<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, 1996
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: 7,974,612 shares of the
Company's Common Stock ($.01-2/3 par value) were outstanding as of September
30, 1996.
<PAGE>
PART I
FINANCIAL INFORMATION
QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1996 1995
---- ----
<S> <C> <C>
Net sales.............................$ 31,593,000 $ 37,643,000
Cost of sales......................... 21,691,000 25,884,000
------------ ------------
Gross profit.......................... 9,902,000 11,759,000
Selling & administrative expenses..... 7,171,000 6,954,000
Research & development expenses....... 444,000 297,000
------------ ------------
7,615,000 7,251,000
Operating profit...................... 2,287,000 4,508,000
Other income (expenses):
Interest income..................... 1,000 75,000
Interest expense.................... (1,092,000) (1,557,000)
Other............................... (59,000) (173,000)
------------ ------------
(1,150,000) (1,655,000)
------------ ------------
Earnings from continuing operations
before income taxes.................. 1,137,000 2,853,000
Provision for income taxes............ 341,000 1,084,000
------------ ------------
Earnings from continuing
operations........................... 796,000 1,769,000
Loss from discontinued operations..... (12,331,000)
------------ ------------
Net earnings (loss)...................$ 796,000 $(10,562,000)
============ ============
Per share data:
Earnings from continuing operations...$ .10 $ .22
Loss from discontinued operations..... (1.54)
------------ ------------
Net earnings (loss)...................$ .10 $ (1.32)
============ ============
Weighted average common and common
equivalent shares outstanding......... 7,988,792 8,024,035
============ ============
<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 1996 1996
- ------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash & cash equivalents.....................$ 1,945,000 $ 2,250,000
Accounts receivable, net of allowances
for doubtful accounts of $952,000 at
September 30 and $740,000 at June 30...... 24,397,000 22,433,000
Refundable income taxes..................... 3,016,000 3,016,000
Inventories:
Raw materials............................. 2,881,000 3,957,000
Work in process........................... 1,708,000 1,052,000
Finished goods............................ 1,088,000 944,000
------------ ------------
5,677,000 5,953,000
Deferred income tax assets.................. 2,643,000 2,643,000
Other current assets........................ 1,685,000 1,223,000
------------ ------------
Total current assets.......................... 39,363,000 37,518,000
------------ ------------
Property, plant and equipment, at cost........ 145,352,000 145,545,000
Less accumulated depreciation............... (59,616,000) (57,219,000)
------------ ------------
85,736,000 88,326,000
------------ ------------
Other assets ................................. 3,886,000 3,985,000
------------ ------------
$128,985,000 $129,829,000
============ ============
<FN>
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
<PAGE>
QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
<TABLE>
<CAPTION>
September 30, June 30,
---------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY 1996 1996
- ------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable...........................$ 4,568,000 $ 3,648,000
Dividend payable........................... 946,000
Accrued expenses........................... 14,830,000 13,259,000
Income taxes payable....................... 297,000
------------ ------------
Total current liabilities.................... 19,695,000 17,853,000
------------ ------------
Long-term debt............................... 54,500,000 58,000,000
Net liabilities of discontinued operations... 4,385,000 4,428,000
Deferred income tax liabilities.............. 1,929,000 1,929,000
Shareholders' equity:
Common stock............................... 145,000 145,000
Capital in excess of par value of stock.... 29,812,000 29,751,000
Retained earnings.......................... 23,992,000 23,196,000
Treasury stock, at cost.................... (5,473,000) (5,473,000)
------------ ------------
48,476,000 47,619,000
------------ ------------
$128,985,000 $129,829,000
============ ============
<FN>
See Notes to Consolidated Condensed Financial Statements.
</TABLE>
<PAGE>
QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1996 1995
------------ -------------
<S> <C> <C>
Cash from operating activities:
Net earnings (loss)......................................$ 796,000 $(10,562,000)
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Depreciation........................................... 3,415,000 3,780,000
Amortization........................................... 108,000 441,000
Provisions for losses on accounts receivable........... 212,000 67,000
Changes in operating assets and liabilities:
Increase in accounts receivable....................... (2,176,000) (2,697,000)
Increase in inventories and other current assets...... (186,000) (1,367,000)
Increase in accounts payable and
accrued expenses..................................... 2,491,000 5,263,000
Increase (decrease) in income taxes payable........... 297,000 (1,227,000)
Discontinued operations-noncash charges and working
capital changes......................................... (43,000) 13,424,000
------------ ------------
Net cash provided by operating activities............... 4,914,000 7,122,000
------------ ------------
Investing activities:
Purchase of property, plant and equipment............... (825,000) (17,451,000)
Capitalized systems, design and software costs.......... (169,000)
Decrease in funds deposited with IDB trustee............ 541,000
Other................................................... (9,000) (66,000)
------------ ------------
Net cash used in investing activities................... (834,000) (17,145,000)
------------ ------------
Financing activities:
Payments on revolving line of credit.................... (3,500,000) (700,000)
Borrowings under short-term note payable................ 10,000,000
Payment of semi-annual dividend......................... (946,000) (861,000)
Proceeds from exercise of stock options................. 61,000
------------ -----------
Net cash (used in) provided by financing activities..... (4,385,000) 8,439,000
------------ -----------
Net change in cash and cash equivalents.................. (305,000) (1,584,000)
Cash and cash equivalents at beginning of period......... 2,250,000 2,093,000
------------ -----------
Cash and cash equivalents at end of period...............$ 1,945,000 $ 509,000
============ ===========
<FN>
Note: In the current quarter the Company made cash payments of $44,000 for income
taxes and paid $661,000 for interest costs. In last year's first quarter the Company
had a net refund of $83,000 for income taxes and paid $809,000 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, 1996 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, 1997.
2. During the first quarter of fiscal 1996, the Company discontinued the
operations of Legal Technologies, Inc., which had been involved in the
development, manufacture and sale of products and systems for the legal
community. The results of operations of the legal technologies segment and
the estimated loss on its disposition are presented as discontinued operations
in the accompanying consolidated statements of operations. The income tax
benefit for discontinued operations for the quarter ended September 30, 1995,
was $7,914,000.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CURRENT YEAR QUARTER VERSUS PRIOR YEAR QUARTER
The Company's sales for the first quarter of fiscal 1997 decreased 16% to
$31,593,000 from $37,643,000 in the same quarter last year due to a decline in
sales at Disc Manufacturing, Inc. (DMI). Sales at DMI decreased 19% in the
current quarter to $20,497,000 from $25,429,000 in the first quarter last year
due to the loss of a major customer, BMG Music, that occurred in last year's
second quarter. BMG Music accounted for $8 million in sales in last year's
first quarter. As a result, CD-Audio unit sales decreased 35% in the current
quarter from the same quarter last year. CD-ROM unit sales increased 12%
during the first quarter from the same quarter last year. As a result of
continued declines in the average unit selling prices of these products, CD-
Audio sales dollars decreased 44% and CD-ROM sales dollars increased 4% in the
quarter from last year. These declines in selling price are due to, among
other things, a continued increase in U.S. production capacity. Sales at
Energy Absorption Systems, Inc. for the current quarter decreased 9% to
$11,096,000 from $12,214,000 in the same quarter last year. This was due to
a decline in sales of the GREAT (TM) product line which declined to
$2,515,000 in the current quarter from $3,597,000 in the first quarter last
year. There was also a decline in parts sales of $321,000 which was offset
somewhat by an increase in Energite (R) sales of $223,000. The Company
believes the decline in GREAT (TM) sales may be due in part to a postponement
in sales in anticipation of a replacement product, the QuadGuard, introduced
by Energy Absorption late in the current quarter.
The gross profit margin in the first quarter remained consistent with the
first quarter last year at 31.3% and 31.2%, respectively. DMI's gross profit
margin decreased as a result of a decrease in the selling prices of its
products but this was offset by decreases in material costs, principally jewel
box price declines. The Company expects to experience continued pressure on
disc selling prices which will have a limiting effect on gross profit margins
at DMI. Energy Absorption's gross profit margin for the current quarter
declined slightly as a result of increased depreciation and other costs due to
the expansion of its Pell City facility which was completed in fiscal 1996.
Selling and administrative expenses in the current quarter increased 3% to
$7,171,000 from $6,954,000 in the same quarter last year attributable to DMI.
DMI's selling and administrative expenses increased principally due to an
increase in legal expenses related to defending a patent infringement claim
against DMI. Energy Absorption's selling and administrative expenses remained
at a level consistent with the first quarter last year.
Research and development expenses in the current quarter increased 49% to
$444,000 compared to $297,000 in the same quarter last year. This increase is
due to expenditures at Energy Absorption for the development of new products
to replace some of Energy Absorption's existing products in order to meet
revised highway safety standards known as NCHRP 350. These new standards
increase safety requirements to include heavier and higher center of gravity
vehicles.
<PAGE>
Interest income in the current quarter was $1,000 compared to $75,000 in the
first quarter last year due to the redemption of the Company's $6 million
restricted certificate of deposit posted as injunction security for certain
litigation. The Company replaced this CD with a surety bond backed by a
letter of credit in the third quarter of last year. Interest expense in the
current quarter decreased 30% to $1,092,000 from $1,557,000 in the first
quarter last year. This was due to a decrease in long-term debt to
$54,500,000 as of September 30, 1996 compared to $78,275,000 at the same time
last year. Other expenses in the current quarter decreased to $59,000 from
$173,000 in the same quarter last year.
The Company's effective tax rate decreased in the current quarter to 30% from
38% from the same quarter last year due to the anticipated realization of
certain tax benefits in the current year along with the settlement of certain
tax contingencies.
LIQUIDITY AND CAPITAL RESOURCES
The Company has cash of $1,945,000 and additional funds of $28,500,000
available under its bank arrangements at September 30, 1996. Operating
activities were a source of cash for the Company providing cash of $4,914,000.
Cash of $834,000 was used during the first quarter for investing activities.
The Company's principal investing activity was the purchase of equipment for
$825,000.
Financing activities used cash of $4,385,000 due to payments made on the
Company's bank debt of $3,500,000 and from the payment of a semiannual cash
dividend to its shareholders of $946,000.
During the balance of fiscal 1997, the Company anticipates the need for
approximately $7,000,000 in cash for capital expenditures. The Company may
also need additional cash as it considers acquiring businesses that complement
its existing operating segments. 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 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., Case No. CV90-1214
(Madison County Circuit Court, Alabama). In September 1996, the Supreme Court
of Alabama rendered its opinion on the parties' appeals of the Circuit Court's
May 1995 Order. The Supreme Court affirmed the dismissal of those aspects of
Disc Manufacturing, Inc.'s complaint based on corporate opportunity to acquire
Memory-Tech, but reinstated all other claims contained in Counts I, II and IV.
Consequently, DMI has pending claims for breach of fiduciary duty,
interference with contract and business relations, fraud and conspiracy. The
Supreme Court affirmed dismissal of claims of the defendants except for
wrongful injunction, breach of contract, fraud, state dilution, palming off
and alleged interference claims. Defendants have filed an Application for
Rehearing which is pending. DMI has filed an Application for Rehearing, which
is also pending, concerning the Court's failure (apparently due to oversight)
to address DMI's appeal of the dismissal of its claim for unjust enrichment.
See the Company's Form 10-K Report for the fiscal year ended June 30, 1996,
item 3, for additional information.
2. MICRO DYNAMICS V. STENOGRAPH CORPORATION, Civil Action No. CD-94-1805
(U.S. District Court for the District of Maryland). In October 1996, the
District Court granted Stenograph's motion for summary judgment in part,
dismissing Micro Dynamics' claim based on quantum meruit, but reserving
judgment until trial on the trade secret and trademark claims. Trial has been
set for December 16, 1996. See the Company's Form 10-K Report for the fiscal
year ended June 30, 1996, 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, 1996.
(c) Exhibits
None.
<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, 1996 to be signed on its behalf by the undersigned
thereunto duly authorized.
QUIXOTE CORPORATION
DATE: November 13, 1996 /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, 1996
--------------------------
Primary Fully Diluted
------- -------------
<S> <C> <C>
Net earnings as reported $ 796,000 $ 796,000
Add interest expense and deferred charge
amortization (net of income taxes) 221,000
---------- ----------
Adjusted net earnings for computation (A) $ 796,000 $1,017,000
========== ==========
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 7,967,301 7,967,301
Shares assumed issued upon conversion
of debentures 947,368
Incremental shares outstanding assuming
exercise of stock options and warrants
using the treasury stock method 21,491 33,979
--------- ---------
Average common and common equivalent
shares outstanding (B) 7,988,792 8,948,648
========= =========
Net earnings per common and common
equivalent share (A/B) $.10 $.11
==== ====
<FN>
Note:
- ------
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>
<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
------------ ------------
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)
====== ======
<FN>
Note:
- ------
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>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 1,945,000
<SECURITIES> 0
<RECEIVABLES> 25,349,000
<ALLOWANCES> 952,000
<INVENTORY> 5,677,000
<CURRENT-ASSETS> 39,363,000
<PP&E> 145,352,000
<DEPRECIATION> 59,616,000
<TOTAL-ASSETS> 128,985,000
<CURRENT-LIABILITIES> 19,695,000
<BONDS> 54,500,000
0
0
<COMMON> 145,000
<OTHER-SE> 48,331,000
<TOTAL-LIABILITY-AND-EQUITY> 128,985,000
<SALES> 31,593,000
<TOTAL-REVENUES> 31,593,000
<CGS> 21,691,000
<TOTAL-COSTS> 21,691,000
<OTHER-EXPENSES> 7,615,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,092,000
<INCOME-PRETAX> 1,137,000
<INCOME-TAX> 341,000
<INCOME-CONTINUING> 796,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 796,000
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
