<PAGE>
- --------------------------------------------------------------------------------
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
For the Fiscal Year Ended: February 28, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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 10,
1999, was approximately $43,027,000. As of May 10, 1999, there were 4,741,270
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,
1999. Part III incorporates information by reference from the Proxy Statement
for the 1999 Annual Meeting of Shareholders of Registrant.
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<PAGE>
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 two segments which are primarily in the United States. These
segments are (i) Manufactured Products and (ii) Services, 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
acquired Parks Machine in 1986, 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. Aztec acquired Rig-A-Lite Partnership, LTD. in
Houston, Texas, in March 1990 and 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 companies 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. The
Company made three acquisitions in fiscal 1998. Hobson Galvanizing, Inc.
located in Belle Chase, Louisiana was acquired in March 1997, and International
Galvanizers, Inc. located in Beaumont, Texas was acquired in December 1997.
Drilling Rig Electrical Systems, Inc. (DRES-CO), located in Houston, Texas was
acquired and added to the Company's Manufactured Products Segment in February
1998. The Company now operates two distinct segments, Manufactured Products and
Services. The Manufactured Products Segment is made up of four electrical
companies and the tubular products operations. The Services Segment is made up
of our ten hot dip galvanizing facilities servicing the steel fabrication
industry.
A three-year summary of sales, operating profit and identifiable assets by
industry segment is included in Note 10 of Notes To Consolidated Financial
Statements on page 30 of the Registrant's 1999 Annual Report to Shareholders.
Such information is hereby incorporated by reference.
Aztec provides manufacturing of products and services in the following areas:
Manufactured Products Segment
This segment includes Rig-A-Lite Partnership, LTD, DRES-CO, The Calvert Company,
Atkinson Industries, Inc. and our tubular products business. Rig-A-Lite
manufactures and assembles lighting fixtures for hostile and hazardous
environments in the industrial market. DRES-CO designs, furnishes and contracts
the installation of electrical systems for oil field drilling rigs, drilling
barges, and other drilling equipment used for the production of oil and natural
gas. DRES-CO operates in conjunction with Rig-A-Lite, utilizing their lighting
products. 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 a variety of physical
configurations 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,
located in Pittsburg, Kansas, manufactures factory-fabricated electrical power
centers and assemblies for the industrial and power generation industries.
Aztec also processes and provides tubular products to the extent of upsetting,
threading, testing and heat treating and also manufactures pup joints. The
principal market for Aztec's tubular products is the oil industry, with
distribution through supply houses, steel mills and other
2
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manufacturers in the metal fittings industry. The market for Aztec's
Manufactured 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
consolidated revenues. Backlog of orders was approximately $18,214,000 at
February 28, 1999, $19,936,000 at February 28, 1998, and $10,945,000 at February
28, 1997. All of the year end 1999 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. Total employment in this segment is
320 persons.
Services 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 and
pricing are, therefore, highly competitive. Aztec is limited to some extent in
its galvanizing market to areas within a close proximity of its existing
locations, due to freight cost. Zinc, the principal raw material used in the
galvanizing process, is readily available but has volatile pricing. 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. Total
employment in this segment is 316 persons.
General
The Company does not have a material portion of business that may be subject to
renegotiations 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 waste material.
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.
Forward-Looking Statements
This Report contains, and from time to time the Company or certain of its
representatives may make, "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements are generally
identified by the use of words such as "anticipate," "expect," "estimate,"
"intend," "should," "may," "believe," and terms with similar meanings. Although
the Company believes that the current views and expectations reflected in these
forward-looking statements are reasonable, those views and expectations, and the
related statements, like all statements that look to the future are inherently
subject to risks, uncertainties, and other factors, many of which are not under
the Company's control and may not even be predictable. Those risks,
uncertainties, and other factors could cause the actual results to differ
materially from these in the forward-looking statements. Those risks,
uncertainties, and factors include, but are not limited to, many of the matters
described in this Report: change in demand, prices and raw material cost,
including zinc which is used in the hot dip galvanizing process; changes in the
economic conditions of the various markets the Company serves, foreign and
domestic, including the market price for oil and natural gas; acquisition
opportunities, adequate financing, and experienced management employees to
implement the Company's growth strategy; and customer demand and response to
products and services offered by the Company. The Company
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expressly disclaims any obligations to release publicly any updates or revisions
to these forward-looking statements to reflect any change in its views or
expectations.
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 73 Chairman and Chief Executive Officer 1958
David H. Dingus 51 President and Chief Operating Officer 1998
President and Chief Executive Officer of Reedrill Corp 1989-1998
Dana L. Perry 50 Vice President of Finance, Chief Financial Officer 1992
and Assistant Secretary 1977
Fred L. Wright, Jr. 58 Senior Vice President/Services Segment 1992
</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, 1999:
<TABLE>
<CAPTION>
Buildings/
Location Land/Acres Sq. Footage Segment/Occupant
- -------- ---------- ----------- ----------------
<S> <C> <C> <C>
Crowley, Texas 152.0 7,772 Corporate Office
25,600 Services
193,245 Manufactured Products
Houston, Texas 8.7 25,800 Services
37.0 36,000 Manufactured Products
5.4 67,440 Manufactured Products
1.8 6,500 Manufactured Products
Waskom, Texas 10.6 30,400 Services
Moss Point, Mississippi 13.5 16,000 Services
Jackson, Mississippi 5.6 22,800 Services
5.1 36,160 Manufactured Products
Pittsburg, Kansas 15.3 86,000 Manufactured Products
Citronelle, Alabama 10.8 33,960 Services
Goodyear, Arizona 11.75 36,750 Services
Prairie Grove, Arkansas 11.5 34,000 Services
Belle Chasse, Louisiana 9.5 34,000 Services
Beaumont, Texas 12.9 33,700 Services
</TABLE>
4
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Item 3. Legal Proceedings
Environmental Proceedings
In the course of its galvanizing operations, the Company is subject to
occasional governmental proceedings and orders pertaining to noise, air
emissions, and water discharges into the environment. The Company has complied
with such proceedings and orders without any materially adverse effect on its
business.
The 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 of Notes To Consolidated Financial Statements on
page 31 of the Registrant's 1999 Annual Report to Shareholders, which is Exhibit
13 to this Form 10-K.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted during the fourth quarter of the fiscal year ended
February 28, 1999, to a vote of security holders through the solicitation of
proxies or otherwise.
5
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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. Prior to that date, the
Company's stock traded on the NASDAQ National Market. Information called for by
Item 201 of Regulation S-K is contained under the caption "Stock Prices and
Dividends Per Share" on the inside back cover of Registrant's 1999 Annual Report
to Shareholders. That inside back cover is hereby incorporated by reference.
Effective January 7, 1999, the Board of Directors approved a stock rights plan,
which authorized and declared a dividend distribution of one right for each
share of common stock outstanding at the close of business on February 4, 1999.
The rights are exercisable at an initial exercise price of $60, subject to
certain adjustments as defined in the agreement, if a person or group acquires
15% or more of the Company's common stock or announces a tender offer that would
result in ownership of 15% or more of the common stock alternatively, the rights
may be redeemed at one cent per right at any time before a 15% position has been
acquired. The rights expire on January 7, 2009.
The approximate number of holders of record of common stock of Registrant at May
10, 1999 was 980.
Item 6. Selected Financial Data
The information contained under the caption "Selected Financial Information" on
page 1 of Registrant's 1999 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 14, 15, 16,
17 and 18 of Registrant's 1999 Annual Report to Shareholders is incorporated
herein by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market risk relating to the Company's operations results primarily from changes
in interest rates and commodity prices. The Company has only limited
involvement with derivative financial instruments and does not use them for
trading purposes and is not a party to any leveraged derivatives.
The Company manages its exposures to changes in interest rates by optimizing the
use of variable and fixed rate debt. The Company had approximately $17.7 million
of variable rate borrowings at February 28,1999. In February 1999 the Company
entered into an interest rate protection agreement with its lender to modify the
interest characteristics on approximately $9.9 million of debt from a variable
rate to a fixed rate.
The Company manages its exposures to commodity prices, primarily zinc used in
its Services Segment, by utilizing contracts with its zinc suppliers that
include protective caps to guard against rising commodity prices. Management
believes these contractual agreements ensure adequate supplies and guard against
exposure to commodity price swings.
6
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Item 8. Financial Statements and Supplementary Data
The consolidated balance sheets of Aztec Manufacturing Co. as of February 28,
1999 and February 28, 1998, and the related consolidated statements of income,
shareholders' equity, and cash flows for each of the three years in the period
ended February 28, 1999, and the report of independent auditors and the
information required by Item 302 of Regulation of S-K are on pages 19 through 32
of Registrant's 1999 Annual Report to Shareholders and are incorporated herein
by reference.
Item 9. Disagreements on Accounting and Financial Disclosure
No changes in accountants or disagreements with accountants on accounting and/or
financial disclosure have arisen.
7
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PART III
Item 10. Directors and Executive Officers
The information required by this 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 this item is incorporated herein by reference
to the Registrant's Proxy Statement for the 1999 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 1999 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 1999 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 1999 Annual Meeting of Shareholders.
8
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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
incorporated herein by reference to pages 19 through 32 of Registrant's 1999
Annual Report to Shareholders.
<TABLE>
<CAPTION>
Page numbers of 1999 Annual
Report to Shareholders
---------------------------
<S> <C>
Consolidated Balance Sheets as of February 28, 1999 and February 28, 1998 19
Consolidated Statements of Income for the years ended 20
February 28, 1999, February 28, 1998, and February 28, 1997
Consolidated Statements of Shareholders' Equity for the years ended 20
February 28, 1999, February 28, 1998, and February 28, 1997
Consolidated Statements of Cash Flows for the years ended 21
February 28, 1999, February 28, 1998, and February 28, 1997
Notes to Consolidated Financial Statements 22-32
Report of Independent Auditors 32
</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).
3c - Bylaws adopted by the Board of Directors of Registrant on May 11, 1999.*
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).
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).
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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).
10f - Amendment No. 1 dated May 15, 1992 to the Change in Control Agreement
dated April 25, 1986.*
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).
10k - 1998 Incentive Stock Option plan of Aztec Manufacturing Co. (incorporated
by reference to Exhibit 10k of the Annual Report on Form 10-K filed by
Registrant for the fiscal year ended February 28, 1998).
10l - 1998 Nonstatutory Stock Option plan of Aztec Manufacturing Co.
(incorporated by reference to Exhibit 10l of the Annual Report on Form 10-K
filed by Registrant for the fiscal year ended February 28, 1998).
10m - 1997 Nonstatutory Stock Option Grants of Aztec Manufacturing Co.
(incorporated by reference to Exhibit 10m of the Annual Report on Form 10-K
filed by Registrant for the fiscal year ended February 28, 1998).
13 - Annual Report to Shareholders for the fiscal year ended February 28,
1999; provided however, only parts of such report as are specifically
incorporated by reference into this Form 10-K shall be deemed part of this Form
10-K*.
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, 1999.
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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: 5/25/99 By: /s/ L.C. Martin
-------------------------- ---------------------------------
L. C. Martin, Principal Executive
Officer and Director
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 and Director Officer, Principal Financial Officer,
and Director
David H. Dingus* /s/ Sam Rosen
- --------------------------------- -------------------------------------
David H. Dingus, President, Sam Rosen, Director
Chief Operating Officer and
Director
Robert H. Johnson* R. J. Schumacher*
- --------------------------------- -------------------------------------
Robert H. Johnson, Director R. J. Schumacher, Director
Martin C. Bowen* Dr. H. Kirk Downey*
- --------------------------------- -------------------------------------
Martin C. Bowen, Director Dr. H. Kirk Downey, Director
W.C. Walker* Kevern R. Joyce*
- --------------------------------- -------------------------------------
W.C. Walker, Director Kevern R. Joyce, Director
/s/ L.C. Martin
- ---------------------------------
L. C. Martin, Attorney-in-Fact
11
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Description Numbered Page
------- ----------- -------------
<S> <C> <C>
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). -------------
3c Bylaws adopted by the Board of Directors of registrant on May 11, 1999.* -------------
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 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). -------------
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). -------------
10f Amendment No. 1 dated May 15, 1992 to the Change in Control Agreement dated April
25, 1986.* -------------
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). -------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Sequentially
Exhibit Description Numbered Page
------- ----------- -------------
<S> <C> <C>
10k 1998 Incentive Stock Option Plan of Aztec Manufacturing Co. (incorporated by
reference to Exhibit 10k of the Annual Report on Form 10-K filed by Registrant
for the fiscal year ended February 28, 1998). -------------
10l 1998 Nonstatutory Stock Option Plan of Aztec Manufacturing Co. (incorporated by
reference to Exhibit 10l of the Annual Report on Form 10-K filed by Registrant
for the fiscal year ended February 28, 1998). -------------
10m 1997 Nonstatutory Stock Option Grants of Aztec Manufacturing Co. (incorporated
by reference to Exhibit 10m of the Annual Report on Form 10-K filed by Registrant
for the fiscal year ended February 28, 1998). -------------
13 Annual Report to Shareholders for the fiscal year ended February 28, 1999;
provided however, only parts of such report as are specifically incorporated
by reference into this Form 10-K shall be deemed part of this Form 10-K.* -------------
21 Subsidiaries of Registrant.* -------------
23 Consent of Ernst & Young LLP.* -------------
24 Power of Attorney.* -------------
</TABLE>
- -------------------
*Filed herewith
13
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EXHIBIT 3c
BYLAWS OF AZTEC MANUFACTURING CO.
Contents
--------
Art. 1: Offices
1.01 Principal Office
1.02 Registered Office
1.03 Other Offices
Art. 2: Meetings of Shareholders
2.01 Place of Meetings
2.02 Annual Meeting
2.03 Special Meetings
2.04 Notice of Meetings
2.05 Voting Lists
2.06 Quorum
2.07 Organization of Meetings
2.08 Business to be Conducted
2.09 Proxies
2.10 Voting of Shares
2.11 Voting of Shares by Certain Holders
2.12 Record Date; Closing Transfer Books
Art. 3: Directors
3.01 Management
3.02 Number; Qualification; Election; Term
3.03 Change in Number
3.04 Resignation
3.05 Removal
3.06 Vacancies
3.07 Election of Directors
3.08 Nomination of Directors
3.09 Place of Meetings
3.10 First Meetings
3.11 Regular Meetings
3.12 Special Meetings
3.13 Quorum; Majority Vote
3.14 Compensation
3.15 Procedure
3.16 Interested Directors, Officers and Shareholders
3.17 Committees of the Board
3.18 Advisory Directors
Art. 4: Notice and Attendance through Use of Electronic Equipment
4.01 Method
4.02 Waiver
4.03 Telephone and Similar Meetings
Art. 5: Officers and Agents
5.01 Number; Qualification; Election; Term
5.02 Removal
EXHIBIT 3c
<PAGE>
5.03 Vacancies
5.04 Authority
5.05 Compensation
5.06 Chairman of the Board
5.07 Chief Executive Officer
5.08 President
5.09 Vice President
5.10 Secretary
5.11 Assistant Corporate Officers
5.12 Treasurer
Art. 6: Certificates and Shareholders
6.01 Certificates
6.02 Replacement of Lost or Destroyed Certificates
6.03 Transfer of Shares
6.04 Registered Shareholders
6.05 Pre-Emptive Rights
6.06 Treasury Stock
6.07 Dividends and Reserves
Art. 7: General Provisions
7.01 Books and Records
7.02 Annual Statement
7.03 Contracts
7.04 Loans
7.05 Checks, drafts, etc.
7.06 Deposits
7.07 Fiscal Year
7.08 Seal
7.09 Resignation
7.10 Amendment of Bylaws
7.11 Construction
7.12 Relation to Laws and Articles
Art. 8: Indemnification
8.01 Indemnification; Insurance
Art. 9: Transition Provisions
9.01 Prior Bylaws
9.02 Directors and Officers
9.03 Effect of Section 2.03
9.04 Effect of Article 9
<PAGE>
Article 1: Offices
Section 1.01. Principal Office. The principal office of Aztec Manufacturing
Co. (the "Corporation") shall be maintained in Tarrant County, Texas.
Section 1.02. Registered Office. The registered office of the Corporation
shall be maintained in the State of Texas as required by law. The registered
office of the Corporation may be, but need not be, the same as the principal
office. The address of the registered office may be changed from time to time
by the Board of Directors of the Corporation (the "Board") in the manner
provided by law.
Section 1.03. Other Offices. The Corporation may also have offices at such
other places, both within and without the State of Texas, as the Board may from
time to time determine or the business of the Corporation may require.
Article 2: Meetings of Shareholders
Section 2.01. Place of Meetings. The Board may designate any place, either
within or without the State of Texas, as the place of meeting for any annual
meeting or for any special meeting called by the Board. If no designation is
made, or if a special meeting is called other than by the Board, the place of
meeting shall be the principal office of the Corporation.
Section 2.02. Annual Meeting. (a) The annual meeting of shareholders shall
be held each year at a time and on a day as may be selected by the Board. At
the meeting, the shareholders shall elect Directors and transact such other
business as may properly come before the meeting.
(b) If an annual meeting is omitted by oversight or otherwise and not
held as provided herein, an annual meeting may be called at a later date in the
manner provided for special meetings, and business transacted at such a meeting
shall be valid as if transacted at an annual meeting held as provided herein.
Section 2.03. Special Meetings. (a) Unless otherwise prescribed by law or
by the Articles of Incorporation of the Corporation (the "Articles") or these
Bylaws, special meetings of the shareholders may be called for any purpose by
(i) the Chairman of the Board (ii) the President, if no Chairman of the Board
has been elected, (iii) the Board, or (iv) the holders of at least fifteen
percent of all of the shares entitled to vote at the meetings.
(b) Business transacted at any special meetings shall be confined to the
purpose or purposes stated in the notice of the meeting.
Section 2.04. Notice of Meetings. (a) Written or printed notice of all
meetings of shareholders stating the place, day and hour thereof, and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called, shall be delivered by personal delivery or by mail, not less than ten
days nor more than 60 days before the date of the meeting, to each shareholder
entitled to vote at the meeting. If mailed, notice shall be deemed delivered
when deposited in the United States mail addressed to the shareholder at his
address as it appears on the share transfer records of the Corporation, with
postage thereon prepaid.
(b) Delivery of any notice of a shareholder meeting to any officer or
manager of a corporation, company or association, or to any member of a
partnership, shall constitute delivery of the notice to the corporation,
company, association or partnership.
Section 2.05. Voting Lists. (a) At least ten days before each meeting of
shareholders, the officer or agent having charge of the share transfer records
of the Corporation shall make a complete list of shareholders entitled to vote
at the meeting. The list shall be arranged in alphabetical order and show the
address of each shareholder and the number
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of shares held by each. For a period of ten days prior to the meeting, the list
shall be kept on file at the registered office or principal place of business of
the Corporation and shall be subject to inspection by any shareholder at any
time during usual business hours. The list shall also be produced and kept open
at the time and place of the meeting and shall be subject to the inspection of
any shareholder during the whole time of the meeting. The original share
transfer records shall be prima facie evidence as to who are the shareholders
entitled to examine such list or share transfer records or to vote at any
meeting of shareholders.
(b) Failure to comply with the requirements of this Section 2.05 with
respect to any meeting of shareholders shall not affect the validity of any
action taken at such meeting.
Section 2.06. Quorum. (a) The holders of a majority of the shares issued
and outstanding and entitled to vote, present in person or represented by proxy,
shall constitute a quorum for the transaction of business at any meeting of
shareholders except as otherwise provided by law, the Articles or these Bylaws.
Once a quorum is present, the shareholders may continue to transact business
properly brought before the meeting until adjournment notwithstanding the
withdrawal of enough shareholders to leave less than a quorum.
(b) If a quorum is not present at any meeting of shareholders, the
shareholders entitled to vote at the meeting, present in person or represented
by proxy may, by majority vote, adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present. At an
adjourned meeting at which a quorum is present, any business may be transacted
which might have been transacted at the meeting under the notice of the meeting
as originally given.
(c) For the purposes of determining the presence of a quorum,
abstentions and broker non-votes, as defined in Section 2.10(c), shall be
treated as shares present and entitled to vote.
Section 2.07. Organization of Meetings. (a) The Chairman of the Board
shall preside at all meetings of the shareholders. In the absence of the
Chairman of the Board or if no Chairman has been elected, the President or, in
his absence, the Vice President shall preside. In the absence of all of these
officers, any shareholder or the duly appointed proxy of any shareholder may
call the meeting to order and a chairman shall be elected from among the
shareholders present.
(b) The Secretary of the Corporation shall act as secretary at all
meetings of the shareholders. In the absence of the Secretary, an Assistant
Secretary shall so act, or, in the absence of all of these officers, the person
presiding at a meeting may appoint any person to act as secretary of the
meeting.
Section 2.08. Business to be Conducted. (a) Only such business may be
conducted at an annual meeting of the shareholders as shall have been properly
brought before the meeting. To be properly brought before an annual meeting,
business must be (i) specified in the notice of meeting given by or at the
direction of the Board, or (ii) otherwise properly brought before the meeting by
or at the direction of the Board, or (iii) properly brought before the meeting
by a shareholder.
(b) In addition to any other applicable requirements, for business to
be properly brought before an annual meeting by a shareholder, the shareholder
must give the Secretary of the Corporation timely written notice as required by
this Section 2.08(b). To be timely, a shareholder's notice must be received at
the principal office of the Corporation not less than 50 days nor more than 75
days prior to the meeting; however, if less than 65 days' notice or prior public
disclosure of the date of the meeting is given or made to shareholders, notice
by a shareholder will be timely if received at the principal office of the
Corporation not later than the close of business on the 15th day following the
earlier of the day on which the notice of the date of the annual meeting was
mailed or public disclosure was made. A shareholder's notice to the Secretary
must set forth (i) a brief description of each business matter which the
shareholder proposed to bring before the annual meeting and the reasons for
bringing each such business matter before the annual meeting, (ii) the name and
record address of the shareholder proposing such business, (iii) the class and
number of
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shares of the Corporation which are beneficially owned by the shareholder, and
(iv) any material interest of the shareholder in such business.
(c) Notwithstanding anything in these Bylaws to the contrary, no
business shall be conducted at an annual meeting unless properly brought before
the meeting in accordance with this Section 2.08. If the chairman of a meeting
should find that the facts warrant a determination that a business matter is not
properly brought before the meeting in accordance with this Section 2.08, he
shall so declare to the meeting, and the matter shall not be considered at the
meeting.
Section 2.09. Proxies. (a) At any meeting of the shareholders, every
shareholder having the right to vote shall be entitled to vote in person or by
proxy executed in writing by the shareholder or by his duly authorized attorney-
in-fact. No proxy shall be valid after eleven months from the date of its
execution unless otherwise provided in the proxy. Each proxy shall be revocable
unless the proxy form expressly and conspicuously states that the proxy is
irrevocable and the proxy is coupled with an interest. All proxies shall be
filed with the Secretary of the Corporation prior to or at the time of the
meeting at which they are to be voted.
(b) In the event that any instrument in writing shall designate two or
more persons to act as proxies, a majority of such persons present at the
meeting or, if only one shall be present, then that one, shall have and may
exercise all of the powers conferred by such written instrument upon all the
persons so designated unless the instrument shall otherwise provide.
Section 2.10. Voting of Shares. (a) Subject to Section 2.12, each
shareholder, regardless of class, shall be entitled at each meeting of
shareholders to one vote on each matter submitted to a vote at the meeting.
Once a quorum is present at any meeting of shareholders, the vote of the holders
of a majority of shares entitled to vote and present in person or represented by
proxy shall decide any question brought before the meeting unless the question
is one upon which, by express provision of law or the Articles or these Bylaws,
a different vote is required in which case such express provision shall control
the decision of the question.
(b) For the purpose of determining whether a majority, or any
different required vote of shares present and entitled to vote, has voted
affirmatively on a particular question, only those shares voted "for" or
"against" such questions shall be included in the count. Abstentions and broker
non-votes shall not be counted even though such shares shall be considered
present and entitled to vote for the purposes of determining the presence of a
quorum under Section 2.06.
(c) As used in these Bylaws, the term "abstention" means shares which
are not voted "for" or "against" a question by a holder or holders present in
person or represented by proxy at the meeting and entitled to vote such shares
on the question, and the term "broker non-votes" means shares represented at a
meeting by proxies held by brokers or nominees as to which instructions have not
been received from the beneficial owner or persons entitled to vote and as to
which the broker or nominee does not have discretionary power to vote on the
question.
(d) Any vote at a shareholders meeting may be taken by voice vote or
by show of hands unless a shareholder or the duly appointed proxy of a
shareholder entitled to vote on the question objects in which case the vote
shall be taken by written ballets.
Section 2.11. Voting of Shares by Certain Holders. (a) Shares standing
in the name of another corporation may be voted by such officer, agent or proxy
as the bylaws of such corporation may authorize or, in the absence of such
authorization, as the board of directors of such corporation may determine.
(b) Shares held by an administrator, executor, guardian or conservator
may be voted by him so long as the shares are part of the estate being served by
him, either in person or by proxy, without a transfer of such shares into his
name. Shares standing in the name of a trustee may be voted by him, either in
person or by proxy, but
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no trustee shall be entitled to vote shares held by him without a transfer of
such shares into his name as trustee.
(c) Shares standing in the name of a receiver may be voted by the
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer into the receiver's name if authority to do
so has been given in an appropriate order of the court by which the receiver was
appointed.
(d) A shareholder whose shares are pledged may vote the shares until
the shares have been transferred into the name of the pledgee, and thereafter
the pledgee may vote the shares so transferred.
(e) Shares of the Corporation's stock either (i) owned by the
Corporation itself, (ii) owned by another corporation, the majority of the
voting stock of which is owned or controlled by the Corporation, or (iii) held
by the Corporation in a fiduciary capacity shall not be voted, directly or
indirectly, at any meeting, and shall not be counted in determining the total
number of outstanding shares at any given time.
Section 2.12. Record Date; Closing Transfer Books. (a) The Board may fix
in advance a record date for the purpose of determining shareholders entitled to
notice of or to vote at a meeting of the shareholders, the record date to be not
less than ten nor more than 60 days prior to the meeting, or the Board may close
the stock transfer books for such purpose for a period of not less than ten nor
more than 60 days prior to such meeting.
(b) In the absence of action by the Board fixing a record date, the
date upon which the notice of the meeting is mailed shall be the record date for
the purpose of determining shareholders entitled to vote at the meeting.
Article 3: Directors
Section 3.01. Management. The business and affairs of the Corporation
shall be managed by the Board of Directors, which may exercise all such powers
of the Corporation and do all such lawful acts and things as are not, by law,
the Articles or these Bylaws, required to be exercised or done by the
shareholders.
Section 3.02. Number; Qualification; Election; Term. (a) Subject to
Section 3.02(b), the Board of Directors shall consist of nine Directors, none of
whom need be shareholders of the Corporation or residents of the State of Texas.
The Directors shall be divided into three classes consisting of three Directors
each. At each annual shareholders meeting, Directors shall be elected for the
class whose term of office expires at that meeting, and the Directors so elected
shall hold office until the third succeeding annual shareholders meeting after
their election and until their successors are elected and qualified.
(b) Notwithstanding subsection (a) of Section 3.02, one Director in
addition to the nine provided by subsection (a) shall serve from April 20, 1999
to the 2000 annual shareholders meeting. At the 1999 annual shareholders
meeting, four Directors shall be elected, one who shall become a fourth member
of the class of Directors whose term of office expires at the 2000 annual
shareholders meeting and three who shall be elected for a three year term to
succeed that class of Directors whose term of office expires at the 1999 annual
meeting. The Board of Directors shall consist of ten Directors from April 20,
1999, until the 2000 annual shareholders meeting and until the successors of the
class of Directors whose term of office expires at the 2000 annual shareholders
meeting shall have been elected and qualified, after which the Board shall
consist of nine Directors.
Section 3.03. Change in Number. The number of Directors may be
increased or decreased from time to time by amendment to these Bylaws, but no
decrease shall have the effect of shortening the term of any incumbent Director.
Any directorship to be filled by reason of an increase in the number of
Directors may be filled by the Board or by election at an annual meeting of
shareholders or at a special meeting of shareholders called for that purpose.
Any Director elected to the Board to fill a directorship resulting in an
increase in the number of Directors shall hold office for a term continuing only
until the next election of Directors by shareholders. The Board may not fill
more than two
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directorships resulting from an increase in the number of Directors between any
two successive annual meeting of shareholders.
Section 3.04. Resignation. Any Director may resign at any time by
giving written notice to the Chairman of the Board, the President or the
Secretary. A Director's resignation shall take effect at the time specified in
the resignation. Unless otherwise provided in the resignation, the acceptance of
a resignation shall not be necessary to make it effective.
Section 3.05. Removal. Any Director may be removed, either with or
without cause, at any meeting of shareholders expressly called for that purpose
by the affirmative vote of more than two-thirds in number of shares of the
shareholders present in person or represented by proxy at such meeting and
entitled to vote for the election of Directors.
Section 3.06. Vacancies. (a) Any vacancy occurring in the Board by
death, resignation or removal of a Director may be filled by an affirmative vote
of a majority of the remaining Directors though less than a quorum of the Board.
A Director elected to fill such a vacancy shall be elected for the unexpired
term of his predecessor in office.
(b) Any vacancy resulting from an increase in the number of
directors shall be filled as provided in Section 3.03.
Section 3.07. Election of Directors. Directors shall be elected by
plurality vote. Cumulative voting shall not be permitted.
Section 3.08. Nomination of Directors. (a) Only those persons who are
nominated in accordance with this Section 3.08 shall be eligible for election as
Directors. Nomination of persons for election to the Board of the Corporation
may be made at a meeting of shareholders (i) by or at the direction of the
Board, (ii) by a nominating committee appointed by the Board, or (iii) by any
shareholder of the Corporation entitled to vote at the meeting for the election
of Directors but only if the shareholder complies with this Section 3.08.
(b) In addition to other applicable requirements, for a nomination
to be made by a shareholder, the shareholder must give the Secretary of the
Corporation timely written notice as required by this Section 3.08(b). To be
timely, a shareholder's notice must be received at the principal office of the
Corporation, not less than 50 days nor more than 75 days prior to the meeting at
which the nomination is to be made; however, if less than 65 days' notice or
prior public disclosure of the date of the meeting is given or made to
shareholders, notice by a shareholder will be timely if received at the
principal office of the Corporation not later than the close of business on the
15th day following the earlier of the day on which the notice of the date of the
meeting was mailed or public disclosure was made. A shareholder's notice to the
Secretary must set forth as to each person whom the shareholder proposes to
nominate (i) the name, age, business address and residence address of the
person, (ii) the principal occupation or employment of the person, (iii) the
class and number of shares of the Corporation which are beneficially owned by
the person, and (iv) any other information relating to the person that is
required to be disclosed in solicitation for proxies for election of Directors
pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended. A
shareholder's notice to the Secretary must also set forth as to the shareholder
giving the notice (i) the name and record address of the shareholder and (ii)
the class and number of shares of the Corporation which are beneficially owned
by the shareholder. The Corporation may require any proposed nominee to furnish
such other information as may reasonably be required by the Corporation to
determine the eligibility of such proposed nominee to serve as a Director of the
Corporation.
(c) Notwithstanding anything in these Bylaws to the contrary, no
person shall be eligible for election as a Director unless nominated in
accordance with this Section 3.08. If the chairman of the meeting at which a
nomination is made should find that the facts warrant a determination that the
nomination is not made in accordance with this Section 3.08, he shall so declare
to the meeting, and the nomination shall be disregarded.
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Section 3.09. Place of Meetings. Meetings of the Board, regular or
special, may be held either within or without the State of Texas.
Section 3.10. First Meetings. The first meeting of a Board after
Directors are elected at an annual meeting of shareholders shall be held,
without further notice, immediately following the annual meeting of
shareholders. The meeting shall be held at the same place as the annual
shareholders meeting unless by written unanimous consent the time or place for
the meeting shall be changed by the Directors serving after the shareholders
meeting.
Section 3.11. Regular Meetings. Regular meetings of the Board may be held
without notice at such time and place as shall, from time to time, be determined
by the Board.
Section 3.12. Special Meetings. (a) Special meetings of the Board may be
called by the Chairman of the Board, the President or the Secretary. Special
meetings shall be called by the Chairman, the President or the Secretary in like
manner and on like notice upon the written request of any Director.
(b) Written notice of the place, day and hour of any special meeting
of the Board shall be delivered to each Director not less than three days before
the date of the meeting, delivery to be by personal delivery, mail, telecopier,
or a national recognized overnight delivery service. If mailed or sent by
overnight delivery service, notice shall be deemed delivered when deposited in
the United States mail or given to the delivery service. Notice by telecopier
shall be deemed delivered when sent.
(c) Except as otherwise expressly provided by law or by the Articles
or these Bylaws, neither the business to be transacted at, nor the purpose of,
any special meeting of the Board need be specified in a notice or waiver of
notice.
Section 3.13. Quorum; Majority Vote. (a) At all meetings of the Board of
Directors, a majority of the Board fixed by these Bylaws shall constitute a
quorum for the transaction of business. The act of a majority of the Directors
present at any meeting at which a quorum is present shall be the act of the
Board, except as otherwise specifically provided by law or by the Articles or
these Bylaws.
(b) Anything herein to the contrary notwithstanding, any alteration,
amendment, or repeal of subsections (a), (b) or (c) of Section 2.10 or of
Sections 3.02, 3.03, 3.04, 3.07, 3.13 or 7.10 of these Bylaws, or adoption of
any bylaw provision inconsistent therewith, by the Board shall require the
affirmative vote of two-thirds of the full Board.
(c) If a quorum is not present at a meeting of the Board, the
Directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present.
Section 3.14. Compensation. By resolution of the Board, the Directors may
be paid their expenses, if any, of attendance at each meeting of the Board and
may be paid a fixed sum for attendance at each meeting of the Board or a stated
salary as Director. No such payment shall preclude any Director from serving the
Corporation in any other capacity and receiving compensation therefor.
Section 3.15. Procedure. (a) The Board shall cause regular minutes of
its proceedings to be kept. The minutes shall be placed in the minute book of
the Corporation.
(b) A Director who is present at a meeting of the Board at which
action on any corporate matter is taken shall be presumed to have assented to
the action unless his dissent shall be entered in the minutes of the meeting
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or unless he shall file his written dissent with the secretary of the meeting
before the adjournment thereof or send his dissent by registered or certified
mail to the Secretary of the Corporation immediately after adjournment of the
meeting. A Director who voted in favor of any action may not thereafter dissent
from such action.
Section 3.16. Interested Directors, Officers and Shareholders. (a) Any
contract or other transaction between the Corporation and any of its Directors,
officers or shareholders (or any corporation or firm which any of them are
directly or indirectly interested) shall be valid for all purposes
notwithstanding the presence of such Director, officer or shareholder at the
meeting at which such contract or transaction is authorized, or his
participation in such meeting or authorization.
(b) Subsection (a) of this Section 3.16 shall, however, apply only if
the interest of each Director, officer or shareholder is known or disclosed:
(1) to the Board of Directors and the Board, nevertheless,
authorizes or ratifies the contract or transaction by a majority of the
Directors present, each such interested person to be counted in determining
whether a quorum is present but not in calculating the majority necessary to
carry the vote; or
(2) to the shareholders and they, nevertheless, authorize or
ratify the contract or transaction by a majority of the shares present, each
such interested person to be counted for quorum and voting purposes.
(c) This Section 3.16 shall not be construed to invalidate any
contract or transaction which would be valid in the absence of this provision.
Section 3.17. Committees of the Board. (a) By resolution adopted by a
majority of the full Board of Directors, the Board may designate from among its
members one or more committees, each of which, to the extent provided in the
resolution, shall have and may exercise all of the authority of the Board in the
business and affairs of the Corporation except were action by the Board is
required by law, the Articles or these Bylaws.
(b) Each committee shall consist of one or more Directors appointed by
resolution adopted by a majority of the full Board. Each committee member shall
serve as such until the expiration of his term as a Director or his earlier
resignation unless sooner removed as a committee member or as a Director.
(c) The number of members of any committee may be increased or
decreased from time to time by resolution adopted by a majority of the full
Board. The Board shall have the power at any time to fill any vacancy in, to
change the membership of, or to dissolve, any committee.
(d) Regular meetings of any committee may be held without notice at
such time and place as may be designated from time to time by resolution of the
committee and communicated to all committee members.
(e) A special meeting of any committee may be held whenever called by
any committee member at such time and place that such committee member shall
designate in the notice of such special meeting. The committee member calling
any such special meeting shall cause notice of such special meeting to be given
to each committee member at least twelve hours before such special meeting.
Notice may be either written or oral. Neither the business to be transacted at,
nor the purpose of, any special meeting of any committee need be specified in
the notice or waiver of notice of any special meeting.
(f) At all meetings of any committee a majority of the number of
committee members designated by the Board of Directors shall constitute a quorum
for the transaction of business. The act of a majority of the committee members
present at any meeting at which a quorum is present shall be the act of the
committee, except as otherwise specifically provided by law, the Articles or
these Bylaws. If a quorum is not present at a meeting of any
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committee, the members present may adjourn the meeting from time to time,
without notice other than an announcement at the meeting, until a quorum is
present.
(g) Each committee shall keep regular minutes of its proceedings and
report the same to the Board of Directors upon the request of the Board. The
minutes of the proceedings of each committee shall be placed in the minute book
of the Corporation.
(h) Any action required or permitted to be taken at any meeting of a
committee may be taken without a meeting if a consent in writing, setting forth
the action so taken, is signed by all the members of the committee. Such
consent shall have the same force and effect as a unanimous vote at a meeting.
The signed consent shall be placed in the minute book.
(i) Members of any committee designated by the Board may participate
in or hold a meeting by use of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other.
(j) The designation of any committee and the delegation of authority
to it shall not operate to relieve the Board, or any member thereof, of any
responsibility imposed upon it or him by law.
Section 3.18. Advisory Directors. (a) The Board, by resolution adopted
by not less than a majority of the Directors then in office, may from time to
time appoint such number of individuals as it may deem appropriate to serve as
Advisory Directors at the pleasure of the Board. Advisory Directors may be
given such designations (including without limitation "Advisory Director,"
"Director Emeritus" or "Honorary Directors") as the Board may from time to time
designate. Advisory Directors are not, and shall not have the duties and
responsibilities of, Directors of the Corporation, and the terms "Directors" or
"members of the Board of Directors" as used in these Bylaws shall not be deemed
to mean or include Advisory Directors.
(b) Without limiting the generality of the foregoing, Advisory
Directors shall not be entitled (i) to receive any notice of any meeting of the
Board of Directors, (ii) to attend any meeting of the Board of Directors except
at the invitation of the Board, (iii) to vote on any matter presented for action
by the Board of Directors or, except at the invitation of the Board, to
participate in the consideration of any such matter or the formulation or
determination of corporate policy, (iv) to receive any non-public information
regarding the business or affairs of the Corporation or any matters presented
for action or consideration by the Board of Directors, or (v) to receive any
compensation for serving as an Advisory Director except as the Board of
Directors may otherwise determine by resolution.
(c) At the discretion of the Board of Directors, an Advisory Director
may be deemed a Director as that term is used in any stock option plan of the
Corporation, in order to qualify such Advisory Director for the continued
holding of stock options, the term of which would otherwise expire as a result
of the termination of Director status.
Article 4: Notice and Attendance through Use of Electronic Equipment
Section 4.01. Method. Whenever by law or the Articles or these Bylaws,
notice is required to be given to a Director, shareholder or committee member
and no provision is made as to how the notice shall be given, notice may be
given (i) in writing, by mail, postage prepaid, addressed to the Director,
committee member or shareholder at the address appearing on the books of the
Corporation, or (ii) in any other method permitted by law. Any notice given by
mail shall be deemed given at the time when the same is thus deposited in the
United States mails.
Section 4.02. Waiver. (a) Whenever, by law or the Articles or these
Bylaws, notice to a Director, committee member or shareholder is required, a
waiver thereof in writing signed by the person or persons entitled to such
notice,
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whether before or after the time stated in such notice, shall be equivalent to
the giving of such notice.
(b) Attendance of a Director or committee member at a meeting shall
constitute a waiver of notice of such meeting, except where a Director or member
attends for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened.
Section 4.03. Telephone and Similar Meetings. Directors and committee
members may participate in and hold a meeting by means of conference telephone
or similar communications equipment by means of which all persons participating
in the meeting can hear each other. Participation in such meeting shall
constitute presence in person at the meeting except where a person participates
in the meeting for the express purpose of objecting to the transaction of any
business on the grounds that the meeting is not lawfully called or convened.
Article 5: Officers and Agents
Section 5.01. Number; Qualification; Election; Term. (a) The Corporation
shall have:
(1) a President, a Vice President, a Secretary and a Treasurer,
and
(2) such other officers (including additional vice presidents)
and assistant officers and agents as the Board may think necessary.
(b) No officer or agent need be a shareholder or a Director of the
Corporation or a resident of Texas.
(c) Officers named in Section 5.0l(a)(l) shall be elected by the Board
on the expiration of an officer's term or whenever a vacancy exists. Officers
and agents named in Section 5.0l(a)(2) may be elected by the Board at any
meeting.
(d) Unless otherwise specified by the Board at the time of election or
appointment, or in an employment contract approved by the Board, each officer's
term shall end at the first meeting of Directors after the next annual meeting
of shareholders. Each officer shall serve until the end of his term or his
earlier death, resignation or removal.
(e) Any two or more offices may be held by the same person, except
that the President and the Secretary shall not be the same person.
Section 5.02. Removal. Any officer or agent elected or appointed by the
Board may be removed by the Board whenever in its judgment the best interests of
the Corporation will be served thereby. Removal shall be without prejudice to
the contract rights, if any, of the person so removed. Election or appointment
of an officer or agent shall not of itself create contract rights.
Section 5.03. Vacancies. Any vacancy occurring in any office of the
Corporation may be filled by the Board.
Section 5.04. Authority. Officers and agents shall have such authority
and perform such duties in the management of the Corporation as are provided in
these Bylaws or as may be determined by resolution of the Board not inconsistent
with these Bylaws.
Section 5.05. Compensation. The compensation of officers and agents shall
be fixed from time to time by the Board.
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Section 5.06. Chairman of the Board. The Corporation may have a Chairman
of the Board. If a Chairman of the Board is elected, he shall be the
Corporation's principal planning and development officer and shall preside at
all meetings of the shareholders and the Board. The Chairman shall also perform
such other duties as may be prescribed by the Board from time to time. If no
Chairman is elected, the duties of that office shall be performed by the
President unless the Board provides otherwise.
Section 5.07. Chief Executive Officer. The Corporation may have a Chief
Executive Officer. If a Chief Executive Officer is elected, he shall supervise,
control and have general and active management of the day-to-day business and
affairs of the Corporation and shall perform such other duties as may be
prescribed by the Board from time to time. If no Chief Executive Officer is
elected, the duties of that office shall be performed by the President unless
the Board provides otherwise.
Section 5.08. President. The President shall have such powers and
responsibilities and shall perform such duties as delineated by the Board or the
Chief Executive Officer.
Section 5.09. Vice President. (a) The Vice President shall, in the
absence of the President, perform the duties and have the authority and exercise
the powers of the President. The Vice President shall perform such other duties
and have such other authority and powers as the Board may from time to time
prescribe or as the Chairman of the Board or Chief Executive Officer may from
time to time delegate.
(b) If the Corporation has more than one Vice President, each Vice
President shall have such duties and authorities as the Board may from time to
time prescribe or as the Chief Executive Officer or President may from time to
time delegate.
Section 5.10. Secretary. (a) The Secretary shall attend all meetings of
the Board and all meetings of the shareholders and record all votes and the
minutes of all proceedings in a book to be kept for that purpose.
(b) The Secretary shall give, or cause to be given, notice of all
meetings of the shareholders and special meetings of the Board.
(c) The Secretary shall keep in safe custody the seal of the
Corporation and, when authorized by the Board, affix the same to any instrument
requiring it and, when so affixed, it shall be attested by his signature or by
the signature of the Treasurer or an Assistant Secretary.
(d) The Secretary shall be under the supervision of the President. He
shall perform such other duties and have such other authority and powers as the
Board may from time to time prescribe or as the President may from time to time
delegate.
Section 5.11. Assistant Corporate Officers. (a) The Board may elect an
Assistant Secretary and Assistant Treasurer and such additional assistant
corporate officers as it may from time to time find necessary.
(b) Each assistant corporate officer shall perform the duties of the
principal officer to whom he is an assistant if the principal office is vacant
or if the principal officer is absent or unable to act, as well as such other
duties as the Board may from time to time prescribe.
Section 5.12. Treasurer. (a) The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements of the Corporation and shall deposit all monies and
other valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board.
(b) The Treasurer shall disburse the funds of the Corporation as may
be ordered by the Board,
10
<PAGE>
taking proper vouchers for such disbursements, and shall render to the President
and Directors, at the regular meetings of the Board, or whenever they may
require it, an account of all his transactions as treasurer and of the financial
condition of the Corporation.
(c) If required by the Board, the Treasurer shall give the Corporation
a bond in such form, in such sum, and with such surety or sureties as shall be
satisfactory to the board for the faithful performance of the duties of his
office and for the restoration to the Corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his possession or under his control
belonging to the corporation.
(d) The Treasurer shall perform such other duties and have such other
authority and powers as the Board may from time to time prescribe or as the
Chief Executive Officer or President may from time to time delegate.
Article 6: Certificates and Shareholders
Section 6.01. Certificates. Certificates in the form determined by the
Board shall be delivered representing all shares to which shareholders are
entitled. Certificates shall be consecutively numbered and shall be entered in
the books of the Corporation as they are issued. Each certificate shall state
on the face thereof the holder's name, the number and class of shares, the par
value of shares or a statement that such shares are without par value, and such
other matters as may be required by law. Certificates shall be signed by the
Chairman of the Board, the President or a Vice President and such other officer
or officers as the Board shall designate, and may be sealed with the seal of the
Corporation or a facsimile thereof. If any certificate is countersigned by a
transfer agent, or an assistant transfer agent or registered by a registrar
(either of which is other than the Corporation or an employee of the
Corporation), the signature of such officer may be a facsimile.
Section 6.02. Replacement of Lost or Destroyed Certificates. The Board
may direct a new certificate or certificates to be issued in place of any
certificate previously issued by the Corporation alleged to have been lost or
destroyed, upon the making of an affidavit of that fact by the person claiming
the loss or destruction. In so doing the Board may, in its discretion and as a
condition precedent to the issuance, (i) require the owner of the lost or
destroyed certificate, or his legal representative, to advertise the same in
such manner as it shall require and/or (ii) to give the Corporation a bond (with
a surety or sureties satisfactory to the Corporation) in such sum as it may
direct, as indemnity against any claim, or expense resulting from any claim,
that may be made against the Corporation with respect to the certificate alleged
to have been lost or destroyed.
Section 6.03. Transfer of Shares. Shares of the Corporation shall be
transferable only on the books of the Corporation by the holder thereof in
person or by his duly authorized attorney. Upon surrender to the Corporation or
its transfer agent of a certificate representing shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, the Corporation or its transfer agent shall issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 6.04. Registered Shareholders. The Corporation shall be entitled
to treat the holder of record of any share or shares as the holder in fact
thereof and, accordingly, shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it has express or other notice thereof, except as otherwise
provided by law.
Section 6.05. Pre-Emptive Rights. No shareholder shall have pre-emptive
rights.
Section 6.06. Treasury Stock. The Board shall be authorized at any time
to purchase any outstanding shares or bonds of the Corporation from the surplus
of the Corporation or from the net profits arising from its business, and the
stock so purchased shall constitute treasury stock of the corporation and may be
subject to resale by the board of
11
<PAGE>
directors upon such terms as the board in its discretion may determine or to
rateable distribution among the shareholders.
Section 6.07. Dividends and Reserves. (a) Subject to statute and the
Articles, dividends may be declared by the Board at any regular or special
meeting and may be paid in cash, in property, or in shares of the Corporation.
The declaration shall be at the discretion of the Board.
(b) The Board may fix in advance a record date for the purpose of
determining shareholders entitled to receive payment of any dividend, the record
date to be not more than 50 days prior to the payment date of such dividend, or
the Board may close the stock transfer books for such purpose for a period of
not more than 50 days prior to the payment date of such dividend. In the
absence of any action by the Board, the date upon which the Board adopts the
resolution declaring the dividend shall be the record date.
(c) By resolution the Board may create such reserve or reserves out of
the earned surplus of the Corporation as the Directors from time to time, in
their discretion, think proper to provide for contingencies, or to equalize
dividends, or to repair or maintain any property of the Corporation, or for any
other purpose they think beneficial to the Corporation. The Board may modify or
abolish any such reserve in the manner in which it was created.
Article 7: General Provisions
Section 7.01. Books and Records. The Corporation shall keep correct and
complete books and records of account and shall keep minutes of the proceedings
of its shareholders and the Board of Directors, and shall keep at its registered
office or principal place of business, or at the office of its transfer agent or
registrar, a record of its shareholders, giving the names and addresses of all
shareholders and the number and class of the shares held by each.
Section 7.02. Annual Statement. The Board shall present at each annual
meeting of shareholders a full and clear statement of the business and condition
of the Corporation, including a reasonably detailed balance sheet, income
statement, and surplus statement.
Section 7.03. Contracts. The Board may authorize any officer or officers,
agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Corporation, and such authority
may be general or confined to a specific instance.
Section 7.04. Loans. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board. Such authority may be general or
confined to a specific instance.
Section 7.05. Checks, drafts, etc. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation, shall be signed by such officer or officers, agent or
agents of the Corporation and in such manner as shall from time to time be
determined by resolution of the Board.
Section 7.06. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies, or other depositories as the Board may select.
Section 7.07. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board.
Section 7.08. Seal. The seal of the Corporation (of which there may be
one or more exemplars) shall contain the name of the Corporation and the name of
the state of incorporation. The seal may be used by impressing it or
reproducing a facsimile of it, or otherwise.
Section 7.09. Resignation. Any officer or agent may resign by giving
written notice to the President or the Secretary. The resignation shall take
effect at the time specified therein, or immediately if no time is specified
therein.
12
<PAGE>
Unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 7.10. Amendment to Bylaws. (a) Subject to Section 7.10(b), these
Bylaws may be altered, amended or repealed or new bylaws may be adopted (subject
to the shareholders repealing or changing the action of the Board, or making new
bylaws, at an annual or special meeting called and held as provided in these
Bylaws) at any meeting of the Board of Directors at which a quorum is present,
by the affirmative vote of a majority of the Directors present at such meeting,
provided notice of the proposed alteration, amendment or repeal is contained in
the notice of such meeting.
(b) The Board of Directors may not amend or repeal a particular Bylaw
if the shareholders, in amending, repealing or adopting that particular Bylaw,
expressly provide that the Directors may not amend or repeal that Bylaw.
Section 7.11. Construction. (a) Unless context requires otherwise, as
used in these Bylaws:
(1) words of the masculine gender include the feminine, and
words in the singular number include the plural and in the plural number include
the singular, and
(2) references to a "Section" or an "Article" are to the given
section or article of these Bylaws.
(b) Article and section headings are used in these Bylaws primarily
for convenience and shall not be construed as limiting the effect any provision
would otherwise have.
(c) If any provision of these Bylaws is held by a court of competent
jurisdiction to be invalid, such invalidity shall not impair or invalidate any
remaining provision of these Bylaws and, insofar as reasonable and possible,
effect shall be given to the intent manifested by the provision held to be
invalid.
Section 7.12. Relation to Laws and Articles. These Bylaws shall be
subject to all valid and applicable laws, including specifically (but without
limitations) the Texas Business Corporation Act, as now or hereafter amended,
and the Corporation's Articles of Incorporation.
Article 8: Indemnification
Section 8.01. Indemnification; Insurance. The Corporation shall indemnify
to the full extent permitted by law any person who is made or threatened to be
made a defendant or respondent in any action, suit or proceeding, whether civil,
criminal, administrative, arbitrative or investigative, or in any appeal in such
an action, suit or proceeding, by reason of the fact that he or she is or was a
Director, advisory director or officer of the Corporation or of any other
company at the request of the Corporation or is or was serving at the
Corporation's request as an officer, managing partner or in any other position
of authority in the operation of a partnership, limited partnership or joint
venture in which the Corporation has or had a substantial direct or indirect
interest (collectively referred to hereinafter as "Indemnified Persons"),
against all expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such Indemnified Persons
in connection with any such action, suit or proceeding. The Corporation shall
advance, pay and reimburse (as applicable) expenses to Indemnified Persons to
the full extent permitted by law. The Corporation may, to the extent permitted
by law, purchase and maintain insurance, create a trust fund, establish any form
of self-insurance, secure its indemnity obligation by grant of a security
interest or other lien on the assets of the Corporation, establish a letter of
credit, guaranty or surety arrangement, or other arrangement on behalf of
Indemnified Persons against any liability asserted against such persons in
their capacities as described above, whether or not the Corporation would have
the power to indemnify such Indemnified Persons against such liability. No
amendment to or rescission of this Article shall affect the rights of any of the
Indemnified Persons to indemnification or the advancement, payment or
reimbursement of expenses required by this bylaw growing out of any act,
transaction,
13
<PAGE>
event or circumstance which occurred before such amendment or rescission.
Article 9: Transition Provisions
Section 9.01. Prior Bylaws. (a) The Bylaws of the Corporation (the
"Prior Bylaws") in effect upon adoption of these Bylaws are hereby amended and,
as amended, restated in their entirety by these Bylaws.
(b) Action validly taken under the Prior Bylaws remains valid.
Section 9.02. Directors and Officers. Each Director, officer and
committee member elected or appointed pursuant to the Prior Bylaws and in office
upon adoption of these Bylaws shall continue in office for the term to which
elected or appointed pursuant to the Prior Bylaws subject to resignation or
removal as provided by these Bylaws.
Section 9.03. Effect of Section 2.03. Until such time as the shareholders
adopt an amendment to the Corporation's Articles of Incorporation to provide
that action by the holders of at least fifteen percent of all of the shares
entitled to vote at the meeting will be required for shareholders to call a
special meeting of shareholders, clause (iv) of subsection (a) of Section 2.03
of these Bylaws shall be effective in the following terms: "(iv) the holders of
at least ten percent of all of the shares entitled to vote at the meeting."
After the shareholders shall have adopted such an amendment to the Corporation's
Articles, clause (iv) of subsection (a) of Section 2.03 shall be effective as
therein stated.
Section 9.04. Effect of Article 9. The provisions of this Article 9
control over any contrary provision of other Articles of these Bylaws.
14
<PAGE>
EXHIBIT 10(f)
AMENDMENT NO. 1 TO CHANGE IN CONTROL AGREEMENT
This agreement is entered into between Aztec Manufacturing Co. (the
"Company") and L.C. Martin ("Martin") on the date hereafter set forth.
WHEREAS, the parties hereto entered into a change in control agreement (the
"Change in Control Agreement") on the 25 day of April, 1986; and
WHEREAS, the parties to that Change in Control Agreement desire to amend it
as set forth herein.
NOW, THEREFORE, in consideration of the premises and the continued employment of
Martin, it is agreed as follows:
1. Subparagraphs 3(ii) and 3 (iii) of the Change in Control Agreement are
amended to read as follows:
"3. Compensation Following Change of Control
...
(ii) If your employment during such three (3) month period shall
be terminated by you for Good Reason, as defined below, or as a
result of your death or total disability or for any other reason
whatsoever by the Company, the Company shall, in addition to the
payment provided for in Section 3(i),pay you your full base
salary through the date of termination of employment, plus any
other amounts to which you are entitled under any compensation
plan of the Company, at the time such payments are due. The
payment provided for in Section 3(i) shall be due within five (5)
days after the date of your termination.
(iii) If your employment during such three (3) month period shall
be terminated by you for any reason whatsoever other than as a
result of your death, total disability or Good Reason as define
below, the Company shall pay you your full base salary through
the date of termination of your employment at the rate in effect
at the time of your termination of employment, plus any other
amounts to which you are entitled under any compensation plan of
the Company, at the time such payments are due, but you shall not
be entitled to the payment provided for in Section 3(i). For
purposes of the Agreement, "Good Reason" shall mean without your
express written consent, the occurrence after a change in control
of the Company of any of the following circumstances:
(A) the assignment to you of any duties inconsistent with your
present status as Chairman of the Board and President of the
Company (or such other title or titles as you may be holding
immediately prior to the change in control of the Company) or a
substantial adverse alteration in the nature or status of your
responsibilities from those in effect immediately prior to the
change in control of the Company;
(B) a reduction by the Company in your annual base salary as in
effect on the date of the change in control of the Company;
(C) the relocation of the Company's principal executive offices
to a location outside of Fort Worth, Texas (or, if different, the
metropolitan area in which such offices are located immediately
prior to the change in control of the Company) or the Company's
requiring you to be based anywhere other than the Company's
principal
EXHIBIT 10(f)
Page 2 of 3
<PAGE>
executive offices except for required travel on the Company's
business to an extent substantially consistent with your business
travel obligations on the date of the change in control of the
Company;
(D) the failure by the Company, without consent to pay to you
any portion of current compensation, or to pay you any portion of
an installment of deferred compensation under any deferred
compensation program of the Company, within seven (7) days of the
date such compensation is due;
(E) except as provided below, the failure by the Company to
continue in effect any compensation plan in which you participate
immediately prior to the change in control of the Company's
current plan under which you receive a bonus, based on gross
profits of the Company or any substitute plans adopted prior to
the change in control, unless an equitable arrangement (embodied
in an ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by the Company to continue
your participation therein (or in such substitute or alternative
plan) on a basis not materially less favorable, both in terms of
the amount of benefits provided and the level of your
participation relative to other participants, as existed at the
time of the change in control;
(F) except as provided below, the failure of the Company to
continue to provide you with benefits substantially similar to
those enjoyed by you under the Employees Benefit Plan and Trust
of Aztec Manufacturing Co. or under any of the Company's other
deferred compensation plans, life insurance, medical, health and
accident, or disability plans in which you were participating at
the time of the change in control of the Company, the taking of
any action by the Company which would directly or indirectly
materially reduce any of such benefits or deprive you of any
material fringe benefits enjoyed by you at the time of the change
in control of the Company, or the failure by the Company to
provide you with the number of paid vacation days to which you
are entitled on the basis of years service with the Company in
accordance with the Company's normal vacation policy for officers
in effect at the time of the change in control of the Company".
2. In all other respects, the Change in Control Agreement is ratified,
confirmed and approved.
WITNESS OUR HANDS this the 15/th/ day of May, 1992.
AZTEC MANUFACTURING CO.
By: _______________________________
Gayle D. Flowers
___________________________________
L.C. MARTIN
EXHIBIT 10(f)
Page 3 of 3
<PAGE>
EXHIBIT 13
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AZTEC MANUFACTURING CO.
- --------------------------------------------------------------------------------
1999
CALVERT AZTEC R-A-L
- --------------------------------------------------------------------------------
ANNUAL REPORT
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<PAGE>
CORPORATE PROFILE
Aztec Manufacturing Co. markets and services industries worldwide through two
distinct segments.
The Manufactured Products Segment is made up of electrical and tubular products
operations providing products to a wide range of customers in the industrial,
power generation and petroleum industries.
The Services Segment provides hot dip galvanizing services to the steel
fabrication business through ten facilities located throughout the South and
Southwest.
<PAGE>
PAGE 1
SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Fiscal Year
-----------------------------------------------------------------------------------------
1999 1998(a) 1997 1996(b) 1995
-------------------- ------------------ ---------------- ----------- -----------
(In thousands, except per share amounts, percentages and ratios)
<S> <C> <C> <C> <C> <C>
Summary of operations:
Net sales $ 80,922 $ 75,479 $ 57,703 $ 49,184 $ 44,608
Net income (c) 4,874 (d) 7,220 4,328 2,582 1,578
Earnings per share:
Basic earnings per common share (c) $ .87 (d) $ 1.21 $ .75 $ .46 $ .28
Diluted earnings per common share (c) .86 (d) 1.19 .74 .45 .27
Return on average shareholders'
equity 15.9% 23% 16.7% 11.6% 7.7%
Pretax profits to sales 9.6% 13.1% 12.4% 8.7% 5.8%
Net income to sales 6.0% 9.6% 7.5% 5.2% 3.5%
Total assets $ 58,399 $ 57,902 $ 45,995 $ 42,621 $ 40,791
Long-term debt, excluding current
portion 20,266 11,321 7,527 9,516 10,484
Total liabilities 31,514 23,582 17,421 19,461 19,415
Shareholders' equity (e) 26,885 34,320 28,573 23,160 21,376
Working capital 15,033 16,731 12,220 7,879 10,117
Shareholders' equity per share (e) 4.79 5.75 4.96 4.11 3.75
Long term debt to equity ratio .75 to 1 .33 to 1 .26 to 1 .41 to 1 .49 to 1
Current ratio 2.40 to 1 2.43 to 1 2.30 to 1 1.89 to 1 2.22 to 1
EBITDA $ 12,413 $ 13,682 $ 10,691 $ 7,407 $ 5,185
Cash provided by operations 8,774 2,698 6,821 9,103 40
Capital expenditures 6,992 3,395 2,037 3,434 4,890
EBITDA per share 2.21 2.29 1.86 1.31 .91
Cash dividends per share .12 .10 .06 .03 .02
Average shares outstanding 5,614 5,968 5,761 5,634 5,698
</TABLE>
(a) Includes the acquisition of three subsidiaries in March 1997, December
1997, and February 1998.
(b) Includes the acquisition of a subsidiary in February 1996.
(c) Includes the a pretax charge of $914,000 (or 10 cents per share) for the
liquidation and write-down of tubular goods inventories.
(d) Includes a one time tax benefit of approximately $1,076,000 (or 18 cents
per share).
(e) Includes the repurchase of approximately 1.2 million shares of the
Company's common stock at a cost of $11.9 million.
NET SALES NET INCOME SHAREHOLDERS' EQUITY
(In millions) (In millions) (In millions)
[BAR CHART APPEARS HERE] [BAR CHART APPEARS HERE] [BAR CHART APPEARS HERE]
<PAGE>
PAGE 2
LETTER TO OUR SHAREHOLDERS
We are pleased to present to you the operating results of Aztec Manufacturing
Co. for the fiscal year ending February 28, 1999. Despite the economic turmoil
in much of the world and low commodity prices, Aztec had a good year.
Aztec's revenues for fiscal 1999 grew to a record level of $80.9 million, a 7
percent increase over the prior year's revenues of $75.5 million. Net income was
$4.9 million for the fiscal year ending February 28, 1999 and generated a 6
percent return on sales. This compares to $7.2 million or 9.6 percent in fiscal
1998.
The Company's operations are divided into two distinct and unique segments,
Manufactured Products and Services. An equal distribution of revenues between
the two segments has been and continues to be an integral part of the operating
and growth strategy of the Company. The Manufactured Products Segment is made
up of our electrical and tubular products, and the Services Segment is made up
of hot dip galvanizing services to the steel fabrication industry. Since the
acquisition of our first electrical products company in 1990, Aztec has
maintained a strategy to grow the Manufactured Products Segment with a
combination of internal growth and acquisition. Simultaneously there has been a
growth strategy of participating fully in the regional industry consolidation,
which is now taking place in the hot dip galvanizing industry. This growth
strategy has resulted in an increase from five galvanizing plants to ten in our
Services Segment. While market conditions and acquisitions can change the mix
from year to year, we remain committed to the strategy of growing both
simultaneously and maintaining an equal distribution between Manufactured
Products and Services.
The Manufactured Products Segment of Aztec's business accounted for 57 percent
of our revenues or $46.4 million compared to the prior year's 60 percent or
$44.9 million. While revenues were at record levels, the downturn in the
international power generation market and the deterioration in the price of oil
adversely affected profit margins in this segment. Each year sales to the
petroleum industry represents a declining portion of our total business. With
the broadening of our business and customer base, combined with entry into new
markets with our tubular products, our future operating results should more
closely track the general economic trends, rather than the price of a singular
commodity. As we look to fiscal 2000, we anticipate further growth in both
revenues and profitability will occur in the Manufactured Products Segment. New
product development and the dynamics of the deregulation of the power generation
industry will be the primary factors in the growth of this segment. We
completed the year with record backlogs and increasing quotation activity.
For the fiscal year ending February 28, 1999, growth in the Manufactured
Products Segment was favorably impacted by the expansion of our manufacturing
facilities, increased investment in machinery and equipment, new product
introductions and the full year impact of the acquisition of DRES-CO. We will
continue our emphasis on increasing market share, globalizing our marketing
efforts, and providing more products to our existing customer base, either
through acquisition or product development.
The Services Segment of our business generated 43 percent of our revenues or
$34.5 million for the year just ended compared to the prior year's 40 percent of
revenues or $30.5 million. This segment recorded record revenue levels and also
a record level of operating profits. Operating results were favorably aided by
the full year impact of acquisitions, improvement in cost control and efficiency
and stabilization of the price of zinc. Extensive reinvestment in this segment
positions us well for a continuation of growth and improvement in operating
results.
We now serve the steel fabrication industry with hot dip galvanizing services
from ten strategically located facilities. In fiscal 1999, we served over 3,500
customers, which has provided a broad economic base and one that is not tied to
a particular industry or market. This has also helped us develop a high level
of expertise and efficiency in many different types of work. A superior level
of service and support to our customers has allowed us to have a very
<PAGE>
PAGE 3
LETTER TO OUR SHAREHOLDERS
high customer retention rate and enhanced marketing capabilities.
Future growth and expansion of the Services Segment will be through vigorous
participation in the accelerating regional industry consolidation, which is now
underway. As we have previously reported to you, Aztec is in a strong position
to capitalize on the pending consolidation wave and should emerge as a premier
industry "consolidator" for several reasons: 1) Aztec has a strong and rapidly
growing cash flow. 2) Aztec has a well-developed management team, experienced in
running a multi-plant operation. 3) The Company has a large enough presence in
its regional area to achieve high levels of synergism as it makes acquisitions.
As we continue to execute our strategy for growth and expansion, the investment
community should recognize the sustainability of our historical and anticipated
growth and this should reward our shareholders accordingly over time.
Improvement in shareholder value remains at the forefront of our goals and
objectives. Management is pleased with the results attained over the past
years, but we are disappointed that the investment community has not looked more
favorably on these results. This problem is not unique to Aztec but is
reflected in the valuation of many small cap companies. This level of pricing
of our stock combined with our excellent cash flows provided an opportunity for
the Company to repurchase a significant number of shares during the fiscal year
ending February 28, 1999. Aztec repurchased 1.2 million shares or approximately
20 percent of the outstanding common stock.
In the Review of Operations section of this report you will find more details
about the specific achievements of our individual operations and the steps being
taken to increase revenues and profits. The changes hold much significance for
the future of Aztec and we trust you will take the time to review them.
The Board of Directors, on February 16, 1999, declared a year-end cash dividend
of 12 cents per share, a 20 percent increase over the previous payment. This
dividend was paid March 26, 1999, to shareholders of record as of March 5, 1999.
The shareholders annual meeting of Aztec Manufacturing Co. will be held at 10:00
a.m. Tuesday, July 13, 1999, at the Petroleum Club in the Derrick I Room on the
39th floor of the UPR Plaza (formerly Continental Plaza), Fort Worth, Texas. We
cordially invite all shareholders to attend.
Aztec remains financially strong, alert to opportunities and looking forward to
another record year in the new millennium. It is our goal to be the best at
what we do, for the benefit and enhancement of our customers, our Company, our
employees and our shareholders. Thank you for your continuing support of our
efforts.
Sincerely,
L.C. Martin
Chairman of the Board and Chief Executive Officer
David H. Dingus
President and Chief Operating Officer
<PAGE>
PAGE 4
A GAME PLAN FOR GROWTH - BENCHMARKS TO MEASURE PROGRESS
Aztec operates in two distinct businesses, Manufactured Products and Services.
Fiscal 1999 provided mixed results among the two businesses. Softening in the
electrical group and a severe drop in tubular products offset continued progress
in our galvanizing operations.
A portion of Rig-A-Lite sales are within the energy sector, depressing their
sales and operating margins. Calvert was impacted in the second and third
quarter by the Asian Crisis as power generating projects were stretched out or
delayed in a number of Pacific Rim countries. This was also the case to a lesser
degree in the Latin American markets. Tubular products remain depressed, but
much of the inventory has been sold and converted to cash. Whether OPEC moves to
cut production are effective and whether this leads to improved oil pricing and
increased activity is still unknown at this juncture.
EBITDA
(In millions)
[BAR CHART APPEARS HERE]
As we enter the new fiscal year, the outlook for the Manufactured Products
Segment is looking more positive. Rig-A-Lite continues to broaden both its
product line and markets served and this is beginning to offset the lower
activity in the energy markets. Atkinson completed its plant expansion last fall
and its sales growth and operating margins are showing excellent progress. Also,
after a shortage of new construction in the U.S. electrical utility industry
over the last several years, deregulation is changing the picture. Calvert saw a
significant turnaround in its business in the fourth quarter, which is
continuing into fiscal 2000. Tubular products is diversifying into new markets
by embarking on two new product offerings away from the petroleum industry. All
of these trends are discussed in more detail in the Review of Operations.
RETURN ON SALES
[BAR CHART APPEARS HERE]
ASSET TURNOVER is the ratio of sales per dollar employed during the year. It is
calculated by dividing net sales by average assets.
(In thousands)
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
Fiscal 1998 Sales = $75,479 =1.45
----- -------
Avg. Assets 51,948
Fiscal 1999 Sales = $80,922 =1.39
----- -------
Avg. Assets 58,150
<PAGE>
PAGE 5
A GAME PLAN FOR GROWTH - BENCHMARKS TO MEASURE PROGRESS
The Services Segment successfully integrated the acquisition made in December
1997 of International Galvanizers in Beaumont, Texas. The improvements made at
this facility coupled with the upgrading of the kettle at Hobson Galvanizing
have us well positioned for the upcoming projects in the coastal area. The
current year outlook holds much promise. The recently enacted $217 billion
national highway bill should open more construction activity. Material costs
(zinc) are currently stable and expected to remain so for the balance of the
year.
RETURN ON ASSETS
[BAR CHART APPEARS HERE]
PRETAX RETURN ON AVERAGE ASSETS is earnings before taxes and extraordinary items
divided by average assets.
(In thousands)
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
Fiscal 1998 Pretax Earnings = $9,909 = 19.1%
--------------- ------
Avg. Assets 51,948
Fiscal 1999 Pretax Earnings = $7,800 = 13.4%
--------------- ------
Avg. Assets 58,150
SALES PER AVERAGE EMPLOYEE is sales divided by average number of employees.
(In thousands)
Fiscal 1995 Sales = $44,608 = $106
----- -------
Avg. Employees 419
Fiscal 1996 Sales = $49,184 = $105
----- -------
Avg. Employees 469
Fiscal 1997 Sales = $57,703 = $110
----- -------
Avg. Employees 524
Fiscal 1998 Sales = $75,479 = $120
----- -------
Avg. Employee 627
Fiscal 1999 Sales = $80,922 = $118
----- -------
Avg. Employees 688
PRETAX INCOME PER AVERAGE EMPLOYEE is earnings before taxes and extraordinary
items divided by average employees.
(In thousands)
Fiscal 1995 Pretax Earnings = $2,608 = $6
--------------- ------
Avg. Employees 419
Fiscal 1996 Pretax Earnings = $4,267 = $9
--------------- ------
Avg. Employees 469
Fiscal 1997 Pretax Earnings = $7,153 = $14
--------------- ------
Avg. Employees 524
Fiscal 1998 Pretax Earnings = $9,909 = $16
--------------- ------
Avg. Employees 627
Fiscal 1999 Pretax Earnings = $7,800 = $11
--------------- ------
Avg. Employees 688
RETURN ON EQUITY - The definitive measure of profitability for our shareholders
is calculated by dividing net income by the average equity capital employed
during the year to achieve the earnings.
(In thousands)
Fiscal 1995 $1,578 = 7.7%
------
20,462
Fiscal 1996 $2,582 = 11.6%
------
22,268
Fiscal 1997 $4,328 = 16.7%
------
25,867
Fiscal 1998 $7,220 = 23.0%
------
31,447
Fiscal 1999 $4,874 = 15.9%
------
30,603
<PAGE>
PAGE 6
A GAME PLAN FOR GROWTH - BENCHMARKS TO MEASURE PROGRESS
In summary, our productivity and performance measurements, while all still at
acceptable levels, declined last year but should post a meaningful recovery in
fiscal 2000. As we pointed out in last years' report the trend over multiple
years is what is relevant.
Of particular importance as we go forward, asset turnover and sales per employee
remained near historical highs - we were able to adjust reasonably quickly.
This leads directly into the topic of cash flow and reinvestment. While earnings
declined in fiscal 1999, cash flow from operations increased primarily because
of good gains in operating income from our galvanizing business and the
liquidation of tubular products inventories. As shown in the accompanying graph,
cash flow from operations was $8.8 million compared to $2.7 million in fiscal
1998. The chart plots the cash flow from operations in millions of dollars each
year since fiscal 1995 and superimposes after tax earnings for the same years.
(IN MILLIONS)
[BAR CHART APPEARS HERE]
Pursuing a policy that stresses maximization of cash flow logically should
result in an improving earnings trend for Aztec because it allows an
acceleration of our expansion and acquisition programs. Of course maximizing the
cash flow and reinvesting it through accelerating our expansion programs is a
sound approach only if acceptable rates of return are achieved.
STANDARD & POORS 500 ROE
[BAR CHART APPEARS HERE]
AZTEC'S ROE
[BAR CHART APPEARS HERE]
The monitoring of the various performance measurements help us make better cash
flow reinvestment decisions. Based on our expectations of our business going
forward, and given the depressed valuation of our common stock and for that
matter small cap stocks in general, we used available cash to repurchase
approximately 20% of Aztec's outstanding common stock in the latter half of the
fiscal year. With depressed prices recently prevailing, the expected rate of
return for the common shareholder appeared to be potentially higher through the
repurchase of common stock rather than the investment in available acquisition
candidates during fiscal 1999.
This does not mean that your management has stopped pursuing growth either
internally or by acquisition. Quite the contrary, we are merely reinvesting cash
for the long-term benefit of all our shareholders.
<PAGE>
PAGE 7
REVIEW OF OPERATIONS
Aztec's volume for fiscal 1999 grew to $80.9 million, a 7% increase over the
prior year. Manufactured Products sales accounted for 57% of our volume, while
Services represented 43%. This compares to a mix in fiscal 1998 of 60%
Manufactured Products and 40% Services. Our Manufactured Products consist of
our electrical and tubular products operations, while our Services consist of
hot dip galvanizing, primarily to steel fabricators.
The distribution of revenue between Manufactured Products and Services has been
an integral part of the growth strategy of the Company. Since the acquisition
of the first electrical company in 1990, Aztec has maintained a strategy to grow
the Manufactured Products with a combination of internal growth and
acquisitions. Simultaneous with the strategy of growth in Manufactured
Products, our growth strategy has seen the Services Segment increase from five
galvanizing plants to ten. This has been accomplished by acquisitions and the
building of a new facility. While market conditions and acquisitions can change
the mix from year to year, we remain committed to the strategy of growing both
simultaneously.
A discussion of the operating results by segment and operations within that
segment is presented below.
MANUFACTURED PRODUCTS
The Manufactured Products Segment of Aztec generated over 57% of total revenues
and 37% of operating income. This segment is one of the core strengths of the
Company and is one we believe is well positioned for continued growth and
expansion. Sales increased by 3% over the prior year. While this appears to be
a low growth rate, this segment was negatively impacted by the economic crisis
in many of our international markets and further impacted by the severe downturn
in the petroleum markets. We were able to offset these factors with a full year
operating results of DRES-CO, which was acquired in February 1998, combined with
continued expansion of our served markets, and broadening of our customer base
and product offerings. Operating margins were below that of the prior year as a
result of the unexpected downturn in some of our markets and increased spending
levels on product development and marketing as we redirected our business to a
broader customer base and continued our investment in the future of this core
segment.
Return on assets employed exceeded 15% and operating income exceeded 9%. While
this is down from the prior year due to the conditions stated above, it remains
a very profitable segment and one that should continue to be a significant
contributor to the overall performance of the Company.
All of our products enjoy world-class status, with excellent name recognition
and customer acceptance. Our strategy is to continue to grow our global
customer base, offering them an integrated and innovative, one-stop total
solution to their needs. We will look to continued product development and
complimentary acquisitions to supplement our growth in this segment in order to
take more products to our existing customer base.
Aztec's Manufactured Products Segment is made up of five operating entities:
Atkinson Industries, Inc. ("Atkinson"), Rig-A-Lite Partnership, Ltd. ("R-A-L"),
The Calvert Company ("Calvert"), tubular products, and Drilling Rig Electrical
Systems Partnership, Ltd., ("DRES-CO"). An individual discussion of each of
these entities is provided below.
ATKINSON INDUSTRIES, INC. - PITTSBURG, KANSAS
Atkinson is a leading manufacturer of custom engineered factory fabricated
modular power distribution enclosures. Atkinson has been involved in this
business for approximately twenty years, and has been one of the primary agents
in promoting the acceptance of the factory fabricated modular enclosure concept
across a broad spectrum of industries and applications. This concept has moved
beyond the original application of providing environmentally controlled
protection for
<PAGE>
PAGE 8
REVIEW OF OPERATIONS
Manufactured Products
(In thousands)
<TABLE>
<CAPTION>
==============================================================================================================
1995 1996 1997 1998 1999
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $31,847 $32,264 $34,057 $44,940 $46,400
- --------------------------------------------------------------------------------------------------------------
% Change 2%- 1% 6% 32% 3%
- --------------------------------------------------------------------------------------------------------------
OP Income $ 2,442 $ 3,836 $ 5,261 $ 6,904 $ 4,380
- --------------------------------------------------------------------------------------------------------------
% Change <47%> 57% 37% 31% <37%>
- --------------------------------------------------------------------------------------------------------------
OP Margin Return on Sales 8% 12% 15% 15% 9%
- --------------------------------------------------------------------------------------------------------------
Avg. Assets Employed $22,296 $21,683 $19,884 $24,830 $29,436
- --------------------------------------------------------------------------------------------------------------
Return on Assets 11% 18% 26% 28% 15%
==============================================================================================================
</TABLE>
power distribution equipment in hazardous areas such as refineries, to encompass
applications in the chemical, paper, automotive, steel, telecommunications and
petroleum industries, as well as general industry, utilities, and
municipalities.
Atkinson has continued to emphasize its "turnkey" capabilities in providing
packages that include instrumentation, analyzing equipment, programmable logic
controllers, and other applications involving microprocessor based equipment.
This is in addition to the more traditional applications composed of power
distribution equipment packages. The "turnkey" package provides the end user
with a modular structure that is ready to operate at a lower installed cost than
is available by procuring and coordinating all of the individual pieces of the
package. This concept reduces the end user procurement and coordination efforts,
while reducing project lead times and field installation cost.
We have long enjoyed a reputation of providing a high quality distinctly
constructed modular enclosure package. This reputation has been maintained as
we have expanded the company to become a more significant force in the industry.
Growth of the company has come from expansion of this type of application across
a wider base of markets served. These efforts resulted in Atkinson realizing
another record year in orders, sales, and operating income for fiscal 1999.
Sales for fiscal 1999 grew by approximately 12% while operating income grew by a
rate of 47%. In addition to recording record levels of orders, sales, and
profitability, fiscal 1999 saw the successful completion of the expansion of our
production facilities. This addition more than doubled our manufacturing
capacity. The expansion was completed without significant production
interruptions, and allowed us to take advantage of opportunities to meet
increasing customer demand for our product. The new capacity has allowed us to
be more responsive to our customers by reducing the lead times associated with
our products. As we enter the new fiscal year, we believe that the expanded and
improved facilities will lead to increased responsiveness to our customer's
requirements, greater efficiency, and higher operating margins.
RIG-A-LITE PARTNERSHIP, LTD. - HOUSTON TEXAS
R-A-L is a leading manufacturer of highly engineered hazardous and severe
environment lighting fixtures primarily operating in three distinct markets with
a fourth being introduced at the end of fiscal 1999 as described below.
Operating results for the current fiscal year reflect a downturn from the prior
fiscal year. This is the first year since the acquisition in 1990 that we have
not shown a substantial growth above the prior year. The primary cause of the
downturn was the severe decline experienced in the petroleum sector and the
unfavorable impact on our international business brought on by the economic
crisis in many of our served geographic markets. The three industry markets
served are Commercial/Industrial, Food Processing and Petrochemical. Our newest
market entry is Retail Outdoor Lighting.
Approximately 43% of R-A-L's revenues are generated in the Commercial/Industrial
lighting
<PAGE>
PAGE 9
REVIEW OF OPERATIONS
fixture market. Development and implementation of proactive sales programs and
enhanced product development are the key factors in increasing the independent
agent specification selling capability, a critical factor to continued growth.
Intense field training has increased the agent knowledge and has increased the
success rate with large project specifications, not only within the U.S. but
also large industrial projects around the world. Further product development and
the introduction of an intrinsically safe fiber optic hazardous product line
should continue R-A-L's technological leadership position in this market.
The Food Processing lighting fixture market, primarily fresh poultry and red
meat products, continues to be driven by new building projects. This market was
pioneered by R-A-L a number of years ago with a product specifically designed
and manufactured for this application. The new generation, state of the art,
energy efficient products were successfully introduced in fiscal 1999. These
products were specified for use in new building projects as well as re-lighting
of older R-A-L installations. This trend of re-lighting and new projects will
continue through the coming fiscal year.
The Petrochemical market that R-A-L serves went through a difficult year. The
steep decline in crude oil prices reduced demand for drilling, especially for
land based rigs. Because of this decline in the new or refurbished land based
rig markets, greater emphasis was placed on offshore rigs, production platforms
and service related barge projects to gain a larger share of a declining market.
Our reliance on this market for growth has diminished over the past few years as
we have expanded our participation in other markets. We will continue our
strategy to increase market share by concentrating on larger project
specifications and offshore project business.
We are excited about our latest market entry, that being the Retail Outdoor
Lighting market. We anticipate that this will represent approximately 10% of R-
A-L's business in the coming fiscal year. We have completed the majority of our
product development for this market and have identified and signed leading
independent sales agents to work with distributors in order to penetrate this
market. Our initial emphasis will be in the growth of the retail outlets that
provide the customer with a combination of services, such as the retail
petroleum, convenience store, and fast food outlet combinations. This is a
growing market and one that should facilitate penetration. We will also
aggressively pursue the auto service, car washes, and retail auto providers as
they increase their emphasis on upgrading their lighting to enhance appearance
and customer acceptance.
While R-A-L incurred a downturn in fiscal 1999, we are encouraged about the
outlook for this entity as we continue to broaden our customer base and expand
our product offerings. Continued product development, further expansion of
agent and distribution networks, and increased emphasis on specification should
facilitate a return to growth and help restore our historical pattern of year
over year increased revenues and profits.
THE CALVERT COMPANY - RICHLAND, MISSISSIPPI
Calvert is a leading manufacturer of custom designed electrical distribution
systems in the fields of isolated phase bus, segregated and non-segregated phase
bar bus, cable bus, grounding cubicles and installation services. The markets
served are Original Equipment Manufacturers (OEM), architectural engineering
design firms, investor owned utilities, independent power producers and
industrial companies.
Total revenues and profits were down due to a weak second and third quarter of
this fiscal year. The primary contributing factor was the turmoil in the Asian
and Latin American markets, combined with the fact that the Independent Power
Producers (IPP's) were not yet in a position to solicit bids for new plant
construction. The IPP market has been brought about by the deregulation of the
electricity industry. As deregulation moves into the electricity market, the
changes promise to be dramatic. The new power structure is made up of 1) power
producers which are deregulated, 2) middlemen or a new class of power
<PAGE>
PAGE 10
REVIEW OF OPERATIONS
marketers which are deregulated, 3) delivery systems which remain regulated and
4) billing and metering which has also been deregulated. We are the most
influenced by the deregulation in the power producers as they address the
critical need for more power production capacity in the United States.
While the fourth quarter of fiscal 1999 was a record setting quarter in terms of
revenues and incoming orders, the sales increase was not sufficient to offset
the downturn in the second and third quarter. The fourth quarter increase was
due primarily to a more stabilized foreign market and the dynamic domestic
market conditions created by deregulation and the resulting business from the
IPP's. The incoming orders for our primary products were supplemented by the
selection of Calvert to be a major supplier of general terminal enclosures to an
OEM. We anticipate that these market conditions will continue for the next
three years. The continuation of these conditions should facilitate further
growth and expansion of our business.
Operating income was unfavorably impacted by the same factors that impacted our
volume in the second and third quarter. The downturn that occurred did not
provide for sufficient near term backlog to effectively and efficiently operate
our facility and cover the fixed overhead and expense structure at the same
margin percent as we have historically enjoyed. This was addressed in the
fourth quarter and the continuation of the operating income level achieved in
the fourth quarter should position this entity to achieve operating income at
record levels in fiscal 2000.
Emphasis on product development was increased in fiscal 1999 and will continue
into the new fiscal year. Keeping abreast of changing market conditions will be
a key focal point for Calvert. With years of service to the industry, every
effort will be made to ensure that we maintain a leadership position and better
serve our changing markets. This will be combined with increased emphasis on
the segment of the international market we serve so as to position the company
for maximum long-term growth. We are utilizing government agencies such as the
Local Trade Commission and the Federal Trade Commission to assist us in
identifying opportunities with NAFTA partners.
Calvert Installation Services (CIS) and parts sales continue to be brisk. As
our bus business grows, so do the opportunities for CIS and spare parts. This
combined with efforts of utility companies to downsize their support staffs in
the cost cutting environment of deregulation have resulted in an increased usage
of outside subcontractors for maintenance and repair, thus adding to the
potential of CIS.
We enter fiscal 2000 with the highest backlog in the history of Calvert.
Domestic sales should account for approximately 70% of its business in the
coming fiscal year. In fiscal 1999 and 1998 approximately 80% of Calvert
projects were shipped overseas. We anticipate that the growth trend experienced
in the fourth quarter will continue into next year. This is supported by the
fact that generator manufacturers are backlogged 1-2 years and their backlog is
increasing. It is anticipated that these factors will continue and favorably
impact the growth and operating results.
TUBULAR PRODUCTS
Tubular products is a small component of our Manufactured Products Segment, and
one that is in a state of change. Fiscal 1999 was a disappointing year and
clearly demonstrates the volatility that occurs when operating results are tied
to a singular market or commodity. With the petroleum industry as tubular
products primary source of revenues, our results clearly reflect the impact on
this segment by wide fluctuations in the price of oil. Operating results for the
current year when compared to the operating results of fiscal 1998, when more
favorable marketing conditions prevailed, demonstrates the need for a change in
nature and direction of this product. Your management has responded to this and
has begun to put in place strategies that will lessen the dependence on a
singular market.
This downturn in oil pricing and the resultant impact it has had on our
operations required us to continually adjust our operating cost structure to
minimize the adverse impact on the
<PAGE>
PAGE 11
REVIEW OF OPERATIONS
Company. Of particular significance is the downward pressure on our product
pricing which resulted in substantial write-downs of inventory and liquidation
of products well below our inventory carrying costs. This charge amounted to
$914,000 in fiscal 1999. We anticipate that without further pricing
deterioration, this should be behind us and our products currently in inventory
should be sold at carried cost or a slight margin. This situation occurred
primarily in our larger diameter pipe.
During the course of the year as business declined, we took steps to maintain
our market share in the small diameter sizes of pipe (macaroni). This is
currently our core competency and is the product that we will have to
concentrate on in the climate we are now experiencing. We do not anticipate any
major favorable change in the marketing condition for the balance of calendar
1999. The other core competency is pup joints. As we endeavored to maintain
acceptable pricing levels during fiscal 1999, we did lose some market share. As
we look to the current year, our strategy for these two products is to maintain
our market share at acceptable pricing levels. In each of these areas, we do
compete from a position of strength.
The key to our long-term success is to diversify into markets that will not
fluctuate as greatly as the oil industry and markets that can be entered based
upon current capabilities and facilities. To that end we have embarked on two
new product offerings. The first is a new product that fits perfectly into our
capabilities and does not require additional capital investment. This product
is for an automotive application, to be supplied to a tier one manufacturer. We
believe that a product such as this will give us constant sales volumes on a
month to month basis.
The second part will be a drill pipe offering to serve the underground
construction and utility industry. This product will have to go through an
acceptance period and will take some time to be widely used in the industry.
Additionally, market distribution channels must be established.
It is imperative that we develop new areas of business to insulate the Company
from the wide fluctuations of the oil industry. Initial steps have been taken
and further investigation will be done. Short-term improvement in our operating
results will need to come from improved oil pricing. However, sustainable
improvement must come from diversification and broadening of our customer base.
Your management is dedicated to minimizing the adverse impact on the Company
from falling oil prices.
DRILLING RIG ELECTRICAL SYSTEM PARTNERSHIP, LTD., (DRES-CO) - HOUSTON, TEXAS
Formed in 1977, DRES-CO's product offering consists of designing and installing
of electrical systems primarily on land based drilling rigs. Over the years,
DRES-CO has established itself as a leader of quality design, workmanship and
service. Aztec acquired DRES-CO in February of 1998 and fiscal 1999 results
reflect the first full year of operation.
Being a provider of design and installation services to primarily land based
drilling rigs, DRES-CO was severely impacted by the decline in crude oil prices
and the resultant deterioration of its primary market segment. In an effort to
offset this unfavorable trend, renewed management effort brought about a
diversification to provide for a business level that would not only offset the
downturn but also provide a means for growth and expansion. This
diversification was to shift the company from strictly a domestic land rig
electrical installation company to a wider range of opportunities that includes
offshore/marine rigs and power load distribution systems designed for other
industries, including but not limited to petroleum, mining and petrochemical.
Despite the severe downturn in the market, DRES-CO made a positive contribution
to the operating income of the Manufactured Products Segment. The
diversification that has been put in place combined with new sales and marketing
emphasis, and managerial structure should lead to an improvement in the coming
year despite the current status of the domestic oil market.
<PAGE>
PAGE 12
REVIEW OF OPERATIONS
SERVICES SEGMENT
(In thousands)
<TABLE>
<CAPTION>
======================================================================================================================
1995 1996 1997 1998 1999
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $12,761 $16,920 $23,646 $30,539 $34,522
- ----------------------------------------------------------------------------------------------------------------------
% Change 35% 33% 40% 29% 13%
- ----------------------------------------------------------------------------------------------------------------------
OP Income $ 3,056 $ 4,270 $ 5,930 $ 6,543 $ 7,474
- ----------------------------------------------------------------------------------------------------------------------
% Change 54% 40% 39% 10% 14%
- ----------------------------------------------------------------------------------------------------------------------
OP Margin Return on Sales 24% 25% 25% 21% 22%
- ----------------------------------------------------------------------------------------------------------------------
Avg. Assets Employed $11,267 $16,594 $19,313 $22,522 $26,576
- ----------------------------------------------------------------------------------------------------------------------
Return on Assets 27% 26% 31% 29% 28%
======================================================================================================================
</TABLE>
SERVICES
The Services Segment of Aztec generated 43% of total revenues and 63% of
operating income. This segment, which provides hot dip galvanizing services to
the steel fabrication industry, is the second of the core strengths of the
Company, and like Manufactured Products, is one we believe is well positioned
for continued growth and expansion. Sales increased by 13% over the prior year
while operating income increased 14% over fiscal 1998. On a same store basis,
the growth was 4% and the favorable impact of a full year of operation of
International Galvanizers in Beaumont Texas, acquired in December 1997,
accounted for the balance of the increase. In fiscal 1999, Aztec provided long
term, cost effective corrosion protection for more than 110,000 tons of steel.
This is a 16% increase over the prior year and exceeded our forecast for the
year.
Return on assets employed exceeded 28% and operating income as a percent of
sales at 22% was slightly ahead of last year. Despite a slight decrease in
average selling price, operating efficiency improvements combined with stability
in zinc pricing more than offset this decrease.
The galvanizing services industry typically serves fabricators and/or
manufacturers involved in the highway construction, power generation,
transportation, water treatment, agriculture, petrochemical and chemical, pulp
and paper, and numerous OEM industries. The market in general is broken into
two major categories, being large structural steel projects and custom
fabrication.
Aztec now operates ten galvanizing plants. Each plant serves a broad base of
customers in a relatively defined geographic market. Most of the customer base
is located within a 150-mile radius of the plant and we compete primarily with
respective galvanizing facilities contiguous to the area. A key strategy of our
Services Segment has been to serve a broader base of customers to better ensure
that we move more in concert with the general economy rather than a specific
market. While a particular customer or market may impact an individual plant,
in total we believe that we have achieved the desired balance. This strategy
not only helps insulate the Company from wide fluctuations in a particular
market, but also helps us achieve a higher average selling price. In general,
the structural steel projects have a lower average selling price than custom
fabrication. In fiscal 1999, we served over 3,500 customers, a key indicator to
us. Additionally, serving a wide customer basis allows us to develop a high
level of expertise and efficiency in handling of essentially every type of work.
A superior level of service and support to our customers has allowed us to have
a very high retention rate and enhanced our marketing abilities.
Since 1966 Aztec has been providing long-term, cost effective corrosion
protection with quality galvanizing and superior service, combined with strict
quality control at each of the plants. The ten galvanizing plants of Aztec are
in the south and southwest with locations in Texas, Louisiana, Alabama,
Mississippi, Arkansas and Arizona. With our multi-plant operations we have the
ability to coordinate and manage the largest projects or smaller single loads.
Through the experience gained from many years of operations, we are able to
<PAGE>
PAGE 13
REVIEW OF OPERATIONS
provide the customer with 1) consistent high quality, 2) excellent customer
service, 3) competitive pricing and 4) on-time delivery.
Responding to industry issues is a key to Aztec's success. An example is the
galvanizing industry has been aware of the adverse effects that silicon killed
steel can have on the galvanized coating. Most steel produced today is made
using continuous casting technology rather than the old method of casting
ingots. Silicon is widely used to deoxidize these steels and significant
concentrations of silicon can remain in the finished product. This results in
very reactive steel, sometimes producing very thick and discolored coatings.
GALVXTRA, Aztec's nickel-zinc alloying process, has had much success in limiting
the adverse effects of reactive steel. GALVXTRA improves the aesthetic appeal
of the galvanized coating and reduces the frequency of developing irregular
thickness. We continue to search for the best methods of serving our customer's
needs.
Since many application designs entail very large fabricated steel parts that
minimize field erection requirements, the galvanizing industry has been
challenged to build longer, wider and deeper kettles. Many of the new plants
and the latest expansions of existing plants have involved installations of
larger kettles. In keeping with this industry trend, Aztec made capital
investments in fiscal 1999 to provide longer, deeper, and wider kettles. We
will continue this trend to ensure that our capabilities match changing
requirements of our customers. In general, Aztec has undertaken an aggressive
reinvestment program in our galvanizing plants to ensure that they address the
needs of our customers, and operate at the highest efficiency level. We believe
that this has been a key success in achievement of the growth and high margin
levels of this segment.
In calendar year 1998, carbon steel production in the United States was 94.3
million tons, a slight decrease from the 1997 level. Of that, 3.2 million tons
were hot dip galvanized. This represents a 10.5% increase over the previous
year. The American Galvanizing Association reports there has been an average
increase of 8.5% over the past five years.
Because of the regional nature of the business, the galvanizing industry is
highly fragmented with over 125 job shop type galvanizing plants in the United
States. However, there is a growing trend toward industry consolidation. Aztec
is one of the leading providers of galvanizing services and is considered to be
an industry consolidator. Even though we are one of the leading providers, our
tonnage of processed steel only represents slightly more than 3% of total
industry shipments. We believe that this provides for excellent opportunities
for growth and your management remains ever vigilant and proactive in pursuing
acquisition opportunities. As one of our core strengths, we will look to the
Services Segment for major expansion of the Company.
<PAGE>
PAGE 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Aztec Manufacturing Co. (the "Company") is organized into two distinct segments,
Manufactured Products and Services. The Manufactured Products Segment consists
of our electrical and tubular products and the Services Segment consist of our
hot dip galvanizing services.
The Company adopted Statement of Financial Accounting Standards ("SFAS") 131,
"Disclosure About Segments of an Enterprise and Related Information," in fiscal
1999. This discussion and analysis has been prepared on the basis of these two
business segments, which are primarily in the United States. Prior year
information has been reclassified to the current year basis of presentation. In
prior years and throughout fiscal 1999, for quarterly reporting purposes, the
Company disclosed the following three segments. The first was the Electrical
Products Segment, which manufactures lighting products, electrical bus ducts and
power distribution enclosures. The second segment was the Galvanizing Segment
which provides hot dip galvanizing services to the steel fabrication industry.
The third segment was the Tubular Products Segment which provides oil field
tubular products to the petroleum industry.
Management believes that the following commentary appropriately discusses and
analyzes the comparative results of operations and the financial conditions of
the Company for the periods covered.
GENERAL
The Company reported sales of $80.9 million for fiscal 1999 compared with $75.5
million in the previous year. Net income for fiscal 1999 was $4.9 million or
$.86 cents per share compared with $7.2 million or $1.19 per share in fiscal
1998 on a diluted basis. Net income for fiscal 1999 was negatively impacted by a
pretax charge of $914,000 associated with liquidations of tubular inventories
and inventory write-downs. Prior fiscal year 1998 results included a one-time
tax benefit of $1.1 million. Excluding these unusual items, net income per share
for the fiscal year ended 1999 would have been $.96 cents per share versus $1.01
per share in 1998 on a diluted basis. 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, 1999 (1999) COMPARED WITH YEAR ENDED FEBRUARY 28, 1998
(1998)
Aztec's consolidated net sales for 1999 grew by $5.4 million or 7% over 1998.
Revenues from the Company's Manufactured Products Segment, which is made up of
Atkinson, R-A-L, Calvert, tubular products and DRES-CO, were up $1.5 million or
3% for 1999 as compared to 1998. Total backlog for this segment was $18.2
million at the end of fiscal 1999 compared to $19.9 million in 1998. Backlog in
the segment's four electrical companies was up $3.5 million or 25% in 1999 as
compared to 1998. Backlog in the tubular product portion of this segment was
down $5.2 million in 1999 from 1998. Revenues at Atkinson were up 12% in 1999 as
compared to 1998. This increase came primarily from their core business, the
manufacture of factory fabricated module power distribution enclosures. With the
successful completion of the expansion of their production facility, Atkinson
should show further revenue increases. Revenues at R-A-L were down 10% in 1999
as compared to 1998. R-A-L's down turn was attributed to the severe decline
experienced in the petroleum related sector of their business and the
unfavorable impact on their international business brought on by the economic
crisis in their served geographic markets. With the introduction of new products
discussed in the Review of Operations, R-A-L should be positioned for future
growth. Revenues at Calvert were down 7% in 1999 as compared to 1998. The down
turn experienced during Calvert's second half of fiscal 1999 is a direct result
of the turmoil in the Asian and Latin American markets they serve. Over 80% of
Calvert's revenues for 1999 and 1998 were generated from these overseas markets.
Fiscal 2000 should see a significant shift in orders towards the domestic market
due to deregulation
<PAGE>
Page 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
in the U.S. electrical market. Backlog at Calvert was at a record level at the
end of fiscal 1999. Revenues generated from tubular products were up 8% or
$700,000 for 1999 as compared to 1998. This portion of the Manufactured Products
Segment has been severely impacted by the volatility in the petroleum industry.
Due to deteriorating oil prices, the Company liquidated a significant portion of
its inventories of tubular products in the last half of fiscal 1999. These
inventory liquidations increased revenues for the year, but were sold at deep
discounts. New products are being developed to move away from the petroleum
industry, but it will take time to bring them to market. It is not anticipated
there will be any major favorable change in the market conditions for the coming
year. Tubular products continue to represent a diminishing portion of
Manufactured Products Segment revenues. DRES-CO, acquired in February 1998,
completed its first year as a contributor to the Company's Manufactured Products
Segment, generating $1.5 million in revenues for fiscal 1999. DRES-CO is a
provider of electrical systems primarily on land based rigs. This portion of the
Manufactured Products Segment has been negatively impacted by the volatility in
the petroleum industry. To offset a portion of this downturn, DRES-CO is
diversifying its business to serve not only land based drilling rigs but also
serve offshore marine rigs. This diversification should lead to an improvement
in DRES-CO's performance in fiscal 2000.
Revenues in the Services Segment, which is made up of the Company's ten hot dip
galvanizing facilities, were up 13% or $4 million in fiscal 1999 as compared to
1998, due to a 4% increase in revenues at the segments existing nine facilities
and the acquisition of International Galvanizers in late fiscal 1998.
International Galvanizers contributed $3.4 million in revenues for the first
full year of operations with the segment.
Aztec's consolidated operating income (see Note 10 of Notes to Consolidated
Financial Statements) decreased $1.6 million or 12% in fiscal 1999 as compared
to 1998. Consolidated operating income in fiscal 1999 was negatively impacted by
a pretax charge of $914,000 associated with liquidations of tubular inventories
and inventory write-downs in the Company's Manufactured Products Segment.
Operating income in the Manufactured Products Segment was down 37% or $2.5
million in fiscal 1999 as compared to 1998. Atkinson's operating income was up
47%, which corresponded with increased revenues for the year as well as
reflecting increased efficiencies associated with its plant expansion. R-A-L's
operating income in fiscal 1999 was down 29% from 1998. This down turn was due
to competitive pricing pressures in the markets it serves. Calvert's operating
income was down 55% in fiscal 1999 as compared to 1998. Again, this down turn
was due to competitive pricing pressures associated with the turmoil in the
Asian and Latin American markets it serves. Margins at Calvert should improve in
fiscal 2000 as its production shifts to higher margin domestic projects. Tubular
products showed a loss for fiscal 1999 of $961,000 as compared to an operating
income of $724,000 in 1998. This loss was primarily associated with the down
turn in the petroleum markets it serves leading to the liquidation and
write-down of inventories. DRES-CO showed an operating income of $125,000 for
its first full year of operations in the Manufactured Products Segment.
The Services Segment's consolidated operating income increased 14% during 1999
compared to 1998. Operating income in this segment's nine existing facilities
was up 12% due to increased volumes and production efficiencies. International
Galvanizers contributed $268,000 in operating income in fiscal 1999.
General corporate expenses for 1999 decreased by 6% from 1998 due to lower
profit sharing expenses associated with lower profits for the year.
Interest expense in 1999, as compared to 1998, was up 33% or $245,000. This
increase was due to larger outstanding loan balances during the last half of
fiscal 1999 associated with the repurchase of 1.2 million shares of the
Company's common stock at a cost of $11.9 million.
<PAGE>
Page 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Other income and expense was made up of scrap sales and other (income) expense
items not specifically identifiable to a segment.
YEAR ENDED FEBRUARY 28, 1998 (1998) COMPARED WITH YEAR ENDED FEBRUARY 28, 1997
(1997)
Aztec's consolidated net sales for 1998 grew by $17.8 million or 31% over 1997.
Revenues from the Company's Manufactured Products Segment were up $10.9 million
or 32% in 1998 as compared to 1997. Total backlog in the Manufactured Products
Segment was $19.9 million at the end of fiscal 1998 compared to $10.9 million in
1997. Revenues at Atkinson were up 18% in 1998 as compared to 1997. Sales of
Atkinson's factory fabricated power centers, which represented 91% of Atkinson's
revenues, were up 24% over 1997. Rig-A-Lite's revenues were up 7% in 1998.
Rig-A-Lite's revenue increase was a direct result of an improved petroleum
industry. Calvert's revenues were up 43% in 1998 compared to 1997, due to
continued market penetration in international markets, which represents 80% of
Calvert's revenues, and Calvert's domestic customer installation service
business was up 11% in the year. Tubular products generated 19% of the segment's
consolidated revenues in 1998. Revenues generated from this segment were up $4.8
million or 127% for 1998 from 1997. Tubular products' backlog increased to $5.9
million at the end of fiscal 1998 compared to $630,000 in 1997. The increased
revenues in 1998 were a direct result of Aztec's strategy to become a direct
supplier of oil field tubular goods in fiscal 1997. DRES-CO, acquired on
February 23, 1998, designs and installs electrical systems on drilling rigs.
DRES-CO did not contribute to fiscal 1998 revenues.
Revenues in the Services Segment were up $6.9 million or 29% for 1998 as
compared to 1997, due to a 3% increase in revenues at the Company's existing
eight facilities and two acquisitions during fiscal 1998. Hobson Galvanizing
acquired in March 1997 and International Galvanizers acquired in December 1997
contributed a combined total of $6.3 million in revenues or 21% of the segment's
revenues in fiscal 1998.
Aztec's consolidated operating income (see Note 10 of Notes to Consolidated
Financial Statements) increased $2.3 million or 20% for fiscal 1998, as compared
to 1997.
Operating income in the Manufactured Products Segment was up 31% in fiscal 1998
compared to 1997. Atkinson's operating income was up 14% compared to 1997 due to
improved operating margins. Rig-A-Lite's operating income in 1998 was up 7% from
1997, which corresponded with the increase in revenues for the year. Calvert's
operating income was up 52% in 1998 compared to 1997, due to increased volumes
as well as higher margin jobs. Tubular products showed a $724,000 operating
income for 1998 as compared to the $56,000 loss in 1997. The operating loss in
1997 included carrying cost of $115,000 for the segment's idle facility in
Houston, which was sold in 1997. The improvement in operating income in this
segment is attributable to the increased volumes of tubular goods processed and
sold during fiscal 1998.
The Services Segment total operating income increased 10% during 1998 compared
to 1997. Income in this segment was negatively impacted by a write-down of zinc
inventory to market price in the amount of $482,000 at the end of fiscal 1998.
Operating income in the segment's eight existing facilities was down 5% due to a
7% reduction in the volume of steel processed in 1998. Hobson Galvanizing and
International Galvanizers, which were acquired in 1997, contributed 14% of the
Service Segment's operating income or $936,000 in combined income.
General corporate expenses in 1998 increased by 13% over 1997 due to higher
employee benefits and profit sharing expenses, and increased selling expenses.
The increased expenses are attributed to higher consolidated sales volumes and
the Services Segment's acquisitions.
<PAGE>
Page 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Interest expense in 1998, as compared to 1997, was down due to a lower average
outstanding loan balance through the course of the year.
Other (income) expense was made up of scrap sales and other (income) expense
items not specifically identifiable to a segment. This amount included the
reduction in various corporate reserves during 1998 that were no longer needed.
LIQUIDITY AND CAPITAL RESOURCES
The primary sources for the Company's liquidity and capital resources are cash
flow from operating activities and bank debt. The Company's cash requirements
are generally for operating activities, acquisitions, debt repayment, treasury
stock purchases and dividend payouts. The Company believes that working capital,
borrowing capabilities, and the funds generated from operations should be
sufficient to finance anticipated operational requirements, internal growth, and
possible future acquisitions.
The Company's operating activities generated cash flow of approximately $8.8
million, $2.7 million, and $6.8 million during fiscal 1999, 1998, and 1997,
respectively. Operating cash flow was provided by net income, depreciation and
amortization, and other non-cash items.
Additional cash was generated during the year through reduction in inventories.
Tubular product inventories were liquidated during the last half of the fiscal
year by $2.1 million and all other inventories were reduced during the year by
$930,000.
The Company made $7 million in various capital improvements during the year,
which were funded from cash flow and bank debt. In the Manufactured Products
Segment, Atkinson doubled its capacity at a cost of $1.9 million. New product
tooling and other capital investments in the amount of $1.7 million were also
expended in the Manufactured Products Segment over the course of the year.
Capital improvements in the amount of $3.3 million were made in the Services
Segment. The Company's excellent cash flows and low stock valuation afforded the
Company an opportunity to repurchase 1.2 million shares of the Company's common
stock at a cost of $11.9 million. Other major uses of cash during 1999 included
repayment of long term debt and payment of cash dividends.
The Company has a credit facility with a bank, which provides for a $15 million
revolving line of credit, a $10 million Term Note A and a $10 million Term Note
B. At the end of fiscal 1999, the Company had $7.8 million outstanding under
their revolving line of credit and $15.4 million outstanding under the term
facilities. Availability under the revolving line of credit at year-end was $7.2
million.
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.
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.
YEAR 2000 COMPLIANCE
The year 2000 issue is the result of computer programs being written to use two
digits rather four digits to define the applicable year. Any computer program
that has date sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in a temporary inability to
process transactions or engage in normal manufacturing or other business
activities.
<PAGE>
Page 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The Company has completed its initial review of the impact of the
year 2000 issue on the Company's financial accounting software, information
systems and support systems, including hardware and software used in the
manufacture of its products. Based on the Company's assessment and subsequent
modifications of its systems, the Company does not believe that any additional
modifications to or replacement of its information technology or other systems
are necessary as a result of the year 2000 problem. The Company plans to
complete the testing process of all significant applications by September 30,
1999. If some of these systems are not year 2000 capable by September 30, 1999,
there are a number of alternate systems available in the market place which have
been designed to be year 2000 capable.
The Company has communicated with others with whom it does significant business
to determine their year 2000 readiness and the extent to which the Company may
be vulnerable to third-party year 2000 problems. However, there can be no
guarantee that the systems of other companies will be converted timely, or that
a failure to convert by another company will not have a material adverse effect
on the Company.
The total cost to the Company of the year 2000 compliance activities has not
been and is not anticipated to be material to its financial position or results
of operations in any given year. These costs and the date on which the Company
plans to complete the year 2000 modifications and testing are based on
management's best estimates, which were derived using numerous assumptions about
future events, including the continued availability of certain resources,
third-party modification plans and other factors. However, there can be no
guarantee that these estimates will be achieved, and actual results could differ
from those plans.
FORWARD LOOKING STATEMENTS
This Report contains, and from time to time the Company or certain of its
representatives may make, "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements are generally
identified by the use of words such as "anticipate," "expect," "estimate,"
"intend," "should," "may," "believe," and terms with similar meanings. Although
the Company believes that the current views and expectations reflected in these
forward-looking statements are reasonable, those views and expectations, and the
related statements, are inherently subject to risks, uncertainties, and other
factors, many of which are not under the Company's control. Those risks,
uncertainties, and other factors could cause the actual results to differ
materially from these in the forward-looking statements. Those risks,
uncertainties, and factors include, but are not limited to, many of the matters
described in this Report: change in demand, prices and raw material cost,
including zinc which is used in the hot dip galvanizing process; changes in the
economic conditions of the various markets the Company serves, foreign and
domestic, including the market price for oil and natural gas; acquisition
opportunities, adequacy of financing, and availability of experienced management
employees to implement the Company's growth strategy; and customer demand and
response to products and services offered by the Company. The Company expressly
disclaims any obligations to release publicly any updates or revisions to these
forward-looking statements to reflect any change in its views or expectations.
<PAGE>
PAGE 19
CONSOLIDATED BALANCE SHEET
February 28, 1999 and 1998
<TABLE>
<CAPTION>
Assets 1999 1998
- ------ ---------------- ---------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 800,183 $ 765,912
Accounts receivable, net of allowance for doubtful accounts of $428,300 in 1999
and $422,700 in 1998 13,465,633 13,068,684
Income taxes receivable 7,004 106,120
Inventories 11,191,363 14,228,741
Prepaid expenses and other 323,176 250,736
---------------- ---------------
Total current assets 25,787,359 28,420,193
Long-term investments 200,000 300,000
Property, plant and equipment, at cost:
Land 1,827,431 1,827,431
Buildings and structures 17,194,254 14,337,446
Machinery and equipment 17,795,993 14,225,780
Furniture and fixtures 1,609,601 1,450,062
Automotive equipment 1,207,593 889,868
Construction in progress 225,179 1,056,705
---------------- ---------------
39,860,051 33,787,292
Less accumulated depreciation 16,781,171 14,519,423
---------------- ---------------
Net property, plant and equipment 23,078,880 19,267,869
Intangible assets, less accumulated amortization of $1,405,000 in 1999 and
$1,336,000 in 1998 160,653 230,334
Costs in excess of fair value of assets purchased, less accumulated amortization of
$2,028,000 in 1999 and $1,482,000 in 1998 8,828,920 9,369,602
Other assets 343,149 313,652
---------------- ---------------
$ 58,398,961 $57,901,650
================ ===============
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Accounts payable $ 3,826,238 $ 5,312,191
Accrued salaries and wages 903,145 1,085,680
Other accrued liabilities 2,889,451 3,534,301
Long-term debt due within one year 3,135,238 1,756,666
---------------- ---------------
Total current liabilities 10,754,072 11,688,838
Long-term debt due after one year 20,266,266 11,320,553
Net deferred income tax liability 493,173 572,479
Shareholders' equity:
Common stock, $1 par value; 25,000,000 shares authorized; 6,304,580 shares issued
and outstanding 6,304,580 6,304,580
Capital in excess of par value 11,422,536 11,402,961
Retained earnings 23,736,974 19,429,451
Less common stock held in treasury, at cost (1,569,822 shares in 1999 and
382,362 shares in 1998) (14,578,640) (2,817,212)
---------------- ---------------
Total shareholders' equity 26,885,450 34,319,780
---------------- ---------------
$ 58,398,961 $57,901,650
================ ===============
</TABLE>
See accompanying notes.
<PAGE>
PAGE 20
CONSOLIDATED STATEMENTS OF INCOME
Years ended February 28, 1999, February 28, 1998 and February 28, 1997
<TABLE>
<CAPTION>
1999 1998 1997
--------------- --------------- ---------------
<S> <C> <C> <C>
Net sales $80,922,415 $75,479,456 $57,703,287
Costs and expenses:
Cost of sales 62,525,479 55,993,665 41,305,269
Selling, general, and administrative 9,709,627 9,570,337 8,089,434
Net (gain) loss on sale of property, plant and equipment (2,161) 35,469 1,310
Interest expense 982,275 737,391 874,209
Other (income) expense, net (93,200) (766,850) 280,065
--------------- --------------- ---------------
73,122,020 65,570,012 50,550,287
--------------- --------------- ---------------
Income before income taxes 7,800,395 9,909,444 7,153,000
Income taxes:
Current expense 3,005,306 2,609,861 3,391,740
Deferred (benefit) expense (79,306) 79,791 (566,305)
--------------- --------------- ---------------
2,926,000 2,689,652 2,825,435
--------------- --------------- ---------------
Net income $ 4,874,395 $ 7,219,792 $ 4,327,565
=============== =============== ===============
Earnings per common share:
Basic $.87 $1.21 $.75
===== ====== =====
Diluted $.86 $1.19 $.74
===== ====== =====
</TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended February 28, 1999, February 28, 1998 and February 28, 1997
<TABLE>
<CAPTION>
Common stock Capital in
----------------------------
excess of Retained Treasury
Shares Amount par value earnings Stock
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at February 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 February 28, 1997 6,145,009 6,145,009 10,351,523 12,802,931 (726,131)
Exercise of stock options 159,571 159,571 1,051,438 - -
Purchase of treasury stock
(150,000 shares) - - - - (2,091,081)
Cash dividends declared - - - (593,272) -
Net income - - - 7,219,792 -
------------- ------------- ------------- ------------- -------------
Balance at February 28, 1998 6,304,580 6,304,580 11,402,961 19,429,451 (2,817,212)
Exercise of stock options - - 19,575 - 98,364
Purchase of treasury stock -
(1,200,030 shares) - - - - (11,859,792)
Cash dividends declared - - - (566,872) -
Net income - - - 4,874,395 -
------------- ------------- ------------- ------------- -------------
Balance at February 28, 1999 6,304,580 $6,304,580 $11,422,536 $ 23,736,974 $(14,578,640)
============= ============= ============= ============= =============
</TABLE>
See accompanying notes.
<PAGE>
PAGE 21
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended February 28, 1999, February 28, 1998 and February 28, 1997
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ---------------- ----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 4,874,395 $ 7,219,792 $ 4,327,565
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 3,014,359 2,449,906 2,231,547
Amortization 615,891 585,389 432,655
Provision for doubtful accounts 132,107 138,883 309,717
Deferred income tax expense (benefit) (79,306) 79,791 (566,305)
Net (gain) loss on sale of property, plant and equipment (2,161) 35,469 1,310
---------------- ---------------- ----------------
8,555,285 10,509,230 6,736,489
Effect of changes in operating assets and liabilities, net
of acquisition of subsidiaries in 1998:
Accounts receivable (529,056) (2,475,504) (356,358)
Inventories 3,037,378 (7,186,887) 357,856
Prepaid expenses and other (72,440) (37,037) (855)
Other assets (29,497) (33,507) (45,805)
Accounts payable (1,485,953) 2,472,083 (1,237,646)
Accrued salaries and wages (182,535) 225,059 145,812
Other accrued liabilities and income taxes (519,334) (775,843) 1,221,385
---------------- ---------------- ----------------
Net cash provided by operating activities 8,773,848 2,697,594 6,820,878
Cash flows from investing activities:
Proceeds from the sale of property, plant and equipment and
property held for sale 168,854 104,979 1,200,853
Purchases of property, plant and equipment (6,992,063) (3,395,402) (2,036,877)
Acquisition of subsidiaries, net of cash acquired (5,528) (6,783,392) -
Purchase of long-term investments - - (300,000)
Proceeds from the sale of long-term investments 100,000 - -
---------------- ---------------- ----------------
Net cash used in investing activities (6,728,737) (10,073,815) (1,136,024)
Cash flows from financing activities:
Proceeds from revolving loan $ 12,200,000 $ 5,550,000 $ 17,863,736
Proceeds from long-term debt 10,000,000 - 10,000,000
Payments on revolving loan (10,000,000) - (24,441,764)
Payments on long-term debt (1,875,715) (1,756,668) (5,213,483)
Cash dividends paid (593,272) (354,847) (166,215)
Proceeds from exercise of stock options 117,939 1,211,009 1,440,369
Purchase of treasury stock (11,859,792) (2,091,081) -
---------------- ---------------- ----------------
Net cash provided by (used in) financing activities (2,010,840) 2,558,413 (517,357)
---------------- ---------------- ----------------
Net increase (decrease) in cash and cash equivalents 34,271 (4,817,808) 5,167,497
Cash and cash equivalents at beginning of year 765,912 5,583,720 416,223
---------------- ---------------- ----------------
Cash and cash equivalents at end of year $ 800,183 $ 765,912 $ 5,583,720
================ ================ ================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 940,588 $ 733,796 $ 866,565
================ ================ ================
Income taxes $ 2,910,713 $ 3,766,345 $ 2,926,265
================ ================ ================
</TABLE>
See accompanying notes.
<PAGE>
PAGE 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies
Organization--Aztec Manufacturing Co. (the "Company") operates primarily in
------------
the United States. Information on the 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 inter-company 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 1999, 1998 and 1997 were approximately $127,000, $102,000 and
$124,000, 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 3-15 years
Automotive equipment 3 years
Maintenance and repairs are charged to expense as incurred; renewals and
betterments are capitalized. When units of property are retired or otherwise
disposed of, their cost and related accumulated depreciation are removed from
the accounts, and any resulting gain or loss is credited or charged to
income.
<PAGE>
PAGE 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies (continued)
The Company reviews its long-term assets for impairment in accordance with
the guidelines of Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of," (SFAS 121). SFAS 121 requires that, when changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable, the Company should determine if impairment of value exists.
Impairment is measured as the amount by which the carrying amount of the
asset exceeds the expected future undiscounted cash flows from the use and
eventual disposal of the assets under review. Any write-downs are treated as
a permanent reduction in the carrying value of the assets.
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.
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 generally 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.
Earnings per share--Effective February 28, 1998, the Company adopted
------------------
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share," which established new standards for computing and disclosing earnings
per share. SFAS No. 128 requires dual presentation of "basic" and "diluted"
earnings per share, each as defined therein, which replaced primary and fully
diluted earnings per share, respectively, required under previous guidance.
The new standard had no effect on previously reported earnings per share
amounts.
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, 1999:
Cash and cash equivalents: The carrying amount reported in the
consolidated balance sheet for cash and cash equivalents approximates fair
value.
Accounts receivable and accounts payable: The recorded amounts of the
Company's accounts receivable and accounts payable approximate fair value.
Long-term investments: The carrying value of long-term investments in the
consolidated balance sheet approximates fair value.
<PAGE>
PAGE 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies (continued)
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.
Reclassifications--Certain prior year amounts have been reclassified to
-----------------
conform to the 1999 presentation.
Impact of Recently Issued Accounting Standards
----------------------------------------------
In June, 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income," and SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information." SFAS No. 130 requires that an enterprise report, by
major component and as a single total, the change in its equity during the
period from nonowner sources, and SFAS No. 131 establishes annual and interim
reporting requirements for an enterprise's operating segments, and related
disclosures about its products and services, geographical areas in which it
operates, and major customers. Both statements were effective for fiscal
years beginning after December 15, 1997, with earlier application permitted.
The Company adopted both of these statements in the first quarter of fiscal
1999 and the impact of adoption did not materially impact the Company's
consolidated financial position or statements of income, shareholder's
equity, and cash flows. The effects of adoption were primarily limited to
form and content of the Company's disclosures.
2. Inventories
<TABLE>
<CAPTION>
Inventories consist of the following:
1999 1998
----------- -----------
(In thousands)
<C> <C>
<S>
Raw materials $ 7,491 $10,297
Work-in-process 1,001 1,510
Finished goods 2,884 2,568
----------- -----------
11,376 14,375
Less reserve for obsolete and slow-moving inventory 185 146
----------- -----------
$11,191 $14,229
=========== ===========
</TABLE>
3. Long-term investments
The Company's long-term investments represent investments in tax-free
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.
4. Employee benefit plans
The Company has a trustee 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 $784,000 for 1999, $992,000 for 1998 and $715,000
for 1997.
<PAGE>
PAGE 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
liability as of February 28, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
(In thousands)
<S> <C> <C>
Deferred tax liabilities:
Depreciation methods and property basis differences $ 944 $1,003
Other assets 155 180
----------- -----------
Total deferred income tax liabilities 1,099 1,183
Deferred tax assets:
Employee related items 199 190
Reserve for environmental liabilities 65 77
Reserve for slow-moving inventory 14 14
Reserve for doubtful accounts 167 165
Other 161 165
----------- -----------
Total deferred tax assets 606 611
----------- -----------
Net deferred tax liability $ 493 $ 572
=========== ===========
</TABLE>
Current income tax expense consists of:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
(In thousands)
<S> <C> <C> <C>
Federal $2,679 $2,229 $3,065
State 326 381 327
----------- ----------- -----------
$3,005 $2,610 $3,392
=========== =========== ===========
</TABLE>
A reconciliation from the federal statutory tax rate to the effective tax
rate for the years 1999, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Statutory tax rate 34.0% 34.0% 34.0%
Expenses not deductible for tax purposes 1.3 1.1 1.5
State income taxes, net of federal income tax benefit 2.8 2.5 3.0
Stock options exercised 0 (7.5) 0
Other (0.6) (3.0) 1.0
----------- ----------- -----------
Effective tax rate 37.5% 27.1% 39.5%
=========== =========== ===========
</TABLE>
<PAGE>
PAGE 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Earnings per share
Earnings per share is based on the month-end average number of shares
outstanding during each year, adjusted for the dilutive effect of stock
options. Cash dividends paid (or declared) per share are $.12 in 1999,
$.10 in 1998 and $.06 in 1997.
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
1999 1998 1997
---------------- -------------- ---------------
(In thousands, except share and per share amounts)
<S> <C> <C> <C>
Numerator:
Net income for basic and diluted
earnings per common share $ 4,874 $ 7,220 $ 4,328
================ ============== ===============
Denominator:
Denominator for basic earnings per
common share - weighted -
average shares 5,614,026 5,967,610 5,761,080
Effect of dilutive securities:
Employee and Director stock options 37,298 124,634 120,441
---------------- -------------- ---------------
Denominator for diluted earnings per
common share - adjusted
weighted-average shares and
assumed conversions 5,651,324 6,092,244 5,881,521
================ ============== ===============
Basic earnings per common share $ .87 $ 1.21 $ .75
================ ============== ===============
Diluted earnings per common share $ .86 $ 1.19 $ .74
================ ============== ===============
</TABLE>
7. Stock options
The Company has three Incentive Stock Option Plans for its employees. The
maximum number of shares that may be issued under each of the plans is
750,000, 322,977 and 525,000 shares respectively. At February 28, 1999,
options outstanding under these plans amounted to 235,417 of which 225,417
options are exercisable at prices (equal to the market price at the date
of grant) ranging from $4.44 to $11.13 per share. These options expire
February 2000 through December 2003. Included in these outstanding options
are 10,000 options granted in fiscal 1999 with an exercise price of
$8.875, which vest ratably over a five year period and expire in December
2003. During fiscal 1999, employees exercised 12,570 options at prices
ranging from $4.44 to $11.13 per share and 5,050 options were forfeited.
The Company also has three Nonstatutory Stock Option Plans for the
independent directors of the Company. Under the plans, options are
generally 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 250,000, 115,762 and 157,500 shares. At February 28, 1999,
options granted and outstanding under these plans amounted to 134,036 of
which 65,436 options are vested and exercisable at prices ranging from
$3.69 to $16.88 per share. Options under these plans vest ratably over a
five year period and expire at various dates through July 2008. Included
in these outstanding options are 70,000 options granted in 1999 with an
exercise price of $11.13, which expire in July 2008. During fiscal 1999,
none of the options under the plans were exercised and none were
forfeited.
<PAGE>
PAGE 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Stock options (continued)
A summary of the Company's stock option activity and related information
is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------- -------------------------- --------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
--------- ----------- --------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year 307,073 $ 8.90 200,420 $ 4.42 565,496 $ 4.04
Granted 80,000 10.84 266,224 11.48 10,500 5.25
Exercised (12,570) 9.38 (159,571) 7.59 (372,094) 3.87
Forfeited (5,050) 17.74 - - (3,482) 4.44
--------- ----------- --------- ----------- ---------- -----------
Outstanding at end of year 369,453 $ 9.18 307,073 $ 8.90 200,420 $ 4.42
========= =========== ========= =========== ========== ===========
Exercisable at end of year 304,853 $ 8.76 288,173 $ 8.72 187,820 $ 4.39
========= =========== ========= =========== ========== ===========
Weighted average fair
value of options granted
during the year $ 4.80 $ 3.21 $ 2.33
=========== =========== ===========
Weighted average
remaining contractual
life in years
4.21 3.94 3.36
========== ========== ==========
</TABLE>
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 ranging from 5.8% to 6.5%, a
dividend yield of 1% and a volatility factor ranging from .458 to .498. In
addition, the fair value of these options was estimated based on an
expected life ranging from 1 1/2 years to 5 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 described above, 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
in fiscal 1999 and 1997 options granted is not material to the operations
of the Company for fiscal 1999 and 1997. The Company's pro forma
information for fiscal 1998 is as follows:
<TABLE>
<CAPTION>
1998
--------------
(In thousands except per share amount)
<S> <C>
Pro forma net income $6,445
Pro forma earnings per common share:
Basic earnings per common share $ 1.08
Diluted earnings per common share $ 1.06
</TABLE>
<PAGE>
PAGE 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Stock options (continued)
Effective January 7, 1999, the Board of Directors approved a stock rights
plan, which authorized and declared a dividend distribution of one right
for each share of common stock outstanding at the close of business on
February 4, 1999. The rights are exercisable at an initial exercise price
of $60, subject to certain adjustments as defined in the agreement, if a
person or group acquires 15% or more of the Company's common stock or
announces a tender offer that would result in ownership of 15% or more of
the common stock. Alternatively, the rights may be redeemed at one cent
per right at any time before a 15% position has been acquired. The rights
expire on January 7, 2009.
8. Long-term debt
The Company has a credit facility with a bank which provides for a $15
million revolving line of credit, a $10 million Term Note A and a $10
million Term Note B.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1999 1998
--------- -----------
(In thousands)
<S> <C> <C>
Term Note A payable to bank, due in monthly installments of
$138,889 through July 2002, with any remaining balance
payable on July 1, 2002 (interest at 7.86 percent on
February 28, 1999) $ 5,555 $ 7,223
Term Note B payable to bank, due in monthly installments of
$119,048 through February 2006, (interest at a fixed rate of
6.80 percent for the term of the note) 9,881 -
Revolving line of credit with bank, due July 2001 (interest at 5.84
percent on February 28, 1998) 7,750 5,550
Industrial Revenue Bonds, due in July 1998 (interest at 7.9
percent on February 28, 1998) - 55
Industrial Revenue Bonds, due in December 2003, payable in
monthly installments (interest at 5.75 percent on February 28,
1999) 215 250
---------- -----------
23,401 13,078
Less amount due within one year 3,135 1,757
---------- -----------
$20,266 $11,321
========== ===========
</TABLE>
The Company's credit facility 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 was in compliance or obtained waivers for events of
non-compliance with these covenants as of February 28, 1999. The Company's
long-term debt is secured by receivables, inventory, equipment, and
fixtures. Under the terms of the loan agreement, borrowing's on the
revolving line of credit are subject to a borrowing base calculation which
is limited to 80% of certain trade accounts receivable and a range of 50%
to 60% of certain raw materials and finished good inventories and is
reduced by the balance of outstanding letters of credit, which amounted to
$548,000 at February 28, 1999.
In February 1999, the Company entered into an interest rate protection
agreement with the bank (the Swap Agreement) to modify the interest
characteristics of the $10 million Term Note B from a variable rate to a
fixed rate. The Swap Agreement involves the exchange of interest
obligations over the life of the Term
<PAGE>
PAGE 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Long-term debt (continued)
Note B whereby the Company receives a fixed rate of 6.8% in exchange for a
variable 30-day LIBOR rate plus 1.25% (6.2% at February 28, 1999) which is
the stated interest rate under the Term Note B agreement.
According to the terms of the Swap Agreement, the Company will make all
future interest payments on the Term Note B at the fixed rate of 6.8%. To
the extent the differences in the fixed rate and the variable rate are not
material, the fair value of the Swap Agreement and changes in the fair
value as a result of changes in the market interest rates will not be
recognized in the financial statements. In the event of the early
termination of the Term Note B, or any early termination of the Swap
Agreement, any realized gain or loss from the Swap Agreement would be
recognized as an adjustment to interest expense at that time.
Maturities of long-term debt are as follows (in thousands):
<TABLE>
<S> <C>
2000 $3,135
2001 3,135
2002 10,885
2003 2,029
2004 1,479
Thereafter 2,738
------------------
$23,401
==================
</TABLE>
9. Quarterly financial information, unaudited (in thousands, except per share
amounts)
<TABLE>
<CAPTION>
Quarters Ended
May 31, August 31, November 30, February 28,
1998 1998 1998 1999
------------ ------------- -------------- -------------
<S> <C> <C> <C> <C>
1999
-----
Net sales $20,729 $20,721 $19,414 $20,058
Gross profit 5,311 4,965 4,426 3,695
Net income 1,576 1,445 1,149 704
Basic earnings per common share .27 .25 .21 (a) .14
Diluted earnings per common share .26 .25 .21 (a) .14
<CAPTION>
Quarters Ended
May 31, August 31, November 30, February 28,
1997 1997 1997 1998
------------ ------------- -------------- -------------
<S> <C> <C> <C> <C>
1998
-----
Net sales $18,387 $18,776 $18,080 $20,236
Gross profit 5,221 4,946 4,560 4,759
Net income 1,647 1,652 1,282 2,639
Basic earnings per common share .28 .28 .21 (b) .44
Diluted earnings per common share .27 .27 .21 (b) .44
</TABLE>
(a) Included a pretax charge of $914,000 (or 10 cents per share) for the
liquidation and write-down of tubular goods inventories.
(b) Includes a one time tax benefit of approximately $1,076,000 (or 18
cents per share).
<PAGE>
PAGE 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Operating segments
Upon adoption of SFAS No. 131 in fiscal 1999, management evaluated the
operations of the Company, which are primarily in the United States, and
established two segments: (1) Manufactured Products and (2) Services. In
prior years and throughout fiscal 1999, for quarterly reporting purposes,
the Company disclosed segment information under the following three
segments: (1) Electrical Products - manufactures petroleum and industrial
lighting products, electrical bus ducts and electrical power centers; (2)
Tubular Products - provides oil field tubular products and manufactures oil
field pup joints; and (3) Galvanizing - provides hot dip galvanizing
services for industries handling fabricated metal products. Under the
provisions of SFAS 131, management has determined that it operates the
business as two segments rather than three; therefore, the electrical
products and tubular products have been combined into the Manufactured
Products Segment and galvanizing has been renamed as the Services Segment.
SFAS No. 131 modified existing standards for reporting information about
operating segments in annual financial statements and requires selected
information about operating segments in interim financial reports issued to
stockholders. Operating segments are defined as components of an enterprise
about which separate financial information is available that is evaluated
regularly by the chief operating decision maker, or decision making group,
in deciding how to allocate resources and in assessing performance.
The segments follow the same accounting policies as described in the
summary of significant accounting policies (see Note 1). Information
regarding operations and assets by segment is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------------- --------------- ---------------
<S> <C> <C> <C>
Net sales:
Manufactured Products $46,400 $44,940 $34,057
Services 34,522 30,539 23,646
--------------- ---------------- ---------------
$80,922 $75,479 $57,703
=============== =============== ===============
Operating income (a):
Manufactured Products $ 4,380 $ 6,904 $ 5,261
Services 7,474 6,543 5,930
--------------- --------------- ---------------
11,854 13,447 11,191
General corporate expenses 3,119 3,316 2,938
Interest expense 982 737 874
Other (income) expense, net (b) (47) (515) 226
--------------- --------------- ---------------
4,054 3,538 4,038
--------------- --------------- ---------------
Income before income taxes $ 7,800 $ 9,909 $ 7,153
=============== =============== ===============
Depreciation and amortization:
Manufactured Products $ 1,152 $ 994 $ 958
Services 2,358 1,941 1,593
Corporate 120 100 113
--------------- ------------------ ---------------
$ 3,630 $ 3,035 $ 2,664
=============== ================== ===============
</TABLE>
<PAGE>
PAGE 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Operating segments (continued)
<TABLE>
<CAPTION>
1999 1998 1997
--------------- --------------- --------------
<S> <C> <C> <C>
Additions to property, plant and equipment (including
assets of purchased subsidiaries in 1998):
Manufactured Products $ 3,550 $ 1,355 $ 649
Services 3,312 3,514 1,353
Corporate 130 56 35
--------------- --------------- ---------------
$ 6,992 $ 4,925 $ 2,037
=============== =============== ===============
Total assets:
Manufactured Products $28,994 $29,877 $19,784
Services 27,235 25,916 19,128
Corporate 2,170 2,109 7,083
--------------- --------------- ---------------
$58,399 $57,902 $45,995
=============== =============== ===============
</TABLE>
(a) Operating income 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.
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 1999, 1998 or 1997. 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.
The Company is involved from time to time in various suits and claims
arising in the normal course of business. In management's opinion, the
ultimate resolution of these matters will not have a material effect on the
Company's financial position or results of operations.
12. Acquisitions
In March 1997, the Company purchased substantially all of the assets of
Hobson Galvanizing for approximately $3.9 million in cash. The assets
purchased were recorded at estimated fair value; the costs in excess of
fair value for this acquisition of approximately $2.8 million were recorded
as goodwill. In connection with this acquisition, the Company paid the
selling shareholders $250,000 pursuant to an agreement not to compete.
<PAGE>
PAGE 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Acquisitions (continued)
The Company purchased substantially all of the assets of International
Galvanizers, Inc. in December 1997 for approximately $1.7 million in cash.
Costs in excess of estimated fair value of this acquisition were
approximately $350,000 were recorded to goodwill. Additionally, the Company
paid the selling shareholder $50,000 pursuant to an agreement not to
compete.
In February 1998 the Company purchased substantially all of the assets of
Drilling Rig Electrical Systems Co. (DRES-CO), a company which is involved
in the design and installation of electrical systems on land based and
offshore drilling rigs, for approximately $1.2 million in cash. Costs in
excess of estimated fair value of this acquisition were approximately
$190,000 were recorded to goodwill.
All acquisitions were accounted for under the purchase method of
accounting. Operations applicable to acquired businesses, which are
immaterial to the consolidated operations of the Company, are included in
the accompanying Consolidated Statements of Income from their respective
dates of acquisition. The excess of costs over fair value for these
acquisitions is being amortized over a period of 15 years.
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, 1999 and 1998, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the three
years in the period ended February 28, 1999. 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, 1999 and 1998, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended February 28, 1999, in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
Fort Worth, Texas
March 29, 1999
<PAGE>
CORPORATE INFORMATION
STOCK PRICES AND DIVIDENDS PER SHARE
<TABLE>
<CAPTION>
Quarter Ended Quarter Ended Quarter Ended Quarter Ended
May 31, August 31, November 30, February 28,
---------------------------------------------------------------------------
Per Share 1999 1998 1999 1998 1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
High 15-1/2 12-3/8 13-7/16 19-7/8 10 24-9/16 10-5/8 18-15/16
Low 12-3/8 9-1/8 8-3/4 12-1/2 6-5/8 15-3/4 8-1/4 10-3/4
Dividends declared $ .00 $ .00 $ .00 $ .00 $ .00 $ .00 $ .12 $ .10
</TABLE>
Stock Prices: Aztec's common stock is listed for trading on the New York Stock
Exchange and its symbol is AZZ. Prior to March 20, 1997, its common stock was
listed on the NASDAQ Stock Market. The above table sets forth the high and low
sales prices for the Company's common stock on the New York and NASDAQ Stock
Exchanges, as appropriate, on a quarterly basis.
BOARD OF DIRECTORS
L. C. MARTIN
Chairman of the Board and Chief Executive Officer of the Company
DAVID H. DINGUS
President and Chief Operating 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
Vice President and Chief Financial Officer of Fine Line, Inc.
R. J. SCHUMACHER
Vice President of Texland Petroleum, Inc.
KEVERN R. JOYCE
President, CEO and Chairman TNP Enterprises, Inc.
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
ADVISORY DIRECTOR
JOHN G. RICHARDS
Fort Worth Investor
EXECUTIVE OFFICERS
L. C. MARTIN
Chairman of the Board and Chief Executive Officer
DAVID H. DINGUS
President and Chief Operating Officer
FRED L. WRIGHT, JR.
Senior Vice President/Services Segment
DANA L. PERRY
Vice President of Finance, Chief Financial Officer, Assistant Secretary
SAM ROSEN
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 Form 10-K for the year ended
February 28, 1999, as filed with the Securities and Exchange Commission by
writing Dana Perry at the Company's Corporate Office.
ANNUAL MEETING
July 13, 1999, 10:00 a.m.
Fort Worth Petroleum Club
Fort Worth, Texas
<PAGE>
AZZ
----------
Listed
----------
NYSE
THE NEW YORK STOCK EXCHANGE
CORPORATE OFFICE
400 N. Tarrant
P.O. Box 668
Crowley, Texas 76036
817/297-4361 Phone
817/297-4621 Fax
<PAGE>
EXHIBIT 21
<TABLE>
<CAPTION>
---------------------------------
AZTEC MANUFACTURING CO.
---------------------------------
<S> <C> <C>
------------------------ ------------------------------ ---------------------------
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, Inc.
Processing, Inc. Company
------------------------ ------------- ----------------------
------------------------
The Calvert Co., Inc.
------------------------ 1% 99%
------------------------------
------------------------
Aztec Manufacturing
Gulf Coast Partnership, Ltd.
------------------------------
Galvanizing, Inc.
------------------------ ------------------------------
------------------------
Aztec Manufacturing
Arkansas Waskom Partnership, Ltd.
Galvanizing, Inc. ------------------------------
------------------------
------------------------------
Rig-A-Lite Partnership, Ltd.
------------------------------
------------------------------
International Galvanizers
Partnership, Ltd.
------------------------------
------------------------------
Drilling Rig Electrical
Systems Partnership, Ltd.
------------------------------
</TABLE>
EXHIBIT 21
Page 2 of 2
<PAGE>
EXHIBIT 23
----------
CONSENT OF ERNST & YOUNG LLP
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Aztec Manufacturing Co. of our report dated March 29, 1999, included in the
1999 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. 1988
Nonstatutory Stock Option Plan, No. 33-49164 pertaining to the Aztec
Manufacturing Co. 1991 Nonstatutory Stock Option Plan, and No. 33-49158
pertaining to the 1991 Incentive Stock Option Plan of Aztec Manufacturing Co.
of our report dated March 29, 1999, with respect to the consolidated financial
statements of Aztec Manufacturing Co., which are incorporated by reference in
the Registrants Form 10-K Annual Report for the year ended February 28, 1999.
ERNST & YOUNG LLP
/s/ Ernst & Young LLP
---------------------
Fort Worth, Texas
May 24, 1999
EXHIBIT 23
Page 2 of 2
<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 such
capacity) the Annual Report on Form 10-K of AZTEC MANUFACTURING CO. ("Form 10-
K") for the fiscal year ended February 28, 1999, 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 18th day of May, 1999.
---- ---
/s/ L.C. Martin
-----------------------------------------
L. C. MARTIN
/s/ David H. Dingus
-----------------------------------------
DAVID H. DINGUS
/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/ Kevern R. Joyce
-----------------------------------------
KEVERN R. JOYCE
/s/ Dana L. Perry
-----------------------------------------
DANA L. PERRY
/s/ R.J. Schumacher
-----------------------------------------
R. J. SCHUMACHER
/s/ W.C. Walker
-----------------------------------------
W. C. WALKER
EXHIBIT 24
Page 2 of 4
<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 20, 1999, and that such resolutions
have not been revoked or amended in any manner:
WHEREAS, the officers of the Company 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, 1999;
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, 1999; 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 18th day of May, 1999.
/s/ Dana L. Perry
------------------------------------------
DANA L. PERRY, Assistant Secretary
EXHIBIT 24
Page 3 of 4
<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 18th day of May 1999.
/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 4 of 4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-START> MAR-01-1998
<PERIOD-END> FEB-28-1999
<CASH> 800,183
<SECURITIES> 0
<RECEIVABLES> 13,893,933
<ALLOWANCES> 428,300
<INVENTORY> 11,191,363
<CURRENT-ASSETS> 25,787,359
<PP&E> 39,860,051
<DEPRECIATION> 16,781,171
<TOTAL-ASSETS> 58,398,961
<CURRENT-LIABILITIES> 10,754,072
<BONDS> 20,266,266
0
0
<COMMON> 6,304,580
<OTHER-SE> 20,580,870
<TOTAL-LIABILITY-AND-EQUITY> 58,398,961
<SALES> 80,922,415
<TOTAL-REVENUES> 80,922,415
<CGS> 62,525,479
<TOTAL-COSTS> 72,139,745
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 982,275
<INCOME-PRETAX> 7,800,395
<INCOME-TAX> 2,926,000
<INCOME-CONTINUING> 4,874,395
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,874,395
<EPS-BASIC> .87
<EPS-DILUTED> .86
</TABLE>
