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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 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 0-16821
UTILX CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 91-1171716
(State of Incorporation) (I.R.S. Employer
Identification Number)
22820 RUSSELL ROAD (98032)
P. O. BOX 97009
KENT, WASHINGTON 98064-9709 (253) 395-0200
(Address of Principal Executive Offices) (Registrant's Telephone Number)
Indicate by check mark whether the Registrant has (1) 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) been subject to such
filing requirements for the past 90 days. Yes X No
As of June 30, 2000, 7,475,944 shares of Common Stock were outstanding.
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TABLE OF CONTENTS
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ITEM PAGE
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PART I
FINANCIAL INFORMATION
1. Financial Statements
Consolidated Balance Sheet
June 30, 2000 and March 31, 2000............................................................ 3
Consolidated Statement of Operations
for the Three Months Ended
June 30, 2000 and 1999...................................................................... 4
Consolidated Statement of Cash Flows
for the Three Months Ended
June 30, 2000 and 1999...................................................................... 5
Notes to Consolidated Financial Statements.................................................. 6
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................................... 9
3. Quantitative and Qualitative Disclosures about Market Risk.................................. 13
PART II
1. Legal Proceedings........................................................................... 13
2. Changes in Securities and Use of Proceeds................................................... 13
3. Defaults Upon Senior Securities............................................................. 13
4. Submission of Matters to a Vote of Security Holders......................................... 13
5. Other Information........................................................................... 13
6. Exhibits and Reports on Form 8-K............................................................ 13
Signatures.................................................................................. 14
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Part I - Financial Information
ITEM 1. FINANCIAL STATEMENTS
UTILX CORPORATION
CONSOLIDATED BALANCE SHEET
JUNE 30 AND MARCH 31, 2000
(IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
June 30 March 31
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(Unaudited)
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Current assets:
Cash and cash equivalents $ 561 $ 769
Accounts receivable, net 24,198 24,011
Materials, supplies and inventories, net of allowance
of $1,330 and $1,450, respectively 5,063 4,755
Income taxes receivable 82 82
Prepaid expenses and other 930 902
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Total current assets 30,834 30,519
Equipment and improvements, net 10,999 11,573
Other assets, net 448 364
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Total assets $42,281 $42,456
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving credit facility $ 3,310 $ 3,897
Current portion of capital lease obligations 1,343 1,363
Accounts payable 8,573 7,711
Other current liabilities 6,068 6,563
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Total current liabilities 19,294 19,534
Capital lease obligations, net of current portion 1,425 1,747
Other long term liabilities 1,189 1,090
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Total liabilities 21,908 22,371
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Commitments and contingencies (Note 6):
Stockholders' equity:
Common stock, $0.01 par value
(authorized 25,000,000 shares, 7,475,944 and 7,475,944 shares
issued and outstanding, respectively) 75 75
Additional paid-in capital 18,665 18,665
Retained earnings 2,280 1,997
Accumulated other comprehensive loss (647) (652)
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Total stockholders' equity 20,373 20,085
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Total liabilities and stockholders' equity $42,281 $42,456
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(See Notes to Consolidated Financial Statements)
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UTILX CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
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2000 1999
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Revenues $27,015 $23,375
Cost of revenues 24,322 20,380
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Gross profit 2,693 2,995
Operating expenses:
Selling, general and administrative 2,013 2,106
Research and engineering 227 188
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Total operating expenses 2,240 2,294
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Operating income (loss) 453 701
Other (income) expense, net 170 138
Income (loss) before income taxes 283 563
Income tax provision 0 0
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Net income (loss) $ 283 $ 563
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Earnings (loss) per share: (Note 2)
Basic $ 0.04 $ 0.08
Diluted $ 0.04 $ 0.07
CALCULATION OF COMPREHENSIVE INCOME (LOSS):
Net income (loss) $ 283 $ 563
Accumulated other comprehensive income (loss), net 5 (16)
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Comprehensive income (loss) $ 288 $ 547
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</TABLE>
(See Notes to Consolidated Financial Statements)
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UTILX CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
(IN THOUSANDS)
(UNAUDITED)
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2000 1999
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OPERATING ACTIVITIES:
Net income (loss) $ 283 $ 563
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 953 1,088
Gain on sale equipment (12) (6)
Changes in assets and liabilities (1,448) (3,196)
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Total adjustments (507) (2,114)
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Net cash provided by (used in) operating
activities (224) (1,551)
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INVESTING ACTIVITIES:
Cost of additions to equipment (353) (248)
Proceeds from sale of equipment 26 23
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Net cash used in investing activities (327) (225)
FINANCING ACTIVITIES:
Net borrowings (repayments) on note payable (587) 112
Issuance of common stock 0 15
Net increase (decrease) in book overdraft 1,267 1,494
Principal payments on capital leases (342) (294)
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Net cash provided by (used in) financing
activities 338 1,327
EFFECT ON CASH FLOWS OF
FOREIGN CURRENCY TRANSACTIONS 5 (5)
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Net increase (decrease) in cash and cash
equivalents (208) (454)
CASH AND CASH EQUIVALENTS
Beginning of period 769 1,580
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End of period $ 561 $ 1,126
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</TABLE>
(See Notes to Consolidated Financial Statements)
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. FINANCIAL STATEMENT PRESENTATION
In the opinion of the management of UTILX Corporation (the "Company"), the
accompanying unaudited consolidated financial statements contain all
adjustments necessary to present fairly the financial position and operating
results for the three month periods ended June 30, 2000 and 1999. The
statements should be read in conjunction with the March 31, 2000 audited
consolidated financial statements included in the fiscal 2000 Annual Report
on Form 10-K.
Certain prior year amounts have been reclassified to conform to the fiscal
2001 presentation, with no effect on previously reported net income (loss) or
retained earnings.
2. EARNINGS PER SHARE
Basic earnings (loss) per share is computed by dividing net income (loss) by
the weighted average number of shares of Common Stock of UTILX Corporation,
$0.01 par value per share (the "Common Stock") outstanding during the period.
Diluted earnings (loss) per share is computed by dividing net income (loss)
by the sum of the weighted average number of shares of Common Stock and, when
dilutive, common stock equivalents outstanding during the period. Common
stock equivalents include shares issuable upon exercise of the Company's
stock options, net of the number of shares repurchasable on the open market
with proceeds from the exercise of such options.
Earnings (loss) per share is calculated as follows:
Basic earnings (loss) per common share:
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Three Months Ended
June 30,
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2000 1999
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Net income (loss) $ 283 $ 563
Divided by weighted average common shares
outstanding 7,476 7,428
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Basic earnings (loss) per common share $ 0.04 $ 0.08
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</TABLE>
Diluted earnings (loss) per common share:
<TABLE>
<CAPTION>
Three Months Ended
June 30,
------------------------------------
2000 1999
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<S> <C> <C>
Net income (loss) $ 283 $ 563
Weighted average share outstanding 7,476 7,428
Stock options and warrants assumed
exercised - net, dilutive 439 108
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Total diluted shares outstanding 7,915 7,536
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Diluted earnings (loss) per common share $ 0.04 $ 0.07
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3. ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
(In thousands)
June 30, 2000 March 31, 2000
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(unaudited)
<S> <C> <C>
North American customers:
Completed work not yet billed $11,128 $ 8,923
Billed but uncollected 12,759 14,702
International customers 841 1,084
Less allowance for doubtful accounts (530) (698)
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Total $24,198 $24,011
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</TABLE>
4. ACCRUED LIABILITIES
<TABLE>
<CAPTION>
(In thousands)
June 30, 2000 March 31, 2000
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(unaudited)
<S> <C> <C>
Accured payroll and related costs $2,062 $2,464
Accrued taxes 389 453
Accrued insurance 2,894 2,540
Other 723 1,106
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Total $6,068 $6,563
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5. REVOLVING CREDIT FACILITY
The Company has a $12,000,000 revolving credit facility from FINOVA Capital
Corporation ("FINOVA") which expires April 20, 2002. Outstanding borrowings
under the facility are not to exceed the lesser of $12,000,000 or the sum of
(a) 85% of eligible accounts receivable, plus, (b) an amount not to exceed
the lesser of 50% of the auction value of the Company's equipment or
$4,000,000, less, (c) any loan reserves. The FINOVA facility is
collateralized by the Company's assets.
The credit agreement requires that the Company maintain certain financial
covenants, including requirements to maintain certain levels of net worth and
debt service coverage. The agreement also places certain restrictions on
capital expenditures, other indebtedness and executive compensation.
Borrowings bear interest at prime (9.50% at June 30, 2000) plus .5%. The
Company pays annual fees of $60,000, monthly fees of $2,000 and may be
required to pay certain termination fees if the Company terminates the
facility prior to the expiration of the term.
At June 30, 2000, the Company had an outstanding balance of $3,310,000 under
this facility, compared to $3,897,000 at March 31, 2000. For the first
quarter of fiscal 2001 and fiscal 2000, the weighted average borrowing rate
was 9.79% and 8.96%, respectively.
6. COMMITMENTS AND CONTINGENCIES
The Company is involved in various litigation matters, both as a plaintiff
and as a defendant, arising in the ordinary course of its business.
Management expects that these matters will not have a materially adverse
effect on the consolidated financial position, results of operations or
liquidity of the Company.
7. SALE OF COMPANY
On June 29, 2000, the Company entered into an Agreement and Plan of Merger
(the "Merger Agreement") with InfrastruX Group, Inc. ("InfrastruX Group") and
InfrastruX Acquisition Inc., a wholly owned subsidiary of InfrastruX Group,
which provided for the acquisition of the Company. Pursuant to the Merger
Agreement, InfrastruX Acquisition, Inc. commenced a tender offer for all of
the outstanding shares of the Company's common stock (the "Shares") at $6.125
per Share, net to the sellers in cash (the "Offer"). InfrastruX Group is a
wholly owned subsidiary of Puget Sound Energy, Inc.
The Offer was successfully completed on July 28, 2000. As a result,
InfrastruX Acquisition Inc. will merge into the Company (the "Merger"), and
all of the Shares not purchased in the Offer (other than Shares held by
InfrastruX Group or its subsidiaries or any Shares as to which appraisal
rights have been properly exercised under applicable law) will be converted
into the right to receive $6.125 per share.
As a result of the Merger, the Company will become a wholly owned subsidiary
of InfrastruX Group.
The Company's acquisition costs will be expensed as incurred during the
second quarter.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
REVENUES
Consolidated revenues increased 15.6% in the first quarter of fiscal year
2001 compared to the same period of fiscal 2000.
NORTH AMERICAN OPERATIONS. Revenues from domestic operations increased 18% or
$3.9 million in the first quarter of fiscal year 2001 compared to the same
period in fiscal 2000.
Revenues increased 46% from $4.9 million in the first quarter of fiscal 2000
to $7.2 million in the same period of fiscal 2001 and to 10% from $16.9
million in the first quarter of fiscal 2000 to $18.5 million in the same
period of fiscal 2000 for CableCURE services and FlowMOLE services,
respectively. These increases are due to additional sales to both new and
existing customers.
INTERNATIONAL OPERATIONS. Revenues decreased 19.1% or $301,000 in the first
quarter of fiscal 2001 respectively, compared with the same period in fiscal
2000. This decrease in revenue was primarily due to a decrease in revenue
from an Asian licensee.
GROSS PROFIT
Gross profit decreased $607,000 in the first quarter fiscal 2001 compared to
the same period in fiscal 2000.
NORTH AMERICAN OPERATIONS. Gross profit from domestic operations decreased
13.1% or $330,000 for the first quarter of fiscal 2001 compared to the same
period of fiscal 2000. This decrease in gross profit was primarily due to a
decrease in the utilization of a large diameter drilling system, as well as a
decrease in the profitability of certain contracts for FlowMOLE services.
INTERNATIONAL OPERATIONS. Gross profit from international operations
decreased 35.5% or $276,000 for the first quarter of fiscal 2001 compared to
the same period in fiscal 2000. This decrease was due to the decrease in
gross profit from an Asian licensee.
OPERATING EXPENSES AND OTHER EXPENSES
Operating expense in the first quarter of fiscal 2001 decreased $359,000 or
13.8%, compared to the same periods in fiscal 2000. Operating expense
decreased primarily as a result of a decrease in general and administrative
costs.
Other expense increased $32,000 in the first quarter of fiscal 2001 over the
same period in the prior year. The increase is a result of a decrease in the
amount of gain from the disposal of assets, which offsets other total
expense, compared with the same period in the prior year.
INCOME TAX PROVISION
The Company would normally expect an effective income tax rate of
approximately 37.0% on positive pretax income. This exceeds the federal
statutory rate due to the impact of state income taxes and nondeductible
expenses. In order to realize the aggregate carrying value of its net
deferred tax assets, the Company will be required to generate certain amounts
of taxable income in future years. Management of the Company has made certain
operational and marketing improvements to achieve such levels of future
income; however, the continuing success of such efforts is uncertain. The
Company has incurred losses in two of its past three fiscal years. Management
has also evaluated its current normalized performance which takes into
account certain short term contracts with customers, the operating capacity
of its drilling fleet as well as the risks and uncertainties associated with
the business. (See "Important Risk Factors Regarding Forward Looking
Statements.") Accordingly, under the provisions of Statement of Financial
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Accounting Standards (SFAS) No. 109 "Accounting for Income Taxes", management
is currently unable to conclude that the full realization of the net deferred
tax assets is more likely than not. Therefore the Company maintains a
valuation against the majority of its net deferred tax asset. An income tax
provision was not recorded against operating profits generated in fiscal
2000, due to the reversal of a portion of the valuation allowance.
NET INCOME
As a result of the foregoing, the Company recorded net income of $283,000 in
the first quarter of fiscal 2001, compared to a net income of $563,000 in the
first quarter of fiscal 2000.
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (EBITDA)
"EBITDA" is defined as net income plus interest expense, plus the provision
for income taxes, plus depreciation and amortization. Management believes
that EBITDA is a relevant and helpful measurement of the Company's operating
performance, liquidity and its ability to service its debt and other fixed
obligations and that EBITDA is commonly reported and widely used by analysts,
investors and other interested parties because it eliminates many differences
in financial, capitalization, and tax structures. EBITDA should be used as a
supplement to net income, operating income and cash flow from operations and
other measures of financial performance and liquidity reported in accordance
with generally accepted accounting principles (GAAP), and not as a substitute
for such measurements. EBITDA as used in this report may not be comparable to
similarly titled measures reported by other companies due to differences in
accounting policies.
Cash flows from operating, investing and financing activities in accordance
with GAAP were $(224,000), $(327,000) and $338,000 for the first quarter of
fiscal 2001, respectively, compared to $(1,551,000) $(225,000) and $1,327,000
compared to same period of fiscal 2000.
The Company had consolidated EBITDA of $1.4 million for the first quarter of
fiscal 2001, as compared to $1.8 million for the same period of fiscal 2000.
At June 30, 2000 interest expense was $181,000, compared to $184,000, for the
same period of fiscal 2000. Depreciation and amortization expense decreased
to $953,000 for the first quarter of 2001, from $1.088 million for the same
period in fiscal 2000. Included in total interest expense is interest on
capital leases. For the first quarter of fiscal 2001, interest on capital
leases was $41,000 and $48,000 for same period of fiscal 2000. Interest
expense on capital leases is included in cost of sales in the accompanying
financial statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company has a revolving credit facility with FINOVA Capital Corporation
for $12.0 million which expires April 22, 2002. The facility is secured
primarily by the assets of the Company. See Note 5 of Notes to Consolidated
Financial Statements.
At June 30, 2000, the Company had unused sources of liquidity consisting of
$561,000 in cash and cash equivalents and an available balance on its
committed line of credit from FINOVA of $8,690,000. This compares to $769,000
in cash and cash equivalents and an available balance on its committed line
of credit of $8,103,000 at March 31, 2000. Uses of cash during the first
three months of fiscal 2001 primarily related to capital expenditures of
$353,000 and changes in working capital.
Capital expenditures in the three months ended June 30, 2000, primarily
included the purchase of equipment for field operations.
The Company relies on cash flow from operations and lease financing, in
addition to its line of credit, to fund operations and capital expenditures.
There can be no assurance that these facilities or similar replacement
facilities will continue to be available on terms acceptable to the Company
or at all. The Company's financial performance will be a key factor in
determining the availability of such facilities. If these facilities became
unavailable to the Company, or
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if the Company is required to seek additional capital to fund anticipated
growth, the Company would be required to seek other sources of public or
private capital. There can be no assurance that adequate funds will be
available to the Company through such sources when needed or will be
available on terms favorable to the Company. If at any time the Company is
unable to obtain sufficient funds, the Company will be required to restrict
or eliminate plans for expansion and other aspects of its operations or may
be unable to meet its financial obligations on a timely basis.
REVIEW AND OUTLOOK
As electric power and telephone utility companies enter a more competitive
era, they are finding that their customers are placing increasing emphasis on
reliability. In fact, end user reliability expectations have been heightened
by the marketing campaigns of these utility companies. At the same time,
these utility companies are attempting to reduce their operating and
maintenance expenditures to generate more profits in efforts to make
themselves more attractive investments for their own shareholders. The
Company is in an excellent position to take advantage of this fundamental
dilemma of its customers. In addition, the increased reliance on outsourcing
by these utility companies has further positioned the Company for growth. The
Company believes it has treated or replaced only a small fraction of the
cable that will need treatment or replacement over the coming years and that
the opportunity this represents is an ongoing and significant issue for its
customers. The Company is accelerating its efforts to focus on its CableCURE
business in the electric power and telephone markets because of its
cost-effectiveness for the customer.
CABLECURE AND RELATED SERVICES. The Company expects the trend towards
increased customer acceptance of the CableCURE-Registered Trademark- process
to continue, especially with rulings in 2000 from the Federal Energy
Regulatory Commission ("FERC") and the Rural Utilities Service ("RUS") that
public utilities may capitalize the cost of CableCURE-Registered Trademark-
services. The Company also expects growth of its CableCURE-Registered
Trademark- services in Europe and Asia. To improve customer acceptance of
CableCURE-Registered Trademark-, the Company now offers a twenty year
warranty on CableCURE-Registered Trademark- services. Management does not
believe that this will have a material impact on the financial position or
operating results of the Company based on historical results and laboratory
tests. The Company anticipates that the trend towards lower pricing for cable
replacement will continue to place downward pressure on the price for
CableCURE-Registered Trademark- services.
The Company expects to see increased volumes from new customers in fiscal
2001 due to the FERC and RUS rulings, and some increased volumes from
existing customers, but expects to continue to be dependent upon a small
number of customers. The Company's goal is to reduce this dependency through
growth. Because the Company's customers can typically cancel their work on
short notice, a certain degree of uncertainty always exists in the Company's
future revenue levels. See also the discussion under UTILITIES' BUDGETARY
CONSIDERATIONS, COMPETITION, SEASONAL FACTORS and DOW CORNING CORPORATION
included under "Important Risk Factors Regarding Forward-Looking Statements",
below.
INTERNATIONAL OPERATIONS. In fiscal 2000, the Company ceased selling its
drilling systems in the international market. However, the Company does
continue to support the drilling systems in place with the continued sale of
spare parts. Management expects most of its international growth to come from
CableCURE-Registered Trademark- services in Europe and Asia.
IMPORTANT RISK FACTORS REGARDING FORWARD-LOOKING STATEMENTS
The Company may from time to time make written or oral forward-looking
statements. Written forward-looking statements may appear in documents filed
with the Securities and Exchange Commission, in press releases and in reports
to stockholders. The Private Securities Litigation Reform Act of 1995
contains a safe harbor for forward-looking statements on which the Company
relies in making such disclosures. In connection with this safe harbor
provision, the Company is hereby identifying important factors that could
cause actual results to differ materially from those contained in any
forward-looking statement made by or on behalf of the Company. Any such
statement is qualified by reference to the following cautionary statements:
UTILITIES' BUDGETARY CONSIDERATIONS. Budgetary considerations arising from
unfavorable regulatory determinations on matters such as rate-setting,
capitalization of services performed by the Company, approval of mergers and
acquisitions, siting of power production facilities, reductions in new housing
starts, reductions in electric utility revenues due to mild weather, general
economic downturns or overall utility profitability relative to its objectives
have affected the ability of some of the Company's utility customers to sustain
their cable replacement or other
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maintenance programs and, accordingly, can adversely impact the Company's
revenues and profits. Because cable replacement, restoration and other
maintenance programs are, to a substantial extent, deferrable and the
Company's contracts with its utility customers permit termination of orders
on relatively short notice, postponement or cancellation of such programs by
customers can cause substantial volatility to the Company's revenues and
profits. Although the Company has broadened its customer base, in the first
quarter of fiscal 2001 one customer generated approximately 25% of the
Company's consolidated revenues, and five customers generated approximately
70% of its CableCURE-Registered Trademark- revenues.
COMPETITION. The Company has experienced a long term trend of declining
prices for trenchless drilling services provided to electric utilities,
particularly for smaller diameter utility installations, due to competitive
pressures and changes in utility bidding practices. This trend has also
caused the Company to lower its prices for CableCURE-Registered Trademark-
injection services, which are priced at a discount to replacement costs,
including replacement by trenchless drilling. In addition, the Company's
utility customers are increasing their requests for "turnkey" installation,
replacement and restoration services, requiring their drilling contractors to
take responsibility for switching circuits, terminating circuits and other
non-incidental tasks. These tasks require additional equipment and labor, and
the cost increases may offset any price increase the Company is able to
negotiate for the expansion of its services. The overall trend of falling
prices for trenchless drilling services provided to electric utilities is
expected to continue into the future which will continue to put downward
pressure on the market price for CableCURE-Registered Trademark- Services.
SEASONAL FACTORS. Weather and other seasonal factors may decrease the
Company's revenues and profits in any given period. Adverse weather may
preclude the Company from operating its FlowMOLE-Registered Trademark-
drilling systems or providing its CableCURE-Registered Trademark- services at
certain times of the year. In addition, the Company believes that the regular
budgetary cycles of certain of its North American utility customers tend to
concentrate demand for the Company's services during the third quarter of its
fiscal year (the fourth quarter of the calendar year), although other
budgetary factors described above may override this trend in any given
quarter. As a result of these factors, results of operations in any given
fiscal quarter are not necessarily indicative of results in any other fiscal
quarter.
MANAGEMENT OF GROWTH. There can be no assurance that the Company's systems,
procedures and controls will be adequate to support the Company's operations
as they expand. Any future growth will impose significant additional
responsibilities on members of senior management, including the need to
identify, recruit and integrate new senior level managers and executives. To
the extent that the Company is unable to manage its growth efficiently and
effectively, or is unable to attract and retain additional qualified
management, there could be a material adverse effect on the Company's
financial condition, results of operations and cash flows.
AVAILABILITY OF QUALIFIED EMPLOYEES. The Company's ability to provide
high-quality services on a timely basis requires an adequate supply of
skilled laborers, equipment operators, journeymen linemen and project
managers. Accordingly, the Company's ability to increase its productivity and
profitability will be limited by its ability to employ, train and retain
skilled personnel necessary to meet the Company's requirements. Many
companies in the Company's industry are currently experiencing shortages of
qualified personnel, and there can be no assurance that the Company will be
able to maintain an adequate skilled labor force necessary to operate
efficiently, that the Company's labor expenses will not increase as a result
of a shortage in the supply of skilled personnel or that the Company will not
have to curtail its planned growth as a result of labor shortages.
DOW CORNING CORPORATION. The Company purchases its CableCURE-Registered
Trademark- fluid exclusively from Dow Corning. In May 1995, Dow Corning filed
for protection under Chapter 11. While the Company has been informed by Dow
Corning that it intends to continue the CableCURE-Registered Trademark-
business, there can be no assurance that Dow Corning or the bankruptcy court
will not take action to amend or terminate the CableCURE-Registered
Trademark- license agreement.
FOREIGN CURRENCY FLUCTUATIONS. The Company's financial results are affected
by fluctuations in certain foreign currencies, particularly the exchange rate
between the U.S. Dollar, the British Pound Sterling, German Deutschmark and
the Euro. Such fluctuations could result in material adverse adjustments to
the carrying values of accounts receivable or other assets measured in
foreign currencies, or on the reported results of operations of the Company's
European operations.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to the risk of fluctuating interest rates in the
normal course of business, primarily as a result of its revolving credit
facility and certain operating and capital leases, which bear interest at
variable rates.
The Company uses the U.S. Dollar as its functional currency, except for its
European operations. The assets and liabilities of the Company's European
operations are translated into U.S. Dollars at exchange rates in effect at
the balance sheet date. Income and expense items are translated at the
average exchange rates prevailing during the period. Aggregate translation
gains and losses included in the determination of net income have not been
material. The Company is party to short-term forward contracts in the
management of its foreign currency exposure. Gains and losses on forward
contracts qualifying as hedges are deferred and included in the measurement
of the related foreign currency transaction. At June 20, 2000 the Company had
outstanding forward exchange contracts of $205,000. At June 30, 1999, the
Company had no outstanding foreign exchange contracts.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in various litigation matters, both as a
plaintiff and as a defendant, arising in the ordinary course of its business.
Management expects that these matters will not have a materially adverse
effect on the consolidated financial position, results of operations or
liquidity of the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27.1 Financial Data Schedule. Filed herewith.
(b) Reports on Form 8-K:
A Current Report on Form 8-K, dated June 29, 2000 was filed
with the Securities and Exchange Commission reporting that the
Company and InfrastruX Group, Inc., had entered into an
Agreement and Plan of Merger.
13
<PAGE>
UTILX CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UTILX CORPORATION
-------------------------------------
(Registrant)
Date: August 11, 2000 By: /s/ WILLIAM M. WEISFIELD
----------------------------------
William M. Weisfield, President,
Chief Executive Officer and
Chairman of the Board
(Principal Executive Officer)
Date: August 11, 2000 By: /s/ DARLA VIVIT NORRIS
----------------------------------
Darla Vivit Norris, Senior Vice
President,
Chief Financial Officer and Treasurer
(Principal Financial Officer)
14
<PAGE>
UTILX CORPORATION
As Filed with the Securities and Exchange Commission on August 14, 2000
File No. 0-16821
-----------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
EXHIBITS
TO
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
UNDER
THE SECURITIES EXCHANGE ACT OF 1934
---------------------
UTILX CORPORATION
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
27.1 Financial Data Schedule. Filed herewith.
</TABLE>
