QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
______________________________
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the period ended September 30, 1997
or
[ ] 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 0-7903
I.R.S. Employer Identification Number 36-2675371
QUIXOTE CORPORATION
(a Delaware Corporation)
One East Wacker Drive
Chicago, Illinois 60601
Telephone: (312) 467-6755
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 XX NO
-------- --------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 8,021,413 shares of the
Company's Common Stock ($.01-2/3 par value) were outstanding as of
September 30, 1997.
PART I
FINANCIAL INFORMATION
QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(Unaudited)
Three Months Ended September 30,
--------------------------------
1997 1996
---- ----
Net sales.............................$ 12,334,000 $ 11,096,000
Cost of sales......................... 6,538,000 5,502,000
----------- -----------
Gross profit.......................... 5,796,000 5,594,000
Operating expenses:
Selling & administrative............ 3,419,000 3,891,000
Research & development.............. 343,000 444,000
----------- -----------
3,762,000 4,335,000
Operating profit...................... 2,034,000 1,259,000
Other income (expense):
Interest income..................... 235,000 1,000
Interest expense.................... (1,000) (157,000)
Other............................... 1,000 (116,000)
----------- -----------
235,000 (272,000)
----------- -----------
Earnings from continuing operations
before income taxes................. 2,269,000 987,000
Provisions for income taxes........... 681,000 296,000
----------- -----------
Earnings from continuing operations... 1,588,000 691,000
----------- -----------
Earnings from discontinued operations 105,000
----------- -----------
Net earnings.......................... $ 1,588,000 $ 796,000
=========== ===========
Per share data:
Earnings from continuing operations $ .20 $ .09
Earnings from discontinued operations .01
----------- -----------
Net earnings........................ $ .20 $ .10
=========== ===========
Weighted average common and common
equivalent shares outstanding......... 8,051,993 7,988,792
=========== ===========
<FN>
See Notes to Consolidated Condensed Financial Statements.
QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
September 30, June 30,
-------------------------------------
ASSETS 1997 1997
- -------------------------------------------------------------------------------
(Unaudited)
Current assets:
Cash and cash equivalents...................$ 16,543,000 $ 18,463,000
Accounts receivable, net of allowances
for doubtful accounts of $168,000 at
September 30 and $165,000 at June 30....... 8,625,000 8,494,000
Refundable income taxes..................... 1,329,000
Inventories:
Raw materials............................. 2,023,000 2,414,000
Work in process........................... 998,000 978,000
Finished goods............................ 1,091,000 832,000
----------- -----------
4,112,000 4,224,000
----------- -----------
Deferred income tax assets.................. 887,000 887,000
Other current assets........................ 408,000 241,000
----------- -----------
Total current assets.......................... 30,575,000 33,638,000
----------- -----------
Property, plant and equipment, at cost........ 21,521,000 21,355,000
Less accumulated depreciation................. (8,859,000) (8,452,000)
----------- -----------
12,662,000 12,903,000
----------- -----------
Other assets.................................. 2,880,000 2,765,000
Assets of discontinued operations............. 5,693,000 5,914,000
----------- -----------
$ 51,810,000 $ 55,220,000
=========== ===========
<FN>
See Notes to Consolidated Condensed Financial Statements.
QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
September 30, June 30,
----------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY 1997 1997
- -------------------------------------------------------------------------------
(Unaudited)
Current liabilities:
Accounts payable........................... $ 1,297,000 $ 1,743,000
Dividends payable.......................... 1,039,000
Accrued expenses........................... 3,287,000 4,168,000
Income tax payable......................... 51,000
Liabilities of discontinued operations..... 2,789,000 6,049,000
----------- ------------
Total current liabilities.................... 7,424,000 12,999,000
----------- ------------
Deferred income tax liabilities.............. 566,000 566,000
Shareholders' equity:
Common stock............................... 147,000 146,000
Capital in excess of par value of stock.... 30,998,000 30,269,000
Retained earnings.......................... 18,956,000 17,368,000
Treasury stock, at cost.................... (6,281,000) (6,128,000)
----------- -----------
Total shareholders' equity................... 43,820,000 41,655,000
----------- -----------
$ 51,810,000 $ 55,220,000
=========== ===========
<FN>
See Notes to Consolidated Condensed Financial Statements.
QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(Unaudited)
Three Months Ended September 30,
--------------------------------
1997 1996
---- ----
Cash from operating activies:
Net earnings........................................$ 1,588,000 $ 796,000
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation...................................... 407,000 3,415,000
Amortization...................................... 111,000 108,000
Provisions for losses on accounts receivable...... 3,000 212,000
Changes in operating assets and liabilities:
Accounts receivable............................. (134,000) (2,176,000)
Refundable income taxes......................... 1,329,000
Inventories and other current assets............ (55,000) (186,000)
Accounts payable and accrued expenses........... (1,327,000) 2,491,000
Income taxes payable............................ 51,000 297,000
Discontinued operations-noncash charges and
working capital changes........................ (2,377,000) (43,000)
---------- ----------
Net cash provided by (used in) operating activities. (404,000) 4,914,000
---------- ----------
Investing activities:
Purchase of property, plant and equipment......... (166,000) (825,000)
Other............................................. (226,000) (9,000)
---------- ----------
Net cash used in investing activities............... (392,000) (834,000)
---------- ----------
Financing activities:
Payments under revolving credit agreement......... (3,500,000)
Payment of semi-annual cash dividend.............. (1,039,000) (946,000)
Proceeds from exercise of stock options........... 68,000 61,000
Repurchase of common stock for the treasury....... (153,000)
---------- ----------
Net cash used in financing activities............... (1,124,000) (4,385,000)
---------- ----------
Decrease in cash and cash equivalents............... (1,920,000) (305,000)
Cash and cash equivalents at beginning of period.... 18,463,000 2,250,000
---------- ----------
Cash and cash equivalents at end of period..........$16,543,000 $ 1,945,000
========== ==========
<FN>
Note: During the three months ended September 30, 1997, the Company had net cash
refunds of $700,000 for income taxes and paid $1,000 for interest. During the same
period last year the Company made cash payments of $44,000 for income taxes and paid
$661,000 for interest.
See Notes to Consolidated Condensed Financial Statements.
QUIXOTE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
1. The interim financial statements are prepared pursuant to the requirements
for reporting on Form 10-Q. The June 30, 1997 balance sheet data was derived
from audited financial statements, but does not include all disclosures
required by generally accepted accounting principles. The interim financial
statements and notes thereto should be read in conjunction with the financial
statements and notes included in the Company's latest annual report on Form
10-K. In the opinion of management, the interim financial statements reflect
all adjustments of a normal recurring nature necessary for a fair
presentation of the results for interim periods. The current period results
of operations are not necessarily indicative of results which ultimately
will be reported for the full fiscal year ending June 30, 1998.
2. In March 1997, the Company sold substantially all of the assets and
transferred significant operating liabilities of Disc Manufacturing, Inc.
(DMI) to Cinram Ltd. for $80,283,000 in cash. The transaction excluded DMI's
Huntsville, Alabama land and building as well as certain DMI litigation.
The results of operations of DMI are presented as discontinued operations in
the accompanying consolidated condensed statements of operations for the
quarter ended September 30, 1996. For the quarter ended September 30, 1996
DMI had earnings of $105,000, which was net of income taxes of $45,000.
3. On October 10, 1997, the Company and its wholly-owned subsidiary, TranSafe
Corporation, acquired certain assets and assumed certain contracts from Roadway
Safety Service,Inc. This transaction was accounted for as a purchase and was
effective as of October 1, 1997. The purchase price was $10,220,000, of which
$4,685,000 was paid in cash at closing and other payments, the present value of
which is $5,535,000, will be paid over the next 10 years using a discount rate
of 8.5%. Goodwill of approximately $10,000,000 was generated and will be
amortized over a 20 year life.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CURRENT YEAR-TO-DATE VERSUS PRIOR YEAR-TO-DATE
- ---------------------------------------------------
The Company's sales for the first quarter of fiscal 1998 increased 11% to
$12,334,000 from $11,096,000 for the first quarter of fiscal 1997. Sales of
Energy Absorption's permanent crash cushion line of products increased due to
strong unit sales of the newer QuadGuard -Registered Trademark- family of
crash cushions which the Company began selling in the second half of last
year. The QuadGuard replaces the Company's GREAT and GREAT CZ crash cushion
products. Sales dollars of the QuadGuard increased at a lesser rate due to
the lower selling price of this product compared to the GREAT. The Company
also experienced sales increases in its truck-mounted attenuator (TMA)-
Trademark- and Triton Barrier -Registered Trademark- product lines. Sales of
the Energite -Registered Trademark- product line and parts sales declined.
The gross profit margin in the first quarter of the current year decreased to
47.0% from 50.4% in the first quarter last year. This was due to a change in
product mix from the GREAT crash cushion to the lower margin new QuadGuard
crash cushion product line.
Selling and administrative expenses in the first quarter of the current year
decreased 12% to $3,419,000 from $3,891,000 in the first quarter last year due
mainly to a decrease in corporate level administrative expenses. Corporate
level expenses decreased $526,000 in the current quarter from the same quarter
last year as a result of a decrease in personnel, consulting and insurance
expense. Selling and administrative expenses at Energy Absorption and its
subsidiaries increased slightly due to an increase in commissions at
Safe-Hit Corpoation, its delineator subsidiary and marketing expenses at
Spin-Cast Plastics,Inc. its rotational molding subsidiary.
Research and development expenses in the first quarter of the current year
decreased 23% to $343,000 compared to $444,000 in the first quarter last year.
This was due to a reduction in the number of tests performed in the current
quarter related to the upgrade of the Company's product line to a higher set
of safety guidelines known as NCHRP 350. These guidelines increase safety
standards to accommodate heavier and higher center of gravity vehicles such as
sport utility vehicles. During the current quarter, the Company continued
with its testing of a wide version of its existing QuadGuard crash cushion as
well as a snowplowable road marker and other new product development.
Interest income in the first quarter of the current year was $235,000 compared
to $1,000 in the same quarter last year. Interest income in the current
quarter relates to interest earned on the Company's invested cash of
$16,543,000 as of September 30, 1997. Interest expense in the current quarter
was $1,000 compared to $157,000 in the same quarter last year. The reduction
in interest expense is due to the Company's payoff of its long term debt in
the third fiscal quarter last year upon receipt of the proceeds from the sale
of DMI, the Company's compact disc manufacturer. Other income was $1,000 in
the current quarter compared to other expenses of $116,000 in the same quarter
last year.
The Company's effective tax rate for the current quarter remained at 30% due
to the anticipated realization of certain tax benefits during the current year
along with the settlement of certain tax contingencies.
On October 10, 1997 the Company and its wholly-owned subsidiary, TranSafe
Corporation, acquired certain assets and assumed certain contracts from Roadway
Safety Service, Inc. The purchase price was $10,220,000 of which $4,685,000
was paid in cash at closing and the other payments, the present value of
which is $5,535,000 will be paid over the next 10 years using a discount rate
of 8.5%.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company had cash and cash equivalents of $16,543,000 and access to
additional funds of $40,000,000 under its bank arrangements as of September
30, 1997. Continuing operating activities were a source of cash for the
Company during the current quarter providing $1,973,000. Discontinued
operations however, used cash of $2,377,000 primarily for legal fees relating
to ongoing litigation and for other expenses including lease commitments,
resulting in a net cash use from operating activities of $404,000.
Cash of $392,000 was used for investing activities during the current quarter
which includes $166,000 used for the purchase of equipment.
Financing activities used cash of $1,124,000 during the current quarter
principally to pay the Company's semi-annual cash dividend of $1,039,000.
Cash of $153,000 was used to purchase 18,485 shares of the Company's own stock
for the treasury. Additional shares may be purchased from time to time. Cash
of $68,000 was also received from the exercise of stock options.
For the remainder of fiscal 1998, the Company anticipates needing less than
$2,000,000 in cash for capital expenditures. The Company may also need
additional cash as it considers acquiring additional businesses that
complement its existing operations. Also, the Company will require additional
investments in working capital to maintain growth. In addition, the Company
may also need funds to repurchase its own stock from time to time. These
expenditures will be financed either through the Company's invested cash, cash
generated from its operations, or from borrowings available under the
Company's revolving credit facility. The Company believes its existing cash,
cash generated from operations and funds available under its existing credit
facility are sufficient for all planned operating and capital requirements.
FORWARD LOOKING STATEMENTS
- --------------------------
Various statements made within the Management's Discussion and Analysis of
Financial Condition and Results of Operations and elsewhere in this Quarterly
Report on Form 10-Q constitute "forward looking statements" for purposes of
the Securities and Exchange Commission's "safe harbor" provisions under the
Private Securities Litigation Reform Act of 1995 and Rule 3b-6 under the
Securities Exchange Act of 1934, as amended. Investors are cautioned that all
forward looking statements involve risks and uncertainties, including those
detailed in the Company's filings with the Securities and Exchange Commission.
There can be no assurance that actual results will not differ from the
Company's expectations. Factors which could cause materially different
results include, among others, uncertainties related to the introduction of
the Company's products and services; the successful completion and integration
of acquisitions; and competitive and general economic conditions.
II
OTHER INFORMATION
ITEM 1. Legal Proceedings
- --------------------------
1. REPETITIVE STRESS INJURY LITIGATION. Another one of the cases involving
allegations of repetitive stress injuries against Stenograph Corporation, a
former subsidiary, has been dismissed with prejudice. Of the thirty-two cases
filed to date against Stenograph, a total of seven cases have been dismissed
with prejudice, ten cases have been dismissed without prejudice to refile the
complaints and six cases were dismissed in April 1997 after a jury verdict in
favor of Stenograph. See the Company's Form 10-K Report for the fiscal year
ended June 30, 1997, Item 3, for additional information.
2. DISCOVISION ASSOCIATES V. DISC MANUFACTURING, INC., Case No. 95-21,
Consolidated with Case No. 95-345 U.S. District Court for the District of
Delaware. A trial on the issue of patent infringement was held in October
1997 and a decision is pending. See the Company's Form 10-K Report for the
fiscal year ended June 30, 1997, Item 3, for additional information.
3. ENERGY ABSORPTION SYSTEMS, INC. V. ROADWAY SAFETY SERVICE, INC., No. 93C
2147, U.S. District Court for the Northern District of Illinois. This case
was settled in October 1997 on terms mutually satisfactory to the parties.
See the Company's Form 10-K Report for the fiscal year ended June 30, 1997,
Item 3, for additional information.
4. DISC MANUFACTURING, INC. V. CD TITLES, INC.; DISC MANUFACTURING, INC. V.
PALOMAR MEDICAL TECHNOLOGIES, INC., CONSOLIDATED Action No. 97-05328-B,
Superior Court of the Commonwealth of Massachusetts. This is an action
brought by Disc Manufacturing, Inc. to recover approximately $680,000 for
goods and services sold to CD Titles, of which $400,000 was guaranteed by
Palomar Medical Technologies. CD Titles has answered the complaint, asserting
a counterclaim for conversion of certain inventory valued by CD Titles at $1.3
million. Discovery is proceeding.
ITEM 2. Changes in Securities
- -----------------------------
None.
ITEM 3. Default upon Senior Securities
- ---------------------------------------
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
None.
ITEM 5. Other Information
- --------------------------
None.
ITEM 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) On October 10, 1997, the Company filed a report on Form 8-K dated October
10, 1997, reporting under "Item 2 Acquisition or Disposition of Assets", that
the Company and its wholly-owned subsidiary, TranSafe Corporation, had
acquired as of October 1, 1997 certain assets and assumed certain contracts
from Roadway Safety Service, Inc., Momentum Mangement, Inc., and Fitch Barrel
Corporation. As part of the acquisition, TranSafe acquired certain Roadway
distributorships and entered into a consulting agreement with the principal
shareholder of the Roadway business. The purchase price for this business was
$10,220,000, of which $4,685,000 was paid in cash at closing and $5,535,000
will be paid over the next ten years with interest at 8.5%.
(b) Exhibits
10(a) Amended and Restated Loan Agreement dated as of June 30, 1997 among
Quixote Corporation and certain subsidiaries ("Quixote'), The Northern Trust
Company ("Northern"), LaSalle National Bank ("LaSalle"), and American National
Bank and Trust Company ("American"); Amended and Restated Revolving Credit
Notes dated June 30, 1997 from the Company and certain of its subsidiaries to
the Northern, LaSalle and American. Filed herein
(b) Amended and Restated Lease Agreement dated as of September 1, 1987 by
and between the Industrial Development Board of the City of Huntsville,
Alabama, (the "Board") and LaserVideo, Inc. (know known as Quixote Laser
Corporation ("DMI")), filed as Exhibit 10(g) to the Company's Form 10-K Report
for the fiscal year ended June 30, 1990, File No. 0-7903, and incorporated
herein by reference; Series 1991 Amendment to Lease Agreement dated as of
April 1, 1991 by and between DMI and the Board, filed as Exhibit 10(i) to the
Company's Form 10-K Report for the fiscal year ended June 30, 1991, File No.
0-7903, and incorporated herein by reference; Series 1993 Amendment to Lease
Agreement dated as of March 1, 1993 by and between DMI and the Board, filed as
Exhibit 10(j) to the Company's Form 10-K Report for the fiscal year ended June
30, 1993, File No. 0-7903, and incorporated herein by reference.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997 to be signed on its behalf by the undersigned
thereunto duly authorized.
QUIXOTE CORPORATION
DATE: November 13, 1997 /s/ Daniel P. Gorey
----------------- ------------------------------
DANIEL P. GOREY
Chief Financial Officer,
Vice President and Treasurer
(Chief Financial & Accounting
Officer)