<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Quarterly Period Ended: August 31, 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 August 31, 1997
Common Stock, $1.00 Par Value 5,994,839
----------------------------- ------------------------------------
Class Number of Shares
<PAGE>
AZTEC MANUFACTURING CO.
INDEX
-----
PART I. Financial Information Page No.
--------------------- -------
Item 1. Financial Statements
Consolidated Condensed Balance Sheets at
August 31, 1997 and February 28, 1997 3
Consolidated Condensed Statements of Income
Periods Ended August 31, 1997 and August 31, 1996 4
Consolidated Condensed Statements of Cash Flow
Periods Ended August 31, 1997 and August 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 4. Submissions of Matters to a Vote of Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
Page 2
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
AZTEC MANUFACTURING CO.
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
8/31/97 2/28/97
ASSETS UNAUDITED AUDITED
- ------------------------------------ ------------ ------------
CURRENT ASSETS
<S> <C> <C>
CASH AND CASH EQUIVALENTS $ 1,425,172 $ 5,583,720
ACCOUNTS RECEIVABLE (NET OF ALLOWANCE) 10,824,559 9,530,112
INVENTORIES:
RAW MATERIALS 6,570,627 4,321,371
WORK-IN-PROCESS 1,109,972 1,105,346
FINISHED GOODS 1,330,340 887,975
PREPAID EXPENSES AND OTHER 97,291 192,902
------------ ------------
TOTAL CURRENT ASSETS $ 21,357,961 $ 21,621,426
LONG TERM INVESTMENT 300,000 300,000
PROPERTY, PLANT AND EQUIPMENT, NET 17,560,977 16,542,177
PROPERTY HELD FOR SALE, NET 380,358 390,698
INTANGIBLE ASSETS, NET 9,360,064 6,860,318
OTHER ASSETS 280,145 280,145
------------ ------------
TOTAL ASSETS $ 49,239,505 $ 45,994,764
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
LONG TERM DEBT DUE WITHIN ONE YEAR $ 1,756,667 $ 1,756,666
ACCOUNTS PAYABLE 3,671,136 2,840,108
ACCRUED LIABILITIES 4,336,274 4,808,749
------------ ------------
TOTAL CURRENT LIABILITIES $ 9,764,077 $ 9,405,523
LONG-TERM DEBT DUE AFTER ONE YEAR 6,693,887 7,527,221
DEFERRED INCOME TAX 492,688 492,688
SHAREHOLDERS' EQUITY:
COMMON STOCK, $1 PAR VALUE
SHARES AUTHORIZED - 25,000,000
SHARES ISSUED - 6,227,201 and 6,145,009 6,227,201 6,145,009
CAPITAL IN EXCESS OF PAR VALUE 10,685,819 10,351,523
RETAINED EARNINGS 16,101,964 12,802,931
LESS COMMON STOCK HELD IN TREASURY
(232,362 SHARES AT COST) (726,131) (726,131)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY $ 32,288,853 $ 28,573,332
------------ ------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 49,239,505 $ 45,998,764
============ ============
</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 SIX MONTHS ENDED
8/31/97 8/31/96 8/31/97 8/31/96
UNAUDITED UNAUDITED UNAUDITED UNAUDITED
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
NET SALES $ 18,776,256 $ 13,889,096 $37,163,071 $28,124,693
COSTS AND EXPENSES:
COST OF SALES 13,830,664 9,977,112 26,996,669 20,194,592
SELLING/G & A EXPENSE 2,398,411 1,964,538 4,782,879 4,019,233
INTEREST EXPENSE 179,954 261,296 368,269 489,510
OTHER (INCOME) EXPENSE (318,569) 157,336 (349,404) 333,991
------------ ------------ ----------- -----------
16,090,460 12,360,282 31,798,413 25,037,326
------------ ------------ ----------- -----------
INCOME BEFORE INCOME TAXES 2,685,796 1,528,814 5,364,658 3,087,367
PROVISION FOR INCOME TAXES 1,034,250 603,420 2,065,625 1,218,931
------------ ------------ ----------- -----------
NET INCOME $ 1,651,546 $ 925,394 $ 3,299,033 $ 1,868,436
============ ============ ============ ============
INCOME PER SHARE:
INCOME PER SHARE - PRIMARY $ 0.28 $ 0.16 $ 0.56 $ 0.33
INCOME PER SHARE - FULLY DILUTED $ 0.27 $ 0.16 $ 0.54 $ 0.32
============ ============ ============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
Page 4
<PAGE>
AZTEC MANUFACTURING CO.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
SIX MONTHS ENDING
8/31/97 8/31/96
UNAUDITED UNAUDITED
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
NET INCOME $ 3,299,033 $ 1,868,436
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATIONS:
PROVISION FOR BAD DEBTS 2,712 198,610
AMORTIZATION AND DEPRECIATION 1,466,325 1,321,637
GAINS ON SALE OF PROPERTY 15,415 1,310
INCREASE (DECREASE) FROM CHANGES IN ASSETS & LIABILITIES:
ACCOUNTS RECEIVABLE (1,297,159) 232,960
INVENTORIES (2,696,247) 521,585
PREPAID EXPENSE 95,694 128,676
ACCOUNTS PAYABLE 831,028 (1,659,560)
ACCRUED LIABILITIES (472,475) 293,878
----------- -----------
NET CASH PROVIDED BY OPERATIONS 1,244,326 2,907,532
----------- -----------
CASH FLOWS USED FOR INVESTING ACTIVITIES:
PURCHASE OF INVESTMENTS 0 (300,000)
PURCHASE OF PROPERTY/PLANT/EQUIPMENT (4,986,028) (892,700)
----------- -----------
NET CASH USED FOR
INVESTING ACTIVITIES (4,986,028) (1,192,700)
----------- -----------
CASH FLOWS PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
EXERCISE OF STOCK OPTIONS 416,488 896,839
CHANGE IN REVOLVING LOAN 0 (6,420,378)
PAYMENTS ON LONG TERM NOTES (833,334) 5,542,113
----------- -----------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES (416,846) 18,574
----------- -----------
INCREASE/(DECREASE) IN CASH & CASH EQUIVALENTS (4,158,548) 1,733,406
CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD 5,583,720 416,223
----------- -----------
CASH & CASH EQUIVALENTS, END OF PERIOD $ 1,425,172 $ 2,149,629
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
Page 5
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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 August 31, 1997, and the
results of its operations and cash flows for the six-month periods ended
August 31, 1997 and August 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 material impact on the Company's prior periods or
present income per share calculations.
Page 6
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AZTEC MANUFACTURING CO.
Computation of Income Per Common Share
--------------------------------------
<TABLE>
<CAPTION>
==========================================================================================================================
THREE MONTHS ENDING SIX MONTHS ENDING
<S> <C> <C> <C> <C>
8/31/97 8/31/96 8/31/97 8/31/96
- --------------------------------------------------------------------------------------------------------------------------
Net Income Applicable to Common Shares $1,651,546 $ 925,394 $3,299,033 $1,868,436
- --------------------------------------------------------------------------------------------------------------------------
Weighted Average Common Shares
Outstanding 5,963,578 5,744,112 5,938,625 5,744,112
Fully Diluted Shares Outstanding 6,173,896 5,759,624 6,119,099 5,759,624
- --------------------------------------------------------------------------------------------------------------------------
Income Per Common Share: Primary $ .28 $ .16 $ .56 $ .33
Income Per Common Share: Fully Diluted $ .27 $ .16 $ .54 $ .32
- --------------------------------------------------------------------------------------------------------------------------
Cash Dividend $ 0 $ 0 $ 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 were up 35% and 32% for the three month and six month
periods ending August 31, 1997 as compared to the same periods in 1996. Net
sales in the Electrical Products Segment were up $1,553,000 or 20% for the three
month period ending August 31, 1997, and $3,524,000 or 24% for the six month
period ending August 31, 1997, as compared to the same periods in 1996. Backlog
remains strong in the Electrical Segment at $10,650,000 compared to $7,941,000
in the prior year. Net sales in the Galvanizing Segment were up $1,916,000 or
34% for the three month period ending August 31, 1997, and $3,041,000 or 26% for
the six month period ending August 31, 1997 as compared to the same periods in
1996, primarily due to the acquisition of Hobson Galvanizing, Inc. on March 10,
1997. Total pounds produced were 43,461,000 and 93,373,000 for the three and six
month periods ending August 31, 1997 compared to 37,407,000 and 82,710,000
during the same periods in 1996. Hobson Galvanizing contributed $1,405,000 and
$2,972,000 in sales for the three and six month periods ending August 31, 1997
and produced 7,363,000 and 17,088,000 pounds respectively. Volumes were down at
all galvanizing locations due to a slow down in project oriented work. The year
to date average selling price increased to $.1529 per pound for 1997 from $.1370
in 1996. Net sales in the Oil Field Products Segment were up 215% and 185% for
the three and six month periods ending August 31, 1997, as compared to the same
periods in 1996. Significant quantities of plain end tubing from reliable
sources are beginning to be delivered and this segment is now concentrating its
efforts on increasing volumes of material processed.
Consolidated operating income (net sales less cost of sales) for the three and
six month periods ending August 31, 1997, as compared to the same periods in
1996, were up 26% and 28% respectively. Gross operating income in the
Electrical Products Segment was up 17% and 36% for the three and six month
periods ending August 31, 1997, as compared to the same periods in 1996 . The
Calvert Company operated at a 15.2% operating margin versus a 5.3% operating
margin in the same period in 1996. The Galvanizing Segment's operating income
was up 29% and 25% for the three and six month periods ending August 31, 1997
as compared to the same periods in 1996. Total operating income in this segment
was $1,651,000 and $3,576,000 for the three and six month periods ending August
31, 1997 as compared to $1,284,000 and $2,867,000 in the same periods in 1996.
Hobson Galvanizing contributed $244,000 and $523,000 for the three and six month
periods ending August 31, 1997. The Oil Field Products Segment showed an
operating income of $204,000 and $342,000 for the three and six month periods
ending August 31, 1997 versus an operating loss for the same periods in 1996.
General corporate expenses (selling, G & A expense, and other [income] expense)
for the three and six month periods ending August 31, 1997, as compared to 1996,
were relatively flat.
Interest expense was lower for the three and six month periods ending August
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 six month period ending August 31, 1997
was $1,244,000 compared to $2,908,000 during the same period in 1996. Accounts
Receivable increased for the period ending August 31, 1997 by $1,297,000,
primarily due to the acquisition of Hobson Galvanizing on March 10, 1997.
Inventories increased for the period ending August 31, 1997 by $2,696,000, due
to an increase in the price of zinc used in the Company's Galvanizing Segment
and as a result of the build up of tubular products for the Company's Oil Field
Products Segment.
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 82,192 $ 82,192 $ 334,296
Balance at August 31, 1997 6,227,201 $6,227,201 $10,685,819
</TABLE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
Aztec Manufacturing Co.'s 1997 Annual Meeting held July 8, 1997.
(A) Messrs. Johnson, Perry, and Walker were elected directors for a three-
year term expiring at the 2000 Annual Meeting.
Messrs. Bowen, Richards, Rosen, Martin, Schumacher, and Downey all
continued as directors after the meeting.
(B) Ernst & Young LLP was appointed auditors of the Company for the year
ending February 28, 1998.
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 August 31, 1997.
(B) REPORTS ON FORM 8-K - There were no reports on Form 8-K filed for the
three months ended August 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: October 14, 1997 /s/Dana Perry
--------------------------------------
Dana Perry, Vice President for Finance
Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-31-1997
<PERIOD-END> AUG-31-1997
<CASH> 1,425,172
<SECURITIES> 0
<RECEIVABLES> 11,213,171
<ALLOWANCES> 388,612
<INVENTORY> 9,010,939
<CURRENT-ASSETS> 21,357,961
<PP&E> 31,218,277
<DEPRECIATION> 13,276,942
<TOTAL-ASSETS> 49,239,505
<CURRENT-LIABILITIES> 9,764,077
<BONDS> 6,693,887
0
0
<COMMON> 6,277,201
<OTHER-SE> 26,061,652
<TOTAL-LIABILITY-AND-EQUITY> 49,239,505
<SALES> 37,163,071
<TOTAL-REVENUES> 37,163,071
<CGS> 26,996,669
<TOTAL-COSTS> 31,430,144
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 368,269
<INCOME-PRETAX> 5,364,658
<INCOME-TAX> 2,065,625
<INCOME-CONTINUING> 3,299,033
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,299,033
<EPS-PRIMARY> .56
<EPS-DILUTED> .54
</TABLE>
