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
ý |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the period ended September 30, 2002
or
| o | 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 ý NO o
Indicate by check mark whether the registrant is an accelerated filer as defined by Rule 12b-2 of the Securities Exchange Act of 1934. YES ý NO o
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 7,768,168 shares of the Company's Common Stock ($.01-2/3 par value) were outstanding as of September 30, 2002.
QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
| |
Three Months Ended September 30, |
|||||||
|---|---|---|---|---|---|---|---|---|
| |
2002 |
2001 |
||||||
| Net sales | $ | 24,629,000 | $ | 20,814,000 | ||||
| Cost of sales | 13,981,000 | 12,950,000 | ||||||
| Gross profit | 10,648,000 | 7,864,000 | ||||||
| Operating expenses: | ||||||||
| Selling & administrative | 7,303,000 | 5,863,000 | ||||||
| Research & development | 435,000 | 412,000 | ||||||
| 7,738,000 | 6,275,000 | |||||||
| Operating profit | 2,910,000 | 1,589,000 | ||||||
| Other income (expense): | ||||||||
| Interest income | 25,000 | 7,000 | ||||||
| Interest expense | (240,000 | ) | (367,000 | ) | ||||
| Other | 749,000 | |||||||
| (215,000 | ) | 389,000 | ||||||
| Earnings from continuing operations before income taxes | 2,695,000 | 1,978,000 | ||||||
| Provision for income taxes | 916,000 | 712,000 | ||||||
| Earnings from continuing operations | 1,779,000 | 1,266,000 | ||||||
Earnings from discontinued operations, net of income taxes |
192,000 |
|||||||
| Net earnings | $ | 1,779,000 | $ | 1,458,000 | ||||
| Per share data—basic: | ||||||||
| Earnings from continuing operations | $ | .23 | $ | .17 | ||||
| Earnings from discontinued operations | .02 | |||||||
| Net earnings | $ | .23 | $ | .19 | ||||
| Weighted average common shares outstanding | 7,799,007 | 7,525,699 | ||||||
| Per share data—diluted: | ||||||||
| Earnings from continuing operations | $ | .22 | $ | .16 | ||||
| Earnings from discontinued operations | .02 | |||||||
| Net earnings | $ | .22 | $ | .18 | ||||
| Weighted average common shares outstanding | 8,018,482 | 8,186,230 | ||||||
See Notes to Consolidated Financial Statements.
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QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
| |
September 30, 2002 |
June 30, 2002 |
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|---|---|---|---|---|---|---|---|---|---|
| |
(Unaudited) |
|
|||||||
| ASSETS | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 886,000 | $ | 1,798,000 | |||||
| Accounts receivable, net of allowance for doubtful accounts of $1,694,000 at September 30 and $1,546,000 at June 30 | 20,272,000 | 24,448,000 | |||||||
| Refundable income taxes | 732,000 | ||||||||
| Inventories, net: | |||||||||
| Raw materials | 3,567,000 | 2,940,000 | |||||||
| Work in progress | 1,537,000 | 2,453,000 | |||||||
| Finished goods | 6,911,000 | 6,497,000 | |||||||
| 12,015,000 | 11,890,000 | ||||||||
| Notes receivable | 233,000 | 233,000 | |||||||
| Deferred income tax assets | 3,098,000 | 3,098,000 | |||||||
| Other current assets | 1,422,000 | 895,000 | |||||||
| Total current assets | 37,926,000 | 43,094,000 | |||||||
Property, plant and equipment, at cost |
37,687,000 |
37,328,000 |
|||||||
| Less: accumulated depreciation | (15,981,000 | ) | (15,369,000 | ) | |||||
| 21,706,000 | 21,959,000 | ||||||||
| Goodwill | 29,594,000 | 29,594,000 | |||||||
| Intangible assets, net | 5,223,000 | 4,967,000 | |||||||
| Other assets | 404,000 | 430,000 | |||||||
| $ | 94,853,000 | $ | 100,044,000 | ||||||
See Notes to Consolidated Financial Statements.
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QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
| |
September 30, 2002 |
June 30, 2002 |
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|---|---|---|---|---|---|---|---|---|
| |
(Unaudited) |
|
||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Current portion of long-term debt | $ | 986,000 | $ | 998,000 | ||||
| Accounts payable | 2,958,000 | 4,511,000 | ||||||
| Dividends payable | 1,240,000 | |||||||
| Income tax payable | 170,000 | |||||||
| Accrued expenses | 6,155,000 | 5,422,000 | ||||||
| Total current liabilities | 10,269,000 | 12,171,000 | ||||||
| Long-term debt, net of current portion | 20,056,000 | 24,772,000 | ||||||
| Deferred income tax liabilities | 3,010,000 | 3,010,000 | ||||||
| Other long-term liabilities | 764,000 | 865,000 | ||||||
| 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 9,759,931 shares at September 30 and 9,744,033 shares at June 30 | 163,000 | 162,000 | ||||||
| Capital in excess of par value of stock | 40,161,000 | 40,033,000 | ||||||
| Retained earnings | 42,326,000 | 40,547,000 | ||||||
| Currency translation adjustment | (382,000 | ) | (424,000 | ) | ||||
| Treasury stock, at cost, 1,991,763 shares at September 30 and 1,967,963 shares at June 30 | (21,514,000 | ) | (21,092,000 | ) | ||||
| Total shareholders' equity | 60,754,000 | 59,226,000 | ||||||
| $ | 94,853,000 | $ | 100,044,000 | |||||
See Notes to Consolidated Financial Statements.
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QUIXOTE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
| |
Three Months Ended September 30, |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| |
2002 |
2001 |
||||||||
| Operating activities: | ||||||||||
| Earnings from continuing operations | $ | 1,779,000 | $ | 1,266,000 | ||||||
| Discontinued operations: | ||||||||||
| Gain on disposal, net of income taxes | 192,000 | |||||||||
| Net earnings | 1,779,000 | 1,458,000 | ||||||||
| Adjustments to reconcile net earnings to net cash provided by operating activities of continuing operations: |
||||||||||
| Depreciation | 739,000 | 669,000 | ||||||||
| Amortization | 95,000 | 62,000 | ||||||||
| Provisions for losses on accounts receivable | 148,000 | 92,000 | ||||||||
| Gain on sale of assets | (749,000 | ) | ||||||||
| Discontinued operations | (192,000 | ) | ||||||||
| Changes in operating assets and liabilities: | ||||||||||
| Accounts receivable | 4,044,000 | 3,193,000 | ||||||||
| Inventories | (134,000 | ) | 603,000 | |||||||
| Other assets | (501,000 | ) | ||||||||
| Accounts payable and accrued expenses | (877,000 | ) | (1,473,000 | ) | ||||||
| Income taxes | 902,000 | 291,000 | ||||||||
| Net cash provided by operating activities of continuing operations | 6,195,000 | 3,954,000 | ||||||||
| Net cash provided by discontinued operations | 224,000 | |||||||||
| Net cash provided by operating activities | 6,195,000 | 4,178,000 | ||||||||
| Investing activities: | ||||||||||
| Capital expenditures | (487,000 | ) | (2,428,000 | ) | ||||||
| Patent expenditures | (351,000 | ) | (40,000 | ) | ||||||
| Cash paid for acquired business, net of cash acquired | (11,300,000 | ) | ||||||||
| Proceeds from sale of assets | 500,000 | |||||||||
| Net cash used in investing activities | (838,000 | ) | (13,268,000 | ) | ||||||
| Financing activities: | ||||||||||
| Proceeds from revolving credit agreement | 1,000,000 | 16,500,000 | ||||||||
| Payments on revolving credit agreement | (5,500,000 | ) | (6,000,000 | ) | ||||||
| Payments on notes payable | (228,000 | ) | (158,000 | ) | ||||||
| Payment of semi-annual cash dividend | (1,240,000 | ) | (1,123,000 | ) | ||||||
| Proceeds from exercise of stock options | 129,000 | 1,573,000 | ||||||||
| Repurchase of common stock for treasury | (422,000 | ) | ||||||||
| Net cash provided by (used in)financing activities | (6,261,000 | ) | 10,792,000 | |||||||
| Effect of exchange rate changes on cash | (8,000 | ) | (30,000 | ) | ||||||
| Increase (decrease) in cash and cash equivalents | (912,000 | ) | 1,672,000 | |||||||
| Cash and cash equivalents at beginning of period | 1,798,000 | 4,118,000 | ||||||||
| Cash and cash equivalents at end of period | $ | 886,000 | $ | 5,790,000 | ||||||
See Notes to Consolidated Financial Statements.
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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, 2002 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, 2002. 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 2003 are not necessarily indicative of performance for the entire year. The Company's business is seasonal with a higher level of sales in the Company's fourth fiscal quarter.
4. The computation of basic and diluted earnings per share is as follows:
| |
Three Months Ended September 30, |
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|---|---|---|---|---|---|---|
| |
2002 |
2001 |
||||
| Numerator: | ||||||
| Net earnings available to common shareholders | $ | 1,779,000 | $ | 1,458,000 | ||
| Denominator: | ||||||
| Weighted average shares outstanding—basic | 7,799,007 | 7,525,699 | ||||
| Effect of dilutive securities—common stock options | 219,475 | 660,531 | ||||
| Weighted average shares outstanding—diluted | 8,018,482 | 8,186,230 | ||||
| Net earnings per share of common stock: | ||||||
| Basic | $ | .23 | $ | .19 | ||
| Diluted | $ | .22 | $ | .18 | ||
There were 230,300 outstanding options to purchase common stock at an average exercise price of $24.00 that exceeded the average market price for the income statement period ended September 30, 2002.
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5. Comprehensive income consists of the following:
| |
Three Months Ended September 30, |
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|---|---|---|---|---|---|---|---|
| |
2002 |
2001 |
|||||
| Net earnings | $ | 1,779,000 | $ | 1,458,000 | |||
| Currency translation adjustment | 42,000 | (30,000 | ) | ||||
| Comprehensive income | $ | 1,821,000 | $ | 1,428,000 | |||
6. The Company's operations are classified as two principal reportable segments within the highway and transportation safety industry. The Company's two reportable segments are: the manufacture and sale of the Company's products which Protect and Direct, and the manufacture and sale of products which Inform and are often referred to as Intelligent Transportation Systems (ITS) products.
The following table presents financial information about reported segments as of and for the three-month periods ended September 30, 2002 and 2001 along with the items necessary to reconcile the segment information to the totals reported in the consolidated financial statements.
| |
Protect and Direct |
Inform |
Unallocated Corporate |
Total |
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|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2002 | ||||||||||||
| Net sales from external customers | $ | 18,765,000 | $ | 5,864,000 | $ | 24,629,000 | ||||||
| Operating profit (loss) | 4,503,000 | 226,000 | $ | (1,819,000 | ) | 2,910,000 | ||||||
| Identifiable assets | 50,876,000 | 40,005,000 | 3,972,000 | 94,853,000 | ||||||||
September 30, 2001 |
||||||||||||
| Net sales from external customers | $ | 15,477,000 | $ | 5,337,000 | $ | 20,814,000 | ||||||
| Operating profit (loss) | 2,086,000 | 706,000 | $ | (1,203,000 | ) | 1,589,000 | ||||||
| Identifiable assets | 53,171,000 | 40,947,000 | 8,538,000 | 102,656,000 | ||||||||
7. Intangible assets consist of the following:
| |
September 30, 2002 |
June 30, 2002 |
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|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| |
Gross Carrying Amount |
Accumulated Amortization |
Gross Carrying Amount |
Accumulated Amortization |
|||||||||
| Amortized intangible assets: | |||||||||||||
| Patents and licenses | $ | 2,685,000 | $ | 1,225,000 | $ | 2,334,000 | $ | 1,195,000 | |||||
| Technology and installed base | 2,610,000 | 211,000 | 2,610,000 | 162,000 | |||||||||
| Customer relationships | 200,000 | 43,000 | 200,000 | 33,000 | |||||||||
| Other | 130,000 | 23,000 | 130,000 | 17,000 | |||||||||
| 5,625,000 | 1,502,000 | 5,274,000 | 1,407,000 | ||||||||||
| Indefinite-lived intangible assets: | |||||||||||||
| Trade names | 1,100,000 | 1,100,000 | |||||||||||
| Total | $ | 6,725,000 | $ | 1,502,000 | $ | 6,374,000 | $ | 1,407,000 | |||||
Amortization expense was $95,000 and $62,000 for the three months ended September 30, 2002 and 2001, respectively. The estimated amortization expenses for this fiscal year ended June 30, 2003 and for the four fiscal years subsequent to 2003 are as follows: $452,000, $423,000, $387,000, $379,000 and $306,000.
The carrying amount of goodwill consists of $21,455,000 for the Inform segment and $8,139,000 for the Protect and Direct segment as of September 30, 2002 and June 30, 2002.
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8. In July 2001, the Company sold certain assets of its non-highway plastic product line for $500,000 in cash and $700,000 in a three-year promissory note with interest imputed at 8%. The gain on the sale of $749,000 was recorded as other income.
9. Effective August 31, 2001, the Company acquired all of the outstanding stock of Surface Systems, Inc. (SSI) for approximately $11,300,000, net of cash acquired. SSI is a leading manufacturer and seller of patented pavement sensing equipment and specialized weather stations and also provides weather forecasting services. SSI has been included in the Company's Inform segment.
10. The Financial Accounting Standards Board (FASB) issued FAS No. 143, "Accounting for the Obligations Associated with the Retirement of Long-Lived Assets," in June 2001. The statement establishes accounting standards for the recognition and measurement of an asset retirement obligation and its associated asset retirement cost. The FASB issued FAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," in August 2001. FAS No. 144 establishes a single accounting method for the impairment or disposal of long-lived assets such as property, plant and equipment, amortized intangibles and other long-lived assets, including discontinued operations. In May 2002, the FASB issued FAS No. 145, "Rescission of FASB Statements No. 4, 44 and 84 and Amendment of FASB Statement No. 13 and Technical Corrections as of April 2002." This statement modifies reporting for the adjustment of debt and accounting for leases. The Company adopted these pronouncements as of July 1, 2002, which did not have an effect on the Company's results of operations or its financial position.
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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 2003 increased 18% to $24,629,000 from $20,814,000 in the first quarter last year primarily due to strong increases in sales of the Company's line of permanent crash cushions. International sales increased 147% to $3,287,000 in the current first quarter from $1,329,000 last year due to strong sales particularly in Canada and Europe. Sales in the Protect and Direct segment increased 21% primarily due to higher sales of the QuadGuard® family of crash cushions, truck mounted attenuators and parts, which were partially offset by decreased sales of sand-filled barrels and delineators. Sales for the Inform segment increased 10% in the current first quarter to $5,864,000 from $5,337,000 due to the acquisition of Surface Systems, Inc. (SSI) in August 2001. SSI added $914,000 in sales for the current quarter not comparable to the prior year. Organic sales for this segment decreased 7% for the first quarter of fiscal 2003 as a result of lower sales of highway advisory radio systems due to one unusually large shipment during the same period last year.
The gross profit margin for the first quarter of the current year increased to 43.2% from 37.8% for the same period last year principally due to volume efficiencies associated with the higher level of sales for the Protect and Direct segment. The gross profit margin for the Protect and Direct segment also increased as a result of a favorable change in product sales mix with increased sales of the higher margin permanent crash cushions. The gross profit margin for the Inform segment decreased due to the lower gross margins generated at SSI as the current quarter includes SSI's seasonal lowest months of July and August. The organic gross profit margin for the Inform segment decreased slightly due to unfavorable product sales mix.
Selling and administrative expenses for the current quarter increased 25% to $7,303,000 compared to $5,863,000 for the fist quarter last year. The increase was due to the increase in sales as well as the inclusion of $511,000 in additional selling and administrative expenses from SSI not comparable to the prior year. In addition, the Company incurred increased expenses during the first quarter of fiscal 2003 compared to the same period last year relating to acquisition development efforts, certain employee benefit expenses and non-recurring consulting work.
Research and development expenditures remained consistent in the first quarter of fiscal 2003 at $435,000 compared to $412,000 last year. The Company continued with its work on new products as well as upgrades and modifications to existing products.
Operating profit increased 83% to $2,910,000 in the first quarter of fiscal 2003 from $1,589,000 for the first quarter of 2002.
Interest expense in the first quarter of fiscal 2003 decreased to $240,000 from $367,000 last year due to a decline in interest rates and to the lower level of average long-term debt.
Other income was $749,000 for the first quarter last year due to the gain on sale of the Company's non-highway plastic molded product line.
Income taxes for the current quarter were $916,000 reflecting a 34% effective income tax rate. This compares to a 36% effective income tax rate for the first quarter last year. The decline in effective rate is due to, among other things, continued federal and state tax planning opportunities and the expected utilization of certain state tax benefits. The Company expects its effective income tax rate to remain at 34% for fiscal 2003.
9
Earnings from continuing operations for the current quarter were $1,779,000 compared to $1,266,000 for the first quarter last year. Net earnings for the first quarter of fiscal 2003 increased to $1,779,000, or $0.22 cents per diluted share, compared to $1,458,000, or $0.18 cents per diluted share last year. Net earnings for the first quarter of fiscal 2002 included a gain from discontinued operations of $192,000, net of income taxes, or $0.02 per diluted share, due to the favorable outcome of a legal settlement.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $886,000 as of September 30, 2002 and access to additional funds of $22,000,000 under a three-year unsecured revolving credit agreement. The Company believes that this credit facility is an important source of liquidity. The credit agreement provides for a $40 million credit facility and contains both fixed and floating interest rate options, at the prime rate or lower, and contains affirmative and negative covenants including requirements that the Company maintain certain financial ratios and be profitable each year. The agreement may be renewed one additional year on each anniversary date upon mutual consent of the Company and the banks. At any time during the three years, the Company may elect to convert the loan to a four-year term with equal quarterly principal payments due throughout the term to amortize the loan in full. The Company is currently in compliance with all covenants in this agreement.
Operating activities were a source of cash for the Company for the first quarter of fiscal 2003 providing $6,195,000. This was achieved principally through the Company's net earnings for the quarter along with a $4.0 million reduction in accounts receivable.
Investing activities used cash of $838,000 during the first quarter of fiscal 2003 including $487,000 for capital expenditures and $351,000 for patent expenditures.
Financing activities used cash of $6,261,000 during the current quarter. The Company paid a net $4,500,000 against its outstanding revolving credit facility. The payment of the Company's semi-annual cash dividend used cash of $1,240,000. In addition, the Company used cash of $228,000 for the payment of notes payable due in connection with the acquisition of Roadway Safety Service, Inc. and paid $422,000 to purchase 23,800 shares of its own common stock for the treasury. Offsetting these cash payments, the Company received cash of $129,000 from the exercise of common stock options.
For fiscal 2003, the Company anticipates needing approximately $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 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.
CRITICAL ACCOUNTING POLICIES
The Securities and Exchange Commission (SEC) requires all registrants to discuss critical accounting policies or methods used in the preparation of financial statements. Note 2 to the Company's June 30, 2002 consolidated financial statements includes a summary of the significant accounting policies and methods used in the preparation of the Company's consolidated financial statements. In the opinion of management, the Company does not have any individual accounting policy which is critical to the preparation of its consolidated financial statements. In most instances, the Company must use an accounting policy or method because it is the only policy or method permitted
10
under accounting principles generally accepted in the United States of America (U.S. GAAP). The following is a summary of the more significant accounting policies and methods used by the Company:
Revenue Recognition: Revenues are recognized when either title and risk of loss of products has been transferred to unaffiliated customers or services have been rendered, with appropriate provision for uncollectible accounts.
Long-Lived Assets: Long-lived assets include such items as goodwill, patents, product rights and equity method investments. Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets, the Company assesses the possibility of obsolescence, demand, new technology, competition, and other pertinent economic factors and trends that may have an impact on the value or remaining lives of these assets. Goodwill and other indefinite-lived intangible assets are tested for impairment at least annually using the discounted cash flow method. Patents and product rights are amortized on a straight-line basis over the life of the patent or agreement.
RECENTLY ISSUED ACCOUNTING PRONOUCEMENTS
In July 2002, the Financial Accounting Standards Board (FASB) issued Financial Accounting Standard (FAS) No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," which is effective for disposal activities initiated after December 31, 2002. FAS No. 146 requires companies to recognize costs associated with exit or disposal activities at their fair values when they are incurred rather than at the date of a commitment to an exit or disposal plan. The Company does not expect the adoption of this standard will have a significant impact on fiscal 2003 financial results.
FUTURE OUTLOOK
The Company has been affected by the general slowdown in U.S. highway safety construction spending for the Company's products. The Company believes this is due principally to revenue shortfalls and budget deficits at the state level where the majority of states are currently operating at a deficit. In addition, current estimates project that annual federal spending on highways could be reduced by approximately $4 billion from approximately $32 billion, which could have an impact on the Company's prospects for 2003. The current six-year federal highway bill (TEA-21) expires on September 30, 2003. The next highway funding bill is currently under consideration by the federal government and it is uncertain as to what the future federal governmental spending levels will be. Currently, the Company is encouraged by recent improvements in shipments, order flow and backlog. However, given the current uncertain economic conditions, the Company remains cautious about its near-term outlook.
FORWARD LOOKING STATEMENTS
Various statements made within the Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report constitute "forward-looking statements" for purposes of the SEC'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. Any statement that addresses expectations or projections about the future, including statements about the Company's strategy for growth, product development, market position, expenditures and financial results, are forward-looking statements.
Investors are cautioned that all forward-looking statements involve risks and uncertainties, including those detailed in the Company's public filings with the SEC, news releases and other communications, which speak only as of the dates of those filings or communications. There can be no assurance that actual results will not differ materially from the Company's expectations. Factors which
11
could cause materially different results include, among others, uncertainties related to the introduction and acceptance of the Company's products and services; the successful completion and integration of acquisitions; continued federal and state funding for highways and risks related to reductions in government expenditures; an unfavorable change in product sales mix; seasonality along with the extent and timing of the award of large contracts; the cyclical nature of the Company's governmental markets; pricing pressures; increasing raw material costs; excess manufacturing capacity; weather conditions; acts of war and terrorist activities; the possible impairment of intangible assets; and competitive and general economic conditions.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes in the information provided in Item 7.A. of the Company's Annual Report on Form 10-K for the year ended June 30, 2002.
ITEM 4. Controls and Procedures
Under the supervision and with the participation of management, including the principal executive officer and principal financial officer, the Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures within 90 days of the filing date of this quarterly report, and, based on the evaluation, the Company's principal executive officer and principal financial officer have concluded that these controls and procedures are effective. There were no significant changes in internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in the Company's reports that are filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the Company's reports that are filed under the Exchange Act is accumulated and communicated to management, including the Company's principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
12
There is no information required to be reported under any items except as indicated below:
In October 2002, Energy Absorption Systems, Inc. was served in a matter entitled Bedlinger v. The Mills Corporation, Gaylord Entertainment and Safe-Hit Corporation, State of Tennessee Circuit Court of Davidson County, No. 02C2832. The Complaint alleges that plaintiff was injured when she tripped over a surface mount twist-lock and post in a parking lot and seeks judgment for $1,000,000 in damages. The case has been forwarded to the Company's insurance carrier.
ITEM 6. Exhibits and Reports on Form 8-K
None
On September 17, 2002, the Company filed a report on Firm 8-K dated August 30, 2002, reporting under Item 5 "Other Events and Regulation FD Disclosure" that the Company's subsidiary, Energy Absorption Systems, Inc., had acquired certain assets of the Dura-Post® product line from The Line Connection Inc. The product line of delineation products will be incorporated into the Company's Protect and Direct segment. The purchase price of approximately $500,000 was paid in cash, subject to certain holdbacks.
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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, 2002 to be signed on its behalf by the undersigned thereunto duly authorized.
| QUIXOTE CORPORATION | |||
DATED: November 12, 2002 |
By: |
/s/ DANIEL P. GOREY Daniel P. Gorey Chief Financial Officer, Vice President and Treasurer (Chief Financial & Accounting Officer) |
|
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I, Leslie J. Jezuit, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Quixote Corporation.
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report.
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report.
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date.
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
(a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls.
6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| Date: November 12, 2002 | /s/ LESLIE J. JEZUIT Leslie J. Jezuit President and Chief Excutive Officer |
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I, Daniel P. Gorey, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Quixote Corporation.
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report.
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report.
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date.
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
(a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls.
6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| Date: November 12, 2002 | /s/ DANIEL P. GOREY Daniel P. Gorey Vice President, Chief Financial Officer and Treasurer |
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