<PAGE> 1
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 September 30, 1996
------------------
[ ] 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 73-0728053
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State of Incorporation I.R.S. Employer Identification No.
P.O. Box 9010
151 Graham Road
College Station, Texas 77842-9010
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (409) 690-1711
--------------
Not Applicable
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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 (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 /X/ No / /
Number of shares outstanding of each of the issuer's classes of common stock, as
of September 30, 1996:
4,109,757 shares
<PAGE> 2
O.I. CORPORATION
Condensed Consolidated Balance Sheet
(In thousands)
(unaudited)
Sept 30, 1996 Dec 31, 1995
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ASSETS
------
Current assets:
Cash and cash equivalents....................... $ 1,356 $ 5,503
Short term investments.......................... 5,410 2,621
Accounts receivable............................. 3,506 3,273
Investment in sales-type lease.................. 321 246
Inventories..................................... 3,313 2,423
Current deferred tax asset...................... 735 735
Other current assets............................ 358 191
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Total current assets......................... 14,999 14,992
Property, plant and equipment, net.................. 1,631 1,591
Investment in sales-type lease, net of current...... 371 363
Other assets........................................ 1,134 754
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TOTAL ASSETS................................. $ 18,135 $ 17,700
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable................................ $ 879 $ 850
Accrued compensation............................ 523 483
Accrued expenses................................ 1,761 1,804
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Total current liabilities.................... 3,163 3,137
Deferred income taxes............................... 371 351
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TOTAL LIABILITIES............................ 3,534 3,488
Shareholders' equity:
Common stock ($.10 par value)................... 414 412
Additional paid in capital...................... 4,612 4,731
Treasury stock.................................. (115) 0
Retained earnings............................... 9,690 9,069
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TOTAL SHAREHOLDERS' EQUITY................... 14,601 14,212
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY... $ 18,135 $ 17,700
========== ==========
<PAGE> 3
O.I. CORPORATION
Condensed Consolidated Statement of Earnings
(In thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept 30 Sept 30
------------------------ -----------------------
1996 1995 1996 1995
---------- --------- -------- --------
<S> <C> <C> <C> <C>
Net sales.................................................. $ 5,107 $ 4,450 $ 14,848 $ 13,577
Cost of goods sold......................................... 2,662 2,292 7,521 7,122
------- -------- ------- --------
Gross profit............................................... 2,445 2,158 7,327 6,455
Research and development expenses.......................... 425 401 1,355 1,373
Selling, general and administrative expenses............... 1,831 1,424 5,325 4,349
------- -------- ------- --------
Operating income........................................... 189 333 647 733
Interest income/other income............................... 119 148 380 405
Interest expense........................................... 0 0 0 5
-------- --------- -------- ---------
Income before income taxes................................. 308 481 1,027 1,133
Provision for taxes on earnings............................ 123 181 406 409
------- --------- ------- ---------
Net income................................................. $ 185 $ 300 $ 621 $ 724
======= ========= ======= =========
Weighted average number of shares outstanding.............. 4,174,994 4,226,729 4,145,091 4,230,913
Earnings per share......................................... $ 0.04 $ 0.07 $ 0.15 $ 0.17
Dividends per share........................................ -0- -0- -0- -0-
</TABLE>
<PAGE> 4
O.I. CORPORATION
Condensed Consolidated Statement of Cash Flows
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
Sept 30, 1996 Sept 30, 1995
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<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income............................................................ $ 621 $ 724
Depreciation and amortization......................................... 370 345
Deferred income taxes................................................. 20 (39)
Change in working capital, net of effect from purchase of Alpkem Corporation
(1996) and Laboratory Automation, Inc.
(1995)............................................................. (949) 44
(Gain) loss on disposition of equipment............................... (4) (16)
------------ -----------
Net cash flows provided by (used in) operating activities............. 58 1,058
CASH FLOW FROM FINANCING ACTIVITIES:
Purchase of treasury stock............................................ (605) 0
Issuance of common stock pursuant to options.......................... 10 0
----------- ------------
Net cash flows provided by (used in) financing activities.......... (595) 0
CASH FLOW USED IN INVESTING ACTIVITIES:
Proceeds from sale of property, plant & equipment..................... 11 36
Purchase of property, plant and equipment............................. (257) (224)
Purchase of Alpkem Corporation (1996) and Laboratory
Automation, Inc. (1995)............................................ (513) (1,174)
Purchase of investments............................................... (6,990) 0
Maturity of investments............................................... 4,201 5,117
Change in other assets................................................ (62) (4)
------------ ------------
Net cash flows provided by (used in) investing activities............. (3,610) 3,751
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.......................... $ (4,147) $ 4,809
Cash and cash equivalents at beginning of year............................ $ 5,503 $ 2,848
----------- ----------
Cash and cash equivalents at end of quarter............................... $ 1,356 $ 7,657
=========== ==========
</TABLE>
<PAGE> 5
O.I. CORPORATION
Notes to Financial Statements
(Unaudited)
1. Summary of Significant Accounting Policies.
The accompanying unaudited 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 nine months ended September 30, 1996 and 1995, 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. 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, 1995.
The Company develops, manufactures, markets and services analytical
monitoring and sample preparation products, components and systems used to
prepare samples for analysis and to detect, measure and analyze chemical
compounds. Sales of the Company's products are recorded based on shipments
of products and no substantial right of return exists.
2. Inventories.
Sept. 30, 1996 Dec. 31, 1995
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Raw Materials $ 1,717,000 $ 1,117,000
Work in Process 662,000 531,000
Finished Goods 934,000 775,000
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$ 3,313,000 $ 2,423,000
================ ===============
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. Reclassification
Certain amounts in the prior periods have been reclassified to conform
with the current period presentation.
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
--------------------------------------------------
This Form 10Q includes certain statements that may be deemed to be
"forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. All statements, other than statements of
historical facts, included in this Form 10Q that address activities,
events or developments that the Company expects, believes or anticipates
will or may occur in the future, are forward-looking statements. These
statements are based on certain assumptions and analyses made by the
Company in light of its experience and its perception of historical
trends, current conditions, expected future developments and other factors
it believes are appropriate in the circumstances. Such statements are
subject to a number of assumptions, risks and uncertainties, many of which
are beyond the control of the Company. Investors are cautioned that any
such statements are not guarantees of future performance and that actual
results or developments may differ materially from those projected in the
forward-looking statements.
OPERATING RESULTS
Sales for the third quarter of 1996 increased 15% to $5,107,000, compared to
$4,450,000 for the third quarter of 1995. Sales of flow injection analyzers from
the 1996 acquisition of Alpkem and an increase in sales of microwave, total
organic carbon analyzers (TOC), and continuous emissions monitoring products
offset a decline in sales of gas chromatography (GC) components and systems.
During the third quarter, the Company began shipping its new Model 1020 TOC
Analyzer and Model 5380 Pulse-Flame Photoionization Detector. Sales for the nine
months ended September 30, 1996 increased 9% to $14,848,000, compared to
$13,577,000 for 1995. International sales, which constituted 23% of sales for
the nine months ended September 30, 1996, increased by 61% over the same period
of 1995. The Company believes its sales are being adversely impacted by
consolidation in the environmental testing market and that such conditions are
affecting all companies serving such market. These conditions are not expected
to change in the foreseeable future. Although the Company is actively pursuing
sales in non-environmental markets, successes in these markets are not yet great
enough to offset the decline in sales to the environmental market.
Gross profit increased to $2,445,000, or 48% of sales for the third quarter of
1996, compared to $2,158,000, or 49% of sales for the same quarter of 1995.
Year-to-date gross profit increased to $7,327,000, or 49% of sales, through the
third quarter of 1996 compared to $6,455,000, or 48% of sales for the same
period of 1995. The increase in gross profit dollars was due to the increase in
sales. The decrease in gross profit percent for the third quarter 1996 was due
to product mix and an increase in warranty expense.
Research and development (R&D) expenses for the third quarter of 1996 were
$425,000, or 8% of sales, compared to 1995 third quarter expenses of $401,000,
or 9% of sales. Year-to-date R&D expenses through September 30, 1996 were
$1,355,000, or 9% of sales, compared to $1,373,000, or 10% of sales, for the
same period of 1995. The increased amount of R&D expenses for the third quarter
1996 was the result of increased contract service and an increase in the
purchase of supplies, offset in part by a slight decrease in wages.
Selling, general, and administrative (SG&A) expenses for the third quarter of
1996 increased 29% to $1,831,000, or 36% of sales, compared to $1,424,000, or
32% of sales for 1995. Year-to-date SG&A expenses through September 30, 1996,
increased 23% to $5,325,000, or 36% of sales, compared to $4,349,000, or 32% of
sales, for the same period of 1995. Third quarter SG&A expenses increased due to
an increase in advertising, purchase of supplies, and accrual for employee
benefits.
<PAGE> 7
Legal billings for the third quarter of 1996 were approximately $200,000, offset
in part by $25,000 from a reserve established in 1995. Third quarter 1995 legal
expenses were approximately $170,000. Other expenses such as salaries, rent,
utilities and telephone increased due to the acquisition of Alpkem. Year-
to-date SG&A expenses increased due to the factors discussed above, as well as
increased legal fees. Year-to-date legal billings related to the Company's claim
that a competitor infringed a patent of the Company were approximately $973,000,
offset in part by $190,000 from a reserve established in 1995.
Income before taxes for the third quarter of 1996 amounted to $308,000, a
decrease of 36% from 1995 third quarter results of $481,000. Net income for the
third quarter 1996 was down 38% to $185,000, or $.04 per share, compared to
$300,000, or $.07 per share in the same period of 1995.
Year-to-date income before taxes decreased 9% to $1,027,000 through the third
quarter of 1996, compared to $1,133,000 for the same period of 1995. The
effective tax rates were 39% in 1996 and 36% in 1995. The increase in the
effective tax rate for 1996 was due to increased state tax expense. Year-to-date
net income decreased 14% to $621,000, or $.15 per share through the third
quarter of 1996, from $724,000, or $.17 per share for the same period of 1995.
The decrease in year-to-date net income was the result of increased SG&A
expense, a decrease in interest income, and a higher effective tax rate, offset
in part by increased sales.
LIQUIDITY
Cash and cash equivalents totaled $1,356,000 as of September 30, 1996, compared
to $5,503,000 as of December 31, 1995. The decrease in cash and cash equivalents
resulted primarily from a shift in funds to longer term, higher yielding
investments. Working capital, as of September 30, 1996, was $11,836,000,
compared to $11,855,000 as of December 31, 1995. Working capital, as a
percentage of total assets, was 65% as of September 30, 1996, compared to 67% as
of December 31, 1995. The current ratio was 4.74 to 1 at September 30, 1996, as
compared to 4.78 to 1 at December 31, 1995. Total liabilities as a percentage of
equity was 24% as of September 30, 1996, compared to 25% as of December 31,
1995.
Net cash flow provided by operating activities for the nine months ended
September 30, 1996, was $58,000, compared to $1,058,000 for the same period of
1995. The decrease in cash flow from operating activities for the first nine
months of 1996 was primarily due to an increase in inventory and accounts
receivable. All changes in working capital accounts are net of the effect of the
purchase of Alpkem. Net cash flow provided by (used in) financing activities for
the nine months ended September 30, 1996 was ($595,000), compared to $-0- for
the same period of 1995. The increase in cash flow used in financing activities
was due to the purchase of treasury stock. The Company purchased a total of
210,629 shares in the nine months through September 30, 1996. A total of 33,289
shares are remaining in treasury stock. The other treasury shares have been
reissued in conjunction with the exercise of employee stock options, the
employee stock purchase plan, and the acquisition of Alpkem. Net cash flow
provided by (used in) investing activities for the nine months ended September
30, 1996 was ($3,610,000), compared to $3,751,000 for the same period of 1995.
The decrease in cash flow from investing activities was primarily the result of
the purchase of investments in 1996. 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.
<PAGE> 8
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. On June 17, 1996, a Motion
by Defendant for Summary Judgment of Non-Infringement was granted.
The Company is appealing the decision to the U.S. Court of
Appeals for the Federal Circuit in Washington, DC.
Item 2. Changes in Securities: None
Item 3. Defaults upon Senior Securities: None
Item 4. Submission of Matters to a Vote of Security Holders: None
Item 5. Other Information: William R. Hart, Vice President/Director of
Marketing, left the Company effective September 30, 1996 and
started an independent sales business. The Company entered into an
agreement with Mr. Hart for representing the Company in the sale
of certain Company products in a defined territory under terms set
forth in the Company's standard manufacturers representative
agreement.
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: November 1, 1996 BY: /s/ Julie Wright
------------------------ ----------------------
Julie Wright
Controller
Date: November 1, 1996 BY: /s/ W. W. Botts
------------------------ ---------------------
William W. Botts
President & CEO
<PAGE> 9
EXHIBIT INDEX
Exhibit 27 -- Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated balance sheet and the condensed consolidated statement of
earnings and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,356
<SECURITIES> 5,410
<RECEIVABLES> 3,766
<ALLOWANCES> 260
<INVENTORY> 3,313
<CURRENT-ASSETS> 14,999
<PP&E> 3,800
<DEPRECIATION> 2,169
<TOTAL-ASSETS> 18,135
<CURRENT-LIABILITIES> 3,163
<BONDS> 0
0
0
<COMMON> 414
<OTHER-SE> 14,187
<TOTAL-LIABILITY-AND-EQUITY> 18,135
<SALES> 5,107
<TOTAL-REVENUES> 5,107
<CGS> 2,662
<TOTAL-COSTS> 1,147
<OTHER-EXPENSES> 1,109
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 308
<INCOME-TAX> 123
<INCOME-CONTINUING> 185
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 185
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
