<PAGE>
SECURITIES 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: November 30, 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 November 30, 1997
Common Stock, $1.00 Par Value 6,081,411
----------------------------- ------------------------------------
Class Number of Shares
<PAGE>
AZTEC MANUFACTURING CO.
INDEX
-----
<TABLE>
<CAPTION>
PART I. Financial Information Page No.
--------------------- --------
<S> <C> <C>
Item 1. Financial Statements
Consolidated Condensed Balance Sheets at
November 30, 1997 and February 28, 1997 3
Consolidated Condensed Statements of Income
Periods Ended November 30, 1997 and November 30, 1996 4
Consolidated Condensed Statements of Cash Flows
Periods Ended November 30, 1997 and November 30, 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
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
AZTEC MANUFACTURING CO.
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
11/30/97 2/28/97
ASSETS UNAUDITED AUDITED
- ----------------------------------------- ------------ ------------
<S> <C> <C>
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $ 370,224 $ 5,583,720
ACCOUNTS RECEIVABLE (NET OF ALLOWANCE) 11,318,375 9,530,112
INVENTORIES:
RAW MATERIALS 8,029,399 4,321,371
WORK-IN-PROCESS 1,587,221 1,105,346
FINISHED GOODS 1,984,294 887,975
PREPAID EXPENSES AND OTHER 44,256 192,902
------------ ------------
TOTAL CURRENT ASSETS $ 23,333,769 $ 21,621,426
LONG TERM INVESTMENT 300,000 300,000
PROPERTY, PLANT AND EQUIPMENT, NET 18,126,556 16,542,177
PROPERTY HELD FOR SALE, NET 378,258 390,698
INTANGIBLE ASSETS, NET 9,220,585 6,860,318
OTHER ASSETS 280,145 280,145
------------ ------------
TOTAL ASSETS $ 51,639,313 $ 45,994,764
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
- -----------------------------------------
CURRENT LIABILITIES
LONG TERM DEBT DUE WITHIN ONE YEAR $ 1,756,666 $ 1,756,666
ACCOUNTS PAYABLE 4,035,228 2,840,108
ACCRUED LIABILITIES 4,719,846 4,804,749
------------ ------------
TOTAL CURRENT LIABILITIES $ 10,511,740 $ 9,401,523
LONG-TERM DEBT DUE AFTER ONE YEAR 6,277,220 7,527,221
DEFERRED INCOME TAXES 492,688 492,688
SHAREHOLDERS' EQUITY:
COMMON STOCK, $1 PAR VALUE
SHARES AUTHORIZED - 25,000,000
SHARES ISSUED - 6,313,773 and 6,145,009 6,313,773 6,145,009
CAPITAL IN EXCESS OF PAR VALUE 11,386,436 10,351,523
RETAINED EARNINGS 17,383,587 12,802,931
LESS COMMON STOCK HELD IN TREASURY
(232,362 SHARES AT COST) (726,131) (726,131)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY $ 34,357,665 $ 28,573,332
------------ ------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 51,639,313 $ 45,994,764
============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
3
<PAGE>
AZTEC MANUFACTURING CO.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
11/30/97 11/30/96 11/30/97 11/30/96
UNAUDITED UNAUDITED UNAUDITED UNAUDITED
---------------- ---------------- --------------- --------------
<S> <C> <C> <C> <C>
NET SALES $ 18,079,978 $ 14,287,180 $ 55,243,049 $ 42,411,873
COSTS AND EXPENSES:
COST OF SALES 13,519,923 10,370,522 40,516,592 30,565,114
SELLING/G & A EXPENSE 2,373,228 1,993,807 7,185,595 6,062,102
INTEREST EXPENSE 169,977 197,089 538,246 686,600
OTHER (INCOME) EXPENSE (67,092) (149,113) (445,984) 135,815
---------------- ---------------- --------------- --------------
$ 15,996,036 $ 12,412,305 $ 47,794,449 $ 37,449,631
---------------- ---------------- --------------- --------------
INCOME BEFORE INCOME TAXES 2,083,942 1,874,875 7,448,600 4,962,242
PROVISION FOR INCOME TAXES 802,320 740,726 2,867,945 1,959,657
---------------- ---------------- --------------- --------------
NET INCOME $ 1,281,622 $ 1,134,149 $ 4,580,655 $ 3,002,585
================ ================ =============== ==============
INCOME PER SHARE:
INCOME PER SHARE - PRIMARY $ 0.21 $ 0.20 $ 0.77 $ 0.53
INCOME PER SHARE- FULLY DILUTE $ 0.21 $ 0.20 $ 0.75 $ 0.52
================ ================ =============== ==============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
4
<PAGE>
AZTEC MANUFACTURING CO.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDING
11/30/97 11/30/96
UNAUDITED UNAUDITED
------------- ------------
<S> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
NET INCOME $ 4,580,655 $ 3,002,585
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATIONS:
PROVISION FOR BAD DEBTS 41,925 236,731
AMORTIZATION AND DEPRECIATION 2,236,469 1,984,988
GAINS ON SALE OF PROPERTY 30,303 1,310
INCREASE (DECREASE) FROM CHANGES IN ASSETS
& LIABILITIES:
ACCOUNTS RECEIVABLE (1,830,188) 562,113
INVENTORIES (5,286,222) 517,770
PREPAID EXPENSE 148,646 170,258
OTHER ASSETS (9,331) 17,191
ACCOUNTS PAYABLE 1,195,120 (1,060,776)
ACCRUED LIABILITIES (84,903) 507,169
------------- ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,022,474 5,939,339
------------- ------------
CASH FLOWS USED FOR INVESTING ACTIVITIES:
PURCHASE OF INVESTMENTS 0 (300,000)
PURCHASE OF PROPERTY/PLANT/EQUIPMENT (6,189,647) (1,538,053)
PROCEEDS FROM SALE OF PROPERTY HELD FOR SALE 0 999,505
------------- ------------
NET CASH USED FOR INVESTING ACTIVITIES (6,189,647) (838,548)
------------- ------------
CASH FLOWS PROVIDE BY (USED FOR) FINANCING
ACTIVITIES:
PROCEEDS FROM EXERCISE OF STOCK OPTIONS 1,203,678 1,209,966
CHANGE IN REVOLVING LOAN 0 (6,420,378)
CHANGE IN LONG TERM DEBT (1,250,001) 5,075,446
------------- ------------
NET CASH PROVIDED BY (USED FOR) FINANCING
ACTIVITIES (46,323) (134,966)
------------- ------------
INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS (5,213,496) 4,965,825
------------- ------------
CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD 5,583,720 416,223
------------- ------------
CASH & CASH EQUIVALENTS, END OF PERIOD $ 370,224 $ 5,382,048
============= ============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
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 November 30, 1997, and the
results of its operations and cash flows for the nine-month periods ended
November 30, 1997 and November 30, 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 non compete agreement.
Effective December 8, 1997, the Company purchased certain assets of
International Galvanizers, Inc. for approximately $1.65 million which
included a $50,000 payment to the seller pursuant to a non compete
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.
6
<PAGE>
AZTEC MANUFACTURING CO.
Computation of Income Per Common Share
--------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDING NINE MONTHS ENDING
11/31/97 11/31/96 11/31/97 11/31/96
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Income Applicable to Common Shares $1,281,622 $1,134,149 $4,580,655 $3,002,585
- -------------------------------------------------------------------------------------------------------------------------
Weighted Average Common Shares 6,069,177 5,761,080 5,982,143 5,761,080
Outstanding
Fully Diluted Shares Outstanding 6,201,826 5,823,924 6,146,673 5,823,924
- -------------------------------------------------------------------------------------------------------------------------
Income Per Common Share: Primary $ .21 $ .20 $ .77 $ .53
Income Per Common Share: Fully Diluted $ .21 $ .20 $ .75 $ .52
- -------------------------------------------------------------------------------------------------------------------------
Cash Dividend $ 0 $ 0 $ 0 $ 0
=========================================================================================================================
</TABLE>
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
---------------------
Consolidated net sales were up 27% and 30% for the three month and nine month
periods ending November 30, 1997 as compared to the same periods in 1996. Net
sales in the Electrical Products Segment were up $1,012,000 or 13% for the three
month period ending November 30, 1997, and $4,535,000 or 20% for the nine month
period ending November 30, 1997, as compared to the same periods in 1996.
Backlog continues to improve in the Electrical Segment at $12,207,000 compared
to $9,178,000 in the prior year. Net sales in the Galvanizing Segment were up
$1,454,000 or 25% for the three month period ending November 30, 1997, and
$4,495,000 or 25% for the nine month period ending November 30, 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 42,981,000 and
136,353,000 for the three and nine month periods ending November 30, 1997
compared to 42,099,000 and 124,808,000 during the same periods in 1996. Hobson
Galvanizing contributed $1,274,000 and $4,246,000 in sales for the three and
nine month periods ending November 30, 1997 and produced 7,147,000 and
24,236,000 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 $.1367 in 1996. Net sales in
the Oil Field Products Segment were up 170% and 180% for the three and nine
month periods ending November 30, 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
nine month periods ending November 30, 1997, as compared to the same periods in
1996, were up 16% and 24% respectively. Gross operating income in the
Electrical Products Segment was up .2% and 24% for the three and nine month
periods ending November 30, 1997, as compared to the same periods in 1996 . The
Calvert Company operated at a 3.9% operating margin versus a 7.4% operating
margin in the same quarter in 1996. The Galvanizing Segment's operating income
was up 10% and 20% for the three and nine month periods ending November 30,
1997 as compared to the same periods in 1996. Total operating income in this
segment was $1,595,000 and $5,171,000 for the three and nine month periods
ending November 30, 1997 as compared to $1,444,000 and $4,310,000 in the same
periods in 1996. Hobson Galvanizing contributed $186,000 and $710,000 for the
three and nine month periods ending November 30, 1997. The Oil Field Products
Segment showed an operating income of $133,000 and $475,000 for the three and
nine month periods ending November 30, 1997 versus operating losses for the same
periods in 1996.
General corporate expenses (selling, G & A expense, and other [income] expense)
for the three and nine month periods ending November 30, 1997, as compared to
1996, were up due to higher accruals for employee benefits and profit sharing
expense.
Interest expense was lower for the three and nine month periods ending November
30, 1997, as compared to 1996, due to a reduction in outstanding debt and lower
interest rates.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Net cash provided by operations for the nine month period ending November 30,
1997 was $1,022,000 compared to $5,939,000 during the same period in 1996.
Accounts Receivable increased for the period ending November 30, 1997 by
$1,830,000, primarily due to the acquisition of Hobson Galvanizing on March 10,
1997. Inventories increased for the period ending November 30, 1997 by
$5,286,000, 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. Aztec acquired on December 8, 1997, the operating assets of
International Galvanizers, Inc. for $1.65 million. The purchase was funded from
the Company's revolving line of credit. 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 $8 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.
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 168,764 168,764 $ 1,034,913
Balance at November 30, 1997 6,313,773 $6,313,773 $11,386,436
</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 November 30, 1997.
(B) REPORTS ON FORM 8-K - There were no reports on Form 8-K filed for the
three months ended November 30, 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.
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: January 14, 1998 /s/Dana Perry
---------------- ----------------------------------------
Dana Perry, Vice President for Finance
Chief Financial Officer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> NOV-30-1997
<CASH> 370,224
<SECURITIES> 0
<RECEIVABLES> 11,746,200
<ALLOWANCES> 427,825
<INVENTORY> 11,600,914
<CURRENT-ASSETS> 23,333,769
<PP&E> 32,477,431
<DEPRECIATION> 13,972,617
<TOTAL-ASSETS> 51,639,313
<CURRENT-LIABILITIES> 10,511,740
<BONDS> 6,277,220
0
0
<COMMON> 6,313,773
<OTHER-SE> 28,043,892
<TOTAL-LIABILITY-AND-EQUITY> 51,639,313
<SALES> 55,243,049
<TOTAL-REVENUES> 55,243,049
<CGS> 40,516,592
<TOTAL-COSTS> 47,256,203
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 538,246
<INCOME-PRETAX> 7,448,600
<INCOME-TAX> 2,867,945
<INCOME-CONTINUING> 4,580,655
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,580,655
<EPS-PRIMARY> 0.77
<EPS-DILUTED> 0.75
</TABLE>
