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 March 31, 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
State of Incorporation I.R.S. Employer Identification No.
P.O. Box 9010
151 Graham Road
College Station, Texas 77842-9010
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 409/690-1711
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
(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 March 31, 1996:
4,042,396 shares
O.I. CORPORATION
Condensed Consolidated Balance Sheet
(In thousands)
(unaudited)
For Three Months Ended
-----------------------
MAR 31, DEC 31,
1996 1995
ASSETS --------- ---------
Current assets:
Cash and cash equivalents . . . . . . $ 2,210 $ 5,503
Investments . . . . . . . . . . . . . 5,445 2,621
Accounts receivable . . . . . . . . . 3,274 3,273
Investment in sales-type lease. . . . 232 246
Inventories . . . . . . . . . . . . . 2,584 2,423
Deferred tax asset. . . . . . . . . . 735 735
Other current assets. . . . . . . . . 299 191
--------- --------
Total current assets . . . . . . . 14,779 14,992
Property, plant and equipment, net . . . 1,600 1,591
Investment in sales-type lease,
net of current . . . . . . . . . . 423 363
Other assets . . . . . . . . . . . . . . 745 754
--------- --------
Total assets . . . . . . . . . . . $ 17,547 $ 17,700
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable. . . . . . . . . . . $ 1,080 $ 850
Accrued compensation. . . . . . . . . 337 483
Accrued expenses. . . . . . . . . . . 1,819 1,804
-------- --------
Total current liabilities. . . . . 3,236 3,137
Deferred income taxes. . . . . . . . . . 351 351
-------- --------
Total liabilities. . . . . . . . . 3,587 3,488
Stockholders' equity:
Common stock ($.10 par value) . . . . 412 412
Additional paid in capital. . . . . . 4,467 4,731
Treasury stock. . . . . . . . . . . . (201)
Retained earnings . . . . . . . . . . 9,282 9,069
------- ------
Total stockholders' equity . . . . 13,960 14,212
------- ------
Total liabilities &
stockholders' equity . . . . . . $ 17,547 $ 17,700
======== ========
O.I. CORPORATION
Condensed Consolidated Statement of Earnings
(In thousands, except per share data)
(unaudited)
Three Months Ended
March 31,
-----------------------
1996 1995
--------- ----------
Net sales. . . . . . . . . . . . . . . . $ 4,648 $ 4,702
Cost of goods sold . . . . . . . . . . . 2,171 2,518
--------- ---------
Gross profit . . . . . . . . . . . . . . 2,477 2,184
Research and development expenses. . . . 444 507
Selling, general &
administrative expenses . . . . . . . . 1,797 1,479
--------- --------
Operating income . . . . . . . . . . . . 236 198
Interest income/other income . . . . . . 120 120
Interest expense . . . . . . . . . . . . 0 5
--------- --------
Income before income taxes . . . . . . . 356 313
Provision for taxes on earnings. . . . . (142) (110)
--------- ---------
Net income . . . . . . . . . . . . . . . $ 214 $ 203
========= =========
Weighted average number of common and
common equivalent shares outstanding . 4,088,794 4,213,614
Earnings per common and common
equivalent share . . . . . . . . . . . $ 0.05 $ 0.05
Dividends per share. . . . . . . . . . . -0- -0-
O.I. CORPORATION
Condensed Consolidated Statement of Cash Flows
(In thousands)
(unaudited)
Three Months Ended
March 31,
-----------------------
1996 1995
--------- ----------
CASH FLOW FROM OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . $ 214 $ 203
Depreciation & amortization . . . . . 110 117
Deferred income taxes . . . . . . . . 0 (24)
Change in working capital, net of
effect from purchase of
Laboratory Automation, Inc. . . . . (234) 167
---------- ---------
Net cash flows provided by
operating activities . . . . . . 90 463
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from issuance of
common stock. . . . . . . . . . . 10 0
Purchase of treasury stock . . . . . (484) 0
---------- ---------
Net cash flows provided by
(used in) financing activities. . (474) 0
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of property, plant &
equipment . . . . . . . . . . . . (89) (120)
Purchase of Laboratory Automation, Inc. 0 (1,174)
Purchase of investments . . . . . . (2,811) 0
Maturity of investments . . . . . . 0 2,500
Change in other assets. . . . . . . (9) 14
-------- --------
Net cash flows provided by (used in)
investing activities . . . . . . (2,909) 1,220
Increase (decrease) in cash . . . . . (3,293) 1,683
Cash and cash equivalents at beginning
of quarter. . . . . . . . . . . . . 5,503 2,848
-------- --------
Cash and cash equivalents at end of
quarter . . . . . . . . . . . . . . $ 2,210 $ 4,531
======== ========
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 months ended March 31, 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. 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,
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 with no substantial right of return.
2. Inventories.
Mar. 31, 1996 Dec. 31, 1995
-------------- --------------
Raw Materials $ 1,165,000 $ 1,117,000
Work in Process 542,000 531,000
Finished Goods 877,000 775,000
-------------- -------------
$ 2,584,000 $ 2,423,000
3. Earnings per Common and Common Equivalent Shares.
Earnings per common and common equivalent shares 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net sales for the first quarter decreased 1% to $4,648,000,
compared to $4,702,000 for 1995, primarily due to volume
decreases. The environmental market, the primary market served
by the Company, has been flat to declining since 1992 due to the
impact of the consolidation of environmental testing laboratories
and less stringent governmental enforcement of state and U.S.
environmental regulations.
Sales of the Company's gas chromatography (GC) systems,
components and water analyzers were consistent with prior quarter
sales, while increased sales of sample preparation products were
offset by lower sales of continuous monitoring products.
International sales increased 37%, driven primarily by demands
for environmental testing products in Asia. Net sales for the
first quarter of 1996 include $232,000 received in connection
with the settlement of a pending lawsuit in February 1996.
On January 26, 1996, the Company announced that it had entered an
agreement with Prolabo S. A. of France, pursuant to which OI will
market, sell, and support Prolabo manufactured focused microwave
systems under the O.I. Analytical label in the U.S. and Canada.
Open-vessel microwave products perform applications for organic
extraction and inorganic sample preparation in industries that
offer new market opportunities for OI, including the food,
petrochemical, nuclear, and pharmaceutical, and environmental
industries. New applications include organic extraction, organic
synthesis, acid digestion for metals, speciation, sample
preparation, and automated sample preparation.
Gross profit was $2,477,000, or 53% of sales, for the first
quarter of 1996, compared to $2,184,000, or 46% of sales, for the
same quarter of 1995. The increase in gross profit was due to
product mix, a decrease in warranty expense and accounting for a
legal settlement received in February 1996.
Research and development (R&D) expenses for the first quarter of
1996 were down 12% to $444,000, or 9.6% of sales, compared to
1995 first quarter expenses of $507,000, or 10.8% of sales. The
Company's product development effort consists of improving
existing products and developing possible new products and
applications. The decreased amount of R&D expense for 1996 was
the result of fewer personnel assigned to R&D, lower consulting
fees, and lower supplies and travel expenses. At the Pittsburgh
Conference, the analytical industry's major trade show held in
March 1996, the Company introduced several new products: the
Model 1020 Total Organic Carbon Analyzer (TOC); a solids module
for the TOC products; the Model 5380 Pulsed-Flame Photometric
Detector (PFPD); the Model 5390 Photoionization Detector/Halogen
Specific Detector (PID/XSD); and the Microtrap, an advancement in
the field of purge and trap sample concentration for GC.
Selling, general, and administrative (SG&A) expenses for the
first quarter of 1996 were up 22% to $1,797,000, or 39% of sales,
compared to $1,479,000, or 31% of sales for 1995. SG&A expenses
for the first quarter of 1996 were higher than 1995 due to an
increase in legal fees, offset in part by a decrease in
distributor discounts and suppliers purchases. The Company has
incurred and will continue to incur, significant legal expenses
relating to a patent infringement lawsuit filed against a
competitor in March 1995. Legal expenses relating to this
litigation were approximately $433,000 in the first quarter of
1996. Nevertheless, management believes it is in the best
interest of the stockholders to protect the Company's
intellectual property. Trial has been set for July 22, 1996. No
assurances can be made as to the outcome of such litigation. On
February 13, 1996, the Company settled a lawsuit against a vendor
and received $290,000 in consideration thereof. First quarter
1996 legal expenses related to this settlement were approximately
$63,000.
Income before tax for the first quarter 1996 amounted to
$356,000, an increase of 14% over 1995 first quarter results of
$313,000. The higher profit for 1996 was a result of increased
gross margin, offset in part by increased SG&A expense. The
effective tax rates were 40% for 1996 and 35% for 1995. The
increase in the effective tax rate for 1996 reflected an increase
in state tax expense and a decrease in estimated credits for
research and development expenditures. Net income after tax for
the first quarter 1996 was up 5% to $214,000 or $.05 per share,
compared to $203,000, or $.05 per share in the same period of
1995.
Liquidity
Cash and cash equivalents totaled $2,210,000 as of March 31,
1996, compared to $5,503,000 as of December 31, 1995. Working
capital, as of March 31, 1996, was $11,543,000 compared to
$11,855,000 as of December 31, 1995. Working capital, as a
percentage of total assets, was 66% as of March 31, 1996,
compared to 67% at December 31, 1995. The current ratio was 4.57
to 1 at March 31, 1996, as compared to 4.78 to 1 at December 31,
1995. Total liabilities to equity was 26% as of March 31, 1996,
compared to 25% as of December 31, 1995.
Net cash flow provided from operating activities for the period
ending March 31, 1996, was $90,000, as compared to $463,000 for
the same period of 1995. The decrease in cash flow from
operating activities for 1996 was primarily due to an increase in
inventory and investment in sales-type leases, offset in part by
an increase in accounts payable.
Net cash flow used in financing activities for the first quarter
1996 was $474,000 compared to $0 for the first quarter 1995. The
increase in cash flow used in financing activities was due to the
purchase of treasury stock. The Company purchased a total of
175,379 common shares for treasury stock during the first quarter
of 1996. Net cash flow provided by (used in) investing
activities was ($2,909,000) for the first quarter 1996 compared
to $1,220,000 for the first quarter 1995. Net uses of cash in
the first quarter of 1996 for investing activities relates to the
purchase of corporate bonds compared to a net increase in cash
related to the maturity of investments in the first quarter of
1995. Capital expenditures for the remainder of the fiscal year
are anticipated to be consistent with the past year, and include
the purchase of personal computers, automobiles for field service
and sales personnel, and other miscellaneous capital purchases.
The Company has financed its growth from funds generated from
operations and expects to continue to do so in the foreseeable
future.
On May 2, 1996, the Company acquired certain assets of a
corporation formerly known as Alpkem Corporation of Wilsonville,
Oregon, a division of Perstorp Analytical, Inc. The acquisition
was for cash and OI common stock and will be accounted for as a
purchase. Alpkem, founded in 1969, was acquired by Perstorp
Analytical on August 31, 1988. Alpkem designs, manufactures and
markets Segmented Flow Analyzers, Flow Injection Analyzers, and
field portable instruments. Alpkem's principal customers are
industrial businesses, semiconductor manufacturers, engineering
and consulting firms, municipalities and environmental testing
laboratories. Information related to Alpkem's historical sales
and operating results has been consolidated with Perstorp
Analytical, Inc. The Company does not believe that the
acquisition meets the requirements for public disclosure of
historical operating results.
Management regularly evaluates opportunities to acquire products
or businesses complimentary to the Company's operations. Such
acquisition opportunities, if they arise and are successfully
consummated, may involve the use of cash, or, depending upon the
size and terms of the acquisitions, may involve equity or debt
financing. Although the Company has completed four acquisitions
in the past two years, the Company cannot guarantee that it will
be able to successfully consummate any future acquisitions or
that, if consummated, that they will have either a short-term or
a long-term positive effect on Company operations.
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, and
U.S. Patent No. 5,470,380 issued to the Company on
November 28, 1995. 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.
On February 13, 1996, the Company settled a lawsuit
against a vendor and received approximately $290,000 in
consideration thereof.
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: 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: 5/10/96 BY: /s/ William W. Botts
-------------------------
William W. Botts
President/CEO
Date: 5/10/96 BY: /s/ Julie Wright
------------------------
Julie Wright
Controller
<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>
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