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 March 31, 1998
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: 7,851,841 shares of the
Company's Common Stock ($.01-2/3 par value) were outstanding as of March 31,
1998.
PART I
FINANCIAL INFORMATION
QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(Unaudited)
Nine Months Ended March 31,
----------------------------
1998 1997
---- ----
Net sales .................................. $ 37,273,000 $ 30,559,000
Cost of sales .............................. 21,135,000 15,857,000
------------ ------------
Gross profit ............................... 16,138,000 14,702,000
Operating expenses:
Selling & administrative ................. 10,959,000 11,236,000
Research & development ................... 1,119,000 1,816,000
------------ ------------
12,078,000 13,052,000
Operating profit ........................... 4,060,000 1,650,000
------------ ------------
Other income (expense):
Interest income .......................... 484,000 1,000
Interest expense ......................... (203,000) (494,000)
Other .................................... 16,000 (385,000)
------------ ------------
297,000 (878,000)
------------ ------------
Earnings from continuing operations before
income taxes ............................. 4,357,000 772,000
Provisions for income taxes ................ 1,307,000 193,000
------------ ------------
Earnings from continuing operations ........ 3,050,000 579,000
------------ ------------
Discontinued operations (net of income taxes):
Loss from operations ..................... (1,980,000) (2,231,000)
Loss on disposition ...................... (4,507,000)
------------ ------------
Loss from discontinued operations ........ (1,980,000) (6,738,000)
------------ ------------
Net earnings (loss) ........................ $ 1,070,000 $ (6,159,000)
============ ============
Per share data - basic:
Earnings from continuing operations ...... $ .38 $ .07
Loss from discontinued operations ........ (.25) (.84)
------------ ------------
Net earnings (loss)....................... $ .13 $ (.77)
============ ============
<FN>
See Notes to Consolidated Condensed Financial Statements.
QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Operations-Continued
(Unaudited)
Nine Months Ended March 31,
----------------------------
1998 1997
---- ----
Per share data - diluted:
Earnings from continuing operations ........... $ .38 $ .07
Loss from discontinued operations ............. (.25) (.84)
---------- ----------
Net earnings (loss) ........................... $ .13 $ (.77)
========== ==========
Shares used to compute net earnings (loss):
Basic ........................................ 7,971,514 7,972,175
========== ==========
Diluted ...................................... 8,065,789 8,024,729
========== ==========
<FN>
See Notes to Consolidated Condensed Financial Statements.
QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(Unaudited)
Three Months Ended March 31,
-------------------------------
1998 1997
---- ----
Net sales .................................. $12,821,000 $10,268,000
Cost of sales .............................. 7,436,000 5,471,000
------------ -----------
Gross profit ............................... 5,385,000 4,797,000
Operating expenses:
Selling & administrative ................. 3,824,000 3,505,000
Research & development ................... 389,000 768,000
------------ -----------
4,213,000 4,273,000
------------ -----------
Operating profit ........................... 1,172,000 524,000
------------ -----------
Other income (expense):
Interest income .......................... 84,000
Interest expense ......................... (100,000) (176,000)
Other .................................... 15,000 (133,000)
------------ -----------
(1,000) (309,000)
------------ -----------
Earnings from continuing operations
before income taxes ..................... 1,171,000 215,000
Provision for income taxes ................ 351,000 26,000
------------ -----------
Earnings from continuing operations ....... 820,000 189,000
------------ -----------
Discontinued operations (net of income taxes):
Loss from operations .................... (3,676,000)
Loss on disposition ..................... (4,507,000)
------------ -----------
Loss from discontinued operations ....... (8,183,000)
------------ -----------
Net earnings (loss) ..................... $ 820,000 $(7,994,000)
============ ===========
Per share data - basic:
Earnings from continuing operations $ .10 $ .02
Loss from discontinued operations........ (1.02)
------------ -----------
Net earnings (loss) ...................... $ .10 $ (1.00)
============ ===========
<FN>
See Notes to Consolidated Condensed Financial Statements.
QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Operations-Continued
(Unaudited)
Three Months Ended March 31,
-------------------------------
1998 1997
---- ----
Per share data - diluted:
Earnings from continuing operations .......... $ .10 $ .02
Loss from discontinued operations ............ (1.02)
----------- ------------
Net earnings (loss) .......................... $ .10 $ (1.00)
=========== ============
Shares used to compute net earnings (loss):
Basic ........................................ 7,904,556 7,974,612
=========== ============
Diluted ...................................... 7,998,831 8,027,166
=========== ============
<FN>
See Notes to Consolidated Condensed Financial Statements.
QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
March 31, June 30,
----------------------------
1998 1997
Assets
- --------------------------------------------------------------------------------
(Unaudited)
Current assets:
Cash and cash equivalents ...................... $ 4,661,000 $ 18,463,000
Accounts receivable, net of allowances for
doubtful accounts of $169,000 at
March 31 and $165,000 at June 30 ............. 8,769,000 8,494,000
Refundable income taxes ........................ 1,329,000
Inventories:
Raw materials ................................ 2,495,000 2,414,000
Work in process .............................. 1,034,000 978,000
Finished goods ............................... 1,391,000 832,000
---------- ----------
4,920,000 4,224,000
---------- ----------
Deferred income tax assets .................... 887,000 887,000
Other current assets .......................... 644,000 241,000
---------- ----------
Total current assets ............................ 19,881,000 33,638,000
---------- ----------
Property, plant and equipment, at cost .......... 22,699,000 21,355,000
Less accumulated depreciation ................... (9,542,000) (8,452,000)
---------- ----------
13,157,000 12,903,000
---------- ----------
Intangible assets .............................. 12,980,000 2,765,000
Assets of discontinued operations .............. 5,712,000 5,914,000
---------- ----------
$51,730,000 $55,220,000
========== ==========
<FN>
See Notes to Consolidated Condensed Financial Statements.
QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
March 31, June 30,
---------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY 1998 1997
- ----------------------------------------------------------------------------------
(Unaudited)
Current liabilities:
Current portion of notes payable ................. $ 602,000
Accounts payable ................................. 1,492,000 $ 1,743,000
Dividends payable ................................ 1,039,000
Income taxes payable ............................. 196,000
Accrued expenses ................................. 3,370,000 4,168,000
Liabilities of discontinued operations ........... 453,000 6,049,000
---------- ----------
Total current liabilities .......................... 6,113,000 12,999,000
---------- ----------
Deferred income tax liabilities .................... 566,000 566,000
Notes payable ...................................... 4,305,000
Shareholders' equity:
Common stock ..................................... 148,000 146,000
Capital in excess of par value of stock .......... 31,174,000 30,269,000
Retained earnings ................................ 17,407,000 17,368,000
Treasury stock, at cost .......................... (7,983,000) (6,128,000)
---------- ----------
Total shareholders' equity ......................... 40,746,000 41,655,000
---------- ----------
$51,730,000 $55,220,000
========== ==========
<FN>
See Notes to Consolidated Condensed Financial Statements.
QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(Unaudited)
Nine Months Ended March 31,
-----------------------------
1998 1997
---- ----
Net earnings (loss)............................... $ 1,070,000 $(6,159,000)
Adjustments to reconcile net earnings (loss) to
net cash (used in) provided by operating activities:
Depreciation and amortization ................ 1,735,000 1,445,000
Provision (benefit) for losses on accounts
receivable ................................. 4,000 (2,000)
Changes in operating assets and liabilities:
Accounts receivable ............................ (279,000) 2,261,000
Refundable income taxes ........................ 1,329,000 3,016,000
Inventories .................................... (511,000) (866,000)
Other current assets ........................... (403,000) (161,000)
Accounts payable and accrued expenses .......... (1,409,000) 1,744,000
Income taxes payable ........................... 196,000 931,000
Discontinued operations-noncash charges and
working capital changes ...................... (4,732,000) 19,000
---------- ----------
Net cash (used in) provided by operating activities (3,000,000) 2,228,000
---------- ----------
Investing activities:
Purchase of property, plant and equipment ...... (1,114,000) (1,107,000)
Proceeds from sale of discontinued operations .. 80,283,000
Cash paid for acquired business ................ (4,822,000)
Other .......................................... (457,000) (488,000)
---------- ----------
Net cash (used in) provided by investing
activities ..................................... (6,393,000) 78,688,000
---------- ----------
Financing activities:
Cash payments on notes payable ................. (729,000)
Payments under revolving credit agreement ...... (58,000,000)
Payment of semi-annual cash dividend ........... (2,070,000) (1,903,000)
Proceeds from exercise of common stock options . 245,000 61,000
Repurchase of common stock for treasury ........ (1,855,000)
---------- ----------
Net cash used in financing activities ............ (4,409,000) (59,842,000)
---------- ----------
Net change in cash and cash equivalents .......... (13,802,000) 21,074,000
Cash and cash equivalents at beginning of period.. 18,463,000 1,337,000
---------- ----------
Cash and cash equivalents at end of period ....... $ 4,661,000 $22,411,000
========== ==========
<FN>
Note: During the nine months ended March 31, 1998, the Company had net cash refunds of
$217,000 for income taxes and paid $203,000 for interest. During the same period last
year the Company had net cash refunds of $3,762,000 for income taxes and paid
$2,962,000 for interest. In connection with the purchase of Roadway Safety Service,
the Company incurred debt of $5,436,000.
See Notes to Consolidated Condensed Financial Statements.
QUIXOTE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Unaudited)
1. The accompanying unaudited consolidated condensed financial statements
present information in accordance with generally accepted accounting
principles for interim financial information and applicable rules of
Regulation S-X. Accordingly, they do not include all information or footnotes
required by generally accepted accounting principles for complete financial
statements. Management believes the financial statements include all normal
recurring adjustments necessary for a fair presentation. Operating results
for the three month and nine month periods ended March 31, 1998 do not
necessarily reflect the results that may be expected for the full year. For
further information, refer to the consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year
ended June 30, 1997.
Certain amounts in the June 30, 1997 financial statements have been
reclassified to conform to the March 31, 1998 financial statement
presentation.
2. During the second quarter, the Company recorded an additional loss from
discontinued operations of $1,980,000 or $0.25 per share which was net of
income tax benefits of $1,320,000. The loss was recorded to provide for
current and anticipated costs associated with the Company=s legal
contingencies, principally for certain DMI patent and antitrust lawsuits with
Pioneer Electronic Corporation and several of its affiliates. For further
information, refer to the Company's Form 10-K Report for the fiscal year ended
June 30, 1997, Item 3, and the Company's Form 10-Q Report for the quarter
ended December 31, 1997, Item 1.
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
and nine months ended March 31, 1997. For the quarter ended March 31, 1997
DMI had a net loss of $8,183,000, which was net of income taxes of $4,580,000.
For the nine months ended March 31, 1997 DMI had a net loss of $6,738,000,
which was net of income taxes of $3,961,000.
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 $10,258,000,
of which $4,822,000 was paid in cash at closing and other payments, the
present value of which is $5,436,000, will be paid over the next 10 years
using a discount rate of 8.5%. Goodwill of approximately $10,000,000 will be
amortized over a 20 year life.
4. On April 14, 1998, the Company and its wholly-owned subsidiary, TranSafe
Corporation, acquired the assets and assumed certain liabilities of Highway
Information Systems, a division of Digital Recorders, Inc. for $2,800,000.
The acquisition was accounted for as a purchase and was effective as of April
1, 1998. Goodwill of approximately $1,500,000 will be amortized over a 20
year life.
5. During the second quarter of fiscal 1998, the Company adopted Statement of
Financial Accounting Standards No. 128, "Earnings Per Share". SFAS No. 128
requires the presentation of basic earnings per share ("EPS") and, for
companies with potential dilutive securities, such as stock options and
warrants, diluted EPS. SFAS No. 128 is effective for annual and interim
periods ending after December 15, 1997 and requires restatement of EPS for
prior periods. The computation of basic and diluted earnings per share, as
prescribed by FASB 128, is as follows:
Three Months Ended Nine Months Ended
March 31, March 31,
1998 1997 1998 1997
---- ---- ---- ----
Net earnings (loss) per share of
common stock:
Basic ...................... $ .10 $(1.00) $.13 $(.77)
Diluted .................... $ .10 $(1.00) $.13 $(.77)
Numerator:
- ----------
Net earnings (loss) available to
common shareholders-basic
and diluted: ................. $ 820,000 $(7,994,000) $1,070,000 $(6,159,000)
========= ========== ========= =========
Denominator:
- ------------
Weighted average shares
outstanding-basic: ........... 7,904,556 7,974,612 7,971,514 7,972,175
Effect of dilutive securities
Options* ..................... 94,275 52,554 94,275 52,554
---------- --------- --------- ---------
Weighted average of shares
outstanding-diluted .......... 7,998,831 8,027,166 8,065,789 8,024,729
========== ========= ========= =========
* There were outstanding options to purchase common stock at prices that exceeded
the average market price for the income statement period as disclosed below. These
options have been excluded from the computation of diluted earnings per share.
Average market price per share . $ 8.83 $ 9.07 $ 8.60 $ 8.22
Number of shares ............... 472,000 415,669 472,000 552,669
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 nine months of fiscal 1998 increased 22% to
$37,273,000 from $30,559,000 for the first nine months of fiscal 1997. This
was due to both internal sales growth as well as from the acquisition of
Roadway Safety Service, which was completed in October 1997. Roadway Safety
Service, a former competitor of Energy Absorption Systems, sells crash
attenuators through its own independent group of highway distributors. 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
fiscal year. The QuadGuard-registered trademark- family of products replaced
the Company's GREAT-Registered Trademark- and GREAT CZ-Registered Trademark-
crash cushion products. Sales dollars of the QuadGuard-Registered Trademark-
increased at a lesser rate due to the lower selling price of this product
compared to the GREAT-Registered Trademark-. The Company also experienced
sales increases in its truck-mounted attenuator(TMA)product line, including
the newer Alpha 100k TMA. Triton Barrier-Registered Tradematrk- sales also
increased during the period. Roadway Safety Service contributed sales of
$2,600,000 for the current nine month period. Sales of Safe-Hit's highway
delineators and Spin-Cast's custom molded products also increased during the
period. Sales of the Energite-Registered Trademark- product line declined
during the nine month period.
The gross profit margin in the first nine months of the current year decreased
to 43.3% from 48.1% in the same period last year. This was due principally to
a change in sales mix from the GREAT-Registered Trademark- crash cushion to
the lower margin newer QuadGuard-Registered Trademark- crash cushion product
line. The QuadGuard-Registered Trademark- family of products is priced lower
than the GREAT-Registered Trademark- crash cushions. Roadway Safety Service
also contributed to the decline in gross margin as its gross margins are
lower than Energy Absorption's historical gross margins. In addition, the
gross margin at Safe-Hit, the Company's highway delineation company,
experienced a slight decline from last year.
Selling and administrative expenses in the first nine months of the current
year decreased 2% to $10,959,000 from $11,236,000 in the same period last
year due mainly to a decrease in corporate level administrative expenses.
Corporate level expenses decreased $781,000 in the current period from the
same period last year as a result of a decrease in personnel, consulting and
insurance expense. Selling and administrative expenses at Energy Absorption
and its subsidiaries remained at a level consistent with the same period last
year. Roadway Safety Service incurred $575,000 in selling and administrative
costs during the period.
Research and development expenses in the first nine months of the current year
decreased 38% to $1,119,000 compared to $1,816,000 in the same period last
year. This was due to a reduction in the number of tests performed in the
current period 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 and pick-up trucks. During the current period,
the Company continued with its testing of a wider version of Roadway Safety
Service's REACT 350 crash cushion as well as a snowplowable road marker and
other developmental products.
Interest income in the first nine months of the current year was $484,000
compared to $1,000 in the same period last year. Interest income in the
current period relates to amounts earned on the Company's invested cash of
$4,661,000 as of March 31, 1998. Interest expense in the current nine month
period was $203,000 compared to $494,000 in the same period last year. Current
period interest expense relates principally to notes payable in connection
with the acquisition of Roadway Safety Service. The decrease in interest
expense is due to the reduction of the Company's long-term debt in the third
fiscal quarter last year upon receipt of the proceeds from the sale of DMI,
the Company's former compact disc manufacturer. Other income was $16,000 in
the current nine month period compared to other expenses of $385,000 in the
same period last year.
The Company's effective tax rate for the current period was 30% due to the
anticipated realization of certain tax benefits during the current year along
with the settlement of certain tax contingencies.
During the second quarter of the current nine month period, the Company
recorded an additional net loss from its discontinued operations of $1,980,000
or $0.25 per share which was net of tax benefits of $1,320,000. The loss was
recorded to provide for current and anticipated costs associated with the
Company's legal contingencies, principally for its patent and antitrust
lawsuits with Pioneer Electronics Corporation and several of its affiliates.
For further information, refer to the Company's Form 10-K Report for the
fiscal year ended June 30, 1997, Item 3, and the Company=s Form 10-Q Report
for the quarter ended December 31, 1997, Item 1.
In the nine month period last year, the Company recorded a loss of $6,738,000
for the operations and loss on sale of DMI, sold in March 1997.
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 $10,258,000 of which
$4,822,000 was paid in cash at closing and other payments, the present value
of which is $5,436,000, will be paid over 10 years using a discount rate of
8.5%.
On April 15, 1998, the Company and its wholly-owned subsidiary, TranSafe
Corporation, acquired certain assets and assumed certain liabilities of
Highway Information Systems, a division of Digital Recorders, Inc. for
$2,800,000 in cash. The acquisition was accounted for as a purchase and was
effective as of April 1, 1998. Goodwill of approximately $1,500,000 will be
amortized over a twenty year life.
CURRENT YEAR QUARTER VERSUS PRIOR YEAR QUARTER
- ----------------------------------------------
The Company's sales for the third quarter of fiscal 1998 increased 25% to
$12,821,000 from $10,268,000 for the third quarter of fiscal 1997 due to
internal sales growth at Energy Absorption as well as from the acquisition of
Roadway Safety Service. Sales of the Company's TMA product line including the
newer Alpha 100k TMA increased during the quarter. In addition, the Company
had sales increases in its Triton water-filled barrier and in parts sales.
Sales of Energy Absorption's permanent crash cushion line of products as well
as Energite sales decreased. Sales of Safe-Hit's highway delineators and Spin-
Cast's custom molded products also increased during the quarter. In addition,
Roadway Safety Service contributed $1,261,000 in sales for the quarter.
The gross profit margin in the third quarter of the current year decreased to
42.0% from 46.7% in the third quarter last year. This was due to a change in
product sales mix from the GREAT crash cushion to the lower margin new
QuadGuard crash cushion product line. In addition, the gross margin also
declined due to the acquisition of Roadway Safety Service as its gross margins
are lower than those of Energy Absorption.
Selling and administrative expenses in the third quarter of the current year
increased 9% to $3,824,000 from $3,505,000 in the third quarter last year due
mainly to Roadway Safety Service which incurred selling and administrative
expenses of $348,000 during the quarter. In addition, corporate level expenses
increased slightly. Offsetting this somewhat, selling and administrative
expenses at Energy Absorption decreased slightly during the quarter.
Research and development expenses in the third quarter of the current year
decreased 49% to $389,000 compared to $768,000 in the third 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.
Interest income in the third quarter of the current year was $84,000 compared
to $0 in the same quarter last year. Interest income in the current quarter
relates to interest earned on the Company's invested cash of $4,661,000 as of
March 31, 1998. Interest expense in the current quarter was $100,000 compared
to $176,000 in the same quarter last year. Current period interest expense
relates principally to the Company's notes payable in connection with the
acquisition of Roadway Safety Service. The decrease in interest expense from
the third quarter last year is due to the reduction of the Company's long term
debt in the third fiscal quarter last year upon receipt of the proceeds from
the sale of DMI, the Company's former compact disc manufacturer. Other income
was $15,000 in the current quarter compared to expense of $133,000 in the same
quarter last year.
During the third quarter, the Company had no income or expense related to its
discontinued operations. In the third quarter last year, the Company recorded
a loss of $8,183,000 due to the operations and sale of DMI.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company had cash and cash equivalents of $4,661,000 and access to
additional funds of $40,000,000 under its bank arrangements as of March 31,
1998. Continuing operating activities were a source of cash for the Company
during the nine month period providing $3,712,000. Discontinued operations,
however, used cash of $6,712,000 primarily for legal fees related to the
Company=s ongoing litigation, and for other expenses including lease
commitments. This resulted in a net cash use from operating activities of
$3,000,000.
Cash of $6,393,000 was used for investing activities during the nine month
period of which $4,822,000 in cash was used for the purchase of the assets of
Roadway Safety Service, acquired in October 1997. In addition, the Company
purchased equipment during the nine month period totaling $1,114,000.
Financing activities used cash of $4,409,000 during the current nine month
period principally to pay the Company's semi-annual cash dividends of
$2,070,000. Cash of $1,855,000 was used to purchase 224,985 shares of the
Company's own stock for the treasury. Additional shares may be purchased from
time to time. Cash of $245,000 was received from the exercise of common stock
options.
For the remainder of fiscal 1998, the Company anticipates needing less than
$500,000 in cash for capital expenditures. The Company may also need
additional cash as it considers acquiring 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.
FACTORS AFFECTING FUTURE PERFORMANCE
- ------------------------------------
The Company is currently in the process of evaluating the potential impact of
the Year 2000 issue on its business and the related expenses that would
foreseeably be incurred in attempting to remedy such impact. Management's
current estimate is that the costs associated with the Year 2000 issue should
not have a material adverse effect on the results of operations or financial
position of the Company. However, even if the internal systems of the Company
are not materially affected by the Year 2000 issue, the Company could be
affected as a result of any disruption in the operation of the various third-
party enterprises with which the Company interacts.
The Intermodal Surface Transportation and Efficiency Act (ISTEA) which
provides authorization for federal funding of highways, and was the primary
source of funds for highway projects, expired on September 30, 1997. An
extension of ISTEA was signed into law in December 1997 which provides for
continued federal highway funding until May 1, 1998. Any delay in the passage
of a new highway bill to replace the ISTEA extension or in the passage of
another extension of ISTEA will result in a lack of funding for Energy
Absorption's products and could cause a material decline in revenues.
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; uncertainties regarding the Company's
litigation and claims resulting from its discontinued operations and the
settlements thereof; the successful completion and integration of
acquisitions; continued funding through the passage of new federal highway
legislation; and competitive and general economic conditions.
II
OTHER INFORMATION
ITEM 1. Legal Proceedings
- --------------------------
1. DISC MANUFACTURING, INC. ET AL. V. MASSEY ET AL., CV 90-1214L (MADISON
COUNTY CIRCUIT COURT, ALABAMA). A mediation between the parties was held on
March 26 and April 11, 1998 and settlement discussions are progressing. See
the Company's Form 10-K Report for the fiscal year ended June 30, 1997, Item
3, for additional information.
2. ESTATE OF THIEL V. ENERGY ABSORPTION SYSTEMS, INC., SUPERIOR COURT OF NEW
JERSEY, DOCKET NO. MRS-L-1431-94. This case was settled in April 1998 on
terms mutually satisfactory to the Company and the plaintiffs. See the
Company=s Form 10-K Report for the fiscal year ended June 30, 1997, Item 3,
for additional information.
3. REPETITIVE STRESS LITIGATION. An additional two cases have been dismissed
with prejudice and one case, previously dismissed without prejudice, has been
refiled by the plaintiff. Of the 32 cases filed to date against Quixote Steno
Corporation, only seven cases remain active; another eight cases have been
dismissed, but without prejudice to refile the complaints. See the Company's
Form 10-K Report for the fiscal year ended June 30, 1997, Item 3, for
additional information.
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) Reports on Form 8-K
None.
(b) Exhibits
* Management contract or compensatory plan or agreement
10(a) * Retirement Award Agreement dated as of February 19, 1998 between
Quixote Corporation and Leslie J. Jezuit.
10(b) Asset Purchase Agreement dated as of April 14, 1998 by and between
TranSafe Corporation and Digital Recorders, Inc.
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 March 31, 1998 to be signed on its behalf by the undersigned thereunto
duly authorized.
QUIXOTE CORPORATION
DATED: May 8, 1998 /s/ Daniel P. Gorey
----------------- -------------------
DANIEL P. GOREY
Chief Financial Officer,
Vice President and Treasurer
(Chief Financial & Accounting
Officer)