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, 1996 ( ) 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 May 31, 1996 Common Stock, $1.00 Par Value 5,850,489 ----------------------------- --------------------------- Class Number of Shares
AZTEC MANUFACTURING CO. <TABLE> <CAPTION> INDEX ----- <S> <C> <C> PART I. Financial Information Page No. --------------------- -------- Item 1. Financial Statements Consolidated Condensed Balance Sheets at May 31, 1996 and February 29, 1996 3 Consolidated Condensed Statements of Income Periods Ended May 31, 1996 and May 31, 1995 4 Consolidated Condensed Statements of Cash Flow Periods Ended May 31, 1996 and May 31, 1995 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 PART II. Other Information ----------------- Item 2. Changes in Securities 9 Item 6. Exhibits and Reports on Form 8-K 9 SIGNATURES 10 EXHIBIT INDEX 11 EXHIBIT 10-P Loan Agreement with Bank of America 12-64 </TABLE> Page 2
ITEM I. FINANCIAL STATEMENTS PART I. FINANCIAL INFORMATION AZTEC MANUFACTURING CO. CONSOLIDATED CONDENSED BALANCE SHEETS <TABLE> <CAPTION> 5/31/96 2/29/96 ASSETS UNAUDITED AUDITED - ---------------------------------------- --------------- -------------- <S> <C> <C> CURRENT ASSETS CASH AND CASH EQUIVALENTS $ 167,156 $ 416,223 ACCOUNTS RECEIVABLE (NET OF ALLOWANCE) 9,095,189 9,483,471 INVENTORIES: RAW MATERIALS 4,582,768 4,934,538 WORK-IN-PROCESS 1,177,708 991,197 FINISHED GOODS 741,932 746,813 PREPAID EXPENSES AND OTHER 115,556 192,047 --------------- -------------- TOTAL CURRENT ASSETS $ 15,880,309 $ 16,764,289 PROPERTY, PLANT AND EQUIPMENT, NET 16,778,683 16,824,952 PROPERTY HELD FOR SALE, NET 1,483,562 1,504,756 INTANGIBLE ASSETS, NET 7,207,136 7,292,973 OTHER ASSETS 234,340 234,340 --------------- -------------- TOTAL ASSETS $ 41,584,030 $ 42,621,310 =============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY - ---------------------------------------- CURRENT LIABILITIES LONG TERM DEBT DUE WITHIN ONE YEAR $ 1,558,926 $ 1,558,926 ACCOUNTS PAYABLE 4,165,513 4,077,754 ACCRUED LIABILITIES 4,007,799 3,248,920 --------------- -------------- TOTAL CURRENT LIABILITIES $ 9,732,238 $ 8,885,600 LONG-TERM DEBT DUE AFTER ONE YEAR 6,389,711 9,516,472 DEFERRED INCOME TAX 1,058,993 1,058,993 SHAREHOLDERS' EQUITY: COMMON STOCK, $1 PAR VALUE SHARES AUTHORIZED - 25,000,000 SHARES ISSUED - 5,850,489 and 5,772,895 5,850,489 5,772,895 CAPITAL IN EXCESS OF PAR VALUE 9,505,563 9,283,268 RETAINED EARNINGS 9,773,167 8,830,213 LESS COMMON STOCK HELD IN TREASURY (232,362 SHARES AT COST) (726,131) (726,131) --------------- -------------- TOTAL SHAREHOLDERS EQUITY 24,403,088 23,160,245 --------------- -------------- TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 41,584,030 $ 42,621,310 =============== ============== </TABLE> SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS. Page 3
AZTEC MANUFACTURING CO. CONSOLIDATED CONDENSED STATEMENTS OF INCOME <TABLE> <CAPTION> THREE MONTHS ENDED 5/31/96 5/31/95 UNAUDITED UNAUDITED -------------- -------------- <S> <C> <C> NET SALES $ 14,235,597 $ 12,068,508 COSTS AND EXPENSES: COST OF SALES 10,217,480 9,120,235 SELLING/G & A EXPENSE 2,054,695 1,801,295 INTEREST EXPENSE 228,214 288,191 OTHER (INCOME) EXPENSE 157,983 (74,498) RESEARCH & DEVELOPMENT 18,672 16,738 -------------- -------------- $ 12,677,044 $ 11,151,961 -------------- -------------- INCOME BEFORE INCOME TAXES 1,558,553 916,547 PROVISION FOR INCOME TAXES 615,511 362,167 -------------- -------------- NET INCOME $ 943,042 $ 554,380 ============= ============== INCOME PER SHARE: INCOME PER SHARE - PRIMARY 0.17 0.10 INCOME PER SHARE - FULLY DILUTED $ 0.16 $ 0.10 ============== ============== </TABLE> SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS. Page 4
AZTEC MANUFACTURING CO. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW <TABLE> <CAPTION> THREE MONTHS ENDING 5/31/96 5/31/95 UNAUDITED UNAUDITED -------------- -------------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME $ 943,042 $ 554,380 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATIONS: PROVISION FOR BAD DEBTS 115,253 74,500 AMORTIZATION AND DEPRECIATION 656,065 522,645 GAINS ON SALE OF PROPERTY 1,310 0 INCREASE (DECREASE) FROM CHANGES IN ASSETS & LIABILITIES: ACCOUNTS RECEIVABLE 273,029 1,976,852 INVENTORIES 170,140 54,589 PREPAID EXPENSE 76,491 11,627 OTHER ASSETS (587) 0 ACCOUNTS PAYABLE 87,759 (624,031) ACCRUED LIABILITIES 758,880 152,674 -------------- -------------- NET CASH PROVIDED BY OPERATIONS 3,081,382 2,723,236 -------------- -------------- CASH FLOWS USED FOR INVESTING ACTIVITIES: PURCHASE OF PROPERTY/PLANT/EQUIPMENT (503,488) (453,314) -------------- -------------- NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES (503,488) (453,314) -------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES: EXERCISE OF STOCK OPTIONS 299,888 7,950 CHANGE IN REVOLVING LOAN (2,747,862) (1,935,642) PAYMENTS ON LONG TERM NOTES (378,899) (347,232) DIVIDENDS PAID (88) (114,825) -------------- -------------- NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES (2,826,961) (2,389,749) -------------- -------------- (DECREASE) IN CASH & CASH EQUIVALENTS (249,067) (119,827) CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD 416,223 192,764 -------------- -------------- CASH & CASH EQUIVALENTS, END OF PERIOD $ 167,156 $ 72,937 ============== ============== </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 11 of its 1996 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, 1996, and the results of operations and cash flows for the three-month periods ended May 31, 1996 and May 31, 1995. 3. The Company arranged a new credit facility with a new lender effective July 1, 1996. The arrangement is discussed in Management's Discussion and Analysis of Financial Conditions. The facility included a $10 million term note for 6 years at a fixed rate of 7.86 percent and a $10 million revolving note for 3 years at LIBOR plus 1 percent. 4. The Company purchased all of the stock of Arkansas Galvanizing in February 1996 for approximately $4.2 million in cash and the assumption of approximately $0.8 million in liabilities. The acquisition was accounted for under the purchase method of accounting. Page 6
AZTEC MANUFACTURING CO. Computation of Income Per Common Share -------------------------------------- <TABLE> <CAPTION> ------------------------------------------ THREE MONTHS ENDING ------------------------------------------ MAY 31, 1996 MAY 31, 1995 - -------------------------------------------------------------------------------- <S> <C> <C> Net Income Applicable to Common Shares $ 943,042 $ 554,380 - -------------------------------------------------------------------------------- Weighted Average Common And Common 5,582,926 5,743,910 Equivalent Shares Outstanding - -------------------------------------------------------------------------------- Income per Common Share: Primary $.17 $.10 Income per Common Share: Fully Diluted $.16 $.10 - -------------------------------------------------------------------------------- Cash Dividend $- 0 - $- 0 - - -------------------------------------------------------------------------------- </TABLE> Page 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations LIQUIDITY AND CAPITAL RESOURCES ------------------------------- Net cash provided by operations for the three-month period ending May 31, 1996 was $3,081,000 compared to $2,723,236 during the same period in 1995. Working capital on May 31, 1996, was $6,148,000, with a current ratio of 1.63 to 1. Uses of cash during the period ended May 31, 1996 included the purchase of equipment in the amount of $503,000 and the repayment of bank debt in the amount of $3,127,000. The Company arranged a new credit facility with a new lender effective July 1, 1996. This agreement is made up of a three year $10,000,000 revolving line of credit and a six year $10,000,000 term note. The revolving line of credit will be used for future acquisitions and working capital. The term note will be used to repay the $8,000,000 total outstanding under the former facility, with the balance available for future acquisitions and working capital purposes. 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 new credit facility mentioned above. After July 1, 1996, the Company's current availability under the credit facility will be approximately $10,000,000. RESULTS OF OPERATIONS --------------------- Consolidated net sales for the period ending May 31, 1996 as compared to the same period in 1995 were up approximately $2,167,000, an 18 percent increase. Net sales in the Electrical Products Segment, as compared to the same period in 1995, were flat. Net sales in the Company's Galvanizing Segment were up 49 percent over the same period in 1995, due to the addition of Arkansas Galvanizing, as well as increased overall volumes of production. Net sales in the Oil Field Products Segment were up as compared to the same period in 1995, by 39 percent. This increase in revenue was attributable to unexpectedly higher prices of crude oil and natural gas which stimulated drilling activity. Consolidated operating income (net sales less cost of sales) for the period ending May 31, 1996, as compared to the same period in 1995, was up 36 percent. Gross operating income in the Electrical Products Segment was up due to operating cost efficiencies previously instituted by management. Gross operating income in the Galvanizing Segment was up 41 percent over the same period last year due to the addition of Arkansas Galvanizing as well as increased volumes in overall production. The Oil Field Products Segment showed a lower gross operating loss as compared to the same period in 1995. General corporate expenses for the period ending May 31, 1996, as compared to the same period in 1995, were up due to higher accruals for employee benefits and profit sharing expense. Interest expense was lower for the period ending May 31, 1996, as compared to 1995, due to reduced debt and lower interest rates. Page 8
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 29, 1996 5,772,895 $5,772,895 $9,283,268 Exercise of Stock Options 77,594 $ 77,594 $ 222,295 Balance at May 31, 1996 5,850,489 $5,850,489 $9,505,563 </TABLE> Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- (A) Exhibits - The following exhibit is filed as part of this report: 10 - P Loan agreement with Bank of America for $20 million. (B) Reports on Form 8-K - There were no reports on Form 8-K filed for the three months ended May 31, 1996. 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 9
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: June 28, 1996 /s/Dana Perry ----------------------- --------------------------------- Dana Perry, Vice President for Finance Chief Financial Officer Page 10
EXHIBIT INDEX Sequentially Exhibit Description Numbered Page - ------- ----------- ------------- 10 - P Loan agreement with Bank of America Incorporated Page 11