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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 28, 1997
[_] 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:
TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH REGISTERED
--------------------- ------------------------------------
COMMON STOCK, $1.00 PAR VALUE NEW YORK STOCK EXCHANGE
Securities registered pursuant to section 12(g) of the act: NONE
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,
1997, was approximately $51,131,362. As of May 2, 1997, there were 5,912,647
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 28,
1997. Part III incorporates information by reference from the Proxy Statement
for the 1997 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 near
Phoenix in Goodyear, Arizona. Arkansas Galvanizing, Inc., located in Prairie
Grove, Arkansas, was acquired in February, 1996. Hobson Galvanizing, Inc.
located in Belle Chase, Louisiana, the Company's ninth galvanizing facility, was
acquired in March, 1997.
A three-year summary of sales, operating profit and identifiable assets by
industry segment is included in Note 10 to the Consolidated Financial Statements
on page 22 of the Registrant's 1997 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 Partnership, LTD, 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 The Calvert Company, 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 $10,315,000 at February 28, 1997, $7,600,000
at February 29, 1996, and $9,100,000 at February
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28, 1995. All of the fiscal 1997 backlog will be delivered in the next 18
months. Orders included in the backlog are represented by contracts and 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. Total employment in this segment is 238 persons.
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, due to freight cost. Aztec is limited
to some extent in its galvanizing market to areas within a close proximity of
its existing locations. 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 252 persons.
OIL FIELD PRODUCTS SEGMENT
Aztec processes and provides oil field tubular products 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 and supply
houses. The Company closed its Houston Tubing facility in March 1989, and
liquidated this facility in 1997. 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 $630,000 at February 28, 1997, $137,000 at February
29, 1996, and $50,000 at February 28, 1995. 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 72
persons.
GENERAL
In fiscal 1997, 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. The Company has established a $386,000
reserve at the end of fiscal 1997 against receivables for any possible loss of
these receivables.
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. To date,
the Company has not expended any material amounts to comply with such
regulations and management does not currently anticipate that future compliance
will have a material adverse effect on the consolidated financial position or
results of operations of the Company. The Company has been named in
environmental proceedings that are further described in Item 3 - Legal
Proceedings.
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FORWARD LOOKING STATEMENT
This Form 10-K contains forward looking statements. Such statements are
typically punctuated by words or phrases such as "anticipates," "estimate,"
"should," "may," "management believes," and words or phrases of similar import.
Such statements are subject to certain risks, uncertainties or assumptions.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those anticipated, estimated or projected. Factors that could cause or
contribute to such differences could include, but are not limited to, changes in
demand, prices, and raw materials cost; changes in the economic conditions of
the various markets the company serves; as well as the other risks detailed
herein and in the Company's reports filed with the Securities and Exchange
Commission.
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
Business Experience for Past
Name Age Five Years; Position or Office with Registrant Held Since
- ------------------- --- ---------------------------------------------- ----------
<S> <C> <C> <C>
L. C. Martin 71 Chairman, President and Chief Executive Officer 1958
D. L. Perry 48 Vice President of Finance, and Chief Financial Officer 1992
Assistant Secretary 1977
F. L. Wright, Jr. 56 Senior Vice President/Galvanizing Segment 1992
Vice President/Galvanizing Segment 1989
General Mgr./Galvanizing Segment 1987
</TABLE>
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 28, 1997:
<TABLE>
<CAPTION>
Location Acres Sq. Footage Segment/Occupant
- -------- ----- ----------- ----------------
<S> <C> <C> <C>
Crowley, Texas 152.0 7,772 Corporate Office
25,600 Galvanizing
193,245 Oil Field Products
Houston, Texas 8.7 25,800 Galvanizing
37.0 36,000 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
</TABLE>
I-3
<PAGE>
<TABLE>
<CAPTION>
Location Acres Sq. Footage Segment/Occupant
- -------- ----- ----------- ----------------
<S> <C> <C> <C>
Belle Chasse, Louisiana 4.5 34,000 Galvanizing
</TABLE>
* 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.
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 Natural Resource
Conservation Commission ("TNRCC") 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 TNRCC 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 TNRCC 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 11 to the Consolidated Financial Statements on page 23 of the
Registrant's 1997 Annual Report to Shareholders.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fiscal year ended February 28, 1997, to a
vote of security holders through the solicitation of proxies or otherwise.
I-4
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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 on
the New York Stock Exchange. The Company was listed on the New York Stock
Exchange and started trading on March 20, 1997. The information contained under
the caption "Stock Prices and Dividends Per Share" on Page 13 of Registrant's
1997 Annual Report to Shareholders is incorporated herein by reference.
The approximate number of holders of record of Common Stock of Registrant at May
2, 1997 was 1,400.
ITEM 6. SELECTED FINANCIAL DATA
The information contained under the caption "Consolidated Summary of Operations
and Other Financial Information" on page 2 of Registrant's 1997 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 10, 11 and
12 of Registrant's 1997 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 28,
1997 and February 29, 1996, and the related consolidated statements of income,
shareholders' equity, and cash flows for each of the three years in the period
ended February 28, 1997 and the report of the independent auditors and the
information required by item 302 of Regulation of S-K are on pages 13 through 24
of Registrant's 1997 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 28, 1997 or the subsequent interim period.
II-1
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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 1997 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 1997 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 1997 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 1997 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 13 through 24 of Registrant's 1997
Annual Report to Shareholders.
<TABLE>
<CAPTION>
Pages of 1997 Annual
Report to Shareholders
----------------------
<S> <C>
Report of Independent Auditors 13
Consolidated Balance Sheets as of February 28, 1997 and February 29, 1996 14
Consolidated Statements of Income for the years ended 15
February 28, 1997, February 29, 1996, and February 28, 1995
Consolidated Statements of Shareholders' Equity for the years ended 15
February 28, 1997, February 29, 1996, and February 28, 1995
Consolidated Statements of Cash Flows for the years ended 16
February 28, 1997, February 29, 1996, and February 28, 1995
Notes to Consolidated Financial Statements 17-24
</TABLE>
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 28,
1997 (including the Registrant Proxy Statement for the 1997 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 no reports on Form 8-K during the fiscal year ended
February 28, 1997.
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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: 5-27-97 By: /s/ L.C. Martin
------------------------------- --------------------------------
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.
/s/ L.C. Martin /s/ Dana L. Perry
- ------------------------------------ ------------------------------------
L. C. Martin, Principal Executive Dana L. Perry, Principal Accounting
Officer,
Officer and Director Principal Financial Officer, and
Director
/s/ Robert H. Johnson /s/ Sam Rosen
- ------------------------------------ ------------------------------------
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
* /s/ L.C. Martin
- ------------------------------------
L. C. Martin, Attorney-in-Fact
IV-3
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
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 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 of 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 From 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).
10d 1986 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 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 29, 1987).
10g 1988 Nonstatutory Stock Option Plan of Registrant (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 28,
1997 (including the Registrant Proxy Statement for the 1997 Annual
Meeting of Shareholders).*
<PAGE>
EXHIBIT DESCRIPTION
- ------- -----------
21 Subsidiaries of Registrant.*
23 Consent of Ernst & Young LLP.*
24 Power of Attorney.*
________________
*FILED HEREWITH
<PAGE>
EXHIBIT 13
About Aztec
Aztec Manufacturing Co. markets
and services worldwide to three
distinct industries.
The Electrical Products Segment
consists of three companies with
different 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 expansions,
thereby providing increasing cash
flow for overall corporate growth.
The Oil Field Segment, redefined
in fiscal 1997, processes and
markets oil field tubular products
and manufactures oil tubular
accessories for the petroleum
industry.
Net Sales Net Income Shareholders Equity
(millions) (millions) (millions)
[CHARTS APPEAR HERE]
<PAGE>
CONSOLIDATED SUMMARY OF OPERATIONS AND OTHER FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Fiscal Year
---------------------------------------------------------------
1997 1996 1995 1994 1993
------------ ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
(In thousands, except per share amounts, percentages and
ratios)
Summary of operations:
Net sales $57,703 $49,184 $44,608 $40,834 $30,834
Net income 4,328 2,582 1,578 2,172 1,073
Income per share:
Net income--assuming no dilution $ .75 $ .46 $ .28 $ .39 $ .19
Net income--assuming full dilution .74 .45 .27 .37 .19
Return on average shareholders'
equity 16.7% 11.6% 7.7% 11.7% 6.2%
Pretax profits to sales 12.4% 8.7% 5.8% 8.7% 6%
Net income to sales 7.5% 5.2% 3.5% 5.3% 3.5%
Total assets $45,995 $42,621 $40,791 $34,060 $25,827
Long-term debt, excluding current
portion 7,527 9,516 10,484 6,622 1,730
Total liabilities 17,421 19,461 19,415 14,512 8,280
Shareholders' equity 28,573 23,160 21,376 19,548 17,547
Working capital 12,220 7,879 10,117 7,389 5,734
Shareholders' equity per share 4.96 4.11 3.75 3.48 3.12
Long term debt to equity ratio .26 to 1 .41 to 1 .49 to 1 .34 to 1 .10 to 1
Current ratio 2.30 to 1 1.89 to 1 2.22 to 1 2.06 to 1 2.04 to 1
EBITDA $10,691 $ 7,407 $ 5,185 $ 5,839 $ 3,477
Cash provided by operations 6,821 9,103 40 3,765 2,137
Capital expenditures 2,037 3,434 4,890 2,713 1,073
EBITDA per share 1.86 1.31 .91 1.04 .62
Cash dividends per share .06 .03 .02 .045 .10
Average shares outstanding 5,761 5,634 5,698 5,625 5,623
</TABLE>
2
<PAGE>
LETTER TO OUR SHAREHOLDERS
Aztec Manufacturing Co. recorded record revenues of 57.7 million dollars for its
fiscal year ended February 28, 1997. The previous record was set prior to the
collapse of the oil business in 1982, which was our fiscal year ending February
28, 1982, when revenues were 55.4 million dollars. Although the record stood
for fifteen years, management anticipates the 57.7 million dollars just recorded
will be broken in the year ending February 28, 1998.
As was previously announced Aztec acquired the operating assets of Hobson
Galvanizing Inc., located outside New Orleans, Louisiana, on March 10, 1997.
This facility will operate as a wholly-owned subsidiary and becomes the ninth
galvanizing operation in our Galvanizing Segment. We will continue to pursue
other opportunities that may arise to expand this portion of our business.
For the first time in several years, the Crowley tubing facility was profitable.
However, it was not profitable enough to offset the carrying cost of the idled
Houston tubing facility sold October 31, 1996. Management anticipates this
Segment of our business to be profitable for the year ending February 28, 1998.
COMMON STOCK PRICE
(High/Low Yearly Bid Price)
[GRAPH APPEARS HERE]
The Electrical Segment also performed well with Rig-A-Lite posting another
record year and Calvert showing solid gains in margins and profitability.
Upon review of the operational portion of this report you will find that all
three segments of our business showed an appreciable improvement in operating
income for the fiscal year just ended. These improvements hold much significance
for the future of Aztec and its shareholders and we hope you will take the time
to learn about them. Aztec is a far different company than it was when we
recorded what is now our second biggest year.
On Thursday, March 20, 1997, the common stock of Aztec Manufacturing Co. became
listed on the New York Stock Exchange using the symbol AZZ and is the last stock
listed under the "A" section of the daily stock report. Management is of the
opinion this listing will enhance shareholder value and give some added degree
of stability to the stock.
It was with deep sorrow and great personal loss that we recorded, on November
30, 1996, the passing of Mr. William D. Ratliff, Jr., a member of the Board of
Directors since 1965. In the years he served on the Board of our Company, he
made invaluable contributions to its progress.
The Board of Directors, on February 18, 1997, declared a year-end cash dividend
of six cents per share, which was a 100% increase over the previous year's
dividend. This six cent dividend was paid March 28, 1997, to shareholders of
record as of March 7, 1997.
The Aztec Annual Meeting is scheduled for 10:00 a.m. Tuesday, July 8, 1997; at
the Petroleum Club, in the Derrick I Room, on the 39th floor of the Continental
Plaza, Fort Worth, Texas. We invite all shareholders to attend.
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
3
<PAGE>
A GAMEPLAN FOR GROWTH
BENCHMARKS TO MEASURE PROGRESS
Aztec operates in three distinct businesses, Electrical Products, Hot Dip
Galvanizing and Oil Field Tubular Products. Each has distinct growth
characteristics and capital requirements.
The Electrical Products Segment should have above average growth prospects in
each of its three operating companies as well as the possibility of
complementary acquisitions. Rig-A-Lite is experiencing a pickup in the offshore
drilling and petrochemical industries, core markets for its hazardous
environmental lighting and electrical product lines. Calvert is likely to
benefit from the coming deregulation of the electric utility industry and is
already a participant in the rapid capacity additions in the Pacific Rim and
other developing areas. The explosion of wireless communication and cellular
services is helping to fuel Atkinson's business.
Galvanizing is an industry that offers very attractive acquisition opportunities
as the consolidation of this highly fragmented industry begins to accelerate.
Management believes Aztec, with its growing cash flow, is positioned to be one
of the leaders in this consolidation process.
EBITDA
(MILLIONS)
[GRAPH APPEARS HERE]
The Oil Field Products Segment is finally turning after years in the doldrums.
The shake out of industry participants would appear to have run its course and
drilling and rework activity in the oil patch has picked up with the recovery in
energy prices. Fortunately for Aztec, at this point, the Company has the
capacity to do multiples of its current Segment sales with its plant in place
and paid for.
The only capital investment required will be modest amounts for inventory and,
as sales recover, this Segment should quickly begin to generate free cash flow
to add to the already positive cash flow of the other two Segments to accelerate
Aztec's growth.
Given the varied opportunities, it is incumbent on Aztec management to be
disciplined and focused in the intelligent reinvestment of rising cash flows.
Sales and earnings growth, as well as expense ratio trends and profit margin
analysis explained in considerable detail in the discussion which accompanies
the financial statements, gives an overall measurement of the Company's
progress. But other more specialized returns and/or productivity benchmarks,
reflected below, specifically address the question of intelligent reinvestment
of capital and are also important to monitor.
RETURN ON SALES
[GRAPH APPEARS HERE]
ASSET TURNOVER - is the ratio of sales per dollar employed during the year. It
is calculated by dividing net sales by the average assets.
Fiscal 1995 Sales = $44,608 = 1.19
----- -------
Avg. Assets 37,425
Fiscal 1996 Sales = $49,184 = 1.18
----- -------
Avg. Assets 41,706
Fiscal 1997 Sales = $57,703 = 1.30
----- -------
Avg. Assets 44,308
4
<PAGE>
A GAMEPLAN FOR GROWTH
BENCHMARKS TO MEASURE PROGRESS
Asset turnover improved in fiscal 1997 for several reasons. The Arizona
Galvanizing facility, opened in 1994, continued to mature, an idled oil tubing
plant in Houston was sold and good internal growth was achieved at Rig-A-Lite,
Atkinson and most of the other galvanizing facilities. Expressed another way,
Aztec generated $1.30 in sales for each dollar of assets employed in fiscal 1997
compared to under $1.20 in each of the prior two years. There is no generally
accepted turnover ratio to target and acquisitions and the timing of an
acquisition closing can affect the ratio in a given year. However, a sudden
precipitous drop or steady deterioration would cause management to reexamine and
adjust the capital reinvestment plan.
RETURN ON ASSETS
[GRAPH APPEARS HERE]
PRETAX RETURN ON AVERAGE ASSETS - is earnings before taxes and extraordinary
items divided by average assets.
Fiscal 1995 Pretax Earnings = $ 2,608 = 7.0%
--------------- -------
Avg. Assets 37,425
Fiscal 1996 Pretax Earnings = $ 4,267 = 10.2%
--------------- -------
Avg. Assets 41,706
Fiscal 1997 Pretax Earnings = $ 7,153 = 16.1%
--------------- -------
Avg. Assets 44,308
The combination of rising asset turnover combined with the improved profit
margin on sales discussed in the financial review section has a multiplier
effect on the return on assets. As a result it has more than doubled since
fiscal 1995 rising to 16.1%.
The inescapable fact that all companies must face is that internal cash flow
funds businesses, not reported earnings or earnings per share. The growth rate
of a corporation is ultimately determined by the generation and growth of such
cash flow. The trends in asset turnover and return on assets is encouraging as
Aztec enters its new fiscal year and this portends favorable cash flow trends as
well. The Hobson Galvanizing acquisition, which closed on March 10, 1997
clearly demonstrates that attractive reinvestment opportunities continue to
present themselves to Aztec and that management will be disciplined and
aggressive in pursuing its growth plan.
5
<PAGE>
REVIEW OF OPERATIONS
ELECTRICAL PRODUCTS
Aztec's Electrical Products Segment is undoubtedly one of the Company's core
strengths. This segment generated over 52% of total revenues and 48% of
operating profit. Sales were essentially flat in fiscal 1997, but operating
margins expanded significantly and return on assets employed exceeded 33%.
Operating income increased 25%.
Aztec's Electrical Products Segment is comprised of three operating entities:
Rig-A-Lite Partnership, Ltd., The Calvert Company and Atkinson Industries, Inc.
ELECTRICAL PRODUCTS
<TABLE>
<CAPTION>
==================================================
1995 1996 1997
- --------------------------------------------------
<S> <C> <C> <C>
Sales $27,547 $30,172 $30,276
- --------------------------------------------------
% Change -0- 10% -0-
- --------------------------------------------------
OP Income $ 1,358 $ 4,264 $ 5,317
- --------------------------------------------------
% Change (67%) 214% 25%
- --------------------------------------------------
OP Margin
Return on Sales 5% 14% 18%
- --------------------------------------------------
Avg. Assets Emp $18,314 $18,100 $15,925
- --------------------------------------------------
Return on Assets 7% 24% 33%
==================================================
</TABLE>
RIG-A-LITE PARTNERSHIP, LTD-HOUSTON, TEXAS
Rig-A-Lite had another record year in fiscal 1997. After three years of
continued growth, the food processing market, primarily fresh poultry, a market
Rig-A-Lite pioneered with lighting products, settled down to essentially a
replacement market. However, this trend was offset by a resurgence in Rig-A-
Lite's core energy and petrochemical markets and rapid expansion in the
international arena.
The domestic petrochemical market comprised approximately one-quarter of Rig-A-
Lite's sales. Products for this market are normally sold through specialized
petrochemical distributors but are also sold directly to large end users.
In this market, Rig-A-Lite enjoys the advantage of having its products known by
name as the "best in the business." The major customers in this market are
those involved with domestic exploration and/or production of oil and gas.
Furthermore, the vast majority of Rig-A-Lite's customer base in this market is
located in the South Central states, such as Texas, Louisiana, and Mississippi,
where most domestic exploration takes place. This market is driven by drilling
activity, thus, is tied to the world prices for oil and gas. Domestic drilling
activity accelerated significantly in fiscal 1997, both onshore and offshore,
particularly in the Gulf of Mexico and this higher level of oil industry
activity appears to be continuing into fiscal 1998.
The international petrochemical market is similarly benefiting from a recovery
in energy prices and activity and Rig-A-Lite is moving aggressively to position
itself to capitalize on the emerging market opportunity. In fiscal 1997, the
company expanded its distribution in Canada, and in Singapore to service the
Pacific Rim. Rig-A-Lite entered into a new relationship in Mexico which is
adding sales there and in other Latin American countries. The company now has
agent/distribution agreements in 20 countries.
1997 SEGMENT SALES
[GRAPH APPEARS HERE]
6
<PAGE>
REVIEW OF OPERATIONS
THE CALVERT COMPANY-RICHLAND, MISSISSIPPI
Calvert primarily manufactures a broad variety of bus duct products for the
power generation and distribution industries. Calvert operates in three primary
markets: Original Equipment Mfg. (OEM), architectural engineering and the
investor owned utility markets. Calvert has continued to show margin
improvements.
The OEMs manufacture and sell a product that utilizes Calvert's bus duct systems
as part of their equipment. The major OEMs are those companies that manufacture
power generators. The architectural engineering firms Calvert conducts business
with are typically those that act as general contractors for an entire power
plant project. As much as 80 percent of the current demand for Calvert's
products is for overseas use.
Until the unfolding deregulation of the domestic electric utility industry fully
develops, U.S. equipment sales will continue to be primarily into the
replacement market.
Markets, such as the Far East, the Asian-Pacific Rim, and South America, have
attracted the attention of those in the bus duct product industry as these areas
have seen (and will continue to see) rapid development of electrical power
generation infrastructures. The hottest foreign markets are those such as
China, India, and Russia, which are expected to significantly increase their
power generation capacity over the next ten years.
Despite the dependence on foreign sales, Calvert has little currency exposure
because it deals primarily with U.S. contractors and quotes its prices in U.S.
dollars.
The current uncertainty arising from the emerging trend towards deregulation in
the U.S. electric utility industry is providing a growth opportunity and Calvert
is devoting resources to capitalize on it. Efforts of utility companies to
downsize their support staffs in the cost cutting environment of deregulation
have resulted in an increased usage of outside sub contractors for maintenance
and repair. Calvert's Installation Services (C.I.S.), a unit that contracts with
utilities to perform bus duct replacement installation, bus maintenance and
installation supervision of bus duct systems, is benefiting from this trend.
ATKINSON INDUSTRIES - PITTSBURG, KANSAS
Atkinson Industries was originally developed to provide power distribution
equipment, electrical components, and electrical repair services to the mining
and other industries. Mine-duty equipment and electrical repair services are
still vital parts of Atkinson but have become smaller components of the business
as the company has concentrated its efforts on factory fabricated electrical
enclosures. These enclosures provide environmentally controlled protection for
electrical equipment that must operate in hazardous locations. Atkinson ships
its enclosures with the electrical equipment requiring protection already
installed so that the enclosures are ready to be set in place and utilized upon
delivery. As market needs continually change, the uses of these enclosures have
evolved and spanned new industries, allowing Atkinson to penetrate new markets.
Some of the bigger industries which utilize enclosures include the
telecommunications, petroleum, chemical, paper, utilities industries and
municipalities.
Fiscal 1997 was a special year for Atkinson as the company delivered two 80 foot
portable electrical and communication command centers for on-site riverside pulp
operations, a new market for Atkinson. Built in 20 foot sections the finished
enclosures housed a computer room, electrical power and switchgear, and even
lavatories.
The electrical utility industry continues to be the backbone of Atkinson's
business, yet fiscal 1997 saw further progress in penetrating the faster growing
communications industry with enclosures to support remote towers. Prospects for
continued growth in the new fiscal year are excellent and Atkinson began fiscal
1998 with a backlog 22% ahead of last year.
7
<PAGE>
REVIEW OF OPERATIONS
GALVANIZING
Aztec operated eight galvanizing facilities in fiscal 1997 and acquired a ninth,
Hobson Galvanizing, Inc. near New Orleans, Louisiana on March 10, 1997. With
current production in excess of 200 million pounds annually, Aztec is one of the
largest independent galvanizers in the United States and one of the fastest
growing.
GALVANIZING SEGMENT
<TABLE>
<CAPTION>
=================================================
1995 1996 1997
- -------------------------------------------------
<S> <C> <C> <C>
Sales $12,761 $16,920 $23,646
- -------------------------------------------------
% Change 35% 33% 40%
- -------------------------------------------------
OP Income $ 3,056 $ 4,270 $ 5,930
- -------------------------------------------------
% Change 54% 40% 39%
- -------------------------------------------------
OP Margin
Return on Sales 24% 25% 25%
- -------------------------------------------------
Avg. Assets Emp $11,267 $16,594 $19,313
- -------------------------------------------------
Return on Assets 27% 26% 31%
=================================================
</TABLE>
The Galvanizing Segment accounted for 41% of the Company's total revenues and
53% of operating income. Growth has and continues to come from a combination
of solid internal growth and acquisitions. The acquisition of Arkansas
Galvanizing in February, 1996 added 34% to production, while existing Aztec
facilities grew a solid 12%. The acquisition of Hobson at the start of our new
fiscal year should further enhance the growth in galvanizing revenues in fiscal
1998. Hobson had revenues in calendar 1996 in excess of $5 million and
processed 41 million pounds of steel products. After less than two months of
ownership, Aztec has already seen a trend of improved margins and a rising
revenue stream from Hobson.
Because galvanizing provides metallurgically bonded protection, it offers
economic advantages over repetitive application of coatings or use of costly
stainless steel. In Europe, about 35 percent of all rolled steel is galvanized,
compared with just six percent in this country. Through coordinated industry
efforts, U.S. market share is expected to increase in the years ahead, but may
not reach European levels. In 1995, the latest year industry wide statistics are
available, U.S. steel companies produced 85.8 million tons of steel. Of that,
only 2.7 million tons, or about 3.2 percent, were hot dipped galvanized. The
significant factor here is that 2.7 million tons represent an 8 percent increase
over the 1994's 2.5 million tons. The American Galvanizing Association projected
a 10 percent increase in 1996 to 3.0 million tons.
Industry growth trends are not necessarily meaningful because of the regional
nature of the business. Galvanizing is a regional business mainly because
freight quickly becomes a significant cost factor in the pricing equation.
Aztec operates plants throughout the South and Southeast and the above industry
growth rate exhibited by the Company's Galvanizing Segment has clearly benefited
by the overall healthy economic progress of the geographical areas in which it
operates.
Because of the regional nature of the business, the galvanizing industry is
highly fragmented with over 200 galvanizing plants in the U.S. Even though
Aztec processed 83,000 tons of steel in the most recent year, that represents
only about 3% of the total 3.0 million tons available industry wide.
The galvanizing industry is starting to consolidate for a variety of reasons.
The demand for value added services and broader geographic service from larger
OEM customers, ever tightening EPA requirements, the aging of entrepreneurs who
built much of the post World War II industry capacity and other reasons are all
contributing to an acceleration of this trend. Aztec, because of its strong
cash flow growth, should be well positioned to be a primary participant in this
consolidation process.
8
<PAGE>
REVIEW OF OPERATIONS
OIL FIELD PRODUCTS
In the early eighties, Aztec was the largest independent processor of oil field
tubing in the United States. After the boom and subsequent bust a decade ago,
the Oil Field Segment has become a very minor part of operations, breaking even
or losing money in recent years. But it may be about to emerge as a significant
incremental profit contributor in fiscal 1998 and beyond.
In fiscal 1997, the Crowley tubing plant posted a solid profit for the first
time in several years, most of which occurred in the fourth quarter. Results of
the Oil Field Products Segment have been negatively impacted in recent years
because of an idle facility in Houston, which was finally sold in October 1996.
OIL FIELD PRODUCTS
<TABLE>
<CAPTION>
==============================================
1995 1996 1997
- ----------------------------------------------
<S> <C> <C> <C>
Sales $4,300 $2,092 $3,781
- ----------------------------------------------
% Change 13% (51)% 81%
- ----------------------------------------------
OP Income $1,084 $ (428) $ (56)
- ----------------------------------------------
% Change 138% (139)% 87%
- ----------------------------------------------
OP Margin
Return on Sales 25% NM NM
- ----------------------------------------------
Avg. Assets Emp $3,983 $3,583 $3,960
- ----------------------------------------------
Return on Assets 27% NM NM
==============================================
</TABLE>
In the eighties and prior, the oil field tubular business was a three or even
four-step market structure. Raw pipe, both seamless and welded, would be
manufactured by a steel company, sold by the ton to either an oil company or an
oil field supply distributor, but consigned to a third party processor (i.e.,
Aztec) for processing, threading, heat treating, and tempering. Aztec
functioned as a service provider for a processing fee but never owned the pipe,
except for the related pup joint business. (Pup joints are short sections of
tubing used to complete a production string.) Aztec was the largest third party
processor from 1978 through 1986 with revenues from the business, at the peak,
in excess of $50 million per year. The industry collapsed in 1985-1986 and
Aztec collapsed with it. In the space of one year, revenues from this business
virtually disappeared.
Because of the glut of tubular products, most steel companies abandoned the
production of tubular products altogether, or at the very least the small
diameter (under two inches, referred to in the industry as macaroni tubing) part
of the business. Those that remain have concentrated on large diameter tubing
and casing products and processing has largely been brought in house.
However, technological innovations in the oil patch such as 3-D seismic,
horizontal drilling and simultaneous production from multiple pay zones, have
improved economics and led to a resurgence in domestic drilling activity.
Further, because of higher oil and gas prices, oil well rework activity has
picked up. Demand for macaroni tubing has resulted from increases in dual
lateral drilling and dual completions that require additional flow lines within
a single wellbore.
Aztec envisions an opportunity to rebuild this business and therefore reentered
the market starting in the fourth quarter of fiscal 1997. Its approach is not
strictly on a third party service basis, but directly, buying new tubing,
processing it into finished pipe and selling to the ultimate customer, i.e. an
oil company or oil field distributor. Purchasing some imported tubing, the
Company shipped approximately 500,000 feet in the December through February
period.
Now that it is obvious there is an ongoing market, Aztec is addressing the
supply side of the business. Supply sources for raw tubing have been found in
Romania and Korea, as well as Spain and Canada, and material started arriving in
December. In addition, the Company is negotiating with other sources both
foreign and domestic.
While there is risk associated with this expansion, the incremental revenue and
profit implications are meaningful. Aztec's oil field tubular processing
facility in Crowley, Texas, has been depreciated to under $3 million over the
years. This is a large facility capable of producing more than ten times its
current production. Aztec intends to pursue this line of business aggressively.
9
<PAGE>
MANAGEMENT'S 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 $57.7 million for fiscal 1997 compared with $49.2 million in the
previous year. Net income for fiscal 1997 was $4.3 million or 74 cents per
share compared with $2.6 million or 45 cents per share fully diluted. A
discussion concerning effects of new accounting standards can be found in Note 1
of Notes to Consolidated Financial Statements.
RESULTS OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1997 (1997) COMPARED WITH YEAR ENDED FEBRUARY 29, 1996
(1996)
Consolidated net sales for 1997 grew by $8.5 million or 17% over 1996. Revenues
from the Company's Electrical Products Segment, which is made up of Rig-A-Lite
Partnership Ltd. ("Rig-A-Lite") , The Calvert Company ("Calvert") and Atkinson
Industries, Inc. ("Atkinson") remained constant for 1997 as compared to 1996.
Rig-A-Lite's revenues were up 18% for 1997. Rig-A-Lite's domestic industrial
sales, which represented 44% of their total revenues, were flat for 1997.
Fixture sales to the food processing industry, which represented 20% of its
total revenues, were down by 11% for 1997 due to a slow down in the consumption
of poultry related products. Sales of Rig-A-Lite's international and petroleum
fixtures, which represented 36% of their total sales, were up 95% due to renewed
activity in international petroleum markets. Calvert's revenues were down 20%
for 1997 compared to 1996 due to the continued sluggishness of the domestic
power generation market. Overseas shipments of bus duct products continued to
represent approximately 80% of Calvert's revenues for 1997. Calvert's domestic
customer installation service business, which represents 15% of Calvert's 1997
revenues, was flat for 1997 as compared to 1996. Revenues at Atkinson were up
2% for 1997 as compared to 1996. Sales of Atkinson's factory fabricated power
centers, which represents 87% of Atkinson's business, were up 3% over 1996.
Atkinson's electrical repair services was down 5% for 1997 as compared to 1996.
Revenues in the Galvanizing Segment were up 40% for 1997 as compared to 1996 due
to a 13% increase in revenues at Aztec's existing seven facilities and the
acquisition of Arkansas Galvanizing on February 1, 1996. During the first full
year under Aztec's management, Arkansas Galvanizing represented 21% of total
revenues for this segment.
The Oil Field Products Segment generated 7% of the Company's consolidated
revenues for 1997. Revenues generated from this segment were up 81% for 1997 as
compared to 1996. Aztec changed its long standing philosophy regarding how the
Company markets its services to the industry. Since the Company's inception in
1956, Aztec's Oil Field Products Segment provided a third party service of end
finishing oil field tubular goods for steel mills and oil field supply houses in
the U.S. In the second half of fiscal 1997, Aztec began buying plain end
tubing, processing it into finished product and marketing the finished tubing
direct to supply houses. The Company has experienced a strong demand for
finished tubing and is working diligently to solidify long term agreements with
reliable suppliers of plain end tubing.
Consolidated operating income (see note 10 of Notes to Consolidated Financial
Statements) increased $3.1 million or 38 percent for 1997, as compared to 1996.
The Electrical Products Segment continued to improve for 1997, with operating
income up 25% over 1996. Rig-A-Lite's operating income for 1997 was up 45% from
1996 due to improved margins achieved by cost efficiencies and lower material
cost related to increased volumes. Calvert's operating income was up 64% for
1997 compared to 1996. Continued cost controls and increased efficiencies
helped to improve margins. Atkinson's operating income was down 16% for 1997
compared to 1996 due to less profitable jobs being accepted to improve backlog.
Higher margin jobs are being added to Atkinson's backlog.
The Galvanizing Segment's operating income increased 39% during 1997 compared to
1996. Operating income was up 7% due to increased volumes of steel being
processed at Aztec's seven existing facilities and the acquisition of Arkansas
Galvanizing on February 1, 1996. Arkansas Galvanizing accounted for 24% of this
segment's operating income.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Oil Field Products Segment showed a $56,000 operating loss for 1997 as
compared to a $428,000 operating loss in 1996. The operating loss included
carrying costs of the Segment's idle facility in Houston, Texas of $115,000 for
1997 and $139,000 for 1996. A portion of this facility was sold on October 31,
1996, and these carrying costs should not reoccur. The Crowley facility showed
a $60,000 operating profit for 1997 as compared to a $289,000 operating loss in
1996. The improvement in operating income at the Crowley facility is
attributable to the increased volumes of tubular goods processed and sold during
the last quarter of 1997.
General corporate expenses for 1997 increased by 16% over 1996. This increase
was attributed to higher employee benefits and profit sharing expenses, and
increased selling expenses. Interest expense in 1997, as compared to 1996, was
down due to lower interest rates through the course of the year as well as a
lower outstanding loan balance.
Other (income) expense was made up of scrap sales, (gains) and losses on sales
of property and equipment, and other (income) expense items not specifically
identifiable to a segment. This expense included the establishment of a
corporate reserve for slow moving inventory in the amount of $240,000.
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% over 1995. The
Company's Electrical Products Segment showed a 10% increase in revenues for
1996 as compared to 1995. Rig-A-Lite's consolidated revenues increased 7% 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. Calvert's
revenues increased 15% for 1996 due to an intensified emphasis on marketing.
The majority of Calvert's products were shipped to foreign markets during 1996.
Atkinson revenues were up 6% in 1996, a record year.
Revenues in the Galvanizing Segment were up 33% for 1996 as compared to 1995.
This increase was primarily due to an approximate 31% increase in the volume of
steel processed, as well as improved average selling prices over 1995. Arizona
Galvanizing contributed $1.86 million or 11% to the segment's total revenues for
their first full year of operation. The addition of Arkansas Galvanizing, Inc.,
effective February 1, 1996, was a small contributor to revenues for 1996.
The Oil Field Products Segment was down 51% for 1996. This segment generated 4%
of the consolidated revenues of the Company in 1996.
Consolidated operating income (see note 10 of Notes to Consolidated Financial
Statements) increased $2.6 million or 47 % for 1996, as compared to 1995. The
Electrical Products Segment showed a dramatic improvement for 1996, with
operating income up 214% over 1995. Rig-A-Lite's operating income for 1996 was
up 10 % from 1995 due to increased volume. 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. Atkinson's operating income
for 1996 was up 20 % from 1995 due to improved operating efficiencies.
The Galvanizing Segment's operating income improved 40 %, consistent with
increased revenues for 1996.
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% 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 in the amount of $420,000, and other (income)
expense items not specifically identifiable to a segment.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
YEARS ENDED FEBRUARY 28, 1997, FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
Aztec's financial condition, in management's opinion, remained strong through
fiscal 1997. The Company's operations and acquisitions have been financed with
funds generated from operations, bank borrowings, liquidation of idle assets and
proceeds from the exercise of stock options.
Cash provided by operating activities was $6.8 million in 1997, $9.1 million
1996 and $39,500 in 1995. Operating cash flows in 1997 were provided by net
income, depreciation and amortization, and other non cash items. The increased
cash flows from operations in 1996 as compared to 1995 were attributed to
improved profits, reductions in outstanding accounts receivable and lower
inventory balances.
The sale of a portion of the Company's idle Houston property on October 31,
1996, generated cash of approximately $1 million. The amount realized from the
sale of this property was equal to the net book value carried by the Company.
The balance of this property is under contract of sale and should close by
midyear of fiscal 1998. The Company anticipates the amount it will receive from
the sale of the remains of the Houston property will equal its current carrying
value. Additional cash was generated through the exercise of employee stock
options in the amount of $1.4 million.
Subsequent to year end, the Company acquired on March 10, 1997, the operating
assets of Hobson Galvanizing, Inc., for $3.9 million. The purchase was funded
from cash reserves of the Company. Hobson Galvanizing had revenues in excess
of $5 million per year. Other major uses of cash during fiscal 1997 included
capital expenditures, repayment of debt, and payment of cash dividends. Working
capital increased to $12.2 million for 1997 from $7.9 million in 1996. The
Company's current ratio and quick ratio for 1997 were 2.30 to 1 and 1.61 to 1,
respectively. The long term debt-to-equity ratio was .26 to 1 on February 28,
1997, and .41 to 1 on February 29, 1996.
The Company arranged a new credit facility with a new lender effective July 1,
1996. This agreement is made up of a three year $10 million revolving line
of credit and a six year $10 million term note.
The Company's current availability under the credit facility is approximately
$10 million. Management believes that the credit facility, current assets and
cash generated from operations will be sufficient to accommodate the Company's
current operations, internal growth, and possible future acquisitions.
Inflation has not significantly impacted the Company over the last three years.
Management does not expect inflation to have a significant impact on operations
in the foreseeable future. The Company does not engage in any hedging
activities or make use of any investments in derivatives, commodities, or other
interest-rate sensitive vehicles.
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 Natural Resource
Conservation Commission ("TNRCC") 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 TNRCC 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 TNRCC 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.
12
<PAGE>
STOCK PRICES AND DIVIDENDS PER SHARE
<TABLE>
<CAPTION>
Fiscal 1997
High Bid Low Bid Cash Dividend
-------- ------- -------------
<S> <C> <C> <C>
1st Quarter $ 6-3/8 $4-3/8 $ .00
2nd Quarter 8-1/4 6 .00
3rd Quarter 9-1/8 6-1/2 .00
4th Quarter 11-3/8 6-3/4 .06
Whole Year 11-3/8 4-3/8 .06
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1996
High Bid Low Bid Cash Dividend
-------- ------- -------------
<S> <C> <C> <C>
1st Quarter $ 4-1/2 $3-1/2 $ .00
2nd Quarter 3-7/8 3-1/8 .00
3rd Quarter 4-1/8 3-1/4 .00
4th Quarter 5-3/8 3-1/2 .03
Whole Year 5-3/8 3-1/8 .03
</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 traded on the NASDAQ Stock Market under the
symbol: AZTC. Subsequent to year-end, the Company was listed on the New York
Stock Exchange and began trading on March 20, 1997. The Company's common stock
trades under the symbol AZZ.
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 28, 1997 and February'29, 1996, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended February 28, 1997. 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 28, 1997 and February'29, 1996, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended February 28, 1997, in conformity with generally
accepted accounting principles.
/s/Ernst & Young, LLP
---------------------
Fort Worth, Texas
March 31, 1997
13
<PAGE>
AZTEC MANUFACTURING CO. CONSOLIDATED BALANCE SHEETS
February 28, 1997 and February 29, 1996
<TABLE>
<CAPTION>
Assets 1997 1996
- ------ ------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,583,720 $ 416,223
Accounts receivable, net of allowance for doubtful
accounts of $385,900 in 1997 and $200,000 in 1996 9,530,112 9,483,471
Inventories 6,314,692 6,672,548
Prepaid expenses and other 192,902 192,047
------------ ------------
Total current assets 21,621,426 16,764,289
Long-term investments 300,000 -
Property, plant, and equipment, at cost:
Land 1,212,750 1,212,750
Buildings and structures 13,088,844 12,859,464
Machinery and equipment 12,556,079 12,080,903
Furniture and fixtures 1,345,227 1,244,137
Automotive equipment 650,953 592,689
Construction in progress 272,501 255,725
------------- ------------
29,126,354 28,245,668
Less accumulated depreciation 12,584,177 11,420,716
------------- ------------
Net property, plant, and equipment 16,542,177 16,824,952
Property held for sale, net of accumulated
depreciation of $235,102
in 1997 and $1,209,000 in 1996 390,698 1,504,756
Intangible assets, less accumulated
amortization of $1,266,126 in 1997 and
$1,427,600 in 1996 300,014 425,430
Costs in excess of fair value of assets
purchased, less accumulated amortization
of $966,281 in 1997 and $642,300 in 1996 6,560,304 6,867,543
Other assets 280,145 234,340
------------- ------------
$45,994,764 $42,621,310
============= ============
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Accounts payable $ 2,840,108 $ 4,077,754
Accrued salaries and wages 839,150 693,338
Other accrued liabilities 3,044,313 2,038,227
Income taxes 921,286 517,355
Long-term debt due within one year 1,756,666 1,558,926
------------ ------------
Total current liabilities 9,401,523 8,885,600
Long-term debt due after one year 7,527,221 9,516,472
Net deferred income tax liability 492,688 1,058,993
Shareholders' equity:
Common stock, $1 par value; 25,000,000 shares
athorized; 6,145,009 and 5,772,895 shares
issued and outstanding at February 28, 1997 and
February 29, 1996, respectively 6,145,009 5,772,895
Capital in excess of par value 10,351,523 9,283,268
Retained earnings 12,802,931 8,830,213
Less common stock held in treasury (232,362 shares,
at cost) (726,131) (726,131)
------------ ------------
Total shareholders' equity 28,573,332 23,160,245
------------ ------------
$45,994,764 $42,621,310
============ ============
</TABLE>
See accompanying notes.
14
<PAGE>
AZTEC MANUFACTURING CO. CONSOLIDATED STATEMENTS OF INCOME
Years ended February 28, 1997, February 29, 1996 and February 28, 1995
<TABLE>
1997 1996 1995
------------ ------------- ------------
<S> <C> <C> <C>
Net sales $ 57,703,287 $ 49,184,383 $44,607,665
Costs and expenses:
Cost of sales 41,305,269 36,352,710 34,129,695
Selling, general, and administrative 8,089,434 7,548,641 6,566,317
Net loss on sale of property, plant, and equipment 1,310 45,162 3,040
Interest expense 874,209 912,586 822,627
Other expense, net 280,065 57,923 477,525
------------ ------------- ------------
50,550,287 44,917,022 41,999,204
------------ ------------- ------------
Income before income taxes 7,153,000 4,267,361 2,608,461
Income taxes:
Current expense 3,391,740 1,514,762 1,269,735
Deferred expense (benefit) (566,305) 170,986 (239,406)
------------ ------------- ------------
2,825,435 1,685,748 1,030,329
------------ ------------- ------------
Net income $ 4,327,565 $ 2,581,613 $ 1,578,132
Income per share:
Assuming no dilution $.75 $.46 $.28
==== ==== ====
Assuming full dilution $.74 $.45 $.27
==== ==== ====
</TABLE>
AZTEC MANUFACTURING CO. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended February 28, 1997, February 29, 1996 and February 28, 1995
<TABLE>
<CAPTION>
Common stock Capital in
------------------------
excess of Retained Treasury
Shares Amount par value earnings stock
---------- ----------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at Feb. 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 Feb. 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 Feb. 29, 1996 5,772,895 5,772,895 9,283,268 8,830,213 (726,131)
Exercise of stock options 372,114 372,114 1,068,255 - -
Cash dividends declared - - - (354,847) -
Net income - - - 4,327,565 -
---------- ----------- ------------- -------------- -------------
Balance at Feb. 28, 1997 6,145,009 $6,145,009 $ 10,351,523 $ 12,802,931 $ (726,131)
=========== =========== ============= ============= =============
</TABLE>
See accompanying notes.
15
<PAGE>
AZTEC MANUFACTURING CO. CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended February 28, 1997, February 29, 1996 and February 28, 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------- -------------- -----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 4,327,565 $ 2,581,613 $ 1,578,132
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation 2,231,547 1,890,836 1,407,846
Amortization 432,655 336,431 346,427
Writedown of property held for
sale - 458,000 -
Provision for doubtful accounts 309,717 564,069 216,000
Deferred income tax expense (566,305) 170,986 (239,406)
(benefit)
Net loss on sale of property,
plant, and equipment 1,310 45,162 3,040
------------- -------------- --------------
6,736,489 6,047,097 3,312,039
Effect of changes in operating
assets and liabilities, net of
acquisition of subsidiaries in
1996:
Accounts receivable (356,358) 2,039,108 (2,341,328)
Inventories 357,856 932,491 (1,926,303)
Prepaid expenses (855) (83,769) 36,737
Other assets (45,805) (17,131) (5,339)
Accounts payable (1,237,646) (208,588) 762,983
Accrued salaries and wages 145,812 135,590 (4,123)
Other accrued liabilities and
income taxes 1,221,385 257,775 204,885
------------- -------------- --------------
Net cash provided by operating 6,820,878 9,102,573 39,551
activities
Cash flows from investing activities:
Proceeds from the sale of
property, plant, and equipment
and property held for sale 1,200,853 59,140 497,370
Purchases of property, plant,
and equipment (2,036,877) (2,861,780) (4,890,348)
Acquisition of subsidiaries,
net of cash acquired - (3,931,225) -
Purchase of long-term
investments (300,000) - -
------------- -------------- --------------
Net cash used in investing
activities (1,136,024) (6,733,865) (4,392,978)
Cash flows from financing activities:
Proceeds from revolving loan 17,863,736 53,681,381 5 2,146,909
Proceeds from long-term debt 10,000,000 - 1,900,000
Payments on long-term debt (5,213,483) (1,490,597) (1,893,304)
Payments on revolving loan (24,441,764) (53,590,073) (47,976,262)
Cash dividends paid (166,215) (114,734) (112,910)
Proceeds from exercise of stock
options 1,440,369 94,905 364,509
Purchase of treasury stock - (726,131) -
------------- -------------- --------------
Net cash provided by (used in)
financing activities (517,357) (2,145,249) 4,428,942
------------- -------------- --------------
Net increase in cash and cash
equivalents 5,167,497 223,459 75,515
Cash and cash equivalents at beginning
of year 416,223 192,764 117,249
------------- -------------- --------------
Cash and cash equivalents at end
of year $ 5,583,720 $ 416,223 $ 192,764
============= ============== ==============
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Interest $ 866,565 $ 967,000 $ 762,000
Income taxes $ 2,926,265 $ 1,210,000 $ 1,440,000
</TABLE>
See accompanying notes.
16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1997, FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
1. Summary of significant accounting policies
Organization--Aztec Manufacturing Co. (the "Company") operates primarily in
------------
the United States. Information on the Company's operations by segment are
included in Note 10 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 and
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 1997, 1996 and 1995 were approximately $124,000, $589,000
and $41,000, respectively. Collateral is usually not required from
customers as a condition of sale.
Revenue recognition--The Company recognizes revenue from product sales upon
-------------------
shipment.
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.
17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies (continued)
Asset impairment--The Financial Accounting Standards Board issued
----------------
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of," 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 December 15, 1995. No assets
were impaired and it is expected that the carrying amount of all assets
will be recoverable.
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.
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 28, 1997:
Cash and cash equivalents: The carrying amount reported in the
consolidated balance sheet for cash and cash equivalents approximates
fair value.
Long-term investments: The carrying value of long-term investments in
the consolidated balance sheet 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>
1997 1996
--------- ----------
(Dollars in thousands)
<S> <C> <C>
Raw materials $4,744 $5,000
Work-in-process 1,101 991
Finished goods 888 747
--------- ----------
6,733 6,738
Less reserve for obsolete and
slow-moving inventory 418 65
--------- ----------
$6,315 $6,673
========= ==========
</TABLE>
3. Long-term investments
At February 28, 1997, the Company's long-term investments represent
investments in municipal bonds maturing in 2001 and carrying interest at
rates ranging from 5.1% to 5.5%. The investments were purchased and are
being held to secure the Company's outstanding letters of credit with a
bank.
18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. 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 $715,000 for 1997, $426,000 for 1996 and
$260,500 for 1995.
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
approximately $250,000 at February 28, 1997.
5. 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 28, 1997 and February 29,
1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
(Dollars in thousands)
<S> <C> <C>
Deferred income tax liabilities:
Depreciation methods and property $ 975 $1,224
basis differences
Accounts receivable and inventory - 237
Other assets 62 -
---------- ----------
Total deferred income tax liabilities 1,037 1,461
Deferred income tax assets:
Employee related items 152 162
Intangible assets - 118
Reserve for environmental liabilities 108 96
Reserve for slow-moving inventory 82 -
Reserve for doubtful accounts 131 -
Other 71 26
---------- ----------
Total deferred income tax assets 544 402
---------- ----------
Net deferred income tax liability $ 493 $1,059
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Current income tax expense consists of:
1997 1996 1995
---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C>
Federal $3,065 $1,393 $1,158
State 327 122 112
---------- ---------- ----------
$3,392 $1,515 $1,270
========== ========== ==========
</TABLE>
A reconciliation from the federal statutory tax rate to the effective tax rate
for the years 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- ----------- ---------
<S> <C> <C> <C>
Statutory tax rate 34.0 % 34.0 % 34.0 %
Expenses not deductible for tax purposes 1.5 2.2 6.7
State income taxes, net of federal
income tax benefit 3.0 1.9 2.8
Other 1.0 1.4 (4.0)
--------- ----------- ---------
Effective tax rate 39.5 % 39.5 % 39.5 %
========= =========== =========
</TABLE>
19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. 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 5,761,080 in 1997, 5,634,341 in
1996 and 5,698,496 in 1995. Cash dividends paid (or declared) per share are
$.06 in 1997, $.03 in 1996 and $.02 in 1995.
7. Stock options
The Company has two Incentive Stock Option Plans for its employees. At
February 28, 1997, options were outstanding and exercisable on 97,788
shares at exercise prices (equal to the market price at the date of grant)
ranging from $3.88 to $4.44 per share. These options expire November 1998
through December 2000. Approximately 281,000 options were exercised and
3,500 options were forfeited in 1997 at prices ranging from $3.00 to $4.44
per share. No options were granted in 1997.
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 February 28, 1997, 102,632 shares have been
granted under these plans, and are exercisable at prices ranging from $3.69
to $5.67 per share. Options under these plans expire at various dates
through April 2006. Included in these outstanding options are 10,500
options granted in 1997 with an exercise price of $5.25 which expire in
April 2006. Approximately 91,100 options were exercised in 1997 at prices
ranging from $3.33 to $5.67 per share. No shares were forfeited in 1997.
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock Based Compensation," requires the disclosure of pro forma net income
and income per share of common stock information computed as if the Company
had accounted for its stock options granted subsequent to February 28, 1995
under the fair value method set forth in SFAS 123. The fair value for these
options was estimated at the date of grant using the Black-Scholes option
pricing model with the following weighted average assumptions: a risk-free
interest rate of 6.5% for options granted in 1997 and 6.3% for options
granted in 1996; a dividend yield of 1.5%; and a volatility factor of .478.
In addition, the fair value of these options was estimated based on an
expected life of five years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions, including the
expected stock price volatility. Because the Company's stock options have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion the existing models do not
necessarily provide a reliable single measure of fair value for the
Company's stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense on a straight-line basis over the option's
vesting period as adjusted for estimated forfeitures. The pro forma effect
of the 1997 and 1996 options granted is not material to the operations of
the Company for 1997 and 1996. The weighted average fair value of the 1997
and 1996 options granted is approximately $2.33 and $1.71 per option,
respectively.
8. Long-term debt
Effective July 1, 1996, the Company entered into a new credit facility with
a new lender. The new credit facility provides a three-year $10 million
revolving line of credit and a six-year $10 million term note and replaced
a term and revolving loan agreement that allowed for borrowings up to $6
million and $10 million, respectively.
20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Long-term debt (continued)
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1997 1996
--------------- --------------
<S> <C> <C>
(Dollars in thousands)
Term note payable to bank ($10 million), due in monthly
installments through July 2002 (interest at 7.86 percent on $ 8,889 $ -
February 28, 1997)
Term notes payable to bank ($6 million), due in monthly
installments through March 2000 (interest at 8.75 percent on - 4,029
February 29, 1996)
Revolving loan payable to bank ($10 million), due May 1997 (interest
at 8.75 percent on February 29, 1996) - 6,578
Industrial Revenue Bonds, due in July 1998, payable in monthly
installments (interest at 7.90 percent on February 28, 1997) 110 153
Industrial Revenue Bonds, due in December 2003, payable in monthly
installments (interest at 5.75 percent on Feb. 28, 1997) 285 315
--------------- --------------
9,284 11,075
Less amount due within one year 1,757 1,559
--------------- --------------
$ 7,527 $ 9,516
=============== ==============
</TABLE>
The revolving line of credit, 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, dividend payments, capital expenditures
and cash flows. The Company is in compliance with these covenants as of
February 28, 1997. The Company's long-term debt is secured by inventory,
equipment, and fixtures.
Pursuant to the loan agreement, borrowing under the revolving line of
credit is limited to certain percentages of trade accounts receivable and
inventory and is reduced by the balance of outstanding letters of credit,
which amounted to $237,000 at February 28, 1997. This line of credit has
not been utilized in 1997.
Maturities of long-term debt are as follows (dollars in thousands):
<TABLE>
<S> <C>
1998 $ 1,757
1999 1,757
2000 1,707
2001 1,707
2002 1,707
Thereafter 649
--------------
$ 9,284
==============
</TABLE>
9. Quarterly financial information, unaudited (dollars in thousands, except
per share amounts)
<TABLE>
<CAPTION>
Quarters Ended
May 31, August 31, November 30, February 28,
1996 1996 1996 1997
----------------- ----------------- ----------------- -----------------
1997
----
<S> <C> <C> <C> <C>
Net sales $ 14,236 $ 13,889 $ 14,287 $ 15,291
Gross profit 4,019 3,912 3,916 4,551
Net income 943 925 1,134 1,325
Net income per share--assuming
no dilution .17 .16 .20 .22
Net income per share--assuming
full dilution .16 .16 .20 .22
</TABLE>
21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Quarterly financial information, unaudited (dollars in thousands, except
per share amounts) (continued)
<TABLE>
<CAPTION>
Quarters Ended
May 31, August 31, November 30, February 29,
1995 1995 1995 1996
--------------- -------------- -------------- ---------------
1996
----
<S> <C> <C> <C> <C>
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
</TABLE>
10. Operating segments (dollars in thousands)
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 centers; (2) Galvanizing -
provides custom hot dip galvanizing service for industries handling
fabricated metal products; and (3) Oil Field Products - provides oil field
tubular products and manufactures oil field pup joints.
Information regarding operations and assets by division is as follows:
<TABLE>
<CAPTION>
Fiscal year Fiscal year Fiscal year
ended ended ended
February 28, February 29, February 28,
1997 1996 1995
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net sales:
Electrical products $ 30,276 $ 30,172 $ 27,547
Galvanizing 23,646 16,920 12,761
Oil field products 3,781 2,092 4,300
----------------- ----------------- -----------------
$ 57,703 $ 49,184 $ 44,608
================= ================= =================
Operating income (loss) (a):
Electrical products $ 5,317 $ 4,264 $ 1,358
Galvanizing 5,930 4,270 3,056
Oil field products (56) (428) 1,084
----------------- ----------------- -----------------
11,191 8,106 5,498
General corporate expenses 2,938 2,523 1,722
Interest expense 874 913 823
Other (income) expense, net (b) 226 403 345
----------------- ----------------- -----------------
4,038 3,839 2,890
================= ================= =================
Income before income taxes $ 7,153 $ 4,267 $ 2,608
================= ================= =================
</TABLE>
22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Operating segments (continued)
<TABLE>
<CAPTION>
Fiscal year Fiscal year Fiscal year
ended ended ended
February 28, February 29, February 28,
1997 1996 1995
----------------- ----------------- -----------------
<S> <C> <C> <C>
Depreciation and amortization:
Electrical products $ 714 $ 656 $ 646
Galvanizing 1,593 1,231 833
Oil field products 244 246 203
Corporate 113 94 72
----------------- ----------------- -----------------
$ 2,664 $ 2,227 $ 1,754
================= ================= =================
Additions to property, plant, and equipment
(including assets of purchased subsidiaries
in 1996):
Electrical products $ 304 $ 1,002 $ 266
Galvanizing 1,353 2,273 4,413
Oil field products 345 48 56
Corporate 35 111 155
----------------- ----------------- -----------------
$ 2,037 $ 3,434 $ 4,890
================= ================= =================
Total assets:
Electrical products $15,395 $16,454 $19,745
Galvanizing 19,128 19,499 13,689
Oil field products 4,389 3,531 3,636
Corporate (c) 7,083 3,137 3,721
----------------- ----------------- -----------------
$45,995 $42,621 $40,791
================= ================= =================
</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 gains and losses on sale of
property, plant, and equipment and other (income) expense not
specifically identifiable to a segment.
(c) Corporate includes $390,700, $1,504,800 and $2,038,300 of property held
for sale in 1997, 1996 and 1995, respectively.
11. 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 Company did not expense any significant amounts related to
environmental liabilities in 1997, 1996 or 1995. 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.
23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. 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 was being offered for sale. The Company reached a
tentative agreement in 1996 to sell a portion of the facility to an
unrelated third party and, accordingly, reduced the carrying value by
$458,000 in 1996 to reflect the estimated net proceeds from the proposed
sale. This agreement was finalized in 1997 and this portion of the property
was sold at its carrying value after the 1996 write-down. The Company
believes the carrying value of the remainder of the facility will be
recovered under an existing lease purchase option.
13. Acquisitions
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 which commenced on April 1, 1996. The
acquisition was accounted for under the purchase method of accounting. The
excess of costs over fair value is being amortized over the estimated
useful life of 25 years. A full year of revenues from this acquisition were
included in fiscal 1997 and one month of revenues for fiscal 1996.
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>
14. Subsequent event
Effective March 10, 1997, the Company purchased certain assets of Hobson
Galvanizing, Inc. for approximately $3.9 million which included a $250,000
payment to the selling shareholders pursuant to a noncompete agreement.
24
<PAGE>
CORPORATE INFORMATION
BOARD OF DIRECTORS
L. C. MARTIN
Chairman of the Board, President &
Chief Executive Officer of the Company
DANA L. PERRY
Vice President of Finance
Chief Financial Officer of the Company
Assistant Secretary of the Company
MARTIN C. BOWEN
President & CEO
Performing Arts Fort Worth
R. J. SCHUMACHER
President of Texland Petroleum, Inc.
JOHN G. RICHARDS
Fort Worth Investor
W. C. WALKER
Management Consultant
SAM ROSEN
Partner in the Law Firm of
Shannon, Gracey, Ratliff & Miller, L.L.P.
Secretary of the Company
DR. H. KIRK DOWNEY
Professor of Management and Dean of
the M.J. Neeley School of Business,
Texas Christian University
ROBERT H. JOHNSON
CPA and Financial Consultant
EXECUTIVE OFFICERS
L. C. MARTIN
Chairman of the Board, President &
Chief Executive Officer
SAM ROSEN
Secretary
FRED L. WRIGHT, JR.
Senior Vice President/Galvanizing Segment
DANA L. PERRY
Vice President of Finance
Chief Financial Officer, Assistant Secretary
OTHER INFORMATION
LEGAL COUNSEL
Shannon, Gracey, Ratliff & Miller, L.L.P.,
Fort Worth, Texas
INDEPENDENT AUDITORS
Ernst & Young LLP, Fort Worth, Texas
TRANSFER AGENT & REGISTRAR
Harris Trust and Savings Bank
Chicago, Illinois
STOCK LISTING
New York Stock Exchange
NYSE Symbol - AZZ
FORM 10-K
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 8, 1997, 10:00 a.m.
Fort Worth Petroleum Club
Fort Worth, Texas
<PAGE>
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 8th
day of July, 1997, 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 it's fiscal year ending
February 28, 1998.
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 9th day of May,
1997, 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 28, 1997 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
Sam Rosen, Secretary
Crowley, Texas
June 1, 1997
<PAGE>
AZTEC MANUFACTURING CO.
P. O. BOX 668
CROWLEY, TEXAS 76036
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 8, 1997
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 8th day of July, 1997, 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, 1997, to the
Shareholders of the Company.
GENERAL INFORMATION
- -------------------
At the close of business on the 9th day of May, 1997, the record date for
determination of Shareholders entitled to notice of and to vote at the meeting,
there were outstanding 5,912,627 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 9, 1997. 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 28, 1997, there were twelve (12) regular meetings
and one (1) special meeting of the Board of Directors. For the fiscal year
ended February 28, 1997, 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
from March, 1996 through July, 1996 and a monthly retainer of $1000 and a fee of
$400 for each meeting of the Board of Directors attended from August, 1996
through February, 1997. 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 was paid a fee of $300 for each
meeting of a committee attended from March, 1996 through July, 1996 and a fee of
$400 for each meeting of a committee attended from August, 1996 through
February, 1997. 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 28, 1997.
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 28, 1997, that committee
_____
1
<PAGE>
had one (1) meeting. 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) 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 28, 1997,
that committee had four (4) meetings. 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 28, 1997, 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,
1997 were as follows:
<TABLE>
<CAPTION>
TITLE OF CLASS NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENT OF CLASS
-------------- ----------------------------------- ---------------- ----------------
<S> <C> <C> <C>
Common Stock Dimensional Fund Advisors, Inc. 316,430(1) 5.27%
$1.00 par value 1299 Ocean Ave., 11th Floor
Santa Monica, CA 90401
Common Stock FMR Corp. 599,500(2) 9.99%
$1.00 par value 82 Devonshire Street
Boston, MA 02109
Common Stock Kennedy Capital Management, Inc. 302,970(3) 5.2%
$1.00 par value 10829 Olive Blvd.
St. Louis, MO 63141
</TABLE>
(1) Based on a Schedule 13G furnished by Dimensional Fund Advisors, Inc.
("Dimensional"), a registered investment adviser, Dimensional is deemed to have
beneficial ownership of 316,430 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 a Schedule 13G 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 599,500 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 599,500 shares of the Common Stock
outstanding. Fidelity Low-Priced Stock fund has its principal business office at
82 Devonshire Street, Boston, Massachusetts, 02109.
(3) Based on a Schedule 13G furnished by Kennedy Capital Management, Inc.
("Kennedy"), Kennedy holds sole voting power over 237,570 shares and sole
dispositive power over 302,970 shares of the Common Stock outstanding.
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 Robert H. Johnson, Dana L.
Perry and W.C. Walker expire at the 1997 Annual Meeting of Shareholders. The
Board of Directors nominated and recommends the reelection of Messrs. Robert H.
Johnson, Dana L. Perry and W.C. Walker for a three-year term expiring at the
2000 Annual Meeting of Shareholders.
Mr. William D. Ratliff, a director of the Company from 1958 to 1996 and an
Advisory Director of the Company since April 16, 1996, died on November 30,1996.
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.
_____
2
<PAGE>
The Board of Directors recommends that Shareholders vote "FOR" the
election of the nominees for directors.
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, 1998. 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 1997 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, 1997, 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>
COMMON STOCK OF
PRINCIPAL OCCUPATION FOR PAST THE COMPANY % OF
FIVE YEARS; POSITIONS AND DIRECTOR BENEFICIALLY OWNED CLASS
DIRECTORS AGE OFFICES WITH THE COMPANY SINCE OTHER DIRECTORSHIPS AT MAY 2, 1997 (1)
- --------- --- ----------------------------- -------- ------------------- ------------------ ---
<S> <C> <C> <C> <C> <C> <C>
L.C. Martin (2) 71 Chairman of the Board, 1958 None. 206,800 (4) 3.5%
President and Chief
Executive Officer of
the Company
Martin C. Bowen (14) 53 Chairman of Team Bank - 1993 Kevco, Inc. (3) 7,300 (6) *
Ft. Worth (1989 to
1992), President & CEO
of Performing Arts Fort
Worth (1993 to present)
John G. Richards 73 Personal Investments 1963 None. 30,507 (7) *
Sam Rosen (8) 61 Partner in the law 1996 Gainsco, Inc. (3) 7,533 (9) *
firm of Shannon,
Gracey, Ratliff &
Miller, L.L.P. ,
Secretary of the Company
Robert H. Johnson (5) 72 Financial Consultant; 1965 None. 2,167 *
Certified Public
Accountant
Dana L. Perry (2) 48 Vice President of 1992 None. 100,600 (10) 1.7%
Finance; Chief
Financial Officer of
the Company; and
Assistant Secretary of
the Company
R.J. Schumacher (5) 68 CEO and Chairman of 1986 None. 28,909 (11) *
Pride Refining, Inc.
(1989-1994); President
and CEO of Texland
Petroleum, Inc.
(1973-Present)
W.C. Walker (5) 73 Management Consultant 1986 None. 29,241 (12) *
(1989-Present)
Dr. H. Kirk Downey (14) 54 Dean of the M.J. Neeley 1992 Harris Methodist -0- *
School of Business and Health Plan
a Professor of LKCM Fund
Management at Texas
Christian University
All Current Directors and Executive Officers as a Group (10 Persons) 420,316 7% (13)
*Less than one percent (1%)
</TABLE>
_____
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, 1997 (5,912,627 shares), plus the shares of Common Stock
such individual has the right to acquire within sixty (60) days of May 2,
1997, 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 19,424 shares of Common Stock which Mr. Martin has the right to
acquire within 60 days of May 2, 1997, pursuant to the exercise of stock
options granted under the 1986 Incentive Stock Option Plan of the Company.
(5) Member of the Audit Committee.
(6) Includes 6,300 shares of Common Stock which Mr. Bowen has the right to
acquire within 60 days of May 2, 1997, pursuant to the exercise of stock
options granted under the 1991 Nonstatutory Stock Option Plan of the
Company.
(7) Includes 16,536 shares Mr. Richards has the right to acquire within sixty
(60) days of May 2, 1997, pursuant to the exercise of stock options granted
under the 1988 Nonstatutory Stock Option Plan.
(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.
(9) Includes 2,100 shares Mr. Rosen has the right to acquire within sixty (60)
days of May 2, 1997, pursuant to the exercise of stock options granted 1991
Nonstatutory Stock Option Plan.
(10) Includes 6,587 shares of Common Stock which Mr. Perry has the right to
acquire within 60 days of May 2, 1997, pursuant to the exercise of stock
options granted under the 1986 Incentive Stock Option Plan.
(11) Includes 27,036 shares Mr. Schumacher has the right to acquire within sixty
(60) days of May 2, 1997, pursuant to the exercise of stock options granted
under the 1988 and 1991 Nonstatutory Stock Option Plans.
(12) Includes 27,036 shares Mr. Walker has the right to acquire within sixty
(60) days of May 2, 1997, pursuant to the exercise of stock 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.
(13) The percentage is calculated by using total shares of Common Stock
outstanding at the close of business on May 2, 1997 (5,912,627) plus 31,998
shares of Common Stock that executive officers of the Company have the
right to acquire within 60 days of May 2, 1997 pursuant to the exercise of
stock options granted under the 1986 Incentive Stock Option Plan of the
Company plus 79,008 shares of Common Stock that directors have the right to
acquire within sixty (60) days of May 2, 1997 pursuant to the exercise of
stock options granted under the 1988 and 1991 Nonstatutory Stock Option
Plans.
(14) 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 officers 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 28, 1997, 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.
It has been the philosophy and the practice of the Committee to relate executive
compensation to the profitability of the Company. The compensation program
provides for market-driven salary ranges based on job responsibilities and
influences on
_______
4
<PAGE>
Company performance with a balanced incentive compensation element based on
profit performance of the Company. This is accomplished through a two-tiered
structure of measuring the compensation rewards as follows:
1. Base Salary - The Committee reviews and approves salaries for the Chief
Executive Officer and the other executive officers on an annual basis.
Recommended base salaries are reviewed and set based on information derived
from comparative group reviews and national surveys of compensation data,
as well as evaluations of the individual executive' positions and expected
future performance and contribution. In making salary decisions, the
Committee exercises its discretion and judgment with no specific formula
being applied to determine salary levels.
2. Bonus - The purpose of the bonus program is to promote the Company's goal
of increasing shareholder value through sustainable internal growth, high
operating efficiencies, strategic acquisitions, and attracting highly
motivated, results-oriented executive officers. A portion of executive
compensation was calculated using a formula reflecting growth in pre-tax
income of the Company in the case of the Chief Executive Officer and
certain executive officers or a particular segment of the Company in the
case of an executive officer who is responsible for such segment.
Mr. Martin's and Mr. Perru's bonus base is fixed at 2.5% and 1% of the
yearly pre-tax profits of the Company, respectively. Mr. Wright's bonus
base is fixed at 1.25% of the yearly pre-tax profits of the Galvanizing
Segment. The maximum and minimum bonus is set at 150% and 50% of the bonus
base, respectively. When the Company or a segment exceeds prior year
performance, the executives are rewarded through increased bonuses up to a
maximum of 150% of his bonus base. Conversely, if the Company or segment
falls short of the prior years performance, the executive officers receive
a reduced bonus. If the current years performance falls below 50% of the
prior year, the executive officers receive no bonus.
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, and the Company Stock
Option Plans.
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, 1998 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
_______
5
<PAGE>
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 28, 1997, February 29, 1996 and February 28, 1995 of
the Chief Executive Officer and the other most highly compensated executive
officers of the Company whose total annual salary and bonus exceeds $100,000
(the "Named Executives").
SUMMARY COMPENSATION TABLE
==========================
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------- ----------------------
AWARDS PAYOUTS
OTHER ANNUAL RESTRICTED LONG-TERM ALL OTHER
NAME AND YEAR COMPENSATION STOCK AWARD(S) OPTIONS/ INCENTIVE COMPENSATION
PRINCIPAL POSITION ENDING SALARY ($) BONUS($) ($) ($) SARS (#) PAYOUTS ($) ($)
- ------------------ ------ ---------- -------- ------------ -------------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
L.C. Martin, Chairman, 1997 250,000 214,919 0 0 0 0 23,060 (2)
President, and Chief 1996 250,000 106,443 0 0 0 0 17,937 (3)
Executive Officer 1995 250,000 65,144 0 0 19,424 0 14,174 (4)
D.L. Perry, Vice 1997 75,000 85,968 0 0 0 0 12,979 (5)
President of Finance, 1996 75,000 36,543 0 0 0 0 6,007 (5)
Chief Financial Officer, 1995 70,500 32,091 0 0 6,587 0 4,313 (5)
and Assistant Secretary
F. L. Wright, Jr. 1997 77,550 84,522 0 0 0 0 14,460 (6)
Senior Vice President 1996 75,000 65,053 0 0 0 0 8,301 (6)
Galvanizing Segment 1995 66,250 46,551 0 0 5,987 0 4,178 (6)
R.O. Grosso, Former 1997 84,800 24,897 0 0 0 0 0
Vice President Electrical 1996 96,085 34,549 0 0 5,000 0 0
Products Segment (1) 1995 0 0 0 0 0 0 0
</TABLE>
(1) Mr. Grosso separated from the Company on October 31, 1996.
(2) The amount of $23,060 includes 1997 Director fees of $8,600 and 1997
contribution made to Mr. Martin's account in Aztec's Profit Sharing Plan of
$14,460.
(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
$5,774.
(5) This amount represents the contribution made to Mr. Perry's account in
Aztec's Profit Sharing Plan.
(6) This amount represents the contribution made to Mr. Wright's account in
Aztec's Profit Sharing Plan.
OPTIONS EXERCISED AND YEAR END VALUE TABLE. The following table sets forth
certain information regarding the options exercised and the year end value of
options held by the Named Executives during the fiscal year ending February 28,
1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
=================================
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-
SHARES ACQUIRED OPTIONS AT FY-END (#) MONEY OPTIONS AT FY-END ($)
NAME ON EXERCISE (#) VALUE REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------- --------------- ------------------ ------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
L. C. Martin 24,833 88,468 19,424 -0- 94,692 -0-
D. L. Perry 6,600 23,512 6,587 -0- 32,112 -0-
F. L. Wright, Jr. 5,900 11,800 5,987 -0- 29,187 -0-
R. O. Grosso 5,000 30,625 -0- -0- -0- -0-
</TABLE>
_______
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 $249,970 at February 28, 1997.
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 New York Stock
Exchange 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 NYSE Stock Market (U.S. Companies) and the CRSP Index for NYSE Stocks
(SIC 5000-5099 US Companies). Aztec is listed on the New York Stock Exchange 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 29, 1992 in shares of Aztec Manufacturing Co. and each
index, all with cash dividends reinvested. The calculations exclude trading
commissions and taxes.
FIVE YEAR-CUMULATIVE TOTAL RETURN
VALUE OF $100 INVESTED ON FEBRUARY 29, 1992
For Fiscal Year Ended on the Last Day of February
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
2/92 2/93 2/94 2/95 2/96 2/97
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Aztec Manufacturing Co. 100.0 73.7 172.2 115.2 127.7 255.5
CRSP Index for NYSE Stock Market (US Companies) 100.0 111.1 120.8 127.8 170.2 209.7
CRSP Index for NYSE Stocks (SIC 5000-5099 US Companies) 100.0 121.5 152.4 145.1 168.5 189.8
Wholesale trade - durable goods
</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 Robert H. Johnson,
Dana L. Perry and W.C. Walker as directors for a three year term expiring at the
2000 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, 1998.
_______
8
<PAGE>
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.
SHAREHOLDER PROPOSALS
- ---------------------
Shareholder proposals for inclusion in the Proxy Statement for the 1998 Annual
Meeting of Shareholders must be received at the executive office of the Company
on or before January 31, 1998.
ANNUAL REPORTS
- --------------
The Company's 1997 Annual Report to Shareholders, covering the fiscal year ended
February 28, 1997, 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 1997 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
Sam Rosen, Secretary
Crowley, Texas
June 1, 1997
________________________________________________________________________________
1997 ANNUAL MEETING OF SHAREHOLDERS
10:00 a.m., July 8, 1997
Petroleum Club
Derrick I Room
39th Floor of the Continental Plaza
777 Main Street
Fort Worth, Texas
_______
9
<PAGE>
AZTEC MANUFACTURING CO. ANNUAL MEETING (CONTINUED FROM OTHER SIDE)
JULY 8, 1997
P
This proxy when properly executed will be voted in the manner directed
R herein by the above signed shareholder. If no direction is made, this proxy
will be voted for Director nominees and for proposal 2.
O
1. ELECTION OF DIRECTORS. (MARK ONLY ONE)
X Nominees: Robert H. Johnson, Dana L. Perry, W.C. Walker
Y [ ] VOTE FOR all nominees listed, [ ] VOTE WITHHELD from all
except as marked to the contrary nominees.
above(if any). (TO WITHHOLD YOUR
VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S
NAME IN THE LIST ABOVE).
2. APPROVAL OF AUDITORS. FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. In their discretion, upon other matters as may properly come before the
meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE
AZTEC MANUFACTURING CO. ANNUAL MEETING
400 N. Tarrant . Crowley, TX 76036 JULY 8, 1997
P
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
R
The undersigned, having received the notice and accompanying Proxy
O Statement and revoking all prior proxies, hereby appoints L.C. MARTIN, SAM
ROSEN and D.L. PERRY and each of them with power of substitution in each,
X proxies to vote at the annual meeting to be held on July 8, 1997 at 10:00
a.m. in Fort Worth, Texas, or at any adjournment thereof, all shares of
Y Aztec Manufacturing Co. which the undersigned may be entitled to vote. Said
proxies are authorized to vote as directed on the reverse side of this
card.
This proxy must be dated and signed exactly as shown
Shares in Your Name hereon.
DATED:________________________________________, 1997
____________________________________________________
____________________________________________________
Executors, administrators, trustees, etc., should
give full title as such. If the signer is a
corporation, please sign full corporate name by duly
authorized officer.
<PAGE>
Exhibit 21
-----------------------------
AZTEC MANUFACTURING CO.
-----------------------------
-----------------------
------------------------ --------------------------
Aztec Industries, Inc. Arbor-Crowley, Inc. Atkinson Industries, Inc.
------------------------ --------------------------
-----------------------
------------------------ ------------------------
Aztec Industries Arizona
Moss Point, Inc. Galvanizing, Inc.
------------------------ ------------------------
------------------------
------------------------ ----------- --------------- Hobson Galvanizing, Inc.
Automatic Aztec Group Aztec Holdings,
Processing, Inc. Company Inc. ------------------------
------------------------ ----------- ---------------
------------------------
The Calvert Co., Inc. 1% 99%
------------------------
------------------------
------------------------ Aztec Manufacturing
Partnership, Ltd.
Gulf Coast ------------------------
Galvanizing, Inc.
------------------------
------------------------
------------------------ Aztec Manufacturing
Waskom Partnership, Ltd.
Arkansas ------------------------
Galvanizing, Inc.
------------------------
------------------------
Rig-A-Lite
Partnership, Ltd.
------------------------
Exhibit 21
----------
(Page 1 of 1)
<PAGE>
EXHIBIT 23
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 31, 1997, included in the
1997 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 plan of Aztec
Manufacturing Co., No. 33-30993 pertaining to the Aztec Manufacturing Co.
Nonstatutory Stock Option Plan, No. 33-49158 pertaining to the Aztec
Manufacturing Co. Nonstatutory Stock Option Plan, and No. 33-49164 pertaining to
the 1991 Incentive Stock Option Plan of Aztec Manufacturing Co. of our report
dated March 31, 1997, with respect to the consolidated financial statements of
Aztec Manufacturing Co., incorporated by reference in the Annual Report (Form
10-K) for the year ended February 28, 1997.
ERNST & YOUNG, LLP
/s/ Ernst & Young, LLP
----------------------
Fort Worth, Texas
May 23, 1997
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 28, 1997, 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 20 day of May, 1997.
-- ---
/s/ L.C. Martin
-----------------------------------
L. C. MARTIN
/s/ Robert H. Johnson
-----------------------------------
ROBERT H. JOHNSON
/s/ Martin C. Bowen
-----------------------------------
MARTIN C. BOWEN
/s/ Dr. H. Kirk Downey
-----------------------------------
DR. H. KIRK DOWNEY
/s/ Sam Rosen
-----------------------------------
SAM ROSEN
/s/ John G. Richards
-----------------------------------
JOHN G. RICHARDS
/s/ Dana L. Perry
-----------------------------------
DANA L. PERRY
/s/ R.J. Schumacher
-----------------------------------
R. J. SCHUMACHER
/s/ W.C. Walker
----------------------------------
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 15, 1997, 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 28, 1997;
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 28, 1997; 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 2 day of May, 1997.
/s/ Dana L. Perry
---------------------------------------------
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 2 day of May 1997.
/s/ Mary Rickard
------------------------------------------
Notary Public in and for
the State of Texas
Mary Rickard
------------------------------------------
(Type or print name)
My commission expires: May 30, 1999
-------------------
Exhibit 24
----------
(Page 3 of 3)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> FEB-28-1997
<CASH> 5,583,720
<SECURITIES> 0
<RECEIVABLES> 9,916,012
<ALLOWANCES> (385,900)
<INVENTORY> 6,314,692
<CURRENT-ASSETS> 21,621,426
<PP&E> 29,126,354
<DEPRECIATION> 12,584,177
<TOTAL-ASSETS> 45,994,764
<CURRENT-LIABILITIES> 9,401,523
<BONDS> 7,527,221
0
0
<COMMON> 6,145,009
<OTHER-SE> 22,428,323
<TOTAL-LIABILITY-AND-EQUITY> 45,994,764
<SALES> 57,703,287
<TOTAL-REVENUES> 57,703,287
<CGS> 41,305,269
<TOTAL-COSTS> 49,676,078
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 874,209
<INCOME-PRETAX> 7,153,000
<INCOME-TAX> 2,825,435
<INCOME-CONTINUING> 4,327,565
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,327,565
<EPS-PRIMARY> .75
<EPS-DILUTED> .74
</TABLE>
