-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Flfs/FlDbjqo8ss9cR6xWJUJJ9Y+njKpt/cOQ/OM0oxnAd9+ywnpzqWx9Q4k35Qx SOc6Tp6Zd2LYzwlcU/kh3Q== 0000930661-01-000044.txt : 20010123 0000930661-01-000044.hdr.sgml : 20010123 ACCESSION NUMBER: 0000930661-01-000044 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001130 FILED AS OF DATE: 20010111 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AZZ INC CENTRAL INDEX KEY: 0000008947 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC LIGHTING & WIRING EQUIPMENT [3640] IRS NUMBER: 750948250 STATE OF INCORPORATION: TX FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12777 FILM NUMBER: 1506874 BUSINESS ADDRESS: STREET 1: 400 N TARRANT RD CITY: CROWLEY STATE: TX ZIP: 76036 BUSINESS PHONE: 8172974361 MAIL ADDRESS: STREET 1: P O BOX 668 STREET 2: P O BOX 668 CITY: CROWLEY STATE: TX ZIP: 76036 10-Q 1 0001.txt FORM 10-Q 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 - -------------------------------------------------------------------------------- (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, 2000 Common Stock, $1.00 Par Value 4,938,721 ----------------------------- -------------------------- Class Number of Shares AZZ incorporated INDEX -----
PART I. Financial Information Page No. --------------------- -------- 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
AZZ incorporated Consolidated Condensed Balance Sheet
11/30/00 02/28/00 ASSETS (UNAUDITED) (AUDITED) - ------ --------- ------- CURRENT ASSETS 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 ================ ==============
3 AZZ incorporated Consolidated Condensed Income Statement
THREE MONTHS ENDED NINE MONTHS ENDED 11/30/00 11/30/99 11/30/00 11/30/99 (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) --------- --------- --------- --------- 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
See Accompanying Notes to Consolidated Condensed Financial Statements 4 AZZ incorporated Consolidated Condensed Statements of Cash Flows (Unaudited)
NINE MONTHS ENDING 11/30/00 11/30/99 -------- -------- 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 ============== =============
See Accompanying Notes to Consolidated Condensed Financial Statements 5 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)
Three months ending November 30, Nine months ending November 30, 2000 1999 2000 1999 ---------- ---------- ---------- ---------- (Dollars in thousands except earnings per share) 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 ============ =========== =========== ===========
6 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)
Three Months Ended Nov. 30, Nine Months Ended Nov. 30, 2000 1999 2000 1999 -------------------- -------------------- -------------------- -------------------- 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 ==================== ==================== ==================== ====================
(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 Item 2. Management's Discussion and Analysis of Financial Condition and Results - -------------------------------------------------------------------------------- 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 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 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 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 -----END PRIVACY-ENHANCED MESSAGE-----