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, 2003
| ¨ | 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 1-12777
AZZ incorporated
(Exact name of registrant as specified in its charter)
| TEXAS | 75-0948250 | |
| (State or other jurisdiction of incorporation of organization) |
(I.R.S. Employer Identification No.) | |
| Suite 200, 1300 South University Drive, Fort Worth, Texas | 76107 | |
| (Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: (817) 810-0095
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 þ No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.
Outstanding at December 17, 2003
| Common Stock, $1.00 Par Value | 5,386,309 | |
| Class | Number of Shares |
AZZ incorporated
| Page No. | ||||
| PART I. |
Financial Information |
|||
| Item 1. |
Financial Statements |
|||
| Consolidated Condensed Balance Sheets at November 30, 2003 and February 28, 2003 |
3 | |||
| 4 | ||||
| 5 | ||||
| 6-9 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
9-15 | ||
| Item 3. |
15 | |||
| Item 4. |
15 | |||
| PART II. |
Other Information |
|||
| Item 1. |
16 | |||
| Item 2. |
16 | |||
| Item 3. |
16 | |||
| Item 4. |
16 | |||
| Item 5. |
16 | |||
| Item 6. |
16 | |||
| 17 | ||||
| 18 | ||||
2
PART I. FINANCIAL INFORMATION
| Item I. | Financial Statements |
AZZ incorporated
CONSOLIDATED CONDENSED BALANCE SHEET
(Unaudited)
| 11/30/03 |
02/28/03 |
|||||||
| ASSETS |
||||||||
| CURRENT ASSETS |
||||||||
| CASH AND CASH EQUIVALENTS |
$ | 784,104 | $ | 1,983,829 | ||||
| ACCOUNTS RECEIVABLE (NET OF ALLOWANCE FOR DOUBTFUL ACCOUNTS) |
23,929,546 | 28,885,688 | ||||||
| INCOME TAX RECEIVABLE |
— | 401,834 | ||||||
| INVENTORIES |
||||||||
| RAW MATERIAL |
7,635,945 | 8,021,468 | ||||||
| WORK-IN-PROCESS |
4,935,796 | 7,527,785 | ||||||
| FINISHED GOODS |
3,505,644 | 3,046,905 | ||||||
| COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS |
678,909 | 2,469,137 | ||||||
| DEFERRED INCOME TAXES |
1,852,412 | 1,914,342 | ||||||
| PREPAID EXPENSES AND OTHER |
297,764 | 805,049 | ||||||
| TOTAL CURRENT ASSETS |
43,620,120 | 55,056,037 | ||||||
| PROPERTY, PLANT AND EQUIPMENT, NET |
33,845,117 | 36,611,781 | ||||||
| GOODWILL, NET OF ACCUMULATED AMORTIZATION |
40,962,104 | 40,962,104 | ||||||
| INTANGIBLES AND OTHER ASSETS, NET OF ACCUMULATED AMORTIZATION |
1,269,147 | 1,406,592 | ||||||
| $ | 119,696,488 | $ | 134,036,514 | |||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
| CURRENT LIABILITIES: |
||||||||
| LONG-TERM DEBT DUE WITHIN ONE YEAR |
$ | 5,550,000 | $ | 6,675,000 | ||||
| ACCOUNTS PAYABLE |
10,583,134 | 11,507,734 | ||||||
| BILLINGS IN EXCESS OF COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS |
— | 53,794 | ||||||
| ACCRUED LIABILITIES |
9,357,925 | 13,108,997 | ||||||
| TOTAL CURRENT LIABILITIES |
25,491,059 | 31,345,525 | ||||||
| LONG-TERM DEBT DUE AFTER ONE YEAR |
25,250,000 | 37,875,000 | ||||||
| DEFERRED INCOME TAXES |
1,407,269 | 1,407,269 | ||||||
| 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 |
13,787,286 | 13,840,339 | ||||||
| CUMULATIVE OTHER COMPREHENSIVE INCOME (LOSS) |
(353,660 | ) | (625,394 | ) | ||||
| RETAINED EARNINGS |
56,390,341 | 53,355,213 | ||||||
| LESS COMMON STOCK HELD IN TREASURY, AT COST ( 922,465) SHARES AT NOVEMBER 30, 2003 AND 1,017,592 SHARES AT FEBRUARY 28, 2003) |
(8,580,386 | ) | (9,466,018 | ) | ||||
| TOTAL SHAREHOLDERS’ EQUITY |
67,548,160 | 63,408,720 | ||||||
| $ | 119,696,488 | $ | 134,036,514 | |||||
See Accompanying Notes to Consolidated Condensed Financial Statements
3
AZZ incorporated
Consolidated Condensed Income Statement
(Unaudited)
| THREE MONTHS ENDED |
NINE MONTHS ENDED | ||||||||||||
| 11/30/03 |
11/30/02 |
11/30/03 |
11/30/02 | ||||||||||
| NET SALES |
$ | 33,337,831 | $ | 45,116,879 | $ | 103,696,157 | $ | 143,572,970 | |||||
| COSTS AND EXPENSES |
|||||||||||||
| COST OF SALES |
26,606,757 | 35,966,785 | 84,365,478 | 112,757,039 | |||||||||
| SELLING, GENERAL & ADMINISTRATIVE |
4,166,379 | 4,959,981 | 12,756,805 | 15,809,140 | |||||||||
| INTEREST EXPENSE |
688,614 | 922,577 | 1,941,699 | 3,129,410 | |||||||||
| OTHER (INCOME) AND EXPENSE, NET |
11,333 | 112,187 | (263,868 | ) | 339,693 | ||||||||
| 31,473,083 | 41,961,530 | 98,800,114 | 132,035,282 | ||||||||||
| INCOME BEFORE INCOME TAXES |
1,864,748 | 3,155,349 | 4,896,043 | 11,537,688 | |||||||||
| INCOME TAX EXPENSE |
708,716 | 1,191,500 | 1,860,916 | 4,341,600 | |||||||||
| NET INCOME |
$ | 1,156,032 | $ | 1,963,849 | $ | 3,035,127 | $ | 7,196,088 | |||||
| INCOME PER SHARE |
|||||||||||||
| (BASIC) |
$ | 0.21 | $ | 0.37 | $ | 0.57 | $ | 1.36 | |||||
| (DILUTED) |
$ | 0.21 | $ | 0.37 | $ | 0.57 | $ | 1.36 | |||||
See Accompanying Notes to Consolidated Condensed Financial Statements
4
PART I. FINANCIAL INFORMATION
| Item I. | Financial Statements |
AZZ incorporated
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
(Unaudited)
| NINE MONTHS ENDING |
||||||||
| 11/30/03 |
11/30/02 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| NET INCOME |
$ | 3,035,127 | $ | 7,196,088 | ||||
| ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: |
||||||||
| PROVISION FOR DOUBTFUL ACCOUNTS |
200,236 | 308,241 | ||||||
| AMORTIZATION AND DEPRECIATION |
4,431,107 | 4,993,283 | ||||||
| NET GAIN ON SALE OF PROPERTY, PLANT & EQUIPMENT |
(302,180 | ) | (13,079 | ) | ||||
| DEFERRED INCOME TAX BENEFIT |
(104,616 | ) | — | |||||
| NON-CASH INTEREST EXPENSE |
343,256 | 405,400 | ||||||
| NON-CASH COMPENSATION EXPENSE |
38,400 | 84,700 | ||||||
| EFFECTS OF CHANGES IN ASSETS & LIABILITIES: |
||||||||
| ACCOUNTS RECEIVABLE |
4,755,906 | 5,997,217 | ||||||
| INVENTORIES |
2,518,773 | 1,072,233 | ||||||
| PREPAID EXPENSES AND OTHER |
507,285 | 696,556 | ||||||
| OTHER ASSETS |
(299,890 | ) | (221,278 | ) | ||||
| NET CHANGE IN BILLINGS RELATED TO COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS |
1,736,434 | 485,918 | ||||||
| ACCOUNTS PAYABLE |
(924,600 | ) | (6,149,038 | ) | ||||
| OTHER ACCRUED LIABILITIES AND INCOME TAXES |
(2,910,958 | ) | 1,416,029 | |||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES |
13,024,280 | 16,272,270 | ||||||
| CASH FLOWS USED IN INVESTING ACTIVITIES: |
||||||||
| PROCEEDS FROM SALE OF PROPERTY, PLANT, AND EQUIPMENT |
723,987 | 17,180 | ||||||
| PURCHASE OF PROPERTY, PLANT AND EQUIPMENT |
(1,992,171 | ) | (3,182,724 | ) | ||||
| NET CASH USED IN INVESTING ACTIVITIES |
(1,268,184 | ) | (3,165,544 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| PROCEEDS FROM EXERCISE OF STOCK OPTIONS |
794,179 | 294,642 | ||||||
| PROCEEDS FROM REVOLVING LOAN |
— | — | ||||||
| PROCEEDS FROM LONG-TERM DEBT |
— | — | ||||||
| PAYMENTS ON LONG TERM DEBT |
(13,750,000 | ) | (13,500,000 | ) | ||||
| NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES |
(12,955,821 | ) | (13,205,358 | ) | ||||
| NET DECREASE IN CASH & CASH EQUIVALENTS |
(1,199,725 | ) | (98,632 | ) | ||||
| CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD |
1,983,829 | 1,737,876 | ||||||
| CASH & CASH EQUIVALENTS AT END OF PERIOD |
$ | 784,104 | $ | 1,639,244 | ||||
See Accompanying Notes to Consolidated Condensed Financial Statements
5
AZZ incorporated
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Summary of Significant Accounting Policies
| 1. | These interim unaudited consolidated financial statements were prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the SEC rules and regulations referred to above. Accordingly, these financial statements should be read in conjunction with the audited financial statements and related notes for the fiscal year ended February 28, 2003 included in the Form 10-K covering such period. |
| 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, 2003, and the results of its operations for the three-month and nine-month periods ended November 30, 2003 and 2002, and cash flows for the nine-month periods ended November 30, 2003 and 2002. |
| 3. | Earnings per share is based on the weighted 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:
| Three months ended Nov. 30, |
Nine months ended Nov. 30, | |||||||||||
| 2003 |
2002 |
2003 |
2002 | |||||||||
| (Unaudited) | ||||||||||||
| (In thousands except share and per share data) | ||||||||||||
| Numerator: |
||||||||||||
| Net income for basic and diluted earnings per common share |
$ | 1,156 | $ | 1,964 | $ | 3,035 | $ | 7,196 | ||||
| Denominator: |
||||||||||||
| Denominator for basic earnings per common share–weighted average shares |
5,379,204 | 5,285,988 | 5,329,693 | 5,277,307 | ||||||||
| Effect of dilutive securities: |
||||||||||||
| Employee and Director stock options |
62,113 | 9,958 | 41,521 | 24,698 | ||||||||
| Denominator for diluted earnings per common share |
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