<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: November 30, 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
AZZ incorporated
(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 November 30, 2000
Common Stock, $1.00 Par Value 4,938,721
----------------------------- --------------------------
Class Number of Shares
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AZZ incorporated
INDEX
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<TABLE>
<CAPTION>
PART I. Financial Information Page No.
--------------------- --------
<S> <C>
Item 1. Financial Statements
Consolidated Condensed Balance Sheets at
November 30, 2000 and February 29, 2000 3
Consolidated Condensed Statements of Income for the
Periods Ended November 30, 2000 and November 30, 1999 4
Consolidated Condensed Statements of Cash Flow for the
Periods Ended November 30, 2000 and November 30, 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
INDEX TO EXHIBITS 11
</TABLE>
<PAGE>
AZZ incorporated
Consolidated Condensed Balance Sheet
<TABLE>
<CAPTION>
11/30/00 02/28/00
ASSETS (UNAUDITED) (AUDITED)
------ --------- -------
<S> <C>
CURRENT ASSETS <C>
CASH AND CASH EQUIVALENTS $ 1,491,901 $ 1,328,139
ACCOUNTS RECEIVABLE(NET OF ALLOWANCE) 20,801,123 19,571,111
INVENTORIES
RAW MATERIAL 10,049,591 8,923,550
WORK-IN-PROCESS 2,171,449 2,197,548
FINISHED GOODS 1,615,349 1,432,220
REVENUE IN EXCESS OF BILLINGS ON
UNCOMPLETED CONTRACTS 2,504,548 487,235
DEFERRED INCOME TAXES 635,673 635,673
PREPAID EXPENSES AND OTHER 284,157 382,047
---------------- --------------
TOTAL CURRENT ASSETS 39,553,792 34,957,523
LONG TERM INVESTMENTS - 200,000
PROPERTY,PLANT AND EQUIPMENT, NET 29,007,423 28,269,959
INTANGIBLE ASSETS, NET 19,817,177 20,792,683
OTHER ASSETS 462,387 583,576
---------------- --------------
TOTAL ASSETS $ 88,840,779 $ 84,803,741
================ ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
LONG TERM DEBT DUE WITHIN ONE YEAR $ 4,345,284 $ 4,367,731
ACCOUNTS PAYABLE 8,763,122 7,302,699
BILLINGS IN EXCESS OF REVENUE ON
UNCOMPLETED CONTRACTS 139,389 405,435
ACCRUED LIABILITIES 7,568,527 7,753,382
---------------- --------------
TOTAL CURRENT LIABILITIES 20,816,322 19,829,247
LONG TERM DEBT DUE AFTER ONE YEAR 26,563,408 31,075,272
DEFFERRED 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 11,404,761 11,113,565
RETAINED EARNINGS 35,581,593 29,559,646
LESS COMMON STOCK HELD IN TREASURY (12,708,385) (13,957,069)
(1,365,859 AND 1,503,024 SHARES AT COST RESPECTIVELY) ---------------- --------------
TOTAL SHAREHOLDERS' EQUITY 40,582,549 33,020,722
================ ==============
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 88,840,779 $ 84,803,741
================ ==============
</TABLE>
3
<PAGE>
AZZ incorporated
Consolidated Condensed Income Statement
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
11/30/00 11/30/99 11/30/00 11/30/99
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET SALES $ 32,085,509 $ 24,653,795 $ 90,503,939 $ 66,310,882
COSTS AND EXPENSES
COST OF SALES 24,305,215 17,847,320 67,778,009 48,688,086
SELLING/G & A EXPENSES 3,750,248 3,254,155 11,030,614 8,601,507
INTEREST EXPENSE 559,943 475,998 1,800,533 1,150,931
OTHER EXPENSE 81,431 186,024 219,317 214,347
---------------- --------------- -------------- -------------
28,696,837 21,763,497 80,828,473 58,654,871
---------------- --------------- -------------- -------------
INCOME BEFORE INCOME TAXES 3,388,672 2,890,298 9,675,466 7,656,011
PROVISION FOR INCOME TAXES 1,289,800 1,083,876 3,653,520 2,871,472
---------------- --------------- -------------- -------------
NET INCOME $ 2,098,872 $ 1,806,422 $ 6,021,946 $ 4,784,539
================ =============== ============== =============
EARNINGS PER SHARE
(BASIC) $ 0.43 $ 0.38 $ 1.24 $ 1.01
(DILUTED) $ 0.42 $ 0.37 $ 1.21 $ 1.00
</TABLE>
See Accompanying Notes to Consolidated Condensed Financial Statements
4
<PAGE>
AZZ incorporated
Consolidated Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDING
11/30/00 11/30/99
-------- --------
<S> <C> <C>
CASH FLOWS PROVIDED BY OPERATIONS:
NET INCOME $ 6,021,946 $ 4,784,539
ADJUSTMENTS TO RECONCILE NET INCOME TO
PROVISION FOR BAD DEBTS 171,000 138,409
AMORTIZATION AND DEPRECIATION 4,317,578 3,276,839
LOSS/(GAIN) ON SALE OF PROPERTY 13,322 (47,335)
OTHER 300,110 0
INCREASE (DECREASE) FROM CHANGES IN ASSETS & LIABILITIES
ACCOUNTS RECEIVABLE (1,398,324) (4,255,767)
INVENTORIES (1,283,070) 138,269
PREPAID EXPENSES & OTHER 95,202 258,521
OTHER ASSETS 107,832 6,770
REVENUE IN EXCESS OF BILLINGS (2,283,359) 1,574,584
ACCOUNTS PAYABLE 1,460,423 3,230,410
ACCRUED LIABILITIES 585,464 1,007,056
-------------- -------------
NET CASH PROVIDED BY OPERATIONS 8,108,124 10,112,295
CASH FLOWS USED FOR INVESTING ACTIVITIES:
PROCEEDS FROM SALE OF EQUIPMENT 73,370 0
PURCHASES OF PROPERTY PLANT AND EQUIPMENT (4,152,872) (1,953,524)
ACQUISITION OF BUSINESS, NET OF CASH (11,171,080)
PROCEEDS FROM SALE OF INVESTMENTS 200,000 0
-------------- -------------
CASH FLOW USED FOR INVESTING ACTIVITIES (3,879,502) (13,124,604)
-------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
PROCEEDS FROM EXERCISE OF STOCK OPTIONS 1,239,770 114,399
(PAYMENTS)/BORROWINGS ON LONG TERM DEBT (4,534,311) 3,075,570
CASH DIVIDENDS PAID (770,318) (248)
-------------- -------------
NET CASH (USED FOR)/PROVIDED BY FINANCING ACTIVITIES (4,064,859) 3,189,721
-------------- -------------
INCREASE IN CASH & CASH EQUIVALENTS 163,762 177,412
CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD 1,328,139 800,183
-------------- -------------
CASH & CASH EQUIVALENTS, END OF PERIOD $ 1,491,901 $ 977,595
============== =============
</TABLE>
See Accompanying Notes to Consolidated Condensed Financial Statements
5
<PAGE>
AZZ incorporated
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 adjustments) necessary to present
fairly the financial position of the Company as of November 30, 2000,
and the results of its operations and cash flows for the periods ended
November 30, 2000 and 1999.
3. Earnings per share is based on the month-end average number of shares
outstanding during each period, adjusted for the dilutive effect of
stock options.
The following table sets forth the computation of basic and diluted
earnings per share: (unaudited)
<TABLE>
<CAPTION>
Three months ending November 30, Nine months ending November 30,
2000 1999 2000 1999
---------- ---------- ---------- ----------
(Dollars in thousands except earnings per share)
<S> <C> <C> <C> <C>
Numerator:
Net income for basic and diluted earnings
per common share $ 2,099 $ 1,806 $ 6,022 $ 4,785
Denominator:
Denominator for basic earnings per
common share -weighted average shares 4,922,058 4,755,054 4,872,741 4,746,253
Effect of dilutive securities:
Employee and Director stock options 124,282 44,097 118,112 43,933
------------ ----------- ----------- -----------
Denominator for diluted earnings per
common share -adjusted weighted-
average shares and assumed conversions 5,046,340 4,799,151 4,990,853 4,790,186
============ =========== =========== ===========
Basic earnings per common share $ .43 $ .38 $ 1.24 $ 1.01
============ =========== =========== ===========
Diluted earnings per common share $ .42 $ .37 $ 1.21 $ 1.00
============ =========== =========== ===========
</TABLE>
6
<PAGE>
4. A summary discussion of the Company's operating segments is contained on
page 28 and 29 of the 2000 Annual Shareholders' Report.
Information regarding operations and assets by segment in thousands is as
follows: (unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nov. 30, Nine Months Ended Nov. 30,
2000 1999 2000 1999
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Net Sales:
Manufactured Products $19,134 $14,381 $50,398 $36,493
Services 12,952 10,273 40,106 29,818
-------------------- -------------------- -------------------- --------------------
$32,086 $24,654 $90,504 $66,311
Operating Income (a):
Manufactured Products $ 3,325 $ 2,158 $ 7,859 $ 4,811
Services 2,005 2,379 7,649 7,050
-------------------- -------------------- -------------------- --------------------
$ 5,330 $ 4,537 $15,508 $11,861
General Corporate Expense $ 1,350 $ 1,160 $ 3,999 $ 3,023
Interest Expense 560 476 1,801 1,151
Other Expense, Net (b) 31 11 33 31
-------------------- -------------------- -------------------- --------------------
$ 1,941 $ 1,647 $ 5,833 $ 4,205
Income Before Income Taxes $ 3,389 $ 2,890 $ 9,675 $ 7,656
==================== ==================== ==================== ====================
Total Assets:
Manufactured Products $46,964 $41,874 $46,964 $41,874
Services 39,516 27,990 39,516 27,990
Corporate 2,361 2,585 2,361 2,585
==================== ==================== ==================== ====================
$88,841 $72,449 $88,841 $72,449
==================== ==================== ==================== ====================
</TABLE>
(a) Operating income consists of net sales less cost of sales, specifically
identifiable general and administrative expenses and selling expenses.
(b) Other expense, net includes gains and losses on sale of property, plant and
equipment and other (income) expense not specifically identifiable to a
segment.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
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of Operations
-------------
RESULTS OF OPERATIONS
---------------------
For the three-month and nine-month periods ended November 30, 2000, consolidated
net sales increased 30% and 37%, respectively, as compared to the same periods
in fiscal 2000. Net sales in the Manufactured Products Segment increased $4.7
million or 33% for the three-month period ended November 30, 2000, and $13.9
million or 38% for the nine-month period ended November 30, 2000, as compared to
the same periods in fiscal 2000. Year-to-date results in the Manufactured
Products Segment for the period ended November 30, 2000 include nine months of
revenues from CGIT Westboro, Inc. which was acquired on September 1, 1999.
Backlog for the Manufactured Products Segment at the end of November 30, 2000,
was $34.1 million compared to $31.7 million at the end of November 30, 1999.
This increase was due primarily to the deregulation of the power generation
industry and the need for increased domestic power supplies. Net sales in the
Services Segment, which is made up of the Company's galvanizing operations,
increased $2.7 million or 26% and $10.3 million or 35% for the three and nine-
month periods ended November 30, 2000, as compared to the same periods in the
prior year. Results for the period ended November 30, 2000, include revenues
from Westside Galvanizing Services, Inc. acquired on January 31, 2000. The
volume of steel processed increased for both the three and nine-month periods
ended November 30, 2000, as compared to the same periods in the prior year.
For the three and nine-month periods ended November 30, 2000, Consolidated
operating income (net sales less operating expenses) increased 17% and 26%,
respectively, as compared to the same periods in fiscal 2000. Operating income
in the Manufactured Products Segment increased $1.2 million or 54% and $3
million or 63% for the three and nine-month periods ended November 30, 2000 as
compared to the same periods in fiscal 2000. Increases in operating income were
experienced in the majority of this segments product lines for the quarter
ending November 30, 2000 as compared to the same periods in the prior year.
Improvements in operating efficiencies and increased volumes contributed to
these increases. In the Services Segment, operating income decreased $374,000 or
16% for the three-month period and was up $599,000 or 8% for the nine-month
period ended November 30, 2000, as compared to the same periods in fiscal 2000.
Operating margins for the Service Segment were unfavorably impacted by
substantial cost increases associated with zinc and utilities.
General corporate expenses (selling, general and administrative expense, and
other (income) expense) for the three and nine-month periods ended November 30,
2000, increased $392,000 or 11% and $2.4 million or 28% as compared to the same
periods in the prior year. As a percent of sales, general corporate expenses
were 11.9% and 12.4% for the three and nine-month periods ended November 30,
2000, as compared to 14% and 13.3% to the same periods in fiscal 2000.
Net interest expense for the three and nine-month periods ended November 30,
2000, was $560,000 and $1.8 million, up 18% and 56%, respectively, compared to
the same periods in fiscal 2000. This increase was due to larger outstanding
loan balances during fiscal 2001 associated with the acquisitions made during
the last half of fiscal 2000.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Net cash provided by operations was $8.1 million for the nine-month period ended
November 30, 2000, compared to $10.1 million for the same period in fiscal 2000.
Net income of $6 million and depreciation and amortization of $4.3 million
contributed to net cash provided by operations. Other non cash item changes in
assets and liabilities utilized $2.2 million of net cash provided by operations.
During the nine-month period ended November 30, 2000, capital improvements were
made in the amount of $4.2 million, long-term debt was repaid in the amount of
$4.5 million, and cash dividends of $770,000 were paid. Proceeds from the
exercise of stock options generated $1.2 million.
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 November 30, 2000, the Company had $8.3 million outstanding
under the revolving line of credit and $22.5 million outstanding under the two
term facilities. At November 30, 2000, the Company had approximately $10.8
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 may contain, 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: 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
<PAGE>
PART II. OTHER INFORMATION
AZZ incorporated
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(A) Exhibits - See INDEX ON EXHIBITS.
(B) Reports on Form 8-K - No reports on Form 8-K were filed during the three
months ended November 30, 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.
AZZ incorporated
----------------------------------------
(Registrant)
Date: 01/11/01 /s/ Dana Perry
-------- ----------------------------------------
Dana Perry, Vice President for Finance
Chief Financial Officer
10
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as a part of this report:
3 (i) Articles of Amendment to the Articles of Incorporation filed
July 17, 2000; (incorporated by reference to Exhibit 3 of the
Quarterly Report on Form 10-Q filed by registrant for the
quarter ended August 31, 2000.)
(ii) Bylaws of AZZ incorporated, as amended and restated on August
15, 2000; (incorporated by reference to Exhibit 3 of the
Quarterly Report on Form 10-Q filed by registrant for the
quarter ended August 31, 2000.)
4 Form of Stock Certificate for the Company's $1.00 par value Common
Stock; (incorporated by reference to Exhibit 4 of the Quarterly
Report on Form 10-Q filed by registrant for the quarter ended August
31, 2000.)
20 (i) Press Release - Corporate Name Change; (incorporated by
reference to Exhibit 20 of the Quarterly Report on Form 10-Q
filed by registrant for the quarter ended August 31, 2000.)
20 (ii) Press Release - New Directors, (incorporated by reference to
Exhibit 20 of the Quarterly Report on Form 10-Q filed by
registrant for the quarter ended August 31, 2000.)
11
