<PAGE>
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, 1995
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: 7,863,168 shares of the
Company's Common Stock ($.01-2/3 par value) were outstanding as of September 30,
1995.
<PAGE>
PART I
FINANCIAL INFORMATION
QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1995 1994
---- ----
<S> <C> <C>
Net sales.............................$ 45,002,000 $ 41,276,000
Cost of sales......................... 29,827,000 25,647,000
------------ ------------
Gross profit.......................... 15,175,000 15,629,000
Selling & administrative expenses..... 10,332,000 9,656,000
Research & development expenses....... 878,000 749,000
------------ ------------
11,210,000 10,405,000
Operating profit...................... 3,965,000 5,224,000
------------ ------------
Other income (expenses):
Interest income..................... 77,000 47,000
Interest expense.................... (1,557,000) (863,000)
Other............................... (166,000) (106,000)
------------ ------------
(1,646,000) (922,000)
------------ ------------
Earnings from continuing operations
before income taxes................... 2,319,000 4,302,000
Provision for income taxes............ 881,000 1,634,000
------------ ------------
Earnings from continuing operations... 1,438,000 2,668,000
------------ ------------
Discontinued operations (net of tax):
Actual loss from operations......... (1,087,000) (580,000)
Estimated loss on disposition of
discontinued operations............. (10,913,000)
------------ ------------
Loss from discontinued operations..... (12,000,000) (580,000)
------------ ------------
Net earnings (loss)...................$(10,562,000) $ 2,088,000
============ ============
Per share data:
Earnings from continuing operations.$ .18 $ .32
Loss from discontinued operations... (1.50) (.07)
------------ ------------
Net earnings (loss)...................$ (1.32) $ .25
============ ============
Weighted average common and common
equivalent shares outstanding......... 8,024,035 $ 8,249,024
============ ============
<FN>
See Notes to Consolidated Condensed Financial Statements
</TABLE>
<PAGE>
QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
<TABLE>
<CAPTION>
September 30, June 30,
-------------------------------------
ASSETS 1995 1995
- -------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash & cash equivalents.....................$ 509,000 $ 2,093,000
Accounts receivable, net of allowances
for doubtful accounts of $2,499,000 at
September 30 and $2,738,000 at June 30...... 30,722,000 28,092,000
Inventories:
Raw materials............................... 6,947,000 2,140,000
Work in process............................. 1,672,000 1,128,000
Finished goods.............................. 2,029,000 6,383,000
------------ ------------
10,648,000 9,651,000
Other current assets.......................... 3,718,000 3,348,000
------------ ------------
Total current assets.......................... 45,597,000 43,184,000
------------ ------------
Property, plant and equipment, at cost........ 150,852,000 142,626,000
Less accumulated depreciation................. (55,692,000) (51,912,000)
------------ ------------
95,160,000 90,714,000
------------ ------------
Other assets including $6,000,000
certificate of deposit........................ 21,579,000 22,326,000
Net assets of discontinued operations......... 13,362,000
------------ ------------
$162,336,000 $169,586,000
============ ============
<FN>
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
<PAGE>
QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
<TABLE>
<CAPTION>
September 30, June 30,
----------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1995
- -------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Current portion of long-term debt..........$ 975,000 $ 975,000
Accounts payable........................... 11,546,000 19,086,000
Accrued expenses........................... 18,794,000 16,077,000
Income taxes payable....................... 2,243,000 3,470,000
Net liabilities of discontinued operations. 62,000
------------ ------------
Total current liabilities.................... 33,620,000 39,608,000
------------ ------------
Long-term debt............................... 77,300,000 68,000,000
Deferred income taxes........................ 3,063,000 3,063,000
Shareholders' equity:
Common stock............................... 143,000 143,000
Capital in excess of par value of stock.... 29,268,000 29,268,000
Retained earnings.......................... 24,415,000 34,977,000
Treasury stock, at cost.................... (5,473,000) (5,473,000)
------------ ------------
48,353,000 58,915,000
------------ ------------
$162,336,000 $169,586,000
============ ============
<FN>
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
<PAGE>
QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1995 1994
---------- ----------
<S> <C> <C>
Cash from operating activities:
Earnings from continuing operations.................$ 1,438,000 $ 2,668,000
Loss from discontinued operations...................(12,000,000) (580,000)
----------- -----------
Net earnings (loss).................................(10,562,000) 2,088,000
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation...................................... 3,780,000 2,822,000
Amortization...................................... 441,000 540,000
Provision for losses on accounts
receivable........................................ 67,000 7,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable...... (2,697,000) 1,266,000
(Increase) in inventories and other current
assets.......................................... (1,367,000) (917,000)
Increase (decrease) in accounts payable
and accrued expenses............................ 5,263,000 (1,179,000)
Increase (decrease) in income taxes payable..... (1,227,000) 1,355,000
Discontinued operations-noncash charges and
working capital changes........................... 13,424,000
----------- -----------
Net cash provided by operating activities........... 7,122,000 5,982,000
----------- -----------
Investing activities:
Purchase of property, plant and equipment.........(17,451,000) (11,663,000)
Capitalized systems, design and software costs.... (169,000) (313,000)
Decrease in funds deposited with IDB trustee...... 541,000
Other............................................. (66,000) (96,000)
----------- -----------
Net cash used in investing activities...............(17,145,000) (12,072,000)
----------- -----------
Financing activities:
Borrowings (payments) on revolving line of credit. (700,000) 6,525,000
Borrowings under short-term note payable.......... 10,000,000
Payment of semi-annual dividend................... (861,000) (853,000)
Proceeds from exercise of stock options........... 230,000
----------- -----------
Net cash provided by financing
activities....................................... 8,439,000 5,902,000
----------- -----------
Decrease in cash and cash equivalents............... (1,584,000) (188,000)
Cash and cash equivalents at beginning of period.... 2,093,000 1,021,000
----------- -----------
Cash and cash equivalents at end of period..........$ 509,000 $ 833,000
=========== ===========
<FN>
Note: In the current quarter the Company had a net cash refund of $83,000 for income
taxes and paid $809,000 for interest costs. In last year's first quarter the Company
had a net refund of $74,000 for income taxes and paid $197,000 for interest costs.
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
<PAGE>
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, 1995 balance sheet data was derived
from audited financial statements, adjusted for the reclassification of assets
and liabilities related to the discontinued operations discussed in Note 2
below, 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, 1996.
2. On September 28, 1995, the measurement date, the Company adopted a plan to
dispose of certain businesses including Integrated Information Services, Inc.,
a document imaging and computerized litigation support company, and Litigation
Sciences, Inc., a litigation consulting firm, and to abandon the concept of
Legal Technologies, Inc. as a full service provider to the legal community.
As a result, the Company recorded a loss during the first quarter consisting of
$2,213,000 (net of income tax benefits of $1,475,000) for the estimated
operating losses of these businesses from the measurement date through the
estimated date of disposition and $8,700,000 (net of income tax benefits of
$5,800,000) for the estimated loss on their disposition. In addition, losses
of $1,087,000 (net of income tax benefits of $725,000) were incurred by these
businesses during the first quarter until the measurement date (September
28, 1995). These results are presented as discontinued operations in the
Company's Consolidated Condensed Statement of Operations for the quarter ended
September 30, 1995. The previously issued Consolidated Condensed Statement of
Operations for the quarter ended September 30, 1994 has been restated to
reflect those results as discontinued operations. Net sales for the
discontinued businesses for the quarters ending September 30, 1995 and 1994
were $3,660,000 and $4,874,000 respectively. The assets of these businesses
consist principally of accounts receivable, inventories and equipment, and net
of their liabilities have been reflected separately in the Company's
Consolidated Condensed Balance Sheets.
In connection with the decision to discontinue these businesses, the Company
violated certain covenants of its Revolving Credit Facility including the
tangible net worth and leverage covenants as of September 30, 1995. In November
1995, the Company was granted an increase in its revolving credit facility to
$70 million from $60 million and received a waiver for all its covenant
violations. The revolving credit agreement was also amended to adjust certain
covenants for future periods.
<PAGE>
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 1996 increased 9% to
$45,002,000 from $41,276,000 in the same quarter last year due to revenue growth
at Disc Manufacturing, Inc. (DMI). Sales at DMI increased 22% in the current
quarter to $25,429,000 from $20,841,000 in the first quarter last year due to
strong growth in unit sales of CD-ROM discs. CD-ROM unit sales increased 111%
during the first quarter from the same quarter last year. Audio CD unit sales
increased 3% in the first quarter from the same quarter last year. These
increases in unit volumes were offset somewhat by declines in the average unit
selling prices of these products, resulting in CD-ROM sales dollars increasing
55% during the current quarter and CD audio sales dollars remaining at the same
level as last year's first quarter. Sales at Energy Absorption for the current
quarter decreased 6% to $12,214,000 from $12,927,000 in the same quarter last
year as a result of an unusually strong first quarter last year due to initial
sales of the BarrierGate (R) product in that quarter. Sales at Stenograph
Corporation decreased slightly to $7,359,000 in the current quarter from
$7,508,000 in the same quarter last year. Sales of domestic computer-aided
transcription (CAT) hardware and software decreased modestly but was offset by
an increase in its international sales.
The gross profit margin in the current quarter decreased to 33.7% from 37.9% in
the same quarter last year due to margin reductions at DMI. DMI's gross profit
margin decreased as a result of a decrease in the selling price of optical
discs, particularly CD-ROM products. This was offset slightly by volume
efficiencies. The Company expects to experience continued pressure on disc
selling prices which may have a limiting effect on gross profit margins at
DMI. Stenograph Corporation's gross profit margin increased due to production
efficiencies resulting in reduced material and labor costs. Energy
Absorption's gross profit margin for the current quarter remained at a level
consistent with the same quarter last year.
Selling and administrative expenses in the current quarter increased 7% to
$10,332,000 from $9,656,000 in the same quarter last year attributable
principally to DMI and Energy Absorption. DMI's selling and administrative
expenses increased principally due to an increase in legal expense, and CD-ROM
selling and marketing expenses. Energy Absorption's selling and administrative
expenses increased due to increased marketing expenses. Stenograph
Corporation's selling and administrative expenses remained at a level
consistent with the same quarter last year.
Research and development expenses in current quarter increased 17% to $878,000
from $749,000 in the same quarter last year. This was due to an increase in R&D
expenditures at Stenograph Corporation related to the development of an update
to its Premier Power (R) computer-aided transcription software. This increase
in R&D at Stenograph Corporation was offset partially by a decrease in R&D at
Energy Absorption as a result of, among other things, reduced expenditures on
its sewer rehabilitation technology.
Interest income in the current quarter was $77,000 compared to $47,000 in the
Company's first quarter last year due to an increase in the rate of interest
earned on the Company's $6 million restricted certificate of deposit. Interest
expense in the current quarter increased 80% to $1,557,000 from $863,000 in the
first quarter last year. This was due to an increase in long-term debt to
$78,275,000 as of September 30, 1995 compared to $45,500,000 at the same time
<PAGE>
last year. Other expenses in the current quarter increased to $166,000 compared
to 106,000 in the same quarter last year.
During the first quarter, the Company adopted a plan to dispose of certain
businesses including Integrated Information Services, Inc., a document imaging
and computerized litigation support company and Litigation Sciences, Inc., a
litigation consulting firm, and to abandon the concept of Legal Technologies,
Inc. as a full service provider to the legal community.
As a result, the Company recorded a loss during the first quarter consisting of
$2,213,000 (net of income tax benefits of $1,475,000) for the estimated
operating losses of these businesses from the measurement date through the date
of disposition and $8,700,000 (net of income tax benefits of $5,800,000) for the
estimated loss on their disposition. In addition, losses of $1,087,000 (net of
income tax benefits of $725,000) were incurred by these businesses during the
first quarter until the measurement date (September 28, 1995). These results
are presented as discontinued operations in the Company's Consolidated
Condensed Statement of Operations for the quarter ended September 30, 1995.
The previously issued Consolidated Condensed Statement of Operations for the
quarter ended September 30, 1994 has been restated to reflect those results as
discontinued operations.
In connection with the decision to discontinue these businesses, the Company
violated certain covenants of its Revolving Credit Facility including the
tangible net worth and leverage covenants as of September 30, 1995. In
November 1995, the Company was granted an increase in its revolving credit
facility to $70 million from $60 million by its bank group and in addition,
received a waiver for all its covenant violations. The revolving credit
agreement was also amended to adjust certain covenants for future periods.
Also during the first quarter, DMI was notified by BMG Music, one of its major
customers, that it is terminating its purchase agreement with DMI effective
December 31, 1995. In fiscal 1995 BMG accounted for 38% of DMI's total sales.
DMI is currently developing a plan to replace this business, but is uncertain as
to how much of this business can be replaced. In the event DMI is unsuccessful
in its pursuit of this replacement business, profits and cash flow may be
materially affected.
Liquidity and Capital Resources
- -------------------------------
The Company has cash of $509,000 and additional funds of $11,700,000 available
under its bank arragements at September 30, 1995. Operating activities were a
source of cash for the Company providing cash of $7,122,000.
Cash of $17,145,000 was used during the first quarter for investing activities.
The Company's primary investing activity was the purchase of $17,451,000 in
plant and equipment. These capital expenditures were made primarily at DMI for
the final phase of its planned expansion program to increase its capacity to 200
million discs annually.
Financing activities provided cash of $8,439,000 principally from borrowings
under the Company's bank facilities offset slightly by, among other things, the
payment of a semiannual cash dividend to its shareholders.
During the balance of fiscal 1996, the Company anticipates the need for
approximately $11,000,000 in cash for capital expenditures. In addition, the
Company may have a need for $8.7 million in the event that certain shareholders
of Quantic Industries, Inc. exercise their right to sell their Quantic shares
to the Company. The Company may also need additional cash as it may consider
acquiring additional businesses that complement its existing operating
segments.
<PAGE>
Also, each of the Company's operating segments will require additional
investments in working capital to maintain growth. These expenditures will be
financed either through cash generated from operations or from borrowings on
the Company's revolving credit facility. The Company believes its cash
generated from operations and funds available under its existing credit
facility or increases in its credit facility are sufficient for all planned
operating and capital requirements.
<PAGE>
II
OTHER INFORMATION
ITEM 1. Legal Proceedings
- --------------------------
1. DISC MANUFACTURING, INC. ET AL. V. MASSEY ET AL., CV-90-H-01029-NE (U.S.
District Court for the Northern District of Alabama). A court-ordered mediation
was conducted in early October 1995. No resolution of this matter was reached.
See the Company's Form 10-K Report for the fiscal year ended June 30, 1995, Item
3, for additional information.
2. ASHBY V. DISC MANUFACTURING, INC., CV-95-N-0247-NE (U.S. District Court for
the Northern District of Alabama). A court-ordered mediation was conducted in
October 1995. Settlement discussions are continuing. See the Company's Form
10-K Report for the fiscal year ended June 30, 1995 for additional information.
3. DISCOVISION ASSOCIATES V. DISC MANUFACTURING, INC., Case No. 95-21 (U.S.
District Court for the District of Delaware). The Court has granted plaintiffs'
motion to amend its complaint to include an additional four patents. See the
Company's Form 10-K Report for the fiscal year ended June 30, 1995, 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) Exhibit 11. Statement regarding Computation of Earnings Per Share.
(b) There were no reports filed on Form 8-K for the quarter ended
September 30, 1995.
<PAGE>
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, 1995 to be signed on its behalf by the undersigned thereunto
duly authorized.
QUIXOTE CORPORATION
DATE: November 13, 1995 /s/Myron R. Shain
---------------------- -----------------------------------
MYRON R. SHAIN
EXECUTIVE VICE PRESIDENT - FINANCE
(Chief Financial & Accounting
Officer)
<PAGE>
Exhibit 11
QUIXOTE CORPORATION AND SUBSIDIARIES
Computation of Net Earnings Per Average Common
and Common Equivalent Share
<TABLE>
<CAPTION>
For the Three Months Ended
September 30, 1995
--------------------------
Primary Fully Diluted
------- -------------
<S> <C> <C>
Net loss as reported $(10,562,000) $(10,562,000)
Add interest expense and deferred charge
amortization (net of income taxes 245,000 (1)
------------ ------------
Adjusted net loss for computation (A) $(10,562,000) $(10,317,000)
============ ============
Average common shares outstanding would
be adjusted for the additional shares
that would be issued assuming conversion
of the debentures and exercise of stock
options and warrants as follows:
Weighted average shares outstanding 7,862,944 7,862,944
Shares assumed issued upon conversion
of debentures 1,051,316
Incremental shares outstanding assuming
exercise of stock options and warrants
using the treasury stock method 161,091 171,861
------------ ------------
Average common and common equivalent
shares outstanding (B) 8,024,035 9,086,121
============ ============
Net loss per common and common
equivalent share (A/B) $(1.32) $(1.14)
====== ======
Notes:
- ------
<FN>
(1) The net loss for the fully diluted calculation are adjusted for interest expense
and deferred charge amortization, assuming exercise of the conversion privilege on the
8% convertible debentures.
</TABLE>
<PAGE>
EXHIBIT 11
QUIXOTE CORPORATION AND SUBSIDIARIES
Computation of Net Earnings Per Average Common
and Common Equivalent Share
<TABLE>
<CAPTION>
For the Three Months Ended
September 30, 1994
--------------------------
Primary Fully Diluted
------- -------------
<S> <C> <C>
Net earnings as reported $2,088,000 $2,088,000
Add interest expense and deferred charge
amortization (net of income taxes) 245,000 (1)
---------- ----------
Adjusted net earnings for computation (A) $2,088,000 $2,333,000
========== ==========
Average common shares outstanding would
be adjusted for the additional shares
that would be issued assuming conversion
of the debentures and exercise of stock
options and warrants as follows:
Weighted average shares outstanding 7,810,457 7,810,457
Shares assumed issued upon conversion
of debentures 1,051,316
Incremental shares outstanding assuming
exercise of stock options and warrants
using the treasury stock method 438,567 438,567
--------- ---------
Average common and common equivalent
shares outstanding (B) 8,249,024 9,300,340
========= =========
Net earnings per common and common
equivalent share (A/B) $.25 $.25
==== ====
Notes:
- ------
<FN>
(1) Net earnings for the fully diluted calculation are adjusted for interest expense
and deferred charge amortization, assuming exercise of the conversion privilege on the
8% convertible debentures.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> SEP-30-1995
<CASH> 509,000
<SECURITIES> 0
<RECEIVABLES> 33,221,000
<ALLOWANCES> 2,499,000
<INVENTORY> 10,648,000
<CURRENT-ASSETS> 45,597,000
<PP&E> 150,852,000
<DEPRECIATION> 55,692,000
<TOTAL-ASSETS> 162,336,000
<CURRENT-LIABILITIES> 33,620,000
<BONDS> 77,300,000
<COMMON> 143,000
0
0
<OTHER-SE> 48,210,000
<TOTAL-LIABILITY-AND-EQUITY> 162,336,000
<SALES> 45,002,000
<TOTAL-REVENUES> 45,002,000
<CGS> 29,827,000
<TOTAL-COSTS> 29,827,000
<OTHER-EXPENSES> 11,210,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,557,000
<INCOME-PRETAX> 2,319,000
<INCOME-TAX> 881,000
<INCOME-CONTINUING> 1,438,000
<DISCONTINUED> (12,000,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,562,000)
<EPS-PRIMARY> (1.32)
<EPS-DILUTED> (1.32)
</TABLE>
