committee. The functions of the Compensation Committee are to (i)
make recommendations to the Board of Directors of remuneration arrangements for
Directors and senior management and (ii)
<PAGE>
administer the Company's Incentive Stock Option plans, which includes selecting
the executives and other key personnel of the Company eligible to participate
thereunder. The members of the Compensation Committee are Martin C. Bowen and
Dr. H. Kirk Downey. During the fiscal year ended February 29, 1996, that
committee had one (1) meeting. The Company has a Nonstatutory Stock Option
Committee which administers the Company's nonstatutory stock option plans. The
members of this committee are L. C. Martin and Dana L. Perry. During the fiscal
year ended February 29, 1996, that committee held no meetings. The Company does
not have a nominating committee.
SECURITY OWNERSHIP OF PRINCIPAL BENEFICIAL OWNERS
- -------------------------------------------------
To the best knowledge of the Company, the only beneficial owners of over 5
percent of the outstanding shares of Common Stock of the Company as of May 2,
1996 were as follows:
<TABLE>
<CAPTION>
TITLE OF NUMBER OF PERCENT OF
CLASS NAME & ADDRESS OF BENEFICIAL OWNER SHARES CLASS
--------- ---------------------------------- ---------- -----------
<S> <C> <C> <C>
Common Stock Dimensional Fund Advisors, Inc. 300,730(1) 5.4%
$1.00 par value 1299 Ocean Ave., 11th Floor
Santa Monica, CA 90401
Common Stock FMR Corp. 531,500(2) 9.5%
$1.00 par value 82 Devonshire Street
Boston, MA 02109
</TABLE>
(1) Based on information furnished by Dimensional Fund Advisors, Inc.
("Dimensional"), a registered investment adviser. Dimensional is deemed to
have beneficial ownership of 300,730 shares of Aztec Manufacturing Co.
Common Stock, all shares of which are held in portfolios of DFA Investment
Dimensions Group, Inc., a registered open-end investment company, or the
DFA Group Trust and DFA Participation Group Trust, investment vehicles for
qualified employee benefit plans, all of which Dimensional serves as
investment manager. Dimensional disclaims beneficial ownership of all such
shares.
(2) Based on information furnished by Fidelity Management & Research Company
("Fidelity"), a wholly-owned subsidiary of FMR Corp. and an investment
adviser. Fidelity is deemed to have beneficial ownership of 531,500 shares
of Aztec Manufacturing Co. Common Stock as a result of acting as investment
adviser to several investment companies. The ownership of one investment
company, Fidelity Low-Priced Stock fund, amounted to 531,500 shares of the
Common Stock outstanding. Fidelity Low-Priced Stock fund has its principal
business office at 82 Devonshire Street, Boston, Massachusetts, 02109.
PROPOSAL NO. 1: ELECTION OF DIRECTORS
- --------------------------------------
The Bylaws of the Company provide for nine directors and classify the Board of
Directors into three classes, each class consisting of three directors, the
members of which serve for three years. Of the directors listed under
"DIRECTORS OF THE COMPANY," the terms of office of Martin C. Bowen, John G.
Richards and Sam Rosen expire at the 1996 Annual Meeting of Shareholders. The
Board of Directors nominated and recommends the reelection of Messrs. Bowen,
Richards and Rosen for a three-year term expiring at the 1999 Annual Meeting of
Shareholders.
Mr. William D. Ratliff, Jr. retired as a director of the Company on April 16,
1996. Mr. Ratliff is now an Advisory Director of the Company. As an Advisory
Director, Mr. Ratliff does not have voting authority. The Bylaws of the Company
provide that any vacancy in the Board is to be filled by the remaining directors
with the newly elected director serving the unexpired term of this predecessor.
Mr. Ratliff's term would have expired in 1996. The Board of Directors of the
Company elected at its April 16, 1996 meeting Mr. Sam Rosen to fill the
unexpired term of Mr. Ratliff. Mr. R. W. Dial, a director of the Company from
1958 to 1993 and an Advisory Director of the Company since November 15, 1993,
died on April 15, 1996.
All of the nominees are now directors of the Company. All of the nominees have
consented to serve if elected. If for any unforeseen reason a nominee would be
unable to serve if elected, the persons named in the accompanying proxy may
exercise their discretion to vote for a substitute nominee selected by the Board
of Directors. However, the Board of Directors has no reason to anticipate that
any of the nominees will not be able to serve, if elected.
The Board of Directors recommends that
Shareholders vote "FOR" the election of the nominees for director.
2
<PAGE>
PROPOSAL NO. 2: APPROVAL OF APPOINTMENT OF AUDITORS
- ----------------------------------------------------
Subject to approval by the Shareholders, the Board of Directors has selected the
firm of Ernst & Young LLP to audit the financial statements of the Company for
the fiscal year ending February 28, 1997. This firm of certified public
accountants or its predecessor has acted as independent auditors for the Company
and its subsidiaries since 1976.
Representatives of Ernst & Young LLP will be present at the 1996 Annual Meeting
of Shareholders and will be available to respond to appropriate questions.
The Board of Directors recommends that Shareholders vote "FOR" the approval
of the appointment of Ernst & Young LLP.
DIRECTORS OF THE COMPANY
- ------------------------
The following table sets forth certain information as to the number of shares of
Common Stock of the Company beneficially owned as of May 2, 1996, by (i) each
current director and (ii) all of the current executive officers and directors of
the Company as a group. Except as otherwise indicated, each of the persons
named below has sole voting and investment power with respect to the shares of
Common Stock beneficially owned by that person.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION FOR COMMON STOCK OF THE % OF
PAST FIVE YEARS; POSITIONS DIRECTOR COMPANY BENEFICIALLY CLASS
DIRECTORS AGE AND OFFICES WITH THE COMPANY SINCE OTHER DIRECTORSHIPS OWNED AT MAY 2, 1996 (1)
- --------------------------- --- ---------------------------- -------- ------------------- -------------------- -----
<S> <C> <C> <C> <C> <C> <C>
L.C. Martin (2) 70 Chairman of the Board, 1958 None. 226,875 (4) 4%
President and Chief
Executive Officer of the
Company
Martin C. Bowen (16) 52 Chairman of Team Bank - Ft. 1993 None. 5,200 (6) *
Worth (1989 to 1992),
President & CEO of
Performing Arts Fort Worth
(1993 to present)
John G. Richards 72 Personal Investments 1963 None. 40,707 (7) *
Sam Rosen (8) 60 Partner in the law firm of 1996 Gainsco, Inc. (3) 3,639 (9) *
Shannon, Gracey, Ratliff &
Miller, L.L.P.
Robert H. Johnson (5) 71 Financial Consultant; 1965 None. 29,203 (10) *
Certified Public Accountant;
Secretary-Treasurer of the
Company
Dana L. Perry (2) 47 Vice President of Finance; 1992 None. 100,600 (11) 1.8%
Chief Financial Officer of
the Company; and Assistant
Secretary of the Company
R.J. Schumacher (5) 67 CEO and Chairman of Pride 1986 None. 28,909 (12) *
Refining, Inc. (1989-1994);
President and CEO of Texland
Petroleum, Inc.
(1973-Present)
W.C. Walker (5) 72 Management Consultant 1986 Global Marine, Inc. 29,241 (13) *
(1989-Present) (3);
D.I. Industries, Inc.
(3)
Dr. H. Kirk Downey (16) 53 Dean of the M.J. Neeley 1992 Harris Methodist 8,400 (14) *
School of Business and a Health Plan
Professor of Management at LKCM Fund
Texas Christian University
All Current Directors and Executive Officers as a Group (12 Persons) 504,133 (15) 8.7%
</TABLE>
*Less than one percent (1%)
3
<PAGE>
(1) The percentage is calculated for each individual by using as the
denominator the total shares of Common Stock outstanding at the close of
business on May 2, 1996 (5,569,042 shares), plus the shares of Common Stock
such individual has the right to acquire within sixty (60) days of May 2,
1996, pursuant to the exercise of Stock Options granted by the Company.
(2) Member of the Nonstatutory Stock Option Committee.
(3) A publicly owned corporation.
(4) Includes 44,257 shares of Common Stock which Mr.Martin has the right to
acquire within 60 days of May 2, 1996, pursuant to the exercise of options
granted under the 1986 and 1991 Incentive Stock Option Plans of the
Company.
(5) Member of the Audit Committee.
(6) Includes 4,200 shares of common stock which Mr. Bowen has the right to
acquire within 60 days of May 2, 1996, pursuant to the exercise of options
granted under the 1991 Nonstatutory Stock Option Plan of the Company.
(7) Includes 27,036 shares Mr. Richards has the right to acquire within sixty
(60) days of May 2, 1996, pursuant to options granted under the 1988 and
1991 Nonstatutory Stock Option Plans.
(8) Mr. Rosen is a Partner in the law firm of Shannon, Gracey, Ratliff &
Miller, L.L.P., which has been general counsel to the Company since 1968.
The Company proposes to retain said law firm as its general counsel during
the current fiscal year. Mr. Rosen was elected to the Board of Directors on
April 16, 1996, to replace Mr. William D. Ratliff, Jr. who retired from the
Board on April 16, 1996.
(9) Includes -0- shares Mr. Rosen has the right to acquire within sixty (60)
days of May 2, 1996, pursuant to options granted 1991 Nonstatutory Stock
Option Plan.
(10) Includes 27,036 shares Mr. Johnson has the right to acquire within sixty
(60) days of May 2, 1996, pursuant to options granted under the 1988 and
1991 Nonstatutory Stock Option Plans.
(11) Includes 13,187 shares of Common Stock which Mr. Perry has the right to
acquire within 60 days of May 2, 1996, pursuant to the exercise of options
granted under the 1986 and 1991 Incentive Stock Option Plans.
(12) Includes 27,036 shares Mr. Schumacher has the right to acquire within sixty
(60) days of May 2, 1996, pursuant to options granted under the 1988 and
1991 Nonstatutory Stock Option Plans.
(13) Includes 27,036 shares Mr. Walker has the right to acquire within sixty
(60) days of May 2, 1996, pursuant to the exercise of options granted under
the 1988 and 1991 Nonstatutory Stock Option Plans. All 2,205 shares of
Common Stock currently owned are held jointly by Mr. Walker and his wife.
(14) Includes 8,400 shares Downey has the right to acquire within sixty (60)
days of May 2, 1996, pursuant to the exercise of options granted under the
1991 Nonstatutory Stock Option Plan.
(15) The percentage is calculated by using total shares of Common Stock
outstanding at the close of business on May 2, 1996 (5,569,042) plus 87,531
shares of Common Stock that executive officers of the Company have the
right to acquire within 60 days of May 2, 1996 pursuant to options granted
under the 1986 and 1991 Incentive Stock Option Plans of the Company plus
120,744 shares of Common Stock that directors have the right to acquire
within sixty (60) days of May 2, 1996 pursuant to options granted under the
1988 and 1991 Nonstatutory Stock Option Plans.
(16) Member of Compensation Committee.
No family relationship exists between any director, or executive officer, of the
Company and any other director or executive officer of the Company.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934. Section
16(a) of the Securities Exchange Act of 1934 requires executive officers,
directors and persons who beneficially own more than ten percent of the
Company's stock to file initial reports of ownership and reports of changes of
ownership with the Securities and Exchange Commission. Copies of such reports
are required to be furnished to the Company.
Based solely on a review of such forms furnished to the Company and certain
written representations from the executive officer and directors, the Company
believes that all Section 16(a) filing requirements applicable to its executive
officers, directors and greater than 10% beneficial owners were complied with on
a timely basis.
EXECUTIVE COMPENSATION AND OTHER MATTERS
- ----------------------------------------
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION. Through fiscal
periods ended February 29, 1996, compensation for the Chief Executive Officer
and senior executives has been approved by the full Board of Directors upon the
recommendations of the Compensation Committee. This Committee is composed of
two outside directors, none of whom perform any services to or receive any fees
from the Company in any capacity other than as director.
4
<PAGE>
It has been the philosophy and the practice of the Committee to relate executive
compensation to the profitability of the Company. This is accomplished through
a two-tiered structure of measuring the compensation rewards as follows:
1. Base Salary - This is related to standard performance in which appropriate
peer companies are compared to the Company's pay standards.
2. Bonus - A portion of executive compensation is calculated by taking a
predetermined percent of the before tax income of the Company in the case of
the Chief Executive Officer and certain executive officers or of a particular
segment of the Company in the case of an executive officer who is responsible
for such segment.
Additionally, the executive officers participate, along with other employees, in
the Company Profit Sharing Plan, the annual contributions to which are
dramatically affected by profitability of the Company.
Section 162(m) of the Internal Revenue Code of 1986, as amended, which was
enacted in 1993, imposes a $1 million limit on the amount of compensation that
will be deductible by the Company with respect to the Chief Executive Officer
and the four other most highly compensated executive officers. Performance
based compensation that meets certain requirements will not be subject to the
deduction limit. The Committee has reviewed the impact of Section 162(m) on the
Company and believes it is unlikely that the compensation paid to any executive
officer during the fiscal year ending February 28, 1997 will exceed the limit.
The Committee will continue to monitor the impact of the Section 162(m) limit
and to assess alternatives for avoiding any loss of tax deductions in future
years.
The role of the Compensation Committee also includes a full review of the
compensation package of the five highest paid executive officers, whether or not
their salary and bonuses exceed $100,000. This review is then presented and
recommended to the full board of nine directors, seven of whom are independent
directors.
MEMBERS OF THE COMPENSATION COMMITTEE
Martin C. Bowen
Dr. H. Kirk Downey
SUMMARY COMPENSATION TABLE. The following information summarizes annual and
long-term compensation for services in all capacities to the Company for the
fiscal years ended February 29, 1996, February 28, 1995 and February 28, 1994 of
the Chief Executive Officer and the other most highly compensated executive
officers of the Company whose total annual salary and bonus exceeds $100,000
(the "Named Executives").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
==========================
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------------------- --------------------------------------
AWARDS PAYOUTS
OTHER ANNUAL RESTRICTED LONG-TERM ALL OTHER
NAME AND YEAR COMPENSATION STOCK AWARD(S) OPTIONS/ INCENTIVE COMPENSATION
PRINCIPAL POSITION ENDING SALARY ($) BONUS($) ($) ($) SARS (#) PAYOUTS ($) ($)
- --------------------------- -------- ---------- --------- ------------- -------------- --------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
L.C. Martin, Chairman, 1996 250,000 106,443 0 0 0 0 17,937 (3)
President, and Chief 1995 250,000 65,144 0 0 19,424 0 14,174 (4)
Executive Officer 1994 250,000 80,569 0 0 0 0 22,698 (5)
D.L. Perry, Vice President 1996 75,000 36,543 0 0 0 0 6,007 (6)
of Finance, Chief 1995 70,500 32,091 0 0 6,587 0 4,313 (6)
Financial Officer, and 1994 66,000 30,464 0 0 0 0 5,088 (6)
Assistant Secretary
F. L. Wright, Jr. 1996 75,000 65,053 0 0 0 0 8,301 (7)
Senior Vice President 1995 66,250 46,551 0 0 5,987 0 4,178 (7)
Galvanizing Segment 1994 60,000 27,753 0 0 0 0 4,806 (7)
R.O. Grosso, Vice 1996 96,085 34,549 0 0 5,000 0 0
President Electrical 1995 0 0 0 0 0 0 0
Products Segment (1) 1994 0 0 0 0 0 0 0
R. L. Hackleman, 1996 84,000 16,107 0 0 0 0 0
President, Atkinson 1995 96,000 18,678 0 0 6,100 0 4,532 (8)
Industries, Inc. (2) 1994 96,000 14,558 0 0 18,000 0 5,936 (8)
</TABLE>
5
<PAGE>
(1) Mr. Grosso's effective date of employment was May 31, 1995.
(2) Mr. Hackleman resigned the position of President, Atkinson Industries,
Inc., effective January 15, 1996.
(3) The amount of $17,937 includes 1996 Director Fees of $8,600 and 1996
contribution made to Mr. Martin's account in Aztec's Profit Sharing Plan of
$9,337.
(4) The amount of $14,174 includes 1995 Director Fees of $8,400 and 1995
contribution made to Mr. Martin's account in Aztec's Profit Sharing Plan of
$5,774.
(5) The amount of $22,698 includes 1994 Director fees of $8,800 and 1994
contribution made to Mr. Martin's account in Aztec's Profit Sharing Plan of
$13,898 (excludes the agreements referred to on Page 7). Mr. Martin made a
$150,000 withdrawal from his account balance in Aztec's Profit Sharing Plan
which had been shown as compensation to Mr. Martin in prior years.
(6) This amount represents the contribution made to Mr. Perry's account in
Aztec's Profit Sharing Plan.
(7) This amount represents the contribution made to Mr. Wright's account in
Aztec's Profit Sharing Plan.
(8) This amount represents the contribution made to Mr. Hackleman's account in
Aztec's Profit Sharing Plan.
OPTION/SAR GRANTS IN LAST FISCAL YEAR. The following table sets forth the
number of shares of Common Stock subject to options with respect to Common Stock
granted to the Company's Chief Executive Officer and the Named Executives during
the fiscal year ending February 29, 1996. The Company has no SARs.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
=====================================
POTENTIAL RELAIZED VALUE AT
% OF TOTAL EXERCISE OR ASSUMED ANNUAL RATES OF STOCK
OPTIONS/SARs BASE PRICE PRICE APPRECIATION FOR OPTION
NUMBER OF OPTIONS/ GRANTED TO EMPLOYEES ($ PER SHARE) EXPIRATION TERM ($)
NAME SARS GRANTED (A) IN FISCAL YEAR (B) DATE 5% (C) 10% (C)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
R.O. Grosso 5,000 33% 3.875 12/19/00 5,353 11,829
</TABLE>
(a) Options granted are immediately exercisable and are for a term of 5
years, subject to earlier termination related to termination of employment.
(b) The option above was granted at market value at date of grant.
(c) These columns reflect the potential realizable value of each grant assuming
the market value of the Company's stock appreciates at 5 percent and 10
percent, compounded annually, from the date of grant over the term of the
option. There is no assurance that the actual stock price appreciation over
the 5 year option term will be at the assumed 5 percent or 10 percent
levels or at any other level. Unless the market price of the stock does in
fact appreciate over the option term, no value will be realized from the
option grants.
OPTIONS EXERCISED AND YEAR END VALUE TABLE. The following table sets forth
certain information regarding the options exercised and the year end value of
options held by the Company's Chief Executive Officer and the Named Executives
during the fiscal year ending February 29, 1996.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
===============================================
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-
SHARES ACQUIRED OPTIONS AT FY-END (#) MONEY OPTIONS AT FY-END ($)
NAME ON EXERCISE (#) VALUE REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------- ---------------- ------------------ ------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
L. C. Martin None -0- 44,257 -0- 43,995 -0-
D. L. Perry None -0- 13,187 -0- 11,960 -0-
F. L. Wright, Jr. None -0- 11,887 -0- 10,710 -0-
R. O. Grosso None -0- 5,000 -0- 3,750 -0-
R. L. Hackleman None -0- 19,100 -0- 8,099 -0-
</TABLE>
LONG-TERM INCENTIVE PLAN AWARDS. The Company did not make any awards to the
Company's CEO or any of its most highly compensated executive officers during
the year ending February 29, 1996, under any long-term incentive plan.
6
<PAGE>
CHANGE IN CONTROL AGREEMENT. The Company has entered into a change in control
agreement with Mr. L. C. Martin, the President and Chief Executive Officer of
the Company. The change in control agreement provides for the payment of
certain benefits upon the occurrence of a change in control of the Company. A
"change in control of the Company" includes the acquisition by any person of 50
percent or more of the shares of Common Stock, a merger or consolidation of the
Company in which the Company does not survive as an independent public company,
a sale of all or substantially all of the assets of the Company, or a
liquidation or dissolution of the Company.
Under the change in control agreement, if Mr. Martin remains in the employ of
the Company for a period of at least three months immediately following the date
of occurrence of a change in control of the Company, he will be entitled to
receive a lump sum payment from the Company within five days after the
expiration of the three-month period, regardless of whether he continues in the
employ of the Company after the expiration of the three-month period (the
"Change in Control Payment"). The change in control agreement provides for the
payment of the Change in Control Payment of $750,000 in the event of any change
in control of the Company, whether or not such change in control is approved by
the Board of Directors and/or Shareholders of the Company. Additionally, if
during the three-month period Mr. Martin is terminated as a result of death or
total disability or for any other reason whatsoever by the Company, he will be
entitled to receive, in addition to the Change in Control Payment provided
above, his full base salary through the date of termination of his employment,
plus any other amounts to which he would be entitled under any compensation plan
of the Company. However, if the employment of Mr. Martin during the three-
month period is terminated by him for any reason other than as a result of his
death or total disability or voluntary termination for good reason as defined in
the agreement, he would be entitled to his full base salary through the date of
termination of his employment, plus any other amounts to which he would be
entitled under any compensation plan of the Company, but would not be entitled
to the Change in Control Payment provided above.
BUY-SELL AND TERMINATION AGREEMENT. During fiscal 1994 the Company entered into
a "Buy-Sell and Termination Agreement" (the "Agreement") with Mr. L. C. Martin,
the President and Chief Executive Officer of the Company. The Agreement
provides that the proceeds from a $1 million dollar life insurance policy on Mr.
Martin be used to acquire (from the executive's wife or estate) the number of
shares of Company Common Stock which could be purchased in the event the
executive dies while employed by the Company. The purchase price per share is
to be the market value of the stock on the day before the date of death. Upon
termination (other than for "just cause") of employment from the Company prior
to death, the Company will convey all rights in the insurance policy to the
executive, including cash surrender value. The Company has recorded a deferred
liability and corresponding charge to expense in the amount of $246,000 during
fiscal 1994. The deferred compensation amount is equivalent to the cash
surrender value of the insurance policy and amounted to $223,000 at February 29,
1996.
Under the "Buy-Sell and Termination Agreement", the Company agrees to maintain a
whole life insurance policy in the face amount of $1 million on the life of Mr.
Martin previously acquired by the Company (the "Policy"). The Company shall be
the owner and direct beneficiary of the Policy and shall be solely responsible
for the payment of any and all premiums required to be paid to keep the Policy
in effect. Within 180 days of the death of Mr. Martin, if Mr. Martin was at the
time of his death employed by the Company, Mrs. Martin or the estate, heirs,
legal representatives, successors or beneficiaries of Mr. Martin shall tender to
the Company for sale, transfer or conveyance to the Company a number of shares
equal in value to the proceeds received by the Company from the Policy. Upon
the tender of the shares of the Company, the Company shall purchase the shares
with the proceeds received by the Company under the policy. For purposes of
this Agreement, the value of the shares to be sold, assigned and conveyed to the
Company as provided for herein shall be determined based on the closing price
per share of the Common Stock of the Company as traded on the National Market
System of NASDAQ on the day before the date of death of Mr. Martin. Upon the
termination of employment of Mr. Martin from the Company for any reason other
than "Just Causes", the Company hereby agrees to assign and convey all rights
and title of the Company in the Policy, including any cash surrender value in
the Policy, to Mr. Martin. No shares shall be transferred to the Company in
consideration of the assignment and conveyance of the Policy to Mr. Martin. For
purposes of this Agreement, "Just Cause" shall mean Mr. Martin willfully and
intentionally fails to substantially perform his duties as an officer of the
Company, or Mr. Martin has committed an illegal act (other than minor traffic
violations or similar acts) in connection with his employment that could
reasonably be expected to materially adversely affect the Company. If Mr.
Martin is terminated for "Just Cause," the Company shall be under no obligation
to assign and convey the Policy to Mr. Martin.
7
<PAGE>
STOCK PRICE PERFORMANCE GRAPH. The following graph illustrates the five-year
cumulative total returns on investments in Aztec Manufacturing Co., the CRSP
Index for Nasdaq Stock Market (U.S. Companies) and the CRSP Index for Nasdaq
Non-Financial Stocks. Aztec is listed on the Nasdaq Stock Market and is engaged
in multiple industries. The shareholder return shown below is not necessarily
indicative of future performance. Total return, as shown, assumes $100 invested
on February 28, 1991 in shares of Aztec Manufacturing Co. and each index, all
with cash dividends reinvested. The calculations exclude trading commissions
and taxes.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
2/91 2/92 2/93 2/94 2/95 2/96
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Aztec Manufacturing Co. 100.0 74.2 54.7 127.8 85.5 94.8
CRSP Index for Nasdaq Stock Market (US Companies) 100.0 142.7 151.9 179.8 182.3 254.2
CRSP Index for Nasdaq Non-Financial Stocks 100.0 141.7 140.0 169.6 166.8 228.9
</TABLE>
ACTION TO BE TAKEN UNDER THE PROXY
- ----------------------------------
Unless otherwise specified in the accompanying proxy, the proxy holders will
vote the shares represented thereby "FOR" the election of Martin C. Bowen, John
G. Richards, and Sam Rosen as directors for a three year term expiring at the
1999 Annual Meeting of Shareholders, and "FOR" the approval of the appointment
of Ernst & Young LLP as the independent auditors of the Company for its fiscal
year ending February 28, 1997.
The accompanying proxy will also be voted in connection with the transaction of
such other business as may properly come before the meeting or any adjournment
or adjournments thereof. Management knows of no other matters, other than as
set forth above, to be considered at the meeting. If, however, any other
matters properly come before the meeting, or any adjournment or adjournments
thereof, the persons named in the accompanying proxy will vote such proxy in
accordance with their best judgment on any such matter.
8
<PAGE>
SHAREHOLDER PROPOSALS
- ---------------------
Shareholder proposals for inclusion in the Proxy Statement for the 1997 Annual
Meeting of Shareholders must be received at the executive office of the Company
on or before January 31, 1997.
ANNUAL REPORTS
- --------------
The Company's 1996 Annual Report to Shareholders, covering the fiscal year ended
February 29, 1996, including audited financial statements, is enclosed with this
Proxy Statement. Neither the Annual Report nor the financial statements are
incorporated into this Proxy Statement or are deemed to be a part of the
material for the solicitation of proxies.
A COPY OF THE COMPANY'S 1996 ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL
STATEMENTS AND SCHEDULES THERETO, REQUIRED TO BE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION, MAY BE OBTAINED WITHOUT CHARGE BY ANY SHAREHOLDER WHOSE
PROXY IS SOLICITED UPON WRITTEN REQUEST TO:
Aztec Manufacturing Co.
400 North Tarrant Street
Crowley, Texas 76036
Attention: Dana Perry
BY ORDER OF THE BOARD OF DIRECTORS
Robert H. Johnson, Secretary
Crowley, Texas
June 1, 1996
- --------------------------------------------------------------------------------
1996 ANNUAL MEETING OF SHAREHOLDERS
10:00 a.m., July 9, 1996
Petroleum Club
Derrick I Room
39th Floor of the Continental Plaza
777 Main Street
Fort Worth, Texas
9
<PAGE>
EXHIBIT 21
-----------------------------
- -------------------------| AZTEC MANUFACTURING CO. |------------
| ----------------------------- |
| | |
| ------------------------ --------------------- ---------------------------
|-|Aztec Industries, Inc.| |Arbor-Crowley, Inc.|-| |Atkinson Industries, Inc.|
| ------------------------ --------------------- | ---------------------------
| | | |
| | | |
| -------------------- | | ---------------------
| | Aztec Industries | | -------- | Arizona |
| | Moss Point, Inc. | | | Galvanizing, Inc. |
| -------------------- | ---------------------
| | -----------------------
| | | |
| ------------------- --------------- -----------------------
| | Automatic | | Aztec Group | | Aztec Holdings, Inc.|
| | Processing, Inc.| | Company | | |
| ------------------- --------------- -----------------------
| | |
| ------------------------ | |
|-| The Calvert Co., Inc.| 1% 99%
| ------------------------ | |
| | |
| | ----------------------- |
| --------------------- |______| Aztec Manufacturing |______|
|__| Gulf Coast | | | Partnership, Ltd. | |
| | Galvanizing, Inc.| | ----------------------- |
| --------------------- | |
| | --------------------------- |
| --------------------- |____| Aztec Manufacturing |____|
| | Arkansas | | | Waskom Partnership, Ltd.| |
|__| Galvanizing, Inc.| | --------------------------- |
--------------------- | |
| ------------------------------- |
|--| Rig-A-Lite Partnership, Ltd.|--|
-------------------------------
Exhibit 21
----------
(Page 1 of 1)
<PAGE>
EXHIBIT 23
----------
CONSENT OF ERNST & YOUNG LLP
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Aztec Manufacturing Co. of our report dated March 29, 1996, included in the
1996 Annual Report to Shareholders of Aztec Manufacturing Co.
We also consent to the incorporation by reference in the Registration Statements
on Form S-8, No. 33-15481 pertaining to the 1986 Incentive Stock Option Plan,
No. 33-30993 pertaining to the 1988 Nonstatutory Stock Option Plan, No. 33-49164
pertaining to the 1991 Stock Option Plan of Aztec Manufacturing Co. of our
report dated March 29, 1996, with respect to the consolidated financial
statements of Aztec Manufacturing Co., incorporated by reference in the Annual
Report (Form 10-K) of the year ended February 29, 1996.
ERNST & YOUNG LLP
FORT WORTH, TEXAS
MAY 22, 1996
Exhibit 23
----------
(Page 1 of 1)
<PAGE>
EXHIBIT 24
SPECIAL POWER OF ATTORNEY
THE STATE OF TEXAS (S)
(S) KNOW ALL MEN BY THESE PRESENTS
COUNTY OF TARRANT (S)
THAT WE, the undersigned, of Tarrant County, Texas, have made, constituted,
and appointed, and by these presents do make, constitute, and appoint L. C.
MARTIN, DANA L. PERRY and SAM ROSEN, and each of them severally, our true and
lawful attorneys and agents to execute in our name, place and stead (in any
capacity) the Annual Report on Form 10-K of AZTEC MANUFACTURING CO. ("Form 10-
K") for the fiscal year ended February 29, 1996, each of said attorneys and
agents to have power to act with or without the other and to have full power and
authority to do and perform in the name of and on behalf of each of the
undersigned, as the case may be, every act whatsoever necessary or advisable to
be done in the premises as fully and to all intents and purposes as any of the
undersigned might or could do in person, such power to extend to the execution
of any amendment to the Form 10-K.
WITNESS OUR HANDS this _____ day of _________________, 1996.
----------------------------------------------
L. C. MARTIN
----------------------------------------------
ROBERT H. JOHNSON
----------------------------------------------
MARTIN C. BOWEN
----------------------------------------------
DR. H. KIRK DOWNEY
----------------------------------------------
SAM ROSEN
----------------------------------------------
JOHN G. RICHARDS
----------------------------------------------
DANA L. PERRY
----------------------------------------------
R. J. SCHUMACHER
----------------------------------------------
W. C. WALKER
Exhibit 24
----------
(Page 1 of 3)
<PAGE>
CERTIFIED COPY OF RESOLUTIONS
The undersigned, being the Assistant Secretary of AZTEC MANUFACTURING CO. (the
"Company"), a Texas corporation, does hereby certify that the following
resolutions are true and correct copies of the resolutions duly adopted by the
Board of Directors of said Company on April 16, 1996, and that such resolutions
have not been revoked or amended in any manner:
WHEREAS, the officers of the Company with the assistance of its
accountants, Ernst & Young LLP, and counsel are obligated to prepare,
execute and file with the Securities and Exchange Commission on behalf of
the Company an Annual Report on Form 10-K of the Company for the fiscal
year ended February 29, 1996;
NOW, THEREFORE, BE IT RESOLVED, that L. C. Martin be, and he is
hereby, authorized and directed to prepare, execute, and file with the
Securities and Exchange Commission on behalf of the Company the Annual
Report on Form 10-K ("Form 10-K") of the Company for the fiscal year ended
February 29, 1996; and
RESOLVED FURTHER, that each officer and director who may be required
in any capacity to execute the Form 10-K on behalf of the Company, be, and
each such officer and director is hereby, authorized to execute a power of
attorney appointing L. C. Martin, Dana L. Perry, and Sam Rosen, and each of
them severally, his true and lawful attorneys and agents to execute in his
name, place and stead (in any such capacity) said Form 10-K, and all
instruments necessary or proper in connection therewith and to file the
same with the Securities and Exchange Commission, each of said attorneys
and agents to have power to act with or without the other and to have full
power and authority to do and perform in the name of and on behalf of each
of said officers and directors, every act whatsoever necessary or advisable
to be done in the premises as fully and to all intents and purposes as any
such officer and director might or could do in person, such power to extend
to the execution of any amendment to the Form 10-K.
SIGNED on the day of May, 1996.
--------
----------------------------------------------
DANA L. PERRY, Assistant Secretary
Exhibit 24
----------
(Page 2 of 3)
<PAGE>
THE STATE OF TEXAS (S)
(S)
COUNTY OF TARRANT (S)
BEFORE ME, the undersigned authority, on this day personally appeared
DANA L. PERRY, Assistant Secretary of the above named corporation, known to me
to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that he executed the same for the purposes and
considerations therein expressed and in the capacity therein stated and that the
statements therein contained are true.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this ____ day of May 1996.
----------------------------------------------
Notary Public in and for
the State of Texas
----------------------------------------------
(Type or print name)
----------------------------------------------
My commission expires:
Exhibit 24
----------
(Page 3 of 3)
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0
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