================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) (X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended: August 31, 1995 ( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _________________ to _____________________ Commission File Number 0-2733 AZTEC MANUFACTURING CO. (Exact name of registrant as specified in its charter) TEXAS 75-0948250 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation of organization) Identification No.) 400 North Tarrant, Crowley, Texas 76036 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (817) 297-4361 ---------------------------- NONE - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ______ ----- Indicate the number of outstanding of each of the issuer's classes of common stock, as of the close of the period covered by this report. Outstanding at August 31, 1995 Common Stock, $1.00 Par Value 5,748,060 ----------------------------- ------------------------------ Class Number of Shares ================================================================================
AZTEC MANUFACTURING CO. INDEX ----- <TABLE> <CAPTION> PART I. Financial Information Page No. --------------------- -------- <S> <C> Item 1. Financial Statements Consolidated Condensed Balance Sheets at August 31, 1995 and February 28, 1995 3 Consolidated Condensed Statements of Income Periods Ended August 31, 1995 and August 31, 1994 4 Consolidated Condensed Statements of Cash Flow Periods Ended August 31, 1995 and August 31, 1994 5 Notes to Consolidated Condensed Financial Statements 6 Computation of Income per Common Share 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 - 9 PART II. Other Information ----------------- Item 2. Changes in Securities 10 Item 4. Submission of Matters to a Vote of Security Holders 10 Item 6. Exhibits and Reports on Form 8-K 10 SIGNATURES 11 </TABLE> Page 2
ITEM I. FINANCIAL STATEMENTS PART I. FINANCIAL INFORMATION AZTEC MANUFACTURING CO. CONSOLIDATED CONDENSED BALANCE SHEETS <TABLE> <CAPTION> 8/31/95 2/28/95 ASSETS UNAUDITED AUDITED - ------------------------------------------------------ -------------- -------------- <S> <C> <C> CURRENT ASSETS CASH AND CASH EQUIVALENTS $ 52,969 $ 192,764 ACCOUNTS RECEIVABLE (NET OF ALLOWANCE) 7,691,892 10,896,521 INVENTORIES: RAW MATERIALS 5,222,341 5,020,587 WORK-IN-PROCESS 1,435,682 1,471,331 FINISHED GOODS 747,391 741,360 PREPAID EXPENSES AND OTHER 54,400 97,217 -------------- -------------- TOTAL CURRENT ASSETS 15,204,675 18,419,780 PROPERTY, PLANT AND EQUIPMENT, NET 15,495,942 15,265,814 PROPERTY HELD FOR SALE, NET 1,990,893 2,038,288 INTANGIBLE ASSETS, NET 4,640,781 4,781,581 OTHER ASSETS 286,167 285,704 -------------- -------------- TOTAL ASSETS $ 37,618,458 $ 40,791,167 ============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------------------------ CURRENT LIABILITIES LONG TERM DEBT DUE WITHIN ONE YEAR $ 1,515,593 $ 1,515,593 ACCOUNTS PAYABLE 3,872,398 4,131,414 ACCRUED LIABILITIES 2,969,777 2,656,137 -------------- -------------- TOTAL CURRENT LIABILITIES 8,357,768 8,303,144 LONG-TERM DEBT DUE AFTER ONE YEAR 6,112,491 10,484,094 DEFERRED INCOME TAX 627,856 627,856 SHAREHOLDERS' EQUITY: COMMON STOCK, $1 PAR VALUE SHARES AUTHORIZED - 25,000,000 SHARES ISSUED - 5,748,060 and 5,741,260 5,748,060 5,741,260 CAPITAL IN EXCESS OF PAR VALUE 9,233,598 9,219,998 RETAINED EARNINGS 7,538,685 6,414,815 -------------- -------------- TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 37,618,458 $ 40,791,167 ============== ============== </TABLE> SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS. Page 3
AZTEC MANUFACTURING CO. CONSOLIDATED CONDENSED STATEMENTS OF INCOME <TABLE> <CAPTION> THREE MONTHS ENDED SIX MONTHS ENDED 8/31/95 8/31/94 8/31/95 8/31/94 UNAUDITED UNAUDITED UNAUDITED UNAUDITED --------- --------- --------- --------- <S> <C> <C> <C> <C> NET SALES $ 11,332,351 $ 11,088,983 $ 23,400,859 $ 22,364,987 COSTS AND EXPENSES: COST OF SALES 8,427,641 7,859,873 17,547,876 15,782,999 SELLING/G & A EXPENSE 1,754,631 1,679,773 3,555,926 3,550,933 INTEREST EXPENSE 239,242 182,190 527,433 347,901 OTHER (INCOME) EXPENSE (44,864) 195,660 (119,362) 340,966 RESEARCH & DEVELOPMENT 14,376 7,890 31,115 34,520 ------------- ------------- -------------- -------------- 10,391,026 9,925,386 21,542,988 20,057,319 ------------- ------------- -------------- -------------- INCOME BEFORE INCOME TAXES 941,325 1,163,597 1,857,871 2,307,668 PROVISION FOR INCOME TAXES 371,845 458,759 734,011 910,665 ------------- ------------- -------------- -------------- NET INCOME $ 569,480 $ 704,838 $ 1,123,860 $ 1,397,003 ============= ============= ============== ============== INCOME PER SHARE: NET INCOME FULLY DILUTED $ 0.10 $ 0.12 $ 0.20 $ 0.24 ============= ============= ============== ============== </TABLE> SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS. Page 4
AZTEC MANUFACTURING CO. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW AUGUST 31, 1995 <TABLE> <CAPTION> SIX MONTHS ENDING 8/31/95 8/31/94 UNAUDITED UNAUDITED ---------- ---------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME $ 1,123,860 $ 1,397,003 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATIONS: PROVISION FOR BAD DEBTS (5,868) 152,013 AMORTIZATION AND DEPRECIATION 1,060,510 814,443 GAIN ON SALE OR PROPERTY/PLANT/EQUIPMENT 1,596 2,152 INCREASE (DECREASE) FROM CHANGES IN ASSETS & LIABILITIES: ACCOUNTS RECEIVABLE 3,210,497 (155,596) INVENTORIES (172,136) (825,986) PREPAID EXPENSES 42,817 65,391 OTHER ASSETS (463) 0 ACCOUNTS PAYABLE (259,016) 1,383,726 ACCRUED LIABILITIES 313,640 86,121 ------------- ------------- NET CASH PROVIDED BY OPERATIONS 5,315,437 2,919,267 ------------- ------------- CASH FLOWS USED FOR INVESTING ACTIVITIES: PURCHASE OF PROPERTY/PLANT/EQUIPMENT (1,104,029) (1,869,817) ------------- ------------- NET CASH PROVIDED BY (USED FOR) (1,104,029) (1,869,817) ------------- ------------- INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES: EXERCISE OF STOCK OPTIONS 20,400 244,222 REPAYMENT OF REVOLVING LOAN (3,645,472) 0 PAYMENTS ON LONG TERM NOTES (726,131) (1,247,814) DIVIDENDS PAID 0 (112,910) ------------- ------------- NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES (4,351,203) (1,116,502) ------------- ------------- INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS (139,795) (67,052) CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD 192,764 117,249 ------------- ------------- CASH & CASH EQUIVALENTS, END OF PERIOD $ 52,969 $ 50,197 ============= ============= </TABLE> SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS. Page 5
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 12 of its 1995 Annual Shareholders' Report. 2. In the opinion of Management of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position of the Company as of August 31, 1995, and the results of operations and cash flows for the three-month periods ended August 31, 1995 and August 31, 1994. 3. The revolving loan and term notes are subject to a loan agreement which states that the Company must comply with various financial covenants including minimum requirements with regard to working capital, debt-to-net worth ratio, and cash flows. The Company is in compliance (or has obtained a waiver through August 31, 1995 for the event of noncompliance, including maintaining a debt coverage ratio less than the minimum ratio of 2.5 to 1) with these covenants as of August 31, 1995. Page 6
AZTEC MANUFACTURING CO. COMPUTATION OF INCOME PER COMMON SHARE -------------------------------------- <TABLE> <CAPTION> ============================================================================================================ THREE MONTHS ENDING SIX MONTHS ENDING ------------------------------- ----------------------------- <S> <C> <C> <C> <C> 8/31/95 8/31/94 8/31/95 8/31/94 - ----------------------------------------------------------------------------- ----------------------------- Net Income Applicable to Common Shares $ 569,480 $ 704,838 $1,123,860 $1,397,003 - ----------------------------------------------------------------------------- ----------------------------- Weighted Average Common And Common 5,748,060 5,819,186 5,748,060 5,819,186 Equivalent Shares Outstanding - ----------------------------------------------------------------------------- ----------------------------- Income per Common Share Fully Diluted $ .10 $ .12 $ .20 $ .24 - ----------------------------------------------------------------------------- ----------------------------- Cash Dividend $ - 0 - $ - 0 - $ - 0 - $ .025 - ----------------------------------------------------------------------------- ----------------------------- </TABLE> Page 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES ------------------------------- Net Cash provided from operations for the six-month period ending August 31, 1995, was $5,315,000 compared to $2,919,000 during the same period in 1994. This increase is primarily the result of a reduction in outstanding receivables at the Calvert Company. Working capital on August 31, 1995, was $6,847,000, with a current ratio of 1.82 to 1. Uses of cash during the period ended August 31, 1995, included the purchase of equipment in the amount of $1,104,000 and the repayment of bank debt in the amount of $4,372,000. On September 5, 1995, the Company repurchased 232,397 shares of Aztec common Stock from an estate. These shares will be reported as Treasury Stock. The Company has an $18,500,000 credit agreement with its current lender. This agreement is made up of a $10,000,000 revolving line of credit and a $8,500,000 term note. The Company's primary sources of liquidity and capital resources in the near term will consist of cash flow from operations and available borrowings under the Company's revolving line of credit mentioned above. The Company's current availability under the total credit agreement is approximately $10,871,000. RESULTS OF OPERATIONS --------------------- Consolidated net sales were up for the three-month and six-month periods ending August 31, 1995 as compared to the same periods in 1994. Net sales in the Electrical Products Segment were up 1 percent for the three-month period ending August 31, 1995 and were up 6 percent for the six-month period ending August 31, 1995, as compared to the same periods in 1994. Backlogs at each of the three companies that make up the Electrical Products Segment continue to improve. Net sales in the Company's Galvanizing Segment were up 25 and 31 percent for the three and six-month periods ending August 31, 1995, as compared to the same periods in 1994. These increases were due to higher volumes of steel processed as well as improved selling prices. The addition of Arizona Galvanizing, the Company's seventh galvanizer, also had a positive impact. Net sales in the Oil Field Products Segment were down 54 and 62 percent for the three and six-month periods ending August 31, 1995, as compared to the same periods in 1994. Depressed activity in the domestic Oil and Gas industry will continue to have an adverse affect on this segment. Consolidated operating income for the three-month and six-month periods ending August 31, 1995, as compared to the same periods in 1994, were down 10 and 11 percent, respectively. Gross operating income in the Electrical Products Segment was down 2 and 7 percent for the three and six-month periods ending August 31, 1995, as compared to the same periods in 1994. The Calvert Company continues to improve as lower margin contracts are replaced in the backlog with higher margin contracts. Calvert should become a contributor to gross operating income in the last half of the year. The Galvanizing Segment's gross operating income was up 16 and 28 percent for the three and six-month periods ending August 31, 1995, as compared to the same periods in 1994. This increase was a result of improved volumes and selling prices as well as improved operating efficiencies. The Oil Field Products Segment showed a gross operating loss for the three and six-month periods ending August 31, 1995, as compared to an operating income in the same periods in 1994. Page 8
General corporate expenses for the three and six-month periods ending August 31, 1995, were down as compared to the same periods in 1994. These decreases were attributed to lower employee benefit and profit sharing expense, as well as interest income associated with a tax refund received. Interest expense was higher for the periods ending August 31, 1995, as compared to 1994 due to increased debt associated with the construction of Arizona Galvanizing and higher interest rates. Page 9
PART II. OTHER INFORMATION AZTEC MANUFACTURING CO. ITEM 2. CHANGES IN SECURITIES - ------------------------------ Title of Class - Common Stock, $1 par value <TABLE> <CAPTION> Number of Common Stock Capital in Shares $1 Par Value Excess of Par --------- ------------ ------------- <S> <C> <C> <C> Balance at February 28, 1995 5,741,260 $5,741,260 $9,219,998 Exercise of Stock Options 6,800 $ 6,800 $ 13,600 Balance at August 31, 1995 5,748,060 $5,748,060 $9,233,598 </TABLE> ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------------------------------------------------------------ Aztec Manufacturing Co,'s 1995 Annual Meeting held July 11, 1995. (A) Messrs. Martin, Schumacher, and Downey were elected directors for a three-year term expiring at the 1998 Annual Meeting of Shareholders. Messrs. Johnson, Walker, Perry, Bowen, Richards and Ratliff all continued as directors after the meeting. (B) Ernst & Young LLP was appointed auditors of the Company for the year ending February 29, 1996. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ----------------------------------------- (A) EXHIBITS - There were no exhibits filed with this 10-Q for the three- month period ended August 31, 1995. (B) REPORTS ON FORM 8-K - There were no reports on Form 8-K filed for the three months ended August 31, 1995. All other schedules and compliance information called for by the instructions for Form 10-Q have been omitted since the required information is not present or not present in amounts sufficient to require submission. Page 10
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: September 22, 1995 /s/Dana Perry ------------------------- ---------------------------------------------- Dana Perry, Vice President for Finance Chief Financial Officer Page 11