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, 2000
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: 7,304,265 shares of the
Company's Common Stock ($.01-2/3 par value) were outstanding as of September 30,
2000.
1
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30,
-------------------------------
2000 1999
---- ----
<S> <C> <C>
Net sales .................................. $ 21,321,000 $ 19,303,000
Cost of sales .............................. 11,256,000 10,030,000
------------ ------------
Gross profit ............................... 10,065,000 9,273,000
------------ ------------
Operating expenses:
Selling & administrative ................. 5,818,000 5,533,000
Research & development ................... 325,000 327,000
------------ ------------
6,143,000 5,860,000
Operating profit ........................... 3,922,000 3,413,000
------------ ------------
Other income (expense):
Interest income .......................... 10,000 8,000
Interest expense ......................... (329,000) (208,000)
Other .................................... (26,000)
------------ ------------
(319,000) (226,000)
------------ ------------
Earnings before income taxes ............... 3,603,000 3,187,000
Provision for income taxes ................. 1,369,000 1,275,000
------------ ------------
Net earnings ............................... $ 2,234,000 $ 1,912,000
============= ============
Basic earnings per share:
Net earnings.............................. $ .30 $ .24
============= ============
Weighted average common shares
outstanding............................. 7,358,904 8,083,580
============= ============
Diluted earnings per share:
Net earnings.............................. $ .29 $ .23
============= ============
Weighted average common shares
outstanding............................. 7,677,075 8,341,381
============= ============
</TABLE>
See Notes to Consolidated Financial Statements.
2
<PAGE>
QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, June 30,
------------- ------------
2000 2000
ASSETS
--------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents ...................... $ 1,769,000 $ 1,524,000
Accounts receivable, net of allowances
for doubtful accounts of $981,000 at
September 30 and $955,000 at June 30 ......... 16,700,000 20,210,000
Inventories, net:
Raw materials ................................ 3,128,000 2,468,000
Work in process .............................. 1,918,000 1,868,000
Finished goods ............................... 7,170,000 5,736,000
----------- -----------
12,216,000 10,072,000
----------- -----------
Deferred income tax assets .................... 2,254,000 2,254,000
Other current assets .......................... 544,000 259,000
----------- -----------
Total current assets ............................ 33,483,000 34,319,000
----------- -----------
Property, plant and equipment, at cost .......... 28,193,000 27,930,000
Less accumulated depreciation ................... (13,474,000) (12,929,000)
----------- -----------
14,719,000 15,001,000
----------- -----------
Intangible assets, net.......................... 22,221,000 22,626,000
Other assets.................................... 1,783,000 1,318,000
----------- -----------
$72,206,000 $73,264,000
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, June 30,
------------- ------------
2000 2000
LIABILITIES AND SHAREHOLDERS' EQUITY
----------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Current portion of long-term debt ................ $ 627,000 $ 630,000
Accounts payable ................................. 4,222,000 2,613,000
Dividends payable ................................ 1,117,000
Accrued expenses ................................. 4,185,000 5,907,000
Income tax payable................................ 1,959,000 727,000
Liabilities of discontinued operations ........... 1,057,000 1,198,000
---------- -----------
Total current liabilities .......................... 12,050,000 12,192,000
----------- -----------
Long-term debt, net of current portion.............. 13,842,000 15,596,000
Deferred income tax liabilities .................... 1,799,000 1,799,000
Liabilities of discontinued operations.............. 558,000 561,000
----------- -----------
Shareholders' equity:
Preferred stock, no par value; authorized 100,000
shares; none issued.............................
Common stock, par value $.01-2/3; authorized
15,000,000 shares; issued 9,204,028 shares at
September 30 and 9,199,194 shares at June 30.... 153,000 153,000
Capital in excess of par value of stock .......... 33,883,000 33,830,000
Retained earnings ................................ 29,799,000 27,565,000
Treasury stock, at cost, 1,899,763 shares at
September 30 and 1,810,420 shares at June 30.... (19,878,000) (18,432,000)
----------- -----------
Total shareholders' equity ......................... 43,957,000 43,116,000
----------- -----------
$72,206,000 $73,264,000
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30,
-----------------------------
2000 1999
---- ----
<S> <C> <C>
Operating activities:
Net earnings ................................... $ 2,234,000 $ 1,912,000
Adjustments to reconcile net earnings to net cash
provided by operating activities of continuing
operations:
Depreciation ................................. 545,000 588,000
Amortization.................................. 429,000 395,000
Provisions for losses on accounts receivable.. 26,000
Equity loss on investment in TMT joint venture 126,000 25,000
Changes in operating assets and liabilities:
Accounts receivable ........................ 3,484,000 1,932,000
Inventories and other current assets........ (2,429,000) 355,000
Accounts payable and accrued expenses ...... 893,000 (2,692,000)
Income taxes payable ....................... 1,232,000 1,272,000
----------- -----------
Net cash provided by operating activities of
continuing operations........................... 6,540,000 3,787,000
Net cash used in discontinued operations.......... (144,000) (574,000)
----------- -----------
Net cash provided by operating activities......... 6,396,000 3,213,000
----------- -----------
Investing activities:
Purchase of property, plant and equipment ...... (263,000) (432,000)
Investment in TMT joint venture ................ (615,000) (250,000)
Other .......................................... 62,000
----------- -----------
Net cash used in investing activities ............ (878,000) (620,000)
----------- -----------
Financing activities:
Payments on notes payable....................... (157,000) (272,000)
Payments on revolving credit agreement.......... (6,600,000) (6,075,000)
Proceeds from revolving credit agreement........ 5,000,000 3,075,000
Decrease in bank overdrafts..................... (1,006,000)
Payment of semi-annual cash dividend............ (1,117,000) (1,128,000)
Proceeds from exercise of stock options......... 53,000 126,000
Repurchase of common stock for treasury......... (1,446,000)
----------- -----------
Net cash used in financing activities ............ (5,273,000) (4,274,000)
----------- -----------
Increase (decrease) in cash and cash equivalents.. 245,000 (1,681,000)
Cash and cash equivalents at beginning of period.. 1,524,000 2,153,000
----------- -----------
Cash and cash equivalents at end of period ....... $ 1,769,000 $ 472,000
=========== ===========
</TABLE>
Note: During the three months ended September 30, 2000, the Company paid $2,000
for income taxes and paid $344,000 for interest. During the same period last
year the Company paid $2,000 for income taxes and paid $214,000 for interest.
See Notes to Consolidated Financial Statements.
5
<PAGE>
QUIXOTE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
1. The accompanying unaudited consolidated 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. The
June 30, 2000 consolidated balance sheet was derived from audited financial
statements. The interim financial statements and notes should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended June 30,
2000. Management believes the financial statements include all normal recurring
adjustments necessary for a fair presentation of the results for the interim
periods.
2. The provision for income taxes is based upon the estimated effective tax rate
for the year.
3. Operating results for the first three months of fiscal 2001 are not
necessarily indicative of performance for the entire year. The Company's
business is seasonal with a higher level of sales of highway safety products in
the Company's fourth fiscal quarter.
4. The computation of basic and diluted earnings per share is as follows:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
2000 1999
---- ----
<S> <C> <C>
Net earnings per share of common stock:
Basic .............................. $ .30 $ .24
Diluted ............................ $ .29 $ .23
Numerator:
----------
Net earnings available to
common shareholders-basic
and diluted: ......................... $ 2,234,000 $ 1,912,000
=========== ===========
Denominator:
------------
Weighted average shares
Outstanding - basic: ................ 7,358,904 8,083,580
Effect of dilutive securities - common
stock options ....................... 318,171 257,801
----------- ----------
Weighted average of shares
Outstanding - diluted ............... 7,677,075 8,341,381
=========== ===========
</TABLE>
Options to purchase 60,000 shares of common stock at $21 per share were
outstanding during the first quarter of fiscal 2001 and fiscal 2000 but were not
included in the computation of diluted earnings per share because the options'
exercise price was greater than the average market price of the common shares or
anti-dilutive.
5. Certain prior period balances have been reclassified to conform with the
presentation of current balances.
6. Effective July 1, 2000, the Company adopted Financial Accounting Standard
(FAS) No. 133. As the Company does not currently use derivative financial
instruments, the adoption of FAS No. 133 did not have an effect on the Company's
results of operations or its financial position.
6
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 2. 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 2001 increased 10% to
$21,321,000 from $19,303,000 in the first quarter last year primarily due to
increased sales of its truck-mounted attenuator (TMA) product line, highway
advisory radios, and REACT 350(R) crash cushions. Sales of the Company's TMA
product line increased 77% over the first quarter of the prior year primarily
due to strong unit sales of the Safe-Stop(TM) TMA which was introduced during
the first quarter of the prior year. Highway advisory radio sales increased 65%
due to several shipments of sizable orders during the quarter. Sales of REACT
350(R) crash cushions increased 25% due to strong unit sales. Also, sales of the
Company's advanced sensing products, the Energite(R) barrel product line,
custom-molded products and part sales increased during the quarter. These
increases in sales were offset in part by a decrease in sales of the
QuadGuard(R) family of crash cushions, the Universal Module(R) barrels, highway
delineators and the Triton Barrier(R). International sales increased 7% to
$2,186,000 in the first quarter of fiscal 2001 from $2,045,000 in the first
quarter of fiscal 2000.
The gross profit margin in the first quarter of the current year decreased to
47.2% from 48.0% in the first quarter of fiscal 2000. This was due primarily to
increased sales of the lower margin Safe-Stop(TM) TMA and decreased sales of the
higher margin QuadGuard(R) family of crash cushions. Offsetting the overall
decrease in gross margin somewhat were increases in gross margin due to volume
efficiencies associated with the higher level of sales and increased sales of
the higher margin highway advisory radios and advanced sensing products.
Selling and administrative expenses in the first quarter of the current year
increased 5% to $5,818,000 from $5,533,000 in the first quarter last year. The
increase was due to principally to the higher level of sales offset in part by a
decrease in certain employee benefit expenses. Also contributing to the increase
was the equity loss on the investment in the joint venture, Transportation
Management Technologies, L.L.C. (TMT) in the current quarter.
Research and development expenses in the first quarter of the current year
remained consistent at $325,000 compared to $327,000 in the first quarter last
year. During the first quarter of the current year, the research and development
expenses primarily related to the FreezeFree(TM) anti-icing system. The Company
also continued with its testing of a snowplowable road marker as well as a
reflective pavement marker for warm weather climates and other developmental
products.
Operating profit increased 15% to $3,922,000 for the first quarter of the
current year from $3,413,000 in the first quarter of the prior year.
Interest income in the first quarter of the current year was $10,000 compared to
$8,000 in the first quarter last year. Interest income increased as a result of
an increase in the Company's invested cash. Interest expense in the first
quarter of the current year was $329,000 compared to $208,000 in the first
quarter last year. The increase in interest expense is due to the higher level
of outstanding debt during the current quarter.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company's effective income tax rate for the current quarter was 38% compared
to an effective income tax rate of 40% in the same quarter last year. The
Company believes its effective income tax rate for the current year will be
approximately 38%.
Net earnings increased 17% to $2,234,000, or $.29 per diluted share, for the
first quarter of the current year from $1,912,000, or $.23 per diluted share, in
the first quarter of the prior year.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Company had cash and cash equivalents of $1,769,000 and access to additional
funds of $29,300,000 under its bank arrangements as of September 30, 2000.
Continuing operating activities were a source of cash for the Company for the
first quarter of fiscal 2001 providing $5,534,000. Discontinued operations,
however, used cash of $144,000 primarily for lease commitments. This resulted in
net cash provided from operating activities of $5,390,000.
Investing activities used cash of $878,000 during the current quarter including
$263,000 for the purchase of equipment and $615,000 for the Company's investment
in TMT.
Financing activities used cash of $4,267,000 during the current quarter. The
payment of the Company's semi-annual cash dividend used cash of $1,117,000. The
Company also reduced its outstanding revolving credit facility by $1,600,000. In
addition, the Company used cash of $157,000 for payment of notes payable due in
connection with the acquisitions of Roadway Safety Services and Nu-Metrics, Inc.
and paid $1,446,000 to acquire 89,343 shares of its own stock for the treasury.
Offsetting these cash payments somewhat, the Company received cash of $53,000
for the exercise of common stock options.
For fiscal 2001, the Company anticipates needing less than $3,000,000 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. 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.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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 outlook for products and markets of the TMT joint
venture and its funding requirements; the successful completion and integration
of acquisitions; continued funding from federal highway legislation; and
competitive and general economic conditions.
9
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
--------------------------
ODIN SYSTEMS INTERNATIONAL. INC. v. ENERGY ABSORPTION SYSTEMS, INC., NO.
CV200-082, U.S. District Court for the Southern District of Georgia. Odin
Systems International, Inc. has filed a second lawsuit in the Southern District
of Georgia, No. CV200-124, to vacate the arbitration award of $2.1 million
granted to Energy Absorption Systems, Inc. in August 2000 and has filed similar
objections to the Petition for Confirmation of the Arbitration Award filed by
Energy Absorption in the Northern District of Illinois, No. OOC5388. See the
Company's Form 10-K for the period ended June 30, 2000, 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) Exhibits
Exhibit 27.
(b) Reports on Form 8-K
None.
10
<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, 2000 to be signed on its behalf by the undersigned thereunto
duly authorized.
QUIXOTE CORPORATION
DATED: November 13, 2000 /s/ Daniel P. Gorey
-------------------- ----------------------------
DANIEL P. GOREY
Chief Financial Officer,
Vice President and Treasurer
(Chief Financial & Accounting
Officer)
11
