AZZ INC — Interim / Quarterly Report 1997

Jan 15, 1997

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, 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 November 30, 1996 Common Stock, $1.00 Par Value 6,089,244 ----------------------------- --------------------------------- Class Number of Shares AZTEC MANUFACTURING CO. INDEX ----- PART I. Financial Information Page No. --------------------- -------- Item 1. Financial Statements Consolidated Condensed Balance Sheets at November 30, 1996 and February 29, 1996 3 Consolidated Condensed Statements of Income Periods Ended November 30, 1996 and November 30, 1995 4 Consolidated Condensed Statements of Cash Flow Periods Ended November 30, 1996 and November 30, 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 8-9 PART II. Other Information ----------------- Item 2. Changes in Securities 10 Item 6. Exhibits and Reports on Form 8-K 10 SIGNATURES 11 Page 2 PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS AZTEC MANUFACTURING CO. CONSOLIDATED CONDENSED BALANCE SHEETS

SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS. Page 3 AZTEC MANUFACTURING CO. CONSOLIDATED CONDENSED STATEMENTS OF INCOME

SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS. Page 4 AZTEC MANUFACTURING CO. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW

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 November 30, 1996, and the results of operations and cash flows for the three-month and nine-month periods ended November 30, 1996 and November 30, 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. Page 6 AZTEC MANUFACTURING CO. COMPUTATION OF INCOME PER COMMON SHARE --------------------------------------

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 nine-month period ending November 30, 1996 was $5,939,000 compared to $5,395,000 during the same period in 1995. Working capital on November 30, 1996, was $11,754,000, with a current ratio of 2.38 to 1. Improvements in utilization of working capital continued through lower accounts receivable days outstanding and higher inventory turns. Uses of cash during the period ended November 30, 1996 included the purchase of equipment in the amount of $1,538,000 and the repayment of bank debt. Cash generated from the exercise of stock options amounted to $1,210,000. The sale of the idle Houston tubing property generated cash in the amount of $999,500. The amount realized from the sale of this property was equal to the net book value carried by the Company. 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 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 credit facility mentioned above. The Company's current availability under the credit facility is approximately $10,000,000. RESULTS OF OPERATIONS ---------------------- Consolidated net sales were up for the three-month and nine-month periods ending November 30, 1996 as compared to the same periods in 1995. Net sales in the Electrical Products Segment were down 9 percent for the three-month period ending November 30, 1996 and were flat for the nine-month period ending November 30, 1996, as compared to the same periods in 1995. 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 44 percent for the three and nine-month periods ending November 30, 1996, as compared to the same periods in 1995. These increases were due to higher volumes of steel processed as well as improved selling prices. The addition of Arkansas Galvanizing, the Company's eighth galvanizer, also had a positive impact. Net sales in the Oil Field Products Segment were up 54 and 38 percent for the three and nine-month periods ending November 30, 1996, as compared to the same periods in 1995. This can be accounted for by higher prices of crude oil and natural gas. Consolidated operating income for the three-month and nine-month periods ending November 30, 1996, as compared to the same periods in 1995, was up 19 and 40 percent, respectively. Gross operating income in the Electrical Products Segment was down 5 percent for the three month period ending November 30, 1996, and was up 26 percent for the nine-month period ending November 30, 1996, as compared to the same periods in 1995. The Calvert Company continues to improve as lower margin contracts are replaced in the backlog with higher margin contracts. The Galvanizing Segment's gross operating income was up 53 and 46 percent for the three and nine-month periods ending November 30, 1996 as compared the same periods in 1995. This increase was a result of improved volumes and selling prices as well as improved operating efficiencies. The addition of Arkansas Galvanizing also had a positive impact on margins. The Oil Field Page 8 Products Segment showed a lower gross operating loss for the periods ending November 30, 1996, as compared to the same periods in 1995 due to improved volumes. General corporate expenses for the three month and nine month periods ending November 30, 1996, as compared to the same periods in 1995, were up due to higher accruals for employee benefits and profit sharing expense. Interest expense was lower for the nine month period ending November 30, 1996, as compared to 1995, due to reduced debt and lower interest rates. Page 9 PART II. OTHER INFORMATION AZTEC MANUFACTURING CO. ITEM 2. CHANGES IN SECURITIES - ------------------------------- Title of Class - Common Stock, $1 par value

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ------------------------------------------ (A) EXHIBITS - There were no exhibits filed with this 10-Q for the nine- months ended November 30, 1996. (B) REPORTS ON FORM 8-K - There were no reports on Form 8-K filed for the nine-months ended November 30, 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 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: January 10, 1997 /s/Dana Perry ---------------------- ---------------------------------------- Dana Perry, Vice President for Finance Chief Financial Officer Page 11