SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
FORM 10-Q
[X] Quarterly report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1995
[ ] 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: 0-6511
----------------------------
O. I. CORPORATION
(Exact name of registrant as specified in its charter)
OKLAHOMA
(State of Incorporation)
P.O. BOX 9010
151 GRAHAM ROAD
COLLEGE STATION, TEXAS
(Address of Principal Executive Offices)
73-0728053
(IRS Employer Identification Number)
77842-9010
(Zip Code)
(409) 690-1711
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former Name, Former Address and Former
Fiscal Year, if Changed Since Last Report)
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, and
(2) has been subject to such filing requirements for the past 90
days.
Yes X No
Number of shares outstanding of each of the issuer's classes of
common stock, as of June 30, 1995: 4,116,129 shares
O.I. CORPORATION
Condensed Consolidated Balance Sheet
(In thousands)
(unaudited)
JUNE 30, DEC 31,
1995 1994
_______ _______
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . $ 7,690 $ 2,848
Short term investments. . . . . . . . . 265 5,139
Accounts receivable . . . . . . . . . . 2,492 3,292
Inventories . . . . . . . . . . . . . . 2,643 2,160
Current deferred tax asset. . . . . . . 482 243
Other current assets. . . . . . . . . . 591 318
________ ________
Total current assets. . . . . . . . . 14,163 14,000
Property, plant and equipment, net . . . 1,781 1,504
Other assets . . . . . . . . . . . . . . 725 475
________ ________
Total assets. . . . . . . . . . . . . $ 16,669 $ 15,979
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable. . . . . . . . . . . . $ 841 $ 993
Accrued compensation. . . . . . . . . . 465 545
Accrued expenses. . . . . . . . . . . . 1,445 1,307
_______ ________
Total current liabilities . . . . . . 2,751 2,845
Deferred income taxes. . . . . . . . . . 305 252
_______ ________
Total liabilities . . . . . . . . . . 3,056 3,097
Shareholders' equity:
Common stock ($.10 par value) . . . . . 412 404
Additional paid in capital. . . . . . . 4,731 4,432
Retained earnings . . . . . . . . . . . 8,470 8,046
_______ ________
Total shareholders' equity. . . . . . 13,613 12,882
Total liabilities &
shareholders' equity . . . . . . . . $16,669 $ 15,979
======= ========
O.I. CORPORATION
Condensed Consolidated Statement of Earnings
(In thousands, except per share data)
(unaudited)
Three Six
Months Ended Months Ended
June 30 June 30
________________ ________________
1995 1994 1995 1994
_______ ______ ______ ______
Net sales. . . . . . . . $ 4,425 $4,632 $9,127 $9,461
Cost of goods sold . . . 2,312 2,551 4,830 5,271
______ ______ ______ ______
Gross profit . . . . . . 2,113 2,081 4,297 4,190
Res. & Dev. expense. . . 466 471 972 854
Selling, general &
administrative expenses 1,445 1,173 2,924 2,358
______ ______ ______ ______
Operating income . . . . 202 437 401 978
Int. income/other inc. . 136 96 256 172
Interest expense . . . . 0 0 5 0
______ ______ ______ ______
Income before inc. taxes 338 533 652 1,150
Provision for taxes on
earnings. . . . . . . . 117 143 228 369
______ ______ ______ ______
Net income . . . . . . . $ 221 $ 390 $ 424 $ 781
======= ====== ====== ======
Weighted average number
of shares outstanding . 4,224,628 4,174,742 4,227,452 4,154,843
Earnings per share . . . $ 0.05 $ 0.09 $ 0.10 $ 0.19
Dividends per share. . . -0- -0- -0- -0-
O.I. CORPORATION
Condensed Consolidated Statement of Cash Flows
(In thousands)
(unaudited)
Six Months Ended
___________________
June 30 June 30
1995 1994
_______ _______
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 424 $ 781
Depreciation & amortization 235 150
Deferred income taxes (27) (55)
Change in working capital, net
of effect from purchase of
Laboratory Automation, Inc. 764 (433)
________ ________
Net cash flows provided by
operating activities 1,396 443
CASH FLOW FROM FINANCING ACTIVITIES:
Principal payments on capital
lease obligation (0) (6)
________ ________
Net cash flows provided (used)
by financing activities (0) (6)
CASH FLOW USED IN INVESTING ACTIVITIES:
Proceeds from sale of property,
plant & equipment 0 13
Purchase of property, plant
& equipment (235) (246)
Purchase of LAI (1,174) 0
Purchase of investments 0 (3,266)
Maturity of investments 4,852 0
Investment in patents (16) (220)
Investment in other assets (0) (59)
Change in deposits 19 6
________ ________
Net cash flows used in
investing activities 3,446 (3,772)
Increase (decrease) in cash and
cash equivalents $ 4,842 $ (3,335)
======== ========
Cash and cash equivalents at
beginning of year $ 2,848 $ 8,442
Cash and cash equivalents at
end of quarter 7,690 5,107
O.I. CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
1. Summary of Significant Accounting Policies.
The accompanying unaudited consolidated financial statements
have been prepared by O.I. Corporation and include all
adjustments which are, in the opinion of management, necessary
for a fair presentation of financial results for the three and
six months ended June 30, 1995 and 1994, pursuant to the rules
and regulations of the Securities and Exchange Commission. All
adjustments and provisions included in these statements are of
a normal recurring nature. All significant intercompany
balances and transfers have been eliminated. For further
information regarding the Company's accounting policies, refer
to the Consolidated Financial Statements and related notes
included in the Company's Annual Report and Form 10-K for the
year ended December 31, 1994.
The Company is an environmental instrument company that
specializes in the design, manufacture, sale and service of
instruments for the sampling, analysis, detection and reporting
of compounds that contaminate water, air and soil. Sales of the
Company's products are recorded based on shipments of products
and no substantial right of return exists.
2. Inventories.
June 30, 1995 Dec. 31, 1994
_____________ _____________
Raw Materials $ 1,473,000 $ 1,262,000
Work in Process 450,000 370,000
Finished Goods $ 720,000 $ 528,000
____________ _____________
$ 2,643,000 $ 2,160,000
============ =============
3. Earnings per Common and Common Equivalent Shares.
Earnings per common and common equivalent share is computed
using the weighted average number of shares of common stock and
common stock equivalents outstanding during the period. Common
stock equivalents include the number of shares issuable upon
exercise of dilutive stock options, less the number of shares
that could have been repurchased with the exercise proceeds
using the treasury stock method.
4. Acquisition of Laboratory Automation, Inc. (LAI)
The Company acquired LAI on February 9, 1995, in a stock and
cash transaction accounted for as a purchase. The unaudited pro
forma combined results of operations of the Company and LAI for
the three and six months ended June 30, 1994 are as follows:
Three Months Six Months
Ended June 30 Ended June 30
_____________ _____________
Net Revenue $ 5,548 $ 11,311
Net Income 386 820
Earnings per share .09 .19
Pro forma combined results for the six months ended June 30,
1995, are not materially different from the actual results due
to the timing of the acquisition of LAI.
5. Reclassification.
Certain amounts in the prior periods have been reclassified to
conform with the current period presentation.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
Demand for the Company's instrumentation may be substantially
affected by the enactment, timing, extent and severity of state,
federal and foreign laws governing detection and analysis of
contaminants in air, water and soil. The Company has experienced
fluctuations in sales of its products as a result of actual or
perceived changes in regulatory requirements. Legislation or
regulations resulting in stricter enforcement of, or more stringent
specifications for detection and analysis of contamination has
resulted in periodic increases in sales. Conversely, decreases in
sales have resulted, and may result in the future, from actual or
perceived delays in or weakening of enforcement standards. The
Company expects such fluctuations to continue in the future.
Net sales for the second quarter of 1995 decreased 4% to
$4,425,000, compared to $4,632,000 for 1994. The environmental
market, the primary market served by the Company, is affected by
business cycles, government regulations and general economic
conditions. These factors create a cyclical market and
fluctuations in the demand for the Company's products. The U.S.
Environmental Protection Agency, state and local government
regulations have been less stringently enforced in recent years and
have contributed to the decline in the Company's sales.
Consolidation of domestic environmental labs has also continued to
hamper sales. Sales of the Company's sample introduction products
continued to be adversely impacted by the manufacture and sale of
a product the Company believes infringes on at least one of its
patents. In March, the Company filed a patent infringement suit
against the company manufacturing and selling such product and
plans to vigorously enforce its patent rights. The decline in
sales of sample introduction products, gas chromatograph systems
and continuous emissions monitoring systems were offset in part by
new revenue generated from the Company's analytical microwave
products, distribution products, and product sales from the
acquisition of Laboratory Automation, Inc. (LAI). Although
domestic sales have been declining, sales to the international
market for the second quarter of 1995 increased over the same
period of 1994.
Gross profit increased to $2,113,000, or 48% of sales, for the
second quarter of 1995, compared to $2,081,000, or 45% of sales,
for the same quarter of 1994. Year-to-date gross profit increased
to $4,297,000 through June 30, 1995 compared to $4,190,000 for the
same period of 1994. Year-to-date gross profit, as a percent of
sales, was 47% for 1995 and 44% for 1994. The increase in gross
profit was due to product mix, a decrease in warranty expense and
improved manufacturing efficiency.
Income before tax for the second quarter 1995 amounted to $338,000,
a decrease of 37% from 1994 second quarter results of $533,000.
The lower profit for 1995 was due to decreased sales volume and
increased operating expenses, offset in part by increased interest
income. Much of the increased operating expenses was due to higher
than anticipated costs relating to LAI's operations, sales and
marketing processes. The effective tax rates for the second
quarter were 35% in 1995 and 27% in 1994. The increase in the
effective tax rate for 1995 is due to the receipt in 1994 of a
federal income tax refund relating to an amendment of the Company's
1992 tax return. Net income after tax for the second quarter 1995
decreased 43% to $221,000, or $0.05 per share, compared to
$390,000, or $0.09 per share in the same period of 1994.
During June, the Company implemented cost reduction actions,
including personnel reduction and a number of expense containment
policies, the benefit of which will not be fully realized until the
third quarter.
Year-to-date sales through June 30, 1995 decreased 4% to
$9,127,000, compared to $9,461,000 for 1994. Year-to-date sales
were impacted by the same factors that affected second quarter 1995
results. Year-to-date income before tax decreased 43% to $652,000
through June 30, 1995, compared to $1,150,000 for the same period
of 1994. Year-to-date net income after tax decreased 46% to
$424,000, or $0.10 per share through June 30, 1995, from $781,000,
or $.19 per share for the same period of 1994.
Research and development (R&D) expenses for the second quarter of
1995 were $466,000, or 11% of sales, compared to $471,000, or 10%
of sales for the same period of 1994. Year-to-date R&D expenses
through June 30, 1995 increased 14% to $972,000, or 11% of sales,
compared to $854,000, or 9% of sales, for the same period of 1994.
The decreased amount of R&D expense for the second quarter of 1995,
compared to the prior period, was due to a decrease in the purchase
of supplies used in the development of new products, offset in part
by the addition of personnel. The increase in year-to-date R&D
expense was due to the addition of personnel and an increase in the
purchase of supplies in the first quarter of 1995.
Selling, general, and administrative (SG&A) expenses for the second
quarter of 1995 increased 23% to $1,445,000, or 33% of sales,
compared to $1,173,000, or 25% of sales, for 1994. SG&A expenses
for the second quarter of 1995 were higher than 1994 due to an
increase in legal fees, travel, distributor discounts and the
addition of four direct sales people. These amounts were offset in
part by decreased advertising costs, royalty expense and supplies.
Other expenses, such as salaries, rent, utilities and telephone,
increased due to the acquisition of LAI. The Company has and will
continue to incur significant legal expenses related to the patent
infringement complaint it filed against a competitor on March 3,
1995. Management believes that it is in the best interest of the
stockholders to pursue this litigation and to protect the Company's
intellectual property. Year-to-date SG&A expenses through June 30,
1995, increased 24% to $2,929,000, or 32% of sales, compared to
$2,358,000, or 25% of sales, for the same period of 1994. Year-to-
date SG&A expenses increased due to the factors discussed above.
Liquidity
Cash and cash equivalents totaled $7,690,000 as of June 30, 1995,
compared to $2,848,000 as of December 31, 1994. Working capital,
as of June 30, 1995, was $11,412,000, an increase of 2%, compared
to $11,155,000 as of December 31, 1994. Working capital, as a
percentage of total assets, was 68% as of June 30, 1995, compared
to 70% as of December 31, 1994. The current ratio was 5.15 to 1 at
June 30, 1995, as compared to 4.92 to 1 at December 31, 1994.
Total liabilities-to-equity was 22% as of June 30, 1995, compared
to 24% at December 31, 1994.
Net cash flow provided from operating activities for the six months
ended June 30, 1995, was $1,396,000, compared to $443,000 for the
same period of 1994. The increase in cash flow provided by
operating activities for the first six months in 1995 was primarily
due to a decrease in accounts receivable and inventory, offset in
part by a decrease in net income and a decrease in accounts
payable. All changes in working capital accounts are net of the
effect of the purchase of LAI. The decrease in inventory and
accounts payable was the result of continued inventory management
practices that began in the fourth quarter of 1994. Days sales in
accounts receivable decreased from 65 at the end of 1994 to 50 as
of June 30, 1995. Net cash flow provided by (used in) investing
activities for the six months ended June 30, 1995 was $3,446,000,
compared to ($3,772,000) for the same period of 1994. The increase
in cash flow provided by investing activities resulted from the
maturity of investments, offset in part by the acquisition of LAI.
Capital expenditures for the remainder of the year are anticipated
to be consistent with the past year, which includes personal
computers, automobiles for field service and sales personnel and
other miscellaneous purchases. The Company will continue to seek
acquisitions but cannot predict whether any acquisitions will be
successfully consummated. The Company has financed its growth from
funds generated from operations and expects to continue to do so in
the foreseeable future.
Part II: Other Information
Item 1. Legal Proceedings: On March 3, 1995, the Company filed a
patent infringement complaint against the Tekmar Company
in the Galveston Division of the U.S. District Court. The
Company alleges that the Tekmar Model 3000 Purge and Trap
Sample Concentrator infringes on U.S. Patent No. 5,358,557
issued to the Company on October 25, 1994. The suit seeks
to enjoin the manufacture and sale of the Model 3000 and
like products sold under different name designations and
seeks unspecified damages. Trial date has been set for
July 22, 1996.
Item 2. Changes in Securities: None
Item 3. Defaults upon Senior Securities: None
Item 4. Submission of Matters to a Vote of Security Holders: At
the Company's Annual Meeting of Shareholders on May 2,
1995, the following members were elected to the Board of
Directors:
Votes For Withheld
_________ ________
Jack S. Anderson 3,405,666 20,444
William W. Botts 3,411,589 14,521
J. Lester Heath 3,405,666 20,444
Edwin B. King 3,410,916 15,194
The following proposals were also approved at the Company's Annual
Meeting:
1. Ratification of Price Waterhouse as the Company's auditors
Votes For Against Abstain
_________ _______ _______
3,417,355 7,192 1,563
Item 5. Other Information: None
Item 6. Exhibits and Reports on Form 8-K: None
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.
O.I. CORPORATION
(Registrant)
Date: 7/25/95 BY: /s/ Julie Wright
_____________ _________________________________
Julie Wright
Controller
Date: 7/25/95 BY: /s/ William W. Botts
_____________ _________________________________
William W. Botts
President/CEO
