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, 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 IRS Employer Identification No.
P.O. Box 9010
151 Graham Road
College Station, Texas 77842-9010
(Address of Principal Executive Offices) (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
(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 June 30, 1996:
4,143,046 shares
O.I. CORPORATION
Condensed Consolidated Balance Sheet
(In thousands)
(unaudited)
June 30 Dec 31
1996 1995
Assets _______ ______
Current assets:
Cash and cash equivalents $ 1,023 $ 5,503
Short term investments 5,665 2,621
Accounts receivable 3,613 3,273
Investment in sales-type lease 264 246
Inventories 3,343 2,423
Current deferred tax asset 735 735
Other current assets 436 191
_______ ______
Total current assets 15,079 14,992
Property, plant and equipment, net 1,668 1,591
Investment in sales-type lease, net of current 390 363
Other assets 1,125 754
_______ ______
Total assets $ 18,262 $ 17,700
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 1,108 $ 850
Accrued compensation 515 483
Accrued expenses 1,749 1,804
________ _______
Total current liabilities 3,372 3,137
Deferred income taxes 357 351
________ _______
Total liabilities 3,729 3,488
Shareholders' equity:
Common stock ($.10 par value) 414 412
Additional paid in capital 4,612 4,731
Retained earnings 9,507 9,069
_______ _______
Total shareholders' equity 14,533 14,212
Total liabilities and shareholders' equity $ 18,262 $ 17,700
======== ========
O.I. CORPORATION
Condensed Consolidated Statement of Earnings
(In thousands, except per share data)
(unaudited)
Three Months Ended Six Months Ended
June 30 June 30
__________________ ________________
1996 1995 1996 1995
____ ____ ____ ____
Net sales $ 5,094 $ 4,425 $ 9,742 $ 9,127
Cost of goods sold 2,689 2,312 4,859 4,830
________ ________ ________ ________
Gross profit 2,405 2,113 4,883 4,297
Res. and dev. expenses 486 466 931 972
Selling, general and
admininistrative expenses 1,696 1,445 3,494 2,924
________ ________ ________ ________
Operating income 223 202 458 401
Interest income/other income 141 136 261 256
Interest expense 0 0 0 5
________ ________ ________ ________
Income before income taxes 364 338 719 652
Provision for taxes on
earnings 140 117 281 228
________ ________ ________ ________
Net income $ 224 $ 221 $ 438 $ 424
======== ======== ======== ========
Weighted average number of
shares outstanding 4,137,953 4,224,628 4,113,374 4,227,452
Earnings per share $ 0.05 $ 0.05 $ 0.11 $ 0.10
Dividends per share -0- -0- -0- -0-
O.I. CORPORATION
Condensed Consolidated Statement of Cash Flows
(In thousands)
(unaudited)
Six Months Ended
June 30, 1996 June 30, 1995
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 438 $ 424
Depreciation and amortization 235 235
Deferred income taxes 6 (27)
Change in working capital, net
of effect from purchase of
Laboratory Automation, Inc.
and Alpkem (927) 764
___________ ___________
Net cash flows provided by
operating activities (248) 1,396
CASH FLOW FROM FINANCING ACTIVITIES:
Purchase of treasury stock (486) 0
Issuance of common stock 10 0
__________ ___________
Net cash flows provided by
(used in) financing activities (476) 0
CASH FLOW USED IN INVESTING ACTIVITIES:
Proceeds from sale of property, plant
and equipment 2 0
Purchase of property, plant and equipment (175) (235)
Purchase of Alpkem (1996)/LAI (1995) (505) (1,174)
Purchase of investments (5,676) 0
Maturity of investments 2,632 4,852
Investment in patents (36) (16)
Change in deposits 2 19
___________ ____________
Net cash flows provided (used in)
investing activities (3,756) 3,446
Increase (decrease) in cash and cash
equivalents (4,480) 4,842
Cash and cash equivalents at
beginning of year 5,503 2,848
___________ ___________
Cash and cash equivalents at end of
quarter $ 1,023 $ 7,690
=========== ===========
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, 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 and no substantial right of return
exists.
2. Inventories.
June 30, 1996 Dec. 31, 1995
Raw Materials $ 1,649,000 $ 1,117,000
Work in Process $ 617,000 $ 531,000
Finished Goods $ 1,077,000 $ 775,000
____________ ____________
$ 3,343,000 $ 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
On May 1, 1996, the Company acquired certain assets of Alpkem
Corporation, a Division of Perstorp Analytical, Inc. The
acquisition was for cash and the Company's common stock and was
accounted for as a purchase. 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
labs. The Company does not believe that the acquisition meets
the materiality requirements for public disclosure of historical
operating results.
Results of Operations
Net sales for the second quarter of 1996 increased 15% to
$5,094,000, compared to $4,425,000 for 1995. This increase was
due to an increase in the sales of the Company's sample prepara-
tion products and to the recent acquisition of Alpkem, offset in
part by a decrease in sales of the Company's continuous monitor-
ing products and gas chromatography (GC) components and systems.
Sample preparation product sales increased principally due to
increased sales of the Company's microwave products. Sales of GC
components and systems to environmental applications were down but
somewhat offset by the sale of these products to new markets such
as industrial chemical facilities. The Company began shipping its
Model 4632 Headspace Sample Inlet System, a GC sample introduction
technique which is used for non-environmental, as well as
environmental applications.
Year-to-date sales through June 30, 1996 increased 7% to
$9,742,000, compared to $9,127,000 for 1995. Year-to-date sales
through June 30, 1996 include $232,000 received in February 1996
in connection with the settlement of a lawsuit. Year-to-date
sales were impacted by the same factors that affected second
quarter 1996 sales.
Gross profit increased to $2,405,000, or 47% of sales, for the
second quarter of 1996, compared to $2,113,000, or 48% of sales,
for the same quarter of 1995. The increase in gross profit
dollars was due to the increase in sales. The decrease in gross
profit percent was due to product mix, offset in part by a
decrease in warranty expense and a decrease in demonstration
equipment depreciation.
Year-to-date gross profit increased to $4,883,000 through June 30,
1996 compared to $4,297,000 for the same period of 1995. Year-to-
date gross profit, as a percent of sales, was 50% for 1996 and 47%
for 1995. The increase in year-to-date gross profit was due to
product mix, a decrease in warranty expense, a decrease in
demonstration equipment depreciation and the receipt of a legal
settlement in February 1996.
Research and development (R&D) expenses for the second quarter of
1996 were $486,000, or 10% of sales, compared to $466,000, or 11%
of sales for the same period of 1995. Year-to-date R&D expenses
through June 30, 1996 decreased 4% to $931,000, or 10% of sales,
compared to $972,000, or 11% of sales, for the same period of
1995. The increased amount of R&D expense for the second quarter
of 1995, compared to the prior period, was due to an increase in
the purchase of supplies used in the development of new products
and R&D expense from Alpkem, offset in part by a decrease in
consulting fees. The decrease in year-to-date R&D expense was due
to fewer personnel assigned to R&D, lower consulting fees and
decreased travel expenses. The Company expects to begin shipping
several new products in the third quarter, including the Model
1020 Total Organic Carbon Analyzer (TOC), a TOC solids analysis
model and the Model 5380 Pulse-Flame Photoionization Detector
(PFPD).
Selling, general, and administrative (SG&A) expenses for the
second quarter of 1996 increased 17% to $1,696,000, or 33% of
sales compared to $1,445,000, or 33% of sales, for 1995. SG&A
expenses for the second quarter of 1996 were higher than 1995 due
to an increase in legal fees, consulting fees, advertising and the
purchase of supplies. Other expenses such as rent, utilities,
telephone and commissions increased due to the acquisition of
Alpkem. The Company incurred legal fees of approximately $365,000
in the second quarter of 1996. These legal fees were related to a
patent infringement lawsuit filed against a competitor in March
1995, and were offset in part by reversing a reserve established
for litigation in the amount of $165,000. On June 17, 1996, the
Galveston Division of the United States District Court for the
Southern District of Texas entered an order granting a Motion by
Defendant for Summary Judgement of Non-Infringement. The order
held that O.I.'s patent claims are limited in scope and do not
cover the accused devices sold by Defendant. The Company is
appealing the decision and expects the cost of appeal to be
significantly lower than the legal costs incurred to date. Year-
to-date SG&A expenses through June 30, 1996, increased 19% to
$3,494,000, or 36% of sales, compared to $2,924,000, or 32% of
sales, for the same period of 1995. Year-to-date SG&A expenses
increased due to the factors discussed above. Year-to-date legal
fees related to the patent infringement case were approximately
$789,000, offset in part by the reserve established in 1995 of
$165,000.
Income before tax for the second quarter of 1996 amounted to
$364,000, an increase of 8% from 1995 second quarter results of
$338,000. Year-to-date income before tax increased 10% to
$719,000 through June 30, 1996, compared to $652,000 for the same
period of 1995. The higher profit for 1996 was due to increased
sales volume, offset in part by increased operating expenses and
higher legal fees. The effective tax rates for the second quarter
were 38% in 1996 and 35% in 1995. The increase in the effective
tax rate for 1996 was due to increased state tax expense. Net
income after tax for the second quarter 1996 increased 1% to
$224,000, or $0.05 per share, compared to $221,000, or $0.05 per
share in the same period of 1995. Year-to-date net income after
tax increased 3% to $438,000, or $0.11 per share through June 30,
1996, from $424,000, or $.10 per share for the same period of
1995.
Liquidity
Cash and cash equivalents totaled $1,023,000 as of June 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 June 30, 1996, was $11,707,000, a decrease of 1%, compared to
$11,855,000 as of December 31, 1995. Working capital, as a
percentage of total assets, was 64% as of June 30, 1996, compared
to 67% as of December 31, 1995. The current ratio was 4.47 to 1
at June 30, 1996, as compared to 4.78 to 1 at December 31, 1994.
Total liabilities-to-equity was 26% as of June 30, 1996, compared
to 25% at December 31, 1995.
Net cash flow provided by (used in) operating activities for the
six months ended June 30, 1996, was $(248,000), compared to
$1,396,000 for the same period of 1995. The decrease in cash flow
provided by operating activities for the first six months in 1996
was primarily due to an increase in accounts receivable and
inventory, offset in part by an increase in accounts payable. The
increase in accounts receivable was primarily due to the increase
in sales. The increase in inventory was principally due to an
increase in finished goods to provide faster delivery to customers.
Net cash flow provided by (used in) financing activities for the
six months ended June 30, 1996 was $(476,000) 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 175,879 shares in the six months
through June 30, 1996. All 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
six months ended June 30, 1996 was $(3,756,000), compared to
$3,446,000 for the same period of 1995. The increase in cash flow
used in investing activities resulted from the purchase of
investments and the acquisition of Alpkem. Capital expenditures
for the remainder of the year are anticipated to be consistent
with the past year, and will include expenditures for personal
computers, automobiles for field service and sales personnel and
other miscellaneous purchases.
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 30 months, the Company cannot guarantee that it will
be able to successfully consummate any future acquisitions or
that, if consummated, they will have either a short-term or a
long-term positive effect on the Company's results of 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. 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, D.C.
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
7, 1996, the following members were elected to the
Board of Directors:
Votes For Withheld
_________ ________
Jack S. Anderson 3,343,086 15,977
William W. Botts 3,335,390 23,673
J. Lester Heath 3,343,486 15,577
Edwin B. King 3,343,516 15,547
Craig R. Whited 3,343,666 15,397
The following proposals were also approved at the
Company's Annual Meeting:
Votes For Against Abstain
_________ _______ _______
Ratification of Price
Waterhouse as the 3,341,018 11,070 6,975
Company's auditors
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: 8/5/96 BY: /s/ Julie Wright
Julie Wright
Controller
Date: 8/5/96 BY: /s/ William W. Botts
William W. Botts
President
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CONSOLIDATED BALANCE SHEET AND THE CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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