10-Q 1 a2038450z10-q.txt 10-Q 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 December 31, 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: 7,287,521 shares of the Company's Common Stock ($.01-2/3 par value) were outstanding as of December 31, 2000. PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS QUIXOTE CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations (Unaudited)
Six Months Ended December 31, ------------------------------- 2000 1999 ---- ---- Net sales ...................................... $ 41,600,000 $ 35,531,000 Cost of sales .................................. 23,170,000 19,091,000 ------------ ------------ Gross profit ................................... 18,430,000 16,440,000 ------------ ------------ Operating expenses: Selling & administrative ..................... 11,489,000 10,597,000 Research & development ....................... 598,000 668,000 ------------ ------------ 12,087,000 11,265,000 Operating profit ............................... 6,343,000 5,175,000 ------------ ------------ Other income (expense): Interest income .............................. 51,000 15,000 Interest expense ............................. (664,000) (392,000) Other ........................................ 15,000 ------------ ------------ (613,000) (362,000) ------------ ------------ Earnings before income taxes ................... 5,730,000 4,813,000 Provision for income taxes ..................... 2,177,000 1,829,000 ------------ ------------ Net earnings ................................... $ 3,553,000 $ 2,984,000 ============ ============ Net earnings per share: Basic ........................................ $ .48 $ .37 ============ ============ Diluted ...................................... $ .46 $ .36 ============ ============ Weighted average common shares outstanding: Basic ........................................ 7,331,837 8,050,539 ============ ============ Diluted ...................................... 7,728,904 8,350,155 ============ ============
See Notes to Consolidated Financial Statements. 2 QUIXOTE CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations (Unaudited)
Three Months Ended December 31, ------------------------------- 2000 1999 ---- ---- Net sales ...................................... $ 20,279,000 $ 16,228,000 Cost of sales .................................. 11,914,000 9,061,000 ------------ ------------ Gross profit ................................... 8,365,000 7,167,000 Operating expenses: Selling & administrative ..................... 5,671,000 5,064,000 Research & development ....................... 273,000 341,000 ------------ ------------ 5,944,000 5,405,000 Operating profit ............................... 2,421,000 1,762,000 ------------ ------------ Other income (expense): Interest income .............................. 41,000 7,000 Interest expense ............................. (335,000) (184,000) Other ........................................ 41,000 ------------ ------------ (294,000) (136,000) ------------ ------------ Earnings before income taxes ................... 2,127,000 1,626,000 Provision for income taxes ..................... 808,000 554,000 ------------ ------------ Net earnings ................................... $ 1,319,000 $ 1,072,000 ============ ============ Net earnings per share: Basic ........................................ $ .18 $ .13 ============ ============ Diluted ...................................... $ .17 $ .13 ============ ============ Weighted average common shares outstanding: Basic ........................................ 7,304,769 8,017,497 ============ ============ Diluted ...................................... 7,752,475 8,326,588 ============ ============
See Notes to Consolidated Financial Statements. 3 QUIXOTE CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets
December 31, June 30, ------------------------------- 2000 2000 ASSETS -------------------------------------------------------------------------------- (Unaudited) Current assets: Cash and cash equivalents .................. $ 1,340,000 $ 1,524,000 Accounts receivable, net of allowances for doubtful accounts of $962,000 at December 31 and $955,000 at June 30 ...... 16,625,000 20,210,000 Refundable income taxes .................... 441,000 Inventories: Raw materials ............................ 3,674,000 2,468,000 Work in process .......................... 2,318,000 1,868,000 Finished goods ........................... 7,338,000 5,736,000 ------------ ------------ 13,330,000 10,072,000 ------------ ------------ Deferred income tax assets ................. 2,254,000 2,254,000 Other current assets ....................... 712,000 259,000 ------------ ------------ Total current assets ......................... 34,702,000 34,319,000 ------------ ------------ Property, plant and equipment, at cost ....... 28,879,000 27,930,000 Less accumulated depreciation ................ (13,898,000) (12,929,000) ------------ ------------ 14,981,000 15,001,000 ------------ ------------ Intangible assets, net ....................... 22,084,000 22,626,000 Other assets ................................. 1,280,000 1,318,000 ------------ ------------ $ 73,047,000 $ 73,264,000 ============ ============
See Notes to Consolidated Financial Statements. 4 QUIXOTE CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets
December 31, June 30, ---------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY 2000 2000 ---------------------------------------------------------------------------------- (Unaudited) Current liabilities: Current portion of long-term debt ............... $ 627,000 $ 630,000 Accounts payable ................................ 2,857,000 2,613,000 Dividends payable ............................... 1,094,000 1,117,000 Accrued expenses ................................ 4,362,000 5,907,000 Income tax payable .............................. 727,000 Liabilities of discontinued operations .......... 995,000 1,198,000 ------------ ------------ Total current liabilities ......................... 9,935,000 12,192,000 ------------ ------------ Long-term debt, net of current portion ............ 17,285,000 15,596,000 Deferred income tax liabilities ................... 1,799,000 1,799,000 Liabilities of discontinued operations ............ 547,000 561,000 ------------ ------------ 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 9,255,484 shares at December 31 and 9,199,194 shares at June 30 ... 154,000 153,000 Capital in excess of par value of common stock .. 34,395,000 33,830,000 Retained earnings ............................... 30,024,000 27,565,000 Treasury stock, at cost, 1,967,963 shares at December 31 and 1,810,420 shares at June 30 ... (21,092,000) (18,432,000) ------------ ------------ Total shareholders' equity ........................ 43,481,000 43,116,000 ------------ ------------ $ 73,047,000 $ 73,264,000 ============ ============
See Notes to Consolidated Financial Statements. 5 QUIXOTE CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended December 31, ----------------------------- 2000 1999 ---- ---- Operating activities: Net earnings .................................... $ 3,553,000 $ 2,984,000 Adjustments to reconcile net earnings to net cash provided by operating activities of continuing operations: Depreciation .................................. 969,000 1,111,000 Amortization .................................. 860,000 910,000 Provisions for losses on accounts receivable .. 7,000 (17,000) Equity loss on investment in TMT joint venture 604,000 Changes in operating assets and liabilities: Accounts receivable ......................... 3,578,000 3,300,000 Refundable income taxes ..................... (441,000) Inventories and other current assets ........ (3,711,000) 402,000 Accounts payable and accrued expenses ....... (1,301,000) (3,590,000) Income taxes payable ........................ (727,000) 544,000 ------------ ------------ Net cash provided by operating activities of continuing operations ........................... 3,391,000 5,644,000 Net cash used in discontinued operations .......... (217,000) (887,000) ------------ ------------ Net cash provided by operating activities ......... 3,174,000 4,757,000 ------------ ------------ Investing activities: Purchase of property, plant and equipment ....... (949,000) (716,000) Investment in Transportation Management Technologies, L.L.C. joint venture ............ (615,000) (250,000) Patent expenditures ............................. (269,000) Other ........................................... (80,000) ------------ ------------ Net cash used in investing activities ............. (1,833,000) (1,046,000) ------------ ------------ Financing activities: Borrowing on revolving line of credit ........... 12,300,000 1,000,000 Payments on revolving line of credit ............ (10,300,000) (3,000,000) Payments on notes payable ....................... (314,000) (421,000) Payment of semi-annual cash dividend ............ (1,117,000) (1,128,000) Proceeds from exercise of common stock options .. 566,000 539,000 Repurchase of common stock for the treasury ..... (2,660,000) (2,177,000) ------------ ------------ Net cash used in financing activities ............. (1,525,000) (5,187,000) ------------ ------------ Decrease in cash and cash equivalents ............. (184,000) (1,476,000) Cash and cash equivalents at beginning of period .. 1,524,000 2,153,000 ------------ ------------ Cash and cash equivalents at end of period ........ $ 1,340,000 $ 677,000 ============ ============
Note: During the six months ended December 31, 2000, the Company paid $3,205,000 for income taxes and paid $614,000 for interest costs. During the same period last year, the Company paid $1,335,000 for income taxes and paid $394,000 for interest costs. See Notes to Consolidated Financial Statements. 6 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 as presented 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 presented. 2. The provision for income taxes is based upon the estimated effective income tax rate for the year. 3. Operating results for the first six months of fiscal 2001 are not necessarily indicative of the performance for the entire year. The Company's business is historically seasonal with a higher level of sales in the Company's first and fourth fiscal quarters. 4. The computation of basic and diluted earnings per share, as prescribed by FASB No. 128, is as follows:
Three Months Ended Six Months Ended December 31, December 31, 2000 1999 2000 1999 ---- ---- ---- ---- Net earnings per share of common stock: Basic ...................... $ .18 $ .13 $ .48 $ .37 Diluted .................... $ .17 $ .13 $ .46 $ .36 Numerator: ---------- Net earnings available to common shareholders-basic and diluted: ................. $1,319,000 $1,072,000 $3,553,000 $2,984,000 ========== ========== ========== ========== Denominator: ------------ Weighted average shares outstanding-basic: ........... 7,304,769 8,017,497 7,331,837 8,050,539 Effect of dilutive securities: Stock options ................ 447,706 309,091 397,067 299,616 ---------- ---------- ---------- ---------- Weighted average shares outstanding-diluted: ......... 7,752,475 8,326,588 7,728,904 8,350,155 ========== ========== ========== ==========
Options to purchase 60,000 shares of common stock at $21 per share were outstanding during the first six months of both fiscal 2001 and fiscal 2000 and 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. 7 QUIXOTE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) 5. Effective January 1, 2001, the Company's wholly owned subsidiary, Quixote Transportation Safety, Inc., acquired all of the outstanding stock of National Signal, Inc. ("NSI"), a leading regional manufacturer of roadway safety products including electronic message signs, directional displays and trailer mounted arrow panels located in La Mirada, California. The purchase price was $2.8 million in cash and a three-year 5% promissory note for $1.5 million payable in equal annual installments. In addition, the selling shareholders have an opportunity to earn up to $2.5 million, as additional purchase price consideration, by attaining certain sales and earnings targets over the next three years. Approximately $1.7 million of NSI's bank debt was assumed and was simultaneously paid off on the date of closing. The Company's source of funds for this acquisition was from its bank line of credit. NSI had approximately $8 million in revenue for calendar 2000. 8 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 fist six months of fiscal 2001 increased 17% to $41,600,000 as compared to $35,531,000 for the first six months last year primarily due to increased sales of its truck-mounted attenuator (TMA) product line, highway advisory radio systems and its permanent line of crash cushions. Sales of the Company's TMA product line increased 41% from the first six months of the prior year primarily due to strong unit sales of the reusable Safe-StopTM TMA which was introduced during the first quarter of the prior year. Sales of highway advisory radio systems increased 128% due to several shipments of sizable orders during the first six months. Sales of the Company's permanent line of crash cushions increased 13% during the first six months of fiscal 2001 led by a 32% increase in sales of REACT 350(R) crash cushions and a 15% increase in sales of QuadGuard(R) crash cushions. Also, sales of the Company's Energite(R) barrel product line, replacement parts, custom-molded products, and advanced sensing products increased during the first six months of the current year. These increases in sales were offset in part by a decrease in sales of the Triton Barrier(R), highway delineators, and Universal Module(R) barrels. International sales remained consistent at $4,448,000 for the first six months of fiscal 2001 as compared to $4,491,000 for the same period last year. The gross profit margin for the first six-month period of the current year decreased to 44.3% compared to 46.3% for the same period last year. This was primarily due to greater sales of the lower margin Safe-Stop TMA and REACT 350(R) products in the current six-month period compared to the prior year. Selling and administrative expenses for the first six months of fiscal 2001 increased 8% to $11,489,000 from $10,597,000 for the first six months last year. The increase was primarily related to the increased level of sales. However, selling and administrative expenses declined as a percentage of sales to 28% of sales for the current six-month period from 30% of sales for the same period last year. The decline is due to the fixed component of the Company's selling and administrative expenses. Research and Development expenditures were $598,000 for the current six-month period compared with $668,000 for the same period last year. The decrease is due to greater expenditures in the first six months of the prior year relating to the more costly testing and development of the QuadGuard(R) and Safe-Stop TMA. This year's projects have been less costly and relate to the FreezeFreeTM anti-icing system, and other development projects for new applications as well as upgrades and modifications to existing products. Operating profit increased 23% to $6,343,000 for the first six months of fiscal 2001 from $5,175,000 for the first six months of fiscal 2000. Interest expense was $664,000 compared to $392,000 for last year's six-month period due to the higher level of long-term debt outstanding during the current six-month period principally due to the purchase of Company shares for the treasury. The Company's effective income tax rate for the first six months of fiscal 2001 was 38%, consistent with the effective income tax rate for the same period last year. The Company believes its effective income tax rate for fiscal year 2001 will be approximately 38%. Net earnings for the current six-month period increased 19% to $3,553,000, or $.46 cents per diluted share, compared to $2,984,000, or $.36 cents per diluted share, for the same period last year. Diluted earnings per share for the six-month period increased 28%. 9 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 second quarter of fiscal 2001 increased 25% to $20,279,000 as compared to $16,228,000 for the second quarter last year primarily due to increased sales of its permanent line of crash cushions, highway advisory radio systems and its Safe-StopTM TMA. Sales of the Company's permanent line of crash cushions increased 44% during the second quarter of fiscal 2001 led by a 54% increase in sales of QuadGuard(R) crash cushions and a 41% increase in sales of REACT 350(R) crash cushions. Sales of highway advisory radio systems increased 209% due to several shipments of sizable orders during the current quarter. Sales of the Safe-StopTM TMA increased 129% for the current second quarter due to strong unit sales. Also, sales of the Company's replacement parts and custom-molded products increased during the second quarter of the current year. These increases in sales were offset in part by a decrease in sales of Energite(R) barrels, Universal Module(R) barrels, the Triton Barrier(R), advanced sensing products, and highway delineators. International sales decreased 8% to $2,263,000 for the second quarter of fiscal 2001 from $2,447,000 for the same period last year due to several large shipments of TMAs to Sweden in the prior year. The gross profit margin for the second quarter of the current year decreased to 41.2% compared to 44.2% for the same period last year. This was primarily due to greater sales of the lower margin Safe-Stop TMA and REACT 350(R) products in the current second quarter compared to the prior year. Also contributing to the decline were lower gross margins at the Company's subsidiary in Australia. Selling and administrative expenses for the second quarter of fiscal 2001 increased 12% to $5,671,000 from $5,064,000 for the second quarter last year. The increase was primarily related to the increased level of sales. However, selling and administrative expenses declined as a percentage of sales to 28% of sales for the current second quarter from 31% of sales for the same quarter last year. The decline is due to the fixed component of the Company's selling and administrative expenses. Research and Development expenditures were $273,000 for the current second quarter compared with $341,000 for the same quarter last year. The decrease is due to greater expenditures in the second quarter of the prior year relating to testing and development of the QuadGuard(R) and Safe-Stop TMA. This year's expenditures related to development projects for new applications as well as upgrades and modifications to existing products. Operating profit increased 37% to $2,421,000 for the second quarter of fiscal 2001 from $1,762,000 for the second quarter of fiscal 2000. Interest expense was $335,000 compared to $184,000 for last year's second quarter due to the higher level of long-term debt outstanding during the current second quarter. The Company's effective income tax rate for the second quarter of fiscal 2001 was 38% compared to an effective income tax rate of 34% in the same period last year. During the second quarter of the prior year, the Company revised its effective income tax rate for fiscal 2000 to 38% from 40% due to its ability to utilize certain state net operating loss carryforwards. Net earnings for the current second quarter increased 23% to $1,319,000, or $.17 cents per diluted share, as compared to $1,072,000, or $.13 cents per diluted share, for the second quarter last year. Diluted earnings per share for the second quarter increased 31%. 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES The Company had cash and cash equivalents of $1,340,000 and access to additional funds of $25,700,000 under its bank arrangements as of December 31, 2000. Cash provided from operating activities was a source of cash for the Company for the first six months of fiscal 2001 providing $3,174,000. Investing activities used cash of $1,833,000 during the first six months of fiscal 2001 including $949,000 for the purchase of equipment and $615,000 for the Company's investment in Transportation Management Technologies, L.L.C. Financing activities used cash of $1,525,000 during the first six months of the current year. The payment of the Company's semi-annual cash dividend used cash of $1,117,000. The Company borrowed $12,300,000 against its outstanding revolving credit facility offset by payments of $10,300,000. In addition, the Company used cash of $314,000 for the payment of notes payable due in connection with the acquisitions of Roadway Safety Service, Inc. and Nu-Metrics, Inc. and paid $2,660,000 to purchase 157,543 shares of its own common stock for the treasury. Offsetting these cash payments somewhat, the Company received cash of $566,000 for the exercise of common stock options. For fiscal 2001, the Company anticipates needing approximately $2,500,000 in cash for capital expenditures. The Company may also need additional cash as it considers acquiring businesses that complement its existing operations. Also, the Company will require additional investments in working capital to maintain growth. The Company may also need additional funds to repurchase its own common 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. 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 successful completion and integration of acquisitions; continued funding from federal highway legislation; and competitive and general economic conditions. 11 PART II - OTHER INFORMATION There is no information required to be reported under any items except as indicated below: 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. On December 22, 2000, Odin Systems International, Inc. filed its Third Amended Complaint which combines the allegations in the original and First Amended Complaint and adds several new theories of liability, including a claim for patent infringement. Energy Absorption Systems, Inc.'s Petition to Confirm its $2.1 million arbitration award has been transferred from the Northern District of Illinois, No. 00C5388, to the proceeding in the Southern District of Georgia. See the Company's Form 10-K for the year ended June 30, 2000, Item 3, for additional information. ITEM 4. Submission of Matters to a Vote of Security Holders The Company's Annual Meeting of Shareholders was held on November 15, 2000. The matters voted on at the Annual Meeting were as follows: (i) The election of James H. DeVries and Lawrence C. McQuade to serve as directors. (ii) The approval of the amendment to the Company's 1993 Long-Term Stock Ownership Incentive Plan. (iii) The approval of PricewaterhouseCoopers LLP as independent auditors for the Company. Messrs. DeVries and McQuade were elected and all other matters were approved as a result of the following shareholder votes:
ABSTAIN OR NO FOR AGAINST WITHHELD VOTE === ======= ========== ==== ELECTION OF DIRECTORS James H. DeVries 6,230,586 443,122 Lawrence C. McQuade 6,229,486 444,222 APPROVAL OF AMENDMENT OF 1993 LONG-TERM STOCK OWNERSHIP INCENTIVE PLAN 5,086,296 1,517,584 69,828 APPROVAL OF PRICEWATERHOUSECOOPERS LLP 6,649,740 4,866 19,102
ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits None 12 (b) Reports on Form 8-K. On January 30, 2001, the Company filed a report on Form 8-K dated January 30, 2001 reporting under Item 2 "Acquisition or Disposition of Assets", that the Company's wholly owned subsidiary, Quixote Transportation Safety, Inc. ("QTS"), had acquired as of January 16, 2001, effective January 1, 2001, all of the outstanding stock of National Signal, Inc. The purchase price was $2.8 million in cash and a three-year 5% promissory note for $1.5 million payable in equal annual installments. In addition, the selling shareholders have an opportunity to earn up to $2.5 million, as additional purchase price consideration, by attaining certain sales and earnings targets over the next three years. Approximately $1.7 million of NSI's bank debt was assumed and was simultaneously paid off on the date of closing. The Company's source of funds for this acquisition was from its bank line of credit. NSI had approximately $8 million in revenue for calendar 2000. The Company has guaranteed the obligations of QTS under the purchase agreement. 13 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 December 31, 2000 to be signed on its behalf by the undersigned thereunto duly authorized. QUIXOTE CORPORATION DATED: February 13, 2001 /s/ Daniel P. Gorey ----------------- ------------------------------ DANIEL P. GOREY Chief Financial Officer, Vice President and Treasurer (Chief Financial & Accounting Officer)