<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Quarterly Period Ended: May 31, 1997
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________________to___________________
Commission File Number 0-2733
AZTEC MANUFACTURING CO.
(Exact name of registrant as specified in its charter)
TEXAS 75-0948250
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
400 North Tarrant, Crowley, Texas 76036
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (817) 297-4361
-----------------------------
NONE
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
Indicate the number of outstanding of each of the issuer's classes of common
stock, as of the close of the period covered by this report.
Outstanding at May 31, 1997
Common Stock, $1.00 Par Value 5,914,185
----------------------------- ------------------------------------
Class Number of Shares
<PAGE>
AZTEC MANUFACTURING CO.
INDEX
-----
PART I. Financial Information Page No.
--------------------- --------
Item 1. Financial Statements
Consolidated Condensed Balance Sheets at
May 31, 1997 and February 28, 1997 3
Consolidated Condensed Statements of Income
Periods Ended May 31, 1997 and May 31, 1996 4
Consolidated Condensed Statements of Cash Flow
Periods Ended May 31, 1997 and May 31, 1996 5
Notes to Consolidated Condensed Financial
Statements 6
Computation of Income Per Common Share 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
PART II. Other Information
-----------------
Item 2. Changes in Securities 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
Page 2
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
AZTEC MANUFACTURING CO.
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
5/31/97 2/28/97
ASSETS UNAUDITED AUDITED
- ------------------------------------------------ ---------------- -----------------
<S> <C> <C>
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $ 1,047,928 $ 5,583,720
ACCOUNTS RECEIVABLE (NET OF ALLOWANCE) 11,700,456 9,530,112
INVENTORIES:
RAW MATERIALS 5,579,886 4,321,371
WORK-IN-PROCESS 1,391,598 1,105,346
FINISHED GOODS 1,035,609 887,975
PREPAID EXPENSES AND OTHER 153,778 192,902
---------------- -----------------
TOTAL CURRENT ASSETS $ 20,909,255 $ 21,621,426
LONG TERM INVESTMENT 300,000 300,000
PROPERTY, PLANT AND EQUIPMENT, NET 17,443,111 16,542,177
PROPERTY HELD FOR SALE, NET 384,494 390,698
INTANGIBLE ASSETS, NET 9,387,285 6,860,318
OTHER ASSETS 280,145 280,145
---------------- -----------------
TOTAL ASSETS $ 48,704,290 $ 45,994,764
================ =================
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------------------
CURRENT LIABILITIES
LONG TERM DEBT DUE WITHIN ONE YEAR $ 1,756,666 $ 1,756,666
ACCOUNTS PAYABLE 3,703,089 2,840,108
ACCRUED LIABILITIES 5,413,645 4,804,749
---------------- -----------------
TOTAL CURRENT LIABILITIES $ 10,873,400 $ 9,401,523
LONG-TERM DEBT DUE AFTER ONE YEAR 7,110,555 7,527,221
DEFERRED INCOME TAX 492,688 492,688
SHAREHOLDERS' EQUITY:
COMMON STOCK, $1 PAR VALUE
SHARES AUTHORIZED - 25,000,000
SHARES ISSUED - 6,146,547 and 6,145,009 6,146,547 6,145,009
CAPITAL IN EXCESS OF PAR VALUE 10,356,814 10,351,523
RETAINED EARNINGS 14,450,418 12,802,931
LESS COMMON STOCK HELD IN TREASURY
(232,362 SHARES AT COST) (726,131) (726,131)
---------------- -----------------
TOTAL SHAREHOLDERS' EQUITY 30,227,648 28,573,332
---------------- -----------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 48,704,291 $ 45,994,764
================ =================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
Page 3
<PAGE>
AZTEC MANUFACTURING CO.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
5/31/97 5/31/96
UNAUDITED UNAUDITED
------------------- ------------------
<S> <C> <C>
NET SALES $ 18,386,815 $ 14,235,597
COSTS AND EXPENSES:
COST OF SALES 13,166,005 10,217,480
SELLING/G & A EXPENSE 2,384,468 2,054,695
INTEREST EXPENSE 188,315 228,214
OTHER (INCOME) EXPENSE (30,835) 176,655
------------------- ------------------
TOTAL $ 15,707,953 $ 12,677,044
------------------- ------------------
INCOME BEFORE INCOME TAXES 2,678,862 1,558,553
PROVISION FOR INCOME TAXES 1,031,375 615,511
------------------- ------------------
NET INCOME $ 1,647,487 $ 943,042
=================== ==================
INCOME PER SHARE:
INCOME PER SHARE - PRIMARY 0.28 0.17
INCOME PER SHARE- FULLY DILUTED $ 0.27 $ 0.16
=================== ==================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
Page 4
<PAGE>
AZTEC MANUFACTURING CO.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
THREE MONTHS ENDING
5/31/97 5/31/96
UNAUDITED UNAUDITED
----------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 1,647,487 $ 943,042
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATIONS:
PROVISION FOR BAD DEBTS 5,499 115,253
AMORTIZATION AND DEPRECIATION 715,283 656,065
GAINS ON SALE OF PROPERTY 1,399 1,310
INCREASE (DECREASE) FROM CHANGES IN ASSETS & LIABILITIES:
ACCOUNTS RECEIVABLE (2,175,843) 273,029
INVENTORIES (1,692,401) 170,140
PREPAID EXPENSE 39,124 76,491
OTHER ASSETS (3,829) (587)
ACCOUNTS PAYABLE 862,981 87,759
ACCRUED LIABILITIES 608,896 758,880
----------------- -----------------
NET CASH PROVIDED BY OPERATIONS 8,596 3,081,382
----------------- -----------------
CASH FLOWS USED FOR INVESTING ACTIVITIES:
PURCHASE OF PROPERTY/PLANT/EQUIPMENT (4,134,550) (503,488)
----------------- -----------------
NET CASH PROVIDED BY (USED FOR)
INVESTING ACTIVITIES (4,134,550) (503,488)
----------------- -----------------
CASH FLOWS FOR FINANCING ACTIVITIES:
EXERCISE OF STOCK OPTIONS 6,829 299,888
CHANGE IN REVOLVING LOAN 0 (2,747,862)
PAYMENTS ON LONG TERM NOTES (416,667) (378,899)
DIVIDENDS PAID 0 (88)
----------------- -----------------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES (409,838) (2,826,961
----------------- -----------------
(DECREASE) IN CASH & CASH EQUIVALENTS (4,535,792) (249,067)
CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD 5,583,720 416,223
----------------- -----------------
CASH & CASH EQUIVALENTS, END OF PERIOD $ 1,047,928 $ 167,156
================= =================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
Page 5
<PAGE>
AZTEC MANUFACTURING CO.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
1. A summary of the Company's significant accounting policies is presented on
Page 17 of its 1997 Annual Shareholders' Report.
2. In the opinion of Management of the Company, the accompanying unaudited
consolidated condensed financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present fairly
the financial position of the Company as of May 31, 1997, and the results
of its operations and cash flows for the three-month periods ended May 31,
1997 and May 31, 1996.
3. 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.
4. In February 1997, the Financial Accounting Standards Board issued FAS No.
128, "Earnings Per Share" ("FAS 128"). The adoption of FAS 128 is not
expected to have a materials impact on the Company's prior periods or
present earnings per share calculations.
Page 6
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AZTEC MANUFACTURING CO.
COMPUTATION OF INCOME PER COMMON SHARE
--------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDING
--------------------------
MAY 31, 1997 MAY 31, 1996
------------ ------------
<S> <C> <C>
Net Income Applicable to Common Shares $1,647,487 $ 943,042
---------- ----------
Weighted Average Common Shares Outstanding 5,913,672 5,582,926
Common Equivalent Shares Outstanding 6,064,303 5,579,624
---------- ----------
Income per Common Share: Primary $ .28 $ .17
Income per Common Share: Fully Diluted $ .27 $ .16
---------- ----------
Cash Dividend $ -0- $ -0-
========== ==========
</TABLE>
Page 7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
---------------------
Consolidated net sales for the three month period ending May 31, 1997 as
compared to the same period in 1996 were up approximately $4.2 million or 29%.
Net sales in the Electrical Products Segment were up $2 million or 27.3% as
compared to the same period in 1996. The increased sales are attributed to
higher volumes which are a result of improved backlogs at each of the electrical
companies. Backlogs were up $2.6 million to $10.2 million from $7.6 million in
1996. Net sales in the Galvanizing Segment were up 17.7% or $1.1 million in 1997
as compared to the same quarter in 1996. Total pounds produced and sales for the
quarter ending May 31, 1997 were 49.9 million pounds and $7.5 million as
compared to 46 million pounds and $6.3 million in 1996. Aztec acquired Hobson
Galvanizing Inc., its ninth galvanizing facility, on March 10,1997. Hobson
Galvanizing contributed 9.7 million pounds to production and $1.6 million in
sales for the three month period ending May 31, 1997. Volumes were down at all
other locations due to a slow down in project oriented work. The average selling
price increased to $.1497 per pound for 1997 from $.1329 in 1996. Net sales in
the Oil Field Products Segment were up 156% from $1.7 million for the quarter
ending May 31, 1997 as compared to $.7 million in 1996. This increase was
primarily due to Aztec buying plain end tubing, processing it into finished
product and marketing the finished product direct to supply companies in 1997,
versus being a third party service company of end finished oil field tubular
goods for steel mills and supply companies in 1996. The company is in the
process of negotiating agreements with reliable suppliers of plain end tubing in
order to expand this segment.
Consolidated operating income (net sales less cost of sales) for the period
ending May 31, 1997, as compared to the same period in 1996, was up $1.2 million
or 30%. Gross operating income in the Electrical Products Segment was up 61% for
the quarter ending May 31, 1997, as compared to the same quarter in 1996 . The
Calvert Company operated at a 15.6% operating margin in the quarter ending May
31, 1997 versus an operating loss in the same quarter of 1996. The Galvanizing
Segment's gross operating income was up 22% for the quarter ending May 31, 1997
compared to the same period in 1996. Total operating income in this Segment for
the quarter ending May 31, 1997 was $1.93 million compared to $1.58 million in
1996. Hobson Galvanizing contributed $280,000 to operating income for the
quarter ending May 31, 1997. The Oil Field Products Segment showed an operating
income of $138,000 for the quarter ending May 31, 1997 compared to an operating
loss in 1996.
General corporate expenses for the period ending May 31, 1997, as compared to
1996, were up due to increased cost for employee benefits and profit sharing.
Interest expense was lower for the period ending May 31, 1997, as compared to
1996, due to a reduction in outstanding debt and lower interest rates.
Page 8
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LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Net cash provided by operations for the three month period ending May 31, 1997
was $8,596 compared to $3,081,382 during the same period in 1996. Accounts
Receivable increased for the three month period ending May 31, 1997 by
$2,176,000. This increase was due to the acquisition of Hobson Galvanizing, Inc.
and additional volumes of business at the Calvert Company. Inventories increased
for the three month period ending May 31, 1997 by $1,692,000. This increase was
due to the acquisition of Hobson Galvanizing, overall increased zinc prices in
the Galvanizing Segment, as well as increased inventory levels in the Oil Field
Segment to support increased business levels.
Aztec 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. Other significant uses of cash included the repayment of bank debt and
capital expenditures.
The Company has a credit facility in place that 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 revolving line of credit 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.
Forward Looking Statement
- -------------------------
This Form 10-Q 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 previous Company reports filed with the Securities and Exchange
Commission.
Page 9
<PAGE>
PART II. OTHER INFORMATION
AZTEC MANUFACTURING CO.
ITEM 2. CHANGES IN SECURITIES
- ------------------------------
Title of Class - Common Stock, $1 par value
<TABLE>
<CAPTION>
Number of Common Stock Capital in
Shares $1 Par Value Excess of Par
--------- ------------ -------------
<S> <C> <C> <C>
Balance at February 28, 1997 6,145,009 $6,145,009 $10,351,523
Exercise of Stock Options 1,538 $ 1,538 $ 5,291
Balance at May 31, 1997 6,146,547 $6,146,547 $10,356,814
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(A) EXHIBITS - There were no exhibits filed with this 10-Q for the three
months ended May 31, 1997.
(B) REPORTS ON FORM 8-K - There were no reports on Form 8-K filed for the
three months ended May 31, 1997.
All other schedules and compliance information called for by the instructions
for Form 10-Q have been omitted since the required information is not present or
not present in amounts sufficient to require submission.
Page 10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AZTEC MANUFACTURING CO.
-------------------------------------
(Registrant)
Date: July 10, 1997 /s/Dana Perry
------------- --------------------------------------
Dana Perry, Vice President for Finance
Chief Financial Officer
Page 11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> MAY-31-1997
<CASH> 1,047,928
<SECURITIES> 0
<RECEIVABLES> 12,091,856
<ALLOWANCES> (391,400)
<INVENTORY> 8,007,093
<CURRENT-ASSETS> 20,909,255
<PP&E> 31,171,066
<DEPRECIATION> 13,343,461
<TOTAL-ASSETS> 48,704,290
<CURRENT-LIABILITIES> 10,873,400
<BONDS> 7,110,555
0
0
<COMMON> 6,146,547
<OTHER-SE> 24,081,101
<TOTAL-LIABILITY-AND-EQUITY> 48,704,291
<SALES> 18,386,815
<TOTAL-REVENUES> 18,386,815
<CGS> 13,166,005
<TOTAL-COSTS> 15,519,638
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 188,315
<INCOME-PRETAX> 2,678,862
<INCOME-TAX> 1,031,375
<INCOME-CONTINUING> 1,647,487
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,647,487
<EPS-PRIMARY> .28
<EPS-DILUTED> .27
</TABLE>
