<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Quarterly Period Ended: May 31, 2000
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from _____________________
_______________ to
Commission File Number 0-2733
AZTEC MANUFACTURING CO.
(Exact name of registrant as specified in its charter)
TEXAS 75-0948250
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(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
400 North Tarrant, Crowley, Texas 76036
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (817) 297-4361
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NONE
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO ______
-----
Indicate the number of outstanding of each of the issuer's classes of common
stock, as of the close of the period covered by this report.
Outstanding at May 31, 2000
Common Stock, $1.00 Par Value 4,834,058
----------------------------- ---------------------------
Class Number of Shares
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AZTEC MANUFACTURING CO.
INDEX
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PART I. Financial Information Page No.
--------------------- --------
Item 1. Financial Statements
Consolidated Condensed Balance Sheets at
May 31, 2000 and February 29, 2000 3
Consolidated Condensed Statements of Income for the
Periods Ended May 31, 2000 and May 31, 1999 4
Consolidated Condensed Statements of Cash Flow for the
Periods Ended May 31, 2000 and May 31, 1999 5
Notes to Consolidated Condensed Financial
Statements 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
PART II. Other Information
-----------------
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 10
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
Aztec Manufacturing Co.
Consolidated Condensed Balance Sheet
05/31/00 02/29/00
ASSETS UNAUDITED AUDITED
------ ------------- --------------
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $ 1,533,318 $ 1,328,139
ACCOUNTS RECEIVABLE(NET OF ALLOWANCE) 16,895,536 19,571,111
INVENTORIES
RAW MATERIAL 9,843,637 8,923,550
WORK-IN-PROCESS 2,772,750 2,197,548
FINISHED GOODS 1,285,649 1,432,220
REVENUE IN EXCESS OF BILLINGS ON
UNCOMPLETED CONTRACTS 755,088 487,235
DEFERRED INCOME TAXES 635,673 635,673
PREPAID EXPENSES AND OTHER 275,759 382,047
------------ -------------
TOTAL CURRENT ASSETS 33,997,410 34,957,523
LONG TERM INVESTMENTS - 200,000
PROPERTY,PLANT AND EQUIPMENT, NET 28,186,394 28,269,959
INTANGIBLE ASSETS, NET 20,467,986 20,792,683
OTHER ASSETS 520,538 583,576
------------ -------------
TOTAL ASSETS $ 83,172,328 $ 84,803,741
============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
LONG TERM DEBT DUE WITHIN ONE YEAR $ 4,345,284 $ 4,367,731
ACCOUNTS PAYABLE 7,728,606 7,302,699
BILLINGS IN EXCESS OF REVENUE ON
UNCOMPLETED CONTRACTS 116,729 405,435
ACCRUED LIABILITIES 6,832,353 7,753,382
------------ -------------
TOTAL CURRENT LIABILITIES 19,022,972 19,829,247
LONG TERM DEBT DUE AFTER ONE YEAR 27,966,050 31,075,272
DEFERRED INCOME TAXES 878,500 878,500
SHAREHOLDERS' EQUITY:
COMMON STOCK,$1 PAR VALUE
SHARES AUTHORIZED-25,000,000
SHARES ISSUED 6,304,580 6,304,580 6,304,580
CAPITAL IN EXCESS OF PAR VALUE 11,224,981 11,113,565
RETAINED EARNINGS 31,430,370 29,559,646
LESS COMMON STOCK HELD IN TREASURY (13,655,125) (13,957,069)
------------ -------------
(1,470,522 AND 1,503,024 SHARES
AT COST RESPECTIVELY)
TOTAL SHAREHOLDERS' EQUITY 35,304,806 33,020,722
------------ -------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 83,172,328 $ 84,803,741
============ =============
3
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
Aztec Manufacturing Co.
Consolidated Condensed Statements of Income
<TABLE>
<CAPTION>
THREE MONTHS ENDED
05/31/00 05/31/99
UNAUDITED UNAUDITED
------------ ------------
<S> <C> <C>
NET SALES $ 27,944,451 $ 20,670,621
COSTS AND EXPENSES
COST OF SALES 20,744,693 15,316,585
SELLING/G & A EXPENSES 3,513,518 2,710,212
INTEREST EXPENSE 628,125 353,095
OTHER EXPENSE 64,476 33,377
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24,950,812 18,413,269
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INCOME BEFORE INCOME TAXES 2,993,639 2,257,352
PROVISION FOR INCOME TAXES 1,122,913 846,537
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NET INCOME $ 1,870,726 $ 1,410,815
============ ============
INCOME PER SHARE
BASIC $ 0.39 $ 0.30
DILUTED $ 0.38 $ 0.30
</TABLE>
4
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
Aztec Manufacturing Co.
Consolidated Condensed Statements of Cash Flows
<TABLE>
<CAPTION>
THREE MONTHS ENDED
05/31/00 05/31/99
------------- -------------
<S> <C> <C>
CASH FLOWS PROVIDED BY OPERATIONS:
NET INCOME $ 1,870,726 $ 1,410,815
ADJUSTMENTS TO RECONCILE NET INCOME TO
PROVISION FOR BAD DEBTS 45,199 70,443
AMORTIZATION AND DEPRECIATION 1,413,116 1,015,001
GAIN ON SALE OF PROPERTY (4,561) -
OTHER 161,250 -
INCREASE (DECREASE) FROM CHANGES IN ASSETS & LIABILITIES
ACCOUNTS RECEIVABLE 2,630,376 (610,344)
INVENTORIES (1,348,718) 392,586
PREPAID EXPENSES 106,288 44,098
OTHER ASSETS 23,237 (2,405)
REVENUE IN EXCESS OF BILLINGS (556,559) -
ACCOUNTS PAYABLE 425,907 1,646,991
ACCRUED LIABILITIES (150,709) 1,319,615
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NET CASH PROVIDED BY OPERATIONS 4,615,552 5,286,800
NET CASH USED FOR INVESTING ACTIVITIES:
PROCEEDS FROM SALE OF EQUIPMENT 26,438 -
PURCHASE OF PROPERTY PLANT AND EQUIPMENT (986,933) (597,038)
PROCEEDS FROM SALE OF INVESTMENTS 200,000 -
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NET CASH USED FOR INVESTING ACTIVITIES (760,495) (597,038)
CASH FLOWS FROM FINANCING ACTIVITIES
PROCEEDS FROM EXERCISE OF STOCK OPTIONS 252,109 29,500
PAYMENTS ON LONG TERM DEBT (3,131,669) (4,273,810)
CASH DIVIDENDS PAID (770,318) (566,872)
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NET CASH USED FOR FINANCING ACTIVITIES (3,649,878) (4,811,182)
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INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS 205,179 (121,420)
CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD 1,328,139 800,183
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CASH & CASH EQUIVALENTS, END OF PERIOD $ 1,533,318 $ 678,763
============= =============
</TABLE>
5
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AZTEC MANUFACTURING CO.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
Summary of Significant Accounting Policies
------------------------------------------
1. A summary of the Company's significant accounting policies is presented on
Page 20 and 21 of its 2000 Annual Shareholders' Report.
2. In the opinion of Management of the Company, the accompanying unaudited
consolidated condensed financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present fairly
the financial position of the Company as of May 31, 2000, and the results
of its operations and cash flows for the periods ended May 31, 2000 and
1999.
3. 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.
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
Three months ended May 31,
2000 1999
------------ ------------
(Dollars in thousands except earnings per share)
<S> <C> <C>
Numerator:
Net income for basic and diluted earnings per
common share $ 1,871 $ 1,411
Denominator:
Denominator for basic earnings per
common share -weighted average shares 4,817,858 4,738,766
Effect of dilutive securities:
Employee and Director stock options 111,231 8,269
------------ ------------
Denominator for diluted earnings per
common share -adjusted weighted-
average shares and assumed conversions 4,929,089 4,747,035
============ ============
Basic earnings per common share $ .39 $ .30
============ ============
Diluted earnings per common share $ .38 $ .30
============ ============
</TABLE>
6
<PAGE>
4. A summary of the Company's operating segments is defined on page 28 and 29
of its 2000 Annual Shareholders' Report.
Information regarding operations and assets by segment in thousands is as
follows:
<TABLE>
<CAPTION>
Three Months Ended May 31,
2000 1999
-------- --------
<S> <C> <C>
Net Sales:
Manufactured Products $ 14,853 $ 10,947
Services 13,091 9,724
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$ 27,944 $ 20,671
Operating Income (a):
Manufactured Products $ 2,024 $ 1,071
Services 2,797 2,476
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$ 4,821 $ 3,547
General Corporate Expense $ 1,212 $ 925
Interest Expense 628 353
Other (Income) Exp., Net (b) (13) 12
-------- --------
$ 1,827 $ 1,290
Income Before Income Taxes $ 2,994 $ 2,257
======== ========
Total Assets:
Manufactured Products $ 42,053 $ 28,062
Services 38,708 27,893
Corporate 2,411 2,010
-------- --------
$ 83,172 $ 57,965
======== ========
</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.
7
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Item 2. Management's Discussion and Analysis of Financial Condition and
--------------------------------------------------------------------------
Results of Operations
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RESULTS OF OPERATIONS
----------------------
Consolidated net sales increased 35% for the three-month period ended May 31,
2000 as compared to the same period in 1999. Net sales in the Manufactured
Products Segment were up $3.9 million or 36% for the three-month period ended
May 31, 2000, as compared to the same period in fiscal 2000. Quarterly results
in the Manufactured Products Segment for the period ended May 31, 2000 include
three months of revenues from CGIT Westboro, Inc. which was acquired on
September 1, 1999. Backlog for the Manufactured Products Segment at the end of
May 31, 2000, was $32 million compared to $18.2 million at the end of May 31.
1999. Net sales in the Services Segment, which is made up of the Company's
galvanizing operations, were up $3.4 million or 35% for the three-month period
ended May 31, 2000 as compared to the same period in the prior year. Quarterly
results for the period ended May 31, 2000 include three months of revenues from
Westside Galvanizing Services, Inc. acquired on January 31, 2000.
Consolidated operating income (net sales less operating expenses) was up 36% for
the three month period ended May 31, 2000 as compared to the same period in
1999. Operating income in the Manufactured Products Segment was up $953,000 or
89% for the three month period ended May 31, 2000 as compared to the same period
in 1999. Increases in operating income were experienced in the majority of this
segments product lines for the quarter ending May 31, 2000 as compared to the
same quarter in the prior year. Improvements in operating efficiencies and
increased volumes contributed to this increase. In the Services Segment,
operating income was up $321,000 or 13% for the quarter ended May 31, 2000 as
compared to the same period in 1999. Increased operating income in the Services
Segment was due to increased volumes and improved operating efficiencies coupled
with the addition of Westside Galvanizing Services for the compared periods.
General corporate expenses (selling, general and administrative expense, and
other (income) expense) for the quarter ended May 31, 2000 were up $843,000 or
30% as compared to the same period in the same period in the prior year. As a
percent of sales, general corporate expenses were 12.8% for the quarter ended
May 31, 2000 compared to 13.2% for the quarter ended May 31, 1999.
Net interest expense for the quarter ended May 31, 2000 was $628,000, up 78%
from the same quarter in fiscal 2000. This increase was due to larger
outstanding loan balances during the first quarter of fiscal 2001 associated
with the acquisitions made during fiscal 2000.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Net cash provided by operations was $4.6 million for the three-month period
ended May 31, 2000 compared to $5.3 million for the same period in fiscal 2000.
Net cash provided by operations was generated by $1.9 million in net income,
$1.4 million in depreciation and amortization, and $1.3 million in other changes
in assets and liabilities. During the three month period ended May 31, 2000,
capital improvements were made in the amount of $987,000, long-term debt was
repaid in the amount of $3.1 million, and cash dividends of $770,000 were paid.
The Company has a credit facility with a bank that provides for a $20 million
revolving line of credit, a $10 million term note, and a $17.5 million term
note. At the end of May 31, 2000, the Company had $7.5 million outstanding under
the revolving line of credit and $25.2 million outstanding under the two term
facilities. At May 31, 2000, the Company had approximately $10.2 million
available under the revolving line of credit.
Management believes that it's current credit facility coupled with the Company's
borrowing capacity along with cash generated from operations will be sufficient
to accommodate the Company's current operations, internal growth and possible
acquisitions.
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.
9
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PART II. OTHER INFORMATION
AZTEC MANUFACTURING CO.
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(A) Exhibits - There were no exhibits filed with this 10-Q for the three months
ended May 31, 2000.
(B) Reports on Form 8-K - There were no 8-K's filed during the three months
ended May 31, 2000.
All other schedules and compliance information called for by the instructions
for Form 10-Q have been omitted since the required information is not present or
not present in amounts sufficient to require submission.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AZTEC MANUFACTURING CO.
--------------------------------
(Registrant)
Date: 7/13/00 /s/ Dana Perry
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Dana Perry, Vice President for Finance
Chief Financial Officer
10
